Are you looking to buy a house now? Waiting could cost you as inflationary pressures will likely cause your dollar to decline. Moreover, interest rates will begin to rise in 2022 – 2023 as the Fed begins to normalize the interest rate. If you have student loan debt that has prevented you in the past from buying a home, keep reading…
In light of this, mortgages and refinances are a very popular topic now — especially among those with student loan debt. One big hang up was just resolved. Previously, a mortgage lender had to use 1% of the outstanding loan balance, even when a borrower was in IDR and the monthly payment reported on the Borrower’s credit report was zero.
We would suggest a temporary fix: the borrower would exit IDR for a month or two where the payment may have been zero, make a fixed standard or extended payment, apply for the mortgage and after approval, get back into the IDR. This wasn’t the best fix; however, as it unnecessarily caused a student loan borrower to have the loan capitalize the unpaid interest. But it did let someone buy a house who otherwise could not.
There is a new guideline effective immediately for new FHA case files.
For Outstanding Student Loans, Regardless of Payment Status the mortgage company may use:
- The payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or
• 0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero.
So a $50,000 balance would have a presumed loan payment at 0.5% or $250. A $100,000 balance would have a presumed payment of $500. $250,000 would be $1,250. Just take the loan balance and multiply that by .oo5. You don’t have to exit the IDR for this to work.
Additionally, the following is also effective immediately which seems like common sense:
The Mortgagee may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full.
We have a wonderful guide as to the new rules and tips to help qualify for a home mortgage under various governmental programs (Fannie, Freddie, VA, FHA and USDA). But we aren’t allowed to publish or disseminate this as most is under a copyright by another company. However, we are allowed to talk with you about it, and help interpret it – which frankly is necessary unless you enjoy reaching things that look like a tax code. 🙂
Beyond these enhanced new governmental rules, we often can settle student loan debt so you are done once and for all. Remember, your student loan servicers do not represent you — their interests are not aligned with yours. They represent the creditor. So while they may or may not be friendly, they are not your friend. Don’t for one second believe that they are.
Most servicers however will take into consideration various hardships that have caused you to be unable to pay student loan debt. We get our best results when dealing with attorneys on the other side, as opposed to the standard debt collector customer service reps. If you need help to settle your student loan debt, please reach out to us to set a 1 on 1 consultation.