Guidelines for KY FHA, VA, USDA and VA Mortgage loans with Student Loans on A Credit Report:
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Kentucky Fannie Mae or Conventional Guidelines for Student Loans:
- 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
Kentucky FHA Mortgage Loans Guidelines:
Regardless of the payment status (currently in payment or deferred), the lender must use either:
- .5 % of the outstanding balance; or
- The monthly payment reported on the credit; or
- Calculate a fully amortized payment using documented loan repayment terms
Kentucky USDA or Rural Housing Guidelines:
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. .5% of the loan balance reflected on the credit report must be used as the monthly payment. No additional documentation is required.
Kentucky VA Mortgage Guidelines for Student Loan:
- 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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As you can see, Fannie Mae or Conventional loans is the most lenient when it comes to qualifying for a mortgage loan with someone that has a lot of student loans on their credit report.
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
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