It is no secret that the cost of higher education just keeps going up across the board and what we are finding out is that more and more recent graduates and potential borrowers are being saddled with crippling student loan debt.
Going into the price of obtaining a college education is a story for another day, but in this article we will focus on the process of Buying Home With Student Loan Debt and rest assured, there are options out there for all borrowers. Just because you have recently graduated and aren’t making your desired income doesn’t mean you cannot purchase a home and renting doesn’t need to be a solution for living on your own. You have put in the hard work in order to better yourself and you shouldn’t be prevented from home ownership and there are loan programs that are more lenient than others.
If there were ever a positive update to Conventional Loan guidelines, in particular Fannie Mae guidelines, these relaxed guidelines made Buying Home With Student Loan Debt a much easier possibility than it had been in the past. Under the old guidelines you were required to calculate 1% of the outstanding debt into your debt to income ratio and that income based repayment plans as well as deferment didn’t have any effect on the amount used. Under the most recent update to the guidelines you will see that income based repayment plans that can be confirmed and documented by the lender are able to be used in a borrower’s debt to income ratio.
However, if your student loan debt is currently being deferred then you are still going to be required to use 1% of this loan in order to qualify for a home. When you try Buying Home With Student Loan Debt you need to figure out if you can truly afford the home and if taking a loan out of deferment is the right way to go and that this debt won’t hurt your financials down the road. If you do choose to take your loan out of deferment, we suggest you contact one of our loan professionals as they can go about forecasting your debt to income ratio and see if you can even get approved when the loan is out of deferment.
Under the more lenient FHA Guidelines, it was way easier Buying Home With Student Loan Debt as FHA used to not use student loan debt into your debt to income ratio if the payments were deferred. Recently they have changed their stance here and have said that “a debt is a debt” when talking about student loans. What this means is no matter if your student loan debt is deferred or under an income based repayment plan, you are going to be required to absorb 2% of the outstanding debt into your debt to income ratio.
Since FHA guidelines require the use of a fully amortized payment amount, the most relief borrowers are going to get is if they refinance their student debt on the longest term possible in order to have a lower payment. Aside from this, Buying Home With Student Loan Debt in terms of FHA guidelines is a lot more difficult than it used to be.
Just because you have student loan debt does not mean that you cannot own a home as there are plenty of borrowers out there who have done both.If you want us to evaluate your situation, please reach out to Mortgage Scenarios immediately and we can definitely point you in the right direction.