2017 FHA Guidelines On Student Loans and How To Get Approved

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2017 FHA Guidelines On Student Loans and How To Get Approved

2017 FHA Guidelines On Student Loans

You finally Graduated, Congrats and are stable with job that has a future and now you want to finally settle down in a new home. Read about 2017 FHA guidelines on student loans and the looming cloud, the easy to get and ever present student loans, with some guidance you can overcome and still get the home you are dreaming about.

The facts associated with student loan debts are mind-boggling; over 40 million people have a student loan off some type, which is up from about 10 million people in 2008.  In the last 8 years, the total number of people with some type of student loan debt has increased by a staggering 300% and no end in sight, as tuition costs keep increasing every year.  Now you see the problem, how are future borrowers going to get an approval letter for an FHA loans. Luckily, if you have a student loan on their credit, the 2017 FHA Guidelines based on Student Loans have changed from previous years.

I know of some people that continue with school just to avoid the dreaded payment as you defer that payment by getting another loan and taking more classes. If that education is not going to help you get a higher income, it is only going to add another student loan adding an increased payment over the length of the student loan.

The days when student loans that were deferred for 12 months and were not counted towards the qualification process are long gone based on 2017 FHA guidelines on student loans.  In the past, any student loan that was deferred for at least 12 months, that monthly payment of your student loan was exempt from being counted into your debt-to-income (DTI) ratios, no matter how much the total amount you borrowed.  Common sense says, this was perfect timing for college graduates to get qualified for homes with large amounts of student loan debt. Also, professionals like doctors, lawyers, engineers and CPAs going to school for Master’s or Doctorate degrees were also in the same category.  Unfortunately current FHA guidelines have changed to the regular guidelines with respect to Conventional Loans and deferred student loans payments are now factored into the debt-to-income ratio.

2017 FHA Guidelines On Student Loans And How They Effect Millennials

In today’s World, the Millennials are currently the largest group of potential buyers for the housing industry. It seems there is only one thing that is differing them home ownership, an ever-growing percentage of them are consumed with student loans, which definitely affects their ability to buy their first home.  The good news, you are not the only one with the proper guidance; you can still qualify for a home loan.

Up until the last couple of years, this problem was deferrable as HUD would not take into the equation student loans and how they affect overall their debt-to-income ratios on FHA loans.  Taking into consideration the loans are being paid back over 10, 20, and 30 years, this group of Millennials are definitely at a drawback when attempting to purchase a home.  From a monetary point of view, you can almost condemn the educational system for setting up America’s Mininnials for financial failure.  We all know that the majority of college age students don’t have parents that have enough to pay all the college expenses to complete higher education.  Additionally, with the ever-increasing expenses of tuition and the odds for home ownership seems to be against the Millennial aged college student.

There Is Hope, With Advice, From An Experienced Mortgage Loan Officer

There is hope, when following a 2017 FHA guidelines on student loans by experienced Mortgage Loan Broker, even with the average student loan debt exceeding $50,000, person can qualify for a mortgage. There are still several ways to get a new home, it just knowing all the Guidelines and know what you qualify under those criteria. Of course, you know you may qualify for as much of a home, but some of the lessor sized homes built today, have all the amenities that a much larger, upscale home typically included in the past few years.

I just looked at a smaller home that was designed for someone who needed to downsize, that included a great features like a raised jetted tub, tiled multiple jet shower, smaller pool, gourmet kitchen, and other great features for the price and square footage of a comparable starter home. It seems the new buyer wants most of the features of a larger home, but less of a price and a much lower payment.

This is to the advantage to the Millenials who have earned the right to a better job, financial security and still wants to settle down to a beautiful home and raise a family. Look at it from this perspective, all the benefits and less square footage to clean.

One very important key to make a note of, is that very important to keep you student loan current and make you payments on time. Most likely your student loan was Government Secured and you can bet your bottom dollar it shows up on your credit report. By presently taking care of your current obligations it shows the lender that you, most likely, will be able to take on your future financial responsibities.

2017 FHA Guidelines On Student Loans: HUD’s Standards Have Changed!

The 2017 FHA Guidelines with respect to Student Loans is based on the rules for Mortgage Letter 16-08 for all FHA Case Numbers. After June 30, 2016, the Mortgagee will need to include the borrower’s monthly student loan payments which are included in the borrower’s credit report, any student loan agreements and/or student loan borrower’s payment schedule must be included.

Those monthly student loan debt payments are then figured into the calculations of the borrower’s debt-to-income (DTI) ratios.  If the credit report does not reflect or show the student loan payment, the Lender needs to add or include the monthly student loan payment that is stated in the borrower’s student loan payment statement or any student loan agreement.  If the mortgage underwriter were to include the payment from the borrower’s individual credit report, no other paperwork would be typically required. But the Lender needs to utilize the monthly student loan payment to be calculating the correct debt-to-income ratios.

Even if the student’s loan payment is high, if the remainders of the short-term debts can be lowered, they can offset the difference. Based on 2017 FHA guidelines on student loans you can lower your credit cards in the foreseeable future, you might be in a much better situation when it comes to your debt to income ratio. Any other short-term loan that you can minimize also will help you with your debt-to-income ratio. Getting rid of or minimizing your car payment can be another way to adjusting your debt to income ratio. I’ve seen people get rid of their expensive car and simplify into a more economical vehicle and in the long run are better off. As one of my customers said once, “you can’t live in your car”, they ended selling the of the dressed up 4 wheel drive truck, they went from a $600 a month auto payment to around $150 a month for a sporty used car.

That was all they needed to go from 4-wheel drive truck to a beautiful 4-bedroom home of their dreams. They also commented how much nicer their fuel expenses were and took they extra amount they saved every month and put that money into a savings account. It doesn’t seem like much but with the extra savings they took the family on a wonderful vacation, bonus! Now that I got you thinking, there might be a few more things that you wanted at the time and really just don’t need. Sell them, you sleep at night better without all the debts and if you haven’t used them much in the last year, you probably won’t much next year either.

2017 FHA Guidelines On Student Loans on Collections And Past Due Student Loans

The new rules, to qualify for an FHA loan, in 2017 FHA guidelines on student loans there is no requirements that borrowers to pay off all collection accounts and charge off accounts.  One very important note, the FHA, can allow for medical collection accounts and charge off accounts, with an unpaid balance and do not count those items towards your from debt-to-income ratio.  Another note, if there is any unpaid portion of related items, it is not typically factored into your debt-to-income ratios.

It is also important to note that non-medical unpaid collection accounts that are over $2,000 do require that 5% of that outstanding balance be included in factoring the total borrower’s debt-to-income ratio. This is also true, even if the borrower hasn’t currently made a recent payment to these particular accounts.

Also, the based on 2017 FHA Guidelines On Student Loans, Fannie Mae has some leniency in regards to factoring those outstanding balances in the situation that the 5% amount is the ultimate cause for you from qualifying for a loan, you can possibly negotiate and a payment agreement with the creditor in an effort to lower the monthly debt requirement.  It doesn’t always work, but many times it can be negotiated and it does work to your advantage. I have even seen, in some situations, negotiating the final payout of the loan and it was more advantageous to go ahead and paid off the loan.

Please note: that to prove that is eligible to be used in lieu of the 5% rule, all documentation, must be provided in writing or documented and the written terms of the payment agreement, must be proved in writing and you must provide proof.   Somehow people forget after talking on the phone, you must be the one to prove you. Get it in writing and follow up, just some sound advice from hearing horror stories in the past.

One Great Big Exception in the past due when it comes to collection accounts and any unpaid/past-due debt and that is, you guessed it, your government funded student loans.  All student loan guaranteed by the government cannot be past–due or in collections. If any chance any or part of the loan is past due, the past due amount needs to be made current and/or in “good standing” for you to qualify for an FHA loan. This also applies to other loans, such as well as VA and USDA.  So do not think you can get around the situation by changing to another government secured loan.

Think about it, you have borrowed from the government and for you to qualify for another similar loan; you need to be up to date on the current one. I have found that there is no exception to this rule and that if you are past-due on current government debt, the same government is not going to loan you another loan. Therefore attempting to borrow on an FHA loan would be out of the totally out of the question.  This is just common sense from the lender, “the government” standpoint, if can’t manage a current loan, you most likely can not be trusted with an additional home loan as well?

Based on the above text we can come up with key points and conclusions  on 2017 FHA Guidelines On Student Loans

  • Adjust you debt-to-income ratio so that you qualify for the loan even with a student loan payment.
  • Adjust your larger payments; such as auto, boat or debt consolidate in order to qualify.
  • Pay off or minimize all high interest credit cards and revolving store cards so that the amount you pay on your student loan is equaled out or surpassed.
  • Make sure that all your payments are current and up to date including your student loan.
  • Negotiate with your creditor to get your payment down, or completely paid off.
  • Do not add any more student debt, unless it will drastically improve your income. In other words, don’t make the problem worse.
  • Get help from an Experienced Mortgage Loan Officer, before you try to get a loan, so they can guide you in the Best Way possible to have the Best Terms on the FHA Loan.

Now that you see that your student debt does have a large impact on your opportunity to buy a house.  I want you to be informed on all the important facts before you waste your time and money into buying your dream home only to get rejected. Also keep in mind that the old rule for exempting student debt does not apply today and you must take into consideration and find ways to compensate for your student loan payments.

I would be glad to help you with all the possible solutions and guide you in all the rule changes. If you need help with this subject or any other topic relating to financing a new home, please feel free to click on my website www.mortgagelendingplace.com or call us anytime at 877-300-6257 or email me at contact@mortgagelendingplace.com

 

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