via FHA’s New Student Loan Rule Could Impact Mortgage Borrowers

 

Student Loan Payment Calculations
Fannie
  • If a monthly payment is on the credit report, the lender may use that amount for qualifying purposes.
  • If a monthly payment is on the credit report is incorrect, the lender may use the monthly payment on the most recent student loan statement
  • If the monthly payment on the credit report is zero, the lender must use one of the following options to calculate the payment for qualifying purposes
  1. Document the borrower is on an income driven payment plan and the actual monthly payment is zero
  2.  Use 1% of the outstanding student loan balance as the monthly payment
  3. Calculate a fully amortized payment using documented loan repayment terms
FHA
Regardless of the payment status (currently in payment or deferred), the lender must use either:
  • The greater of:
  1. 1% of the outstanding balance; or
  2. The monthly payment reported on the credit; or
  •  Calculate a fully amortized payment using documented loan repayment terms
RHS
Regardless of the payment amount reporting on the credit, the lender must include the payment as follows:
  • A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
  • Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. One percent of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.
VA
  • If the borrower can document the student loan will be deferred 12 months from the closing date, the monthly payment does not need to be considered
  • If a student loan is in repayment or scheduled to begin repayment within 12 months from the closing date, the threshold payment amount must be calculated by  using 5% of the loan balance divided by 12 months
  • If the payment reporting on the credit report is greater than the threshold payment calculation amount, then the credit report payment must be used for ratios.
  • If the payment reporting on the credit report is less than the threshold payment calculation and the lender is using the lower payment to qualify the borrower then:
  1. A statement from the student loan servicer reflecting the actual loan terms and payment information must be included in the file.
  2. The statement must be dated within 60 days of closing
  3. It is the underwriter’s discretion to use the lower payment

 

One thought on “FHA’s New Student Loan Rule Could Impact Mortgage Borrowers”

  1. Reblogged this on Kentucky USDA Mortgage Lender for Rural Housing Mortgage Loans and commented:

    Student Loan Payment Calculations

    Fannie
    If a monthly payment is on the credit report, the lender may use that amount for qualifying purposes.
    If a monthly payment is on the credit report is incorrect, the lender may use the monthly payment on the most recent student loan statement
    If the monthly payment on the credit report is zero, the lender must use one of the following options to calculate the payment for qualifying purposes
    Document the borrower is on an income driven payment plan and the actual monthly payment is zero
    Use 1% of the outstanding student loan balance as the monthly payment
    Calculate a fully amortized payment using documented loan repayment terms

    FHA
    Regardless of the payment status (currently in payment or deferred), the lender must use either:
    The greater of:
    1% of the outstanding balance; or
    The monthly payment reported on the credit; or
    Calculate a fully amortized payment using documented loan repayment terms

    RHS
    Regardless of the payment amount reporting on the credit, the lender must include the payment as follows:
    A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
    Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. One percent of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.

    VA
    If the borrower can document the student loan will be deferred 12 months from the closing date, the monthly payment does not need to be considered
    If a student loan is in repayment or scheduled to begin repayment within 12 months from the closing date, the threshold payment amount must be calculated by using 5% of the loan balance divided by 12 months
    If the payment reporting on the credit report is greater than the threshold payment calculation amount, then the credit report payment must be used for ratios.
    If the payment reporting on the credit report is less than the threshold payment calculation and the lender is using the lower payment to qualify the borrower then:
    A statement from the student loan servicer reflecting the actual loan terms and payment information must be included in the file.
    The statement must be dated within 60 days of closing
    It is the underwriter’s discretion to use the lower payment

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