Picture it.......Atlanta, 2019 You've been working your dream job for quite some time and your salary is enough to support your lifestyle and accumulate a pretty decent amount of savings. You've accomplished a lot in obtaining multiple and/or advanced degrees and you're finally enjoying the fruits of your labor. So...you decide that now's the perfect time to buy a home. Since you're paying 1800 per month in rent, you figure that handling a similar mortgage would be as easy as taking candy from a sleeping baby. You drive around town to get a feel for your desired neighborhoods and you're finally ready to take the plunge. Confidently, you contact your neighborhood mortgage lender and realize that all of the hard work you've placed in obtaining your degrees has now come to bite you in your proverbial ass. You learn that your student loans have become much more of a nemesis than you initially thought. Unfortunately, you're not alone. FHA has now revamped the way in which student loans are calculated in determining your debt to income ratio. You learn that, instead of calculating your student loan payment at the actual amount of your payment provided by your graduated or income based repayment plan, your student loan payment will be calculated at 1% of the total loan balance. So, if your loan balance is $100,000, in FHA's viewpoint, your monthly payment is calculated at $1000! What in the entire hell???!!!???
Many of my clients find themselves in the same predicament and it's not one that's easily navigated. Once an auto loan and credit cards are thrown into the mix, many find themselves unable to purchase at all! Luckily, there's another option that may help...but it definitely takes a bit of preparation work. Fannie Mae's Home Ready loan product may be a viable solution! Their guidelines are a bit more relaxed than FHA, but the overall product may be the better fit for you. Some benefits of Fannie Mae's Home Ready loan product include:
* Low down payment of only 3% of the purchase price.
*Calculates student loan payment at the ACTUAL payment amount (even if you're currently enrolled in an income based repayment plan or a graduated repayment plan).
* Allows mortgage insurance to be canceled when your loan to value falls below 80%.
*Does not contain a minimum amount for reserves.
*Allows for down payment funds to be sourced in various ways including down payment grants, gift funds, and personal reserves.
*Requires a lower mortgage insurance payment.
*Does not contain a first time homebuyer requirement.
Of course, this loan product has credit score and debt to income requirements, so paying off as much debt as possible and working to ensure that your credit score exceeds 620 will fare much better in obtaining that coveted loan approval. However, it's a much better alternative to FHA when your student loans have created a stumbling block on your journey to home ownership. To learn more about homeownership and loan options, feel free to download a copy of my home buyer's guide by clicking here. If you'd like to learn more about Fannie Mae's Home Ready loan, just let me know and I'll be more than happy to put you in contact with one of my magnificent lending partners.
Have a great weekend! Oh wait...today's only Wednesday..Shoot!.
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