Friday, January 20, 2012

Will deferred student loans hurt my chances to get a home loan?

Norwalk, CA asks:
I want to buy a house but I'm being told that my students loans will hurt my ability to get a home loan.

The funny  thing is that my student loan payments don't start for 1 1/2 years. I don't have payments. How can payments I don't have stop me from getting a home loan?

Will my deferred student loans hurt my chances to get a home loan?
Franklin Advantage:
Deferred Student loans do not hurt your ability to get a home loan as long as:
A.) You are applying for a FHA or VA loan
B.) There will be at least 12 months (1 year) deferment of payments at the time of close.
FHA and VA financing will not calculate student loan payments against a borrower if there is at least 12 months deferment at the close of your escrow. This will need to be documented with a letter from your student loan creditors.

Conventional financing (Fannie Mae and Freddie Mac loans) will count a student loan payment in your debt to income ratios regardless of its deferment status.  If no payment is yet established, 1.5 percent to 5 percent of the balance will be used as a surrogate payment in qualifying depending on the investor.

Five percent of the current student loan balance is usually much more than what the eventual payment on the student loan will be. It behooves the borrower to get a letter from Sally Mae (or their student loan creditor) with their proposed payment. The letter with a lower payment can be used by the investor to qualify.

Contact or call Franklin Advantage at (800) 314-5626. Our seasoned professional Loan Officers are always available to answer your questions.

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