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FHA Mortgage and Student Loans as of June 30


Brian B The Loan Professor
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The last post in this topic was posted 2458 days ago. 

 

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HUD sent out a letter sharing changes that will be in effect for all loans with a case number assigned after June 30.

 

Mortgagee Letter 2016-08, Continued

HUD Single Family Housing Policy Handbook 4000.1 (continued) Student Loans (II.A.4.b.iv.(H) (TOTAL) and II.A.5.a.iv.(G) (Manual))

(1) Definition Student Loan refers to liabilities incurred for educational purposes.

(2) Standard The Mortgagee must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments.

(3) Required Documentation If the payment used for the monthly obligation is:  less than 1 percent of the outstanding balance reported on the Borrower’s credit report, and  less than the monthly payment reported on the Borrower’s credit report; the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor.

(4) Calculation of Monthly Obligation Regardless of the payment status, the Mortgagee must use either:  the greater of: o 1 percent of the outstanding balance on the loan; or o the monthly payment reported on the Borrower’s credit report; or  the actual documented payment, provided the payment will fully amortize the loan over its term.

 

To Summarize

all student loans must be counted - regardless of payment type or status

You must get proof/documentation of the terms and payment - or use the greater of 1% of the balance or the payment showing on the credit report

 

 

BrianBTheLoanProfessor

Mortgage Forum Lead

 

 

 

 

 

 

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  • 3 weeks later...

late reply, but what makes this different than the ruling that started last fall in which student loans have to be counted..Our local Regions does not include student loans if they have been in forebearance for over 12 months if using their loan program.

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The difference is how the payments are calculated. My total monthly obligation for my student loans is about $500, but with the new change, they will take 1% of the total balance, which is $530.

 

I'm lucky it just slightly affects my DTI, but I can see this having a huge impact on people who have very low (sometimes even $0) income-based repayment plans.

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so... if I currently have an income based repayment plan that is only $350 per month, but I have a total loan debt of $112K, it sounds like if I apply this month, by the time I close I may not qualify for the loan anymore because they'll use $1120 as my monthly payment? (assuming it throws off my DTI too much)

 

Am I interpreting this correctly?

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so... if I currently have an income based repayment plan that is only $350 per month, but I have a total loan debt of $112K, it sounds like if I apply this month, by the time I close I may not qualify for the loan anymore because they'll use $1120 as my monthly payment? (assuming it throws off my DTI too much)

 

Am I interpreting this correctly?

Your new payment for mortgage calculations will be 1% or $1120 a month - sorry - you are right

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If I'm looking at FHA, does that go to 2%, or $2240?

If that's the case, I may want to ditch my income contingent plan. Do they only use the actual payment amount if it's a standard plan? (Not graduated?)

Edited by disatty
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they were saying 2% but changed it to 1% - if the payment is fixed for the life of the loan they will use that - if it is income based then they will use the 1% -

 

doesnt make much sense since IBR is based on your income - if income goes up payment goes up-

 

With these larger student loan debts that people are taking on they had to adjust something - I just think they went overboard a little

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they were saying 2% but changed it to 1% - if the payment is fixed for the life of the loan they will use that - if it is income based then they will use the 1% -

 

doesnt make much sense since IBR is based on your income - if income goes up payment goes up-

 

With these larger student loan debts that people are taking on they had to adjust something - I just think they went overboard a little

Ok, this part is good to know. I'm on the Extended repayment plan. My payment is fixed for the life of the loan, but the repayment period is 25 years instead of the standard 10 years.

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Is there any specific time period you need to have been in the particular payment plan for them to use the actual payment amount instead of the 1%?

 

Assuming 1% of my loan is $1120 and the dept of ed's website says my repayment amount on the standard plan would be $526, it would definitely be more beneficial to me to be on the standard plan, but if I have to be on it for 6 months before applying for it to be considered, it would not help me out to change it now (if I'm trying to get financed in the next month or so)

 

Thank you for all of the information!

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