U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 01-20-2018, 12:54 AM
 
12,683 posts, read 12,097,290 times
Reputation: 17361

Advertisements

Here is Fannie;

"Student Loans
If a monthly student loan payment is provided on the credit report, the lender may use that amount for qualifying purposes. If the credit report does not reflect the correct monthly payment, the lender may use the monthly payment that is on the student loan documentation (the most recent student loan statement) to qualify the borrower.

If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the lender must determine the qualifying monthly payment using one of the options below.

If the borrower is on an income-driven payment plan, the lender may obtain student loan documentation to verify the actual monthly payment is $0. The lender may then qualify the borrower with a $0 payment.

For deferred loans or loans in forbearance, the lender may calculate

a payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment), or

a fully amortizing payment using the documented loan repayment terms."
Reply With Quote Quick reply to this message

 
Old 01-20-2018, 06:04 AM
 
93 posts, read 65,936 times
Reputation: 114
Quote:
Originally Posted by boxus View Post
Here is Fannie;

"Student Loans
If a monthly student loan payment is provided on the credit report, the lender may use that amount for qualifying purposes. If the credit report does not reflect the correct monthly payment, the lender may use the monthly payment that is on the student loan documentation (the most recent student loan statement) to qualify the borrower.

If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the lender must determine the qualifying monthly payment using one of the options below.

If the borrower is on an income-driven payment plan, the lender may obtain student loan documentation to verify the actual monthly payment is $0. The lender may then qualify the borrower with a $0 payment.

For deferred loans or loans in forbearance, the lender may calculate

a payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment), or

a fully amortizing payment using the documented loan repayment terms."
I think you must have pulled this information from an older source. It is no longer correct. It is really simple: a lender must use the greater of 1% or fully amortized payment. Income based payments are not fully amortized.

Here's an illustration using a loan balance of $20,000
1% = $200
Fully amortized = $207 ($20k balance at 4.5% interest over 10 year term)
Income based payment = $55

In the scenario above, no matter what is showing on the credit report, an underwriter would use the $207, the fully amortized payment, for qualifying.
Reply With Quote Quick reply to this message
 
Old 01-20-2018, 01:51 PM
 
12,683 posts, read 12,097,290 times
Reputation: 17361
Quote:
Originally Posted by LoanChic View Post
I think you must have pulled this information from an older source. It is no longer correct. It is really simple: a lender must use the greater of 1% or fully amortized payment. Income based payments are not fully amortized.

Here's an illustration using a loan balance of $20,000
1% = $200
Fully amortized = $207 ($20k balance at 4.5% interest over 10 year term)
Income based payment = $55

In the scenario above, no matter what is showing on the credit report, an underwriter would use the $207, the fully amortized payment, for qualifying.
It is from this source:

https://www.fanniemae.com/content/gu...g/b3/6/05.html

I only bring it up because I just got a mortgage and they used my income based repayment amount as part of the DTI. They said new rules passed last summer allow for this, versus the old rules that did not allow it because it is technically only good for a year and must be approved each year.
Reply With Quote Quick reply to this message
 
Old 01-20-2018, 09:02 PM
 
16 posts, read 6,730 times
Reputation: 10
Seems like most lenders do not check for themselves, do what their boss says (whether current or not), or just goes with the highest payment to be safe...

I find it ironic that I thought this would be simple, but it changes rather frequent it seems.
Reply With Quote Quick reply to this message
 
Old 01-21-2018, 12:26 PM
 
10,274 posts, read 6,515,435 times
Reputation: 10857
Quote:
Originally Posted by Wasted Potential View Post


This "gift" payment can simply be a check denoted as "gift?" I believe one of the prior LO's mentioned if the funds are within my account for over 6+ months then they do not question origin if no credit report shows similar loans. Is that a standard time frame or just personal to the provider?


.
Someone mentioned if your finance gifts you money, that would only be if you apply solo. If she is a co applicant she can't gift money becuase it would be for half her loan too.

There are some different rules as far as gifting money goes. My loan was FHA and I got closing cost money as a gift from my father and some loans have stricter rules as to who can gift you the money. He had to sign a gift letter and provide 2 months of bank statements and the money had to be wired to the closing company but other lenders may have different rules
Reply With Quote Quick reply to this message
 
Old 01-21-2018, 03:15 PM
 
93 posts, read 65,936 times
Reputation: 114
Quote:
Originally Posted by boxus View Post
It is from this source:

https://www.fanniemae.com/content/gu...g/b3/6/05.html

I only bring it up because I just got a mortgage and they used my income based repayment amount as part of the DTI. They said new rules passed last summer allow for this, versus the old rules that did not allow it because it is technically only good for a year and must be approved each year.
OK, I see what's going on here. That is from the Fannie Mae guidelines and it applies to conventional loans. It does not apply to FHA loans, which has different guidelines. Below is from the HUD handbook, which is the manual for underwriting FHA loans:

(4) Calculation of Monthly Obligation
Regardless of the payment status, the Mortgagee must use either:
 the greater of:
o 1 percent of the outstanding balance on the loan; or
o the monthly payment reported on the Borrower’s credit report; or
 the actual documented payment, provided the payment will fully
amortize the loan over its term

With conventional, the borrower will need at least 5% down and will need to carry private mortgage insurance. With FHA, the borrower can get by with 3.5% down, but will also carry mortgage insurance for the life of the loan.
Reply With Quote Quick reply to this message
 
Old 01-21-2018, 03:22 PM
 
93 posts, read 65,936 times
Reputation: 114
Quote:
Originally Posted by Wasted Potential View Post
Seems like most lenders do not check for themselves, do what their boss says (whether current or not), or just goes with the highest payment to be safe...

I find it ironic that I thought this would be simple, but it changes rather frequent it seems.
Lenders have very vigorous behind-the-scene checks they run on borrowers. I can assure you they don't just "do what their boss says." Government loans--such as FHA, VA and USDA--and conventional loans sold to Fannie or Freddie are highly regulated and the very last thing a lender wants is to underwrite a loan incorrectly, rendering the loan uninsurable and non-salable. When that happens, the lender is forced to buy back the loan, with can potentially reduce their warehouse line and also expose them to risk they are not in the business to take on. It's always possible they might be able to sell the uninsured loan on the scratch-and-dent market (yes, there seriously is a market for uninsured loans called the scratch-and-dent market) but they sell for less than their face value, meaning a lender takes a loss on those loans.

You are correct that changes in underwriting guidelines occur frequently. That is why it's import that you work with an experienced loan officer that you trust.
Reply With Quote Quick reply to this message
 
Old 01-22-2018, 09:07 AM
 
2,962 posts, read 2,875,098 times
Reputation: 2839
I think the key part of the problem is that your aggregated debt is so high. I'd imagine your student loan payments are on an income contingency repayment plan. I could be wrong, but that also means that as your income goes up, your payments go up. Or your payments can go up for other reasons.

Point is, you already have $300k in debt walking in the door to get another 130k in debt. That 300k doesn't count your other 900/mo in debt (car loans?). When I bought a house, they didn't just look at DTI on a monthly basis, but they looked at debt-to-income from a broader view.

What if I owned a second house paying interest-only payments for the next two years and I wanted a jumbo loan on top of that one? How would I pay it off when the principal end of my mortgage came due? I think they are looking at your student loans with knowledge that those payments will likely go up. From my own experience, your fiancee's $400/mo loan payment likely WILL go to 2200 under ICR. My wife had a $90k student loan that jumped to something like 1200/mo after she worked a few years.

I'm not saying they are right. And I'm all too keenly aware of that rule and how much it hurts recent grads. I didn't buy my first house until I was 28, partially due to my outstanding student loan debt. But I leveraged my degrees into high-paying jobs and then it was a non-issue.
Reply With Quote Quick reply to this message
 
Old 01-22-2018, 09:50 AM
 
16 posts, read 6,730 times
Reputation: 10
Quote:
Originally Posted by dspguy View Post
Point is, you already have $300k in debt walking in the door to get another 130k in debt. That 300k doesn't count your other 900/mo in debt (car loans?). When I bought a house, they didn't just look at DTI on a monthly basis, but they looked at debt-to-income from a broader view.

What if I owned a second house paying interest-only payments for the next two years and I wanted a jumbo loan on top of that one? How would I pay it off when the principal end of my mortgage came due? I think they are looking at your student loans with knowledge that those payments will likely go up. From my own experience, your fiancee's $400/mo loan payment likely WILL go to 2200 under ICR. My wife had a $90k student loan that jumped to something like 1200/mo after she worked a few years.

I'm not saying they are right. And I'm all too keenly aware of that rule and how much it hurts recent grads. I didn't buy my first house until I was 28, partially due to my outstanding student loan debt. But I leveraged my degrees into high-paying jobs and then it was a non-issue.
My non loan debt: 1 card w/ $3.5k on it, another w/ $1.4k on it. So in actuality, my current monthly payments are closer to $350, no other payments.
Fiancee non loan debt:$300 car payment, and around $200/mo on two other credit cards w/ other revolving cards around $50/mo. Total owed on cards probably $2k for herself.

I tried to give high end values at time of application; but in actuality, by the time of application I will most likely only have 3-5k in private school loans and 55k in federal school loans; all other monthly payments for myself expected to be $200/mo for debt obligations. I do not feel I will have a problem w/ approval, more so just the conjunction of her and I. for the $110k-130k mortgage I would assume the 50k to "barely" suffice in a lender's eyes and that's the only reason for co-signing.

She will be 29 by time of application, and I will be 27 (hard to feel like I have been alive and kicking for that long and accomplished so little); we have been renting for what will be 6 or 7 years by the time of application. Her degree doesn't give "doctor-salary" but gives her satisfaction and she would continue the job even if she was not paid (well, at least for 20 hours a week haha) - so we know she is content.
It is good to see people who understand this difficulty while we show we are not incompetent individuals.

Last edited by Wasted Potential; 01-22-2018 at 10:08 AM..
Reply With Quote Quick reply to this message
 
Old 01-22-2018, 10:15 AM
 
16 posts, read 6,730 times
Reputation: 10
Quote:
Originally Posted by LieslMet View Post
While fair or not, please consider that your fiancee might have financial issues that need to be directly addressed. Such debt for an education that will not return her investment is something to take a second look at, and consider whether this is a pattern (and will continue in your life together) or isolated to being led unwisely at the vulnerable time of parental expectations and ignorance of her former life.

You may very well have done this already... but just please consider that this may not be a burden you HAVE TO carry. Student loans cannot be bankrupted. This debt is something you WILL have to pay, no matter how prudently you've made your own choices, when you marry and The Future happens. Consider that you may have a wife who stays at home in the future because childcare costs more than her salary. And you'll be paying for her poor decisions until you can't take it anymore.
The first $3k-5k I spend before home ownership is an ironclad prenuptial agreement
Whether I feel like I need it or not; 5k now is cheaper than 100k+ in the future.

It is like being old and wearing a diaper; for safety of course. Ok you got me, comfort too.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top