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Old 03-20-2011, 09:13 AM
 
42 posts, read 251,016 times
Reputation: 39

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Hi there! I also posted this in the real estate pro forum because I didn't realize this forum was here - maybe more appropriate here? Hoping someone can help me out!

My husband and I are thinking of buying a home in a year or so when he finishes school. He's an electrician and is doing an electrical degree to enhance his marketability. What he REALLY loves, though, is farming, so we're hoping to get a few acres so he can grow heirloom vegetables and garlic. I found out recently about the USDA rural home loans, which sound perfect for our family.

The questions I'm hoping you can help me with:

-When lenders consider the loan amount, do they base it on the last year of your income? My husband got a job in September making around $50,000, but prior to that he was making about half as much. We were hoping that if we wait to buy a house until next fall, they would use his current income to figure the loan amount. Is this right?

-I'm wondering, how do student loans factor into loan amount approval? Do they just consider the monthly payment amount?

-I have very large student loans (around $100,000) which are on the income contingent plan, making my payment currently $0 (they can never go above 20% of our discretionary income, but usually less, especially while we have 3 minor children). My husband's loans will be much lower than mine - maybe $20,000. If my husband applies for a loan without listing me on the application, will they still consider my debt, or just his?

If anyone has any advice on how to deal with student loans and mortgage applications (or any other input), I'd appreciate it! Thank you thank you so much in advance - we're really excited about figuring this all out!
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Old 03-20-2011, 07:22 PM
 
Location: MID ATLANTIC
8,206 posts, read 20,316,560 times
Reputation: 9467
I couldn't tell where you live, but I'm going to hope Virginia, based on your forum posts. Why is this important? My answer will not apply if you live in a community property state.

First, USDA mirrors FHA guidelines, for the most part. FHA requires the student loans to be deferred for 12 months or more, in order not to count them as a debt. NOT UNDER A HARDSHIP deferment, but thru the normal deferment process. There is a distinct difference. If the loans are due to start up in the next 12 months, the estimated payment would be required.

If your husbands higher paying job is not temporary (he is a regular full time employee), his new, improved income can be used. If he is hourly and not guaranteed 40 hours, his hours will be averaged. This is where you can run into an issue, if he runs into various weeks where there's no work. In that case, it's possible his past two years earnings could be averaged. However, if you present 1 month (or more) paystubs showing consistant 40 hours and the year to date shows consistent pay, you shouldn't have an issue.

If your student loans must be counted, you will have the option of not going on the contract and the loan. (Community property states wouldn't allow this). You will have to prove your income (or lack of) because USDA has a ceiling income. In other words, he could make too much. And there's two separate income sets of criteria and each is worse case. If your husband's paystub shows he is working 20 hours overtime and that puts him over the USDA limit, you're out. But, there's no way for the mortgage OT will be included without a track record.
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Old 03-21-2011, 06:44 AM
 
42 posts, read 251,016 times
Reputation: 39
Thank you for the help!

I actually live in PA right now, which I believe is not a community property state either. So I think your answer applies.

My student loans are actually not deferred - they are set up on Direct Loan's income contingent payment plan. So they calculate your monthly payment based on your family size and income - they subtract the poverty income for your state from your income and then take a percentage of what is left - if it's below a certain number, your payment is $0, which is what mine is right now. My payment will likely go up in the future if my husband's income increases, so I have no idea how they'd figure that into a mortgage... Which is why we thought maybe we'd have an easier time if he applied without me. I don't have any income of my own because I'm a stay at home mom, so that wouldn't have an impact either way.

My husband is hourly and works consistently unless the weather is really bad. When we apply, will we present several paystubs as evidence of income? Or a full year's? I'm thinking it would be better to apply in the summer or fall if it's for several months - that way we wouldn't have any days off for snow.

Thank you again! Any additional input is always appreciated!
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Old 03-22-2011, 09:25 PM
 
Location: Lending in all 50 states
189 posts, read 747,099 times
Reputation: 109
Quote:
Originally Posted by LaughinWillow View Post
Hi there! I also posted this in the real estate pro forum because I didn't realize this forum was here - maybe more appropriate here? Hoping someone can help me out!

My husband and I are thinking of buying a home in a year or so when he finishes school. He's an electrician and is doing an electrical degree to enhance his marketability. What he REALLY loves, though, is farming, so we're hoping to get a few acres so he can grow heirloom vegetables and garlic. I found out recently about the USDA rural home loans, which sound perfect for our family.

The questions I'm hoping you can help me with:

-When lenders consider the loan amount, do they base it on the last year of your income? My husband got a job in September making around $50,000, but prior to that he was making about half as much. We were hoping that if we wait to buy a house until next fall, they would use his current income to figure the loan amount. Is this right?

-I'm wondering, how do student loans factor into loan amount approval? Do they just consider the monthly payment amount?

-I have very large student loans (around $100,000) which are on the income contingent plan, making my payment currently $0 (they can never go above 20% of our discretionary income, but usually less, especially while we have 3 minor children). My husband's loans will be much lower than mine - maybe $20,000. If my husband applies for a loan without listing me on the application, will they still consider my debt, or just his?

If anyone has any advice on how to deal with student loans and mortgage applications (or any other input), I'd appreciate it! Thank you thank you so much in advance - we're really excited about figuring this all out!

Hi LaughinWillow,

Your husband's current year to date on his pay stubs will be used to qualify. The county income limits for a family of 5 will run as high as $97,750.00 per year for the household in PA.

Unlike FHA, USDA will include the student loan payments regardless of whether or not they are deferred.
See this link: http://www.rurdev.usda.gov/SupportDo...itingGuide.pdf.

With the unique situation of your student loans you will need to provide a copy of your terms and repayment agreement so an underwriter does not apply the standard 1% of the balance as your monthly payment.

You will want to apply in the summer while your husband's hours are consistant for a better chance of approval.

I hope this helps.
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Old 03-23-2011, 07:54 PM
 
42 posts, read 251,016 times
Reputation: 39
Thank you!

Do you know, if my husband applies on his own, does he have to list my debt at all? It seems that it might make things less complicated just to leave me off the application - plus I don't have any income to add, so I can't really bring that to the table anyway...
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Old 03-23-2011, 09:27 PM
 
Location: Lending in all 50 states
189 posts, read 747,099 times
Reputation: 109
Quote:
Originally Posted by LaughinWillow View Post
Thank you!

Do you know, if my husband applies on his own, does he have to list my debt at all? It seems that it might make things less complicated just to leave me off the application - plus I don't have any income to add, so I can't really bring that to the table anyway...

You're welcome.

Since PA is not a community property state, your debts will not be factor so that will make things a bit easier for you guys.
I just closed a USDA purchase up there in December, you gotta watch out for the property taxes!
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Old 03-24-2011, 09:00 AM
 
42 posts, read 251,016 times
Reputation: 39
Oh I know! And they're getting worse because the state is cutting funding for everything, so the localities make it up by raising property tax.
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Old 07-24-2011, 03:22 PM
 
1 posts, read 13,499 times
Reputation: 10
I have a question somewhat along the same lines as yours, I am currently a student seeking a USDA loan and I was denied because of the underwriters 1% rule on my student loans. I don't graduate until the end of 2012 but I would like to buy a house before that time and I can afford the mortgage if I can get the USDA to see my loans for a more reasonable payment is there anyway around that 1%? I was even thinking that I could start making payments on my loans but with that in mind my other concern is that when/if I borrow more money for school what will happen to my debt to income ratio?
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Old 07-24-2011, 07:54 PM
 
741 posts, read 3,335,303 times
Reputation: 402
To OP,
my husband and I got and closed on a USDA mortgage. We put this mortgage only his name. I didn't have to give SS# or anything. Because we're married they put me on the deed. This was the easiest mortgage we ever had. I was shocked that I didn't have to put down 20%. Every mortgage I ever had we put down 20%. We put $0. down and there is no MIP. The interest rates I got was in the 4's back in January.
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Old 07-26-2011, 12:41 PM
 
Location: Lending in all 50 states
189 posts, read 747,099 times
Reputation: 109
Quote:
Originally Posted by LordNicholas85 View Post
I have a question somewhat along the same lines as yours, I am currently a student seeking a USDA loan and I was denied because of the underwriters 1% rule on my student loans. I don't graduate until the end of 2012 but I would like to buy a house before that time and I can afford the mortgage if I can get the USDA to see my loans for a more reasonable payment is there anyway around that 1%? I was even thinking that I could start making payments on my loans but with that in mind my other concern is that when/if I borrow more money for school what will happen to my debt to income ratio?

Hi LordNicholas,

The only way around the 1% is to provide the exact terms of repayment from your student loan servicer.
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