The FHA has announced they will be changing how they calculate student loan payments come September 2015. Until now, the FHA allowed you to exclude student loans that were in deferment from your debt to income ratios.
Under new rules, the FHA will calculate 2% of the student loan balance regardless if the loan is in deferment, unless a payment is already established. So on a $25k student loan, the payment calculated will be $500.
This means if you are planning on applying for an FHA loan and have deferred student loans that would disqualify you if their payment was included in your debt ratio, you should get moving sooner rather than later, or adjust your plans to get qualified for a mortgage.
As more than 65% of home buyers are carrying student loans these days, and the average student debt per borrower is $25k, this new ruling will affect borrowers looking to qualify for a FHA loan.
These rules go into affect in September 2015.
Fannie Mae also announced recently they will be changing how they calculate student loan payments for conventional loans.
They are now using 1% of the student loan balance, regardless if your student loan payment is lower than 1% of the balance.
So even if you are paying a monthly payment of $125 on a $30k student loan balance for example, a $300 monthly payment (=1% of the balance) will be calculated in the debt to income ratios.
These new rules are already in affect and we are seeing it affect some borrowers, as the higher student loan payments are lowering the final loan approval amounts borrowers can qualify for.
If you have been approved for a conventional mortgage recently and you are carrying student loan debts, but you are still shopping for a home and are not in contract, it would be a good idea to check if this new rule affects you.This will ensure you can still qualify for the mortgage.
If you are planning on applying for an FHA loan and have deferred student loans that would disqualify you if their payment was included in your debt ratio, you should get moving sooner rather than later on the loan approval process so you can see what you qualify for.
If you have any questions about any of this information above, or you would like to get approved for financing, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!
