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My wife and I live in Pennsylvania. Our FICO is 710 and we earn a gross income of $125,000 a year. We are in a student loan repayment plan where we pay 15% of our income per month toward the loan. At present, our student loan is in forbearance. We had a bankruptcy discharged five years ago, so we have not reached the 7-year mark.
FHA and Fannie would have accepted the five-year bankruptcy time period but turned down our mortgage application because our student loan monthly payment (1% = $4000 a month) made our debt to income ratio too high. They would not use our repayment monthly payment, which is substantially less than the 1% criteria they used.
Freddie Mac accepted our student loan repayment plan amount--instead of the 1% criteria that FHA and Fannie require--but they require we wait at least 7 years from the bankruptcy to get approved for the loan.
Our question: At this time, do we have any options for a mortgage loan approval? Or must we wait until the 7 years pass and apply for a Freddie Mac loan?
My wife and I live in Pennsylvania. Our FICO is 710 and we earn a gross income of $125,000 a year. We are in a student loan repayment plan where we pay 15% of our income per month toward the loan. At present, our student loan is in forbearance. We had a bankruptcy discharged five years ago, so we have not reached the 7-year mark.
FHA and Fannie would have accepted the five-year bankruptcy time period but turned down our mortgage application because our student loan monthly payment (1% = $4000 a month) made our debt to income ratio too high. They would not use our repayment monthly payment, which is substantially less than the 1% criteria they used.
Freddie Mac accepted our student loan repayment plan amount--instead of the 1% criteria that FHA and Fannie require--but they require we wait at least 7 years from the bankruptcy to get approved for the loan.
Our question: At this time, do we have any options for a mortgage loan approval? Or must we wait until the 7 years pass and apply for a Freddie Mac loan?
We would appreciate any feedback.
Did you include a mortgage in your BK?
The only real option you have is to take your loans out of forbearance & the IBR plan & switch to a standard repayment plan. The only other option is to wait until you're eligible for a Freddie Mac loan.
Call a couple other banks and mortgage brokers.
For example, my CU uses 1% of my balance, which put me at a bad debt:income. The mortgage company I'm going through used my IBR payment. Both were looking at FHA loans.
Call a couple other banks and mortgage brokers.
For example, my CU uses 1% of my balance, which put me at a bad debt:income. The mortgage company I'm going through used my IBR payment. Both were looking at FHA loans.
Just a heads up:
The FHA guidelines require lenders to use either:
- The greater of:
- 1% of the outstanding balance on the loan; or
- The monthly payment reported on your credit report; or
- The actual documented payment AS LONG AS the payment will fully amortize over the term of your loan.
The first part pretty much kills you cause lenders will have to take the higher payment between 1% of your loan balance & the actual payment on your credit report.
The second part means that your loan would have to pay off by the end of term in order to count an actual IBR payment. For example: Let's say you have $150,000 in student loans at 6% and the term of the loan is 30 years. The monthly payment that would have that loan paid off by the end of the 30 year term would be $915.06 so if your IBR payment is less than this amount, the lender will have to fall back to first option.
Am I crazy to think that somebody who makes $125,000 a year shouldn't be in forbearance on student loans and ought to get those things paid off BEFORE buying a house? (Especially given the prior history of bankruptcy )
Am I crazy to think that somebody who makes $125,000 a year shouldn't be in forbearance on student loans and ought to get those things paid off BEFORE buying a house? (Especially given the prior history of bankruptcy )
Nope, I don't necessarily think you need to pay them off before buying a house, but the fact that they are in forbearance with that level of income means this person is living way above their means.
My wife and I live in Pennsylvania. Our FICO is 710 and we earn a gross income of $125,000 a year. We are in a student loan repayment plan where we pay 15% of our income per month toward the loan. At present, our student loan is in forbearance. We had a bankruptcy discharged five years ago, so we have not reached the 7-year mark.
FHA and Fannie would have accepted the five-year bankruptcy time period but turned down our mortgage application because our student loan monthly payment (1% = $4000 a month) made our debt to income ratio too high. They would not use our repayment monthly payment, which is substantially less than the 1% criteria they used.
Freddie Mac accepted our student loan repayment plan amount--instead of the 1% criteria that FHA and Fannie require--but they require we wait at least 7 years from the bankruptcy to get approved for the loan.
Our question: At this time, do we have any options for a mortgage loan approval? Or must we wait until the 7 years pass and apply for a Freddie Mac loan?
We would appreciate any feedback.
Holy moly.....$400k in student loan debt, $125k income and you want to buy a house....please tell me this is a joke....you already have a mortgage worth of debt as is, and are having enough trouble paying it to go into forbearance, and you want to add another mortgage load of debt??? Did I get this right? Will someone please knock some sense in?
Nope, I don't necessarily think you need to pay them off before buying a house, but the fact that they are in forbearance with that level of income means this person is living way above their means.
FHA and Fannie would have accepted the five-year bankruptcy time period but turned down our mortgage application because our student loan monthly payment (1% = $4000 a month) made our debt to income ratio too high. They would not use our repayment monthly payment, which is substantially less than the 1% criteria they used.
We would appreciate any feedback.
stop... do not pass go... do not collect $200....
with a $4k/month debt repayment stop taking on debt. No more vacations, no new cars, no new debt!
If your combined gross income is $125k / year on $400k in debt then something seriously went wrong. With that # both of you could have JD + LLM from NYU and should be grossing 2X where you are at.
I think a review of your entire debt/asset/earnings profile is in need for review.
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