I was just wondering how your student loans affect your debt to income and your fico score. I am currently in school and since 2005 there have been 6 student loans opened because the school splits the disbursment into two. I have paid for my classes myself this semester but, come the fall I will be taking out student loans again.
My husband and I would like to try to buy a house in a year and I was just wondering if these will negatively affect us in any way.

BTW... they are all still in defered status and as of right now I have about 10,000 in student loans and after next school year I will have about 20,000 in student loans.

I think this is a very valid question that deserves a good response. I do not know the answer either and would like to know if anyone else has any information?

I have wondered this as well. I am in the same situation!

DTI is never a part of your FICO score -- they don't know your income, so they wouldn't be able to figure it out. Assuming all of your loans are in deferment, they're not having any effect on your FICO score at all. They're just sort of there.

However, they do get looked at in a manual review. No loan decision is ever based exclusively off of your FICO score. As I understand it, loan processors will look at anything that's going to come due in the next 6 months or so to determine DTI. If they're in repayment, they will absolutely affect your DTI in the same way as any other loan in repayment will, but, again, that's just a straight percentage. You could figure that out right now (take your total debt payments each month and divide it by your gross monthly income and voila!). But, even if they are in deferment and aren't considered by your loan processor, you're going to want to calculate them to be sure you can afford the payments along with the house payment once you're out of deferment.

Hope this helps! Good luck in school and with the house!!

Thanks for the answer zig, I had no idea they only looked about 6 months out, and I always assumed DTI was based on the amount you owed overall, not on the amount owed per month. What you owe per month, and what they reasonably expect you take in over the next six months or so, given the state of things in the economy, makes far, far more sense. Learn something new every day.

Excellent point about considering what happens when they DO enter repayment, too...

Given that information whoever approved the last loan I recieved on a house was defiantely having a bad day when they approved it

I generally agree with Ziggy, have very little knowledge about loan underwriting, and do have a bit to add:

1) Generally speaking, student loans do not seem to ever be part of a manual review process for anything but a mortgage. If they are we never get requests for documents for these other purposes, at least.

2) Talking to borrowers and loan officers, I get the impression that different mortgage programs have different ways of factoring it. Common document requests:
- letter stating loan is in deferment or forbearance for a certain period of time (form letter that's automatically sent when deferment or forbearance is granted, easy to send copy, borrower can print from website, etc.)
- letter stating monthly payment amount, number of payments in loan term, etc ("disclosure of repayment" automatically sent when loan goes into repayment, copy can be sent).
- other (often stuff in the "other" category isn't going to happen, or is completely retarded. Ex: "letter showing account status, balance, payment due date, and amount"- in other words, a statement.)

3) Generally, these document requests are for manual review of a sub-prime mortgage. Some will not count into DTI if no payment is due in 6 months. For others they count it if a payment is due in the next 2 years. For others it's the installment amount they need to document (unless you can prove it has a 15-year term they will divide amount owed by 12, etc).

4) Countrywide, Citi Mortgage, Chase, etc never ever request docs. It's always some small company.

Seminolegirl

If you look in the pinned area of the Mortgage Forum you will find an in depth explanation of how student loans are viewed by different types of lenders. However, a quick overview goes like this:

1) Conforming lenders (loans that conform to Fannie Mae or Freddie Mac guidelines): Student loans count towards debt ratio period. It does not matter whether you are in repayment or in deferment/forbearance.

2) FHA/VA/USDA lenders (mortgages guaranteed/backed by the Federal Government): If you can document that the loan(s) will be in deferment/forbearance for at least 12 months after a mortgage closing they will not count towards the debt ratio. Otherwise they will.

3) Nonconforming/Subprime: Generally they will follow FHA guidelines but each lender makes their own determination and you would need to check with the speicific lender for verification.


fla-tan