When getting a mortgage many items are taken into account. These items includes your income, credit scores, assets, expenses, etc. One major expense can be if you have student loans. How mortgages address student loans is different than how we think of them. Such as, if your payments are deferred we take that as we do not have student loan payments. But for a mortgage they consider what the future student loan payment will be. And they address what that payment would be from a worse case stand point. Here is how your student loans are addressed when getting one of the different mortgage types:
FHA Loan- When getting a FHA loan you need to know:
In the past if your student loan payment was deferred for over 12 months you could ignore the payment. THIS IS NO LONGER TRUE. Even if your payment is deferred a payment must be determined
When calculating a payment you must go with the highest payment of these 3 options: 1% of the account balance as the payment or the payment shown on the credit report, whichever is more. Or use the fully amortized payment during the loan. This means you will need to call your student loan company and find out what the highest the payment could go to.
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If your payment has been reduced due to income or other factors, the future fully calculated payment must be counted
VA Loan- When getting a VA loan:
If your loan payment is deferred for over 12mths, the future payment can be ignored.
If the payment is deferred for under 12mths, you must find out what that future payment will be.
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If the payment has been reduced, due to income or other factors you can use that current payment. And not have to document future higher payment.
Conventional loan- When getting a Conventional loan:
What the fully amortized/calculated payment must be determined
Even if the loan is deferred currently, the full future payment must be determined. Or the 1% of the account balance as a payment can be used if higher than the future amortized payment.
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If following Freddie Mac’s underwriting guidelines you can use a reduced payment if documented.
USDA Loan- when getting a USDA loan:
Even if the payment is deferred, the future payment must be determined.
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If the payment is based on an adjustable rate, reduced payment, income influenced payment the future payment must be determined or 1% of the account balance as a payment. Whichever payment option being the highest would be used as the future payment. You can get an exception for the lower future payment if the interest rate is fixed and is not to change over the life of the student loan
Whew, that is a lot of info to remember. When getting a mortgage it is important to know the truth about how student loans can affect you getting a mortgage.
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