Congratulations! You decided to take advantage of the buyers market right now. I have been working with borrower's in Palm Beach Gardens, Florida as well as throughout Florida. Recently, one of my borrowers had deferred Student loans which showed clearly on their credit report as deferred. (No Payment due)
When figuring the clients Debt-to-income(DTI) I have to admit I did not include this at first. However, after speaking with one of my account executives from one of my Wholesale Lenders they reminded me of Fannie Mae guidelines. Which clearly state even if your student loans are in deferment you must include them on your Debt-to-Income Ratios.
How Do I Figure Out What My Payment Would Be?
The mathematical equation is simple. Take the balance of what you owe and multiply it by .014. This is what Fannie Mae uses as a guide. Even if this is not your payment. For example:
You Owe $25,000
x 0.014
Payment = $350
At this point you must be asking yourself "Why do I have to count this in my debt even though I don't have to make the payment yet?". Quite simply one day you will have to make this payment and Fannie Mae does not want you to get into financial trouble. They want to ensure you can afford to keep your home and pay your student loans. Especially with what has happened in the Mortgage Industry recently.
Does this Mean I Can't Get a Mortgage?
No. This does not mean you don't qualify for a mortgage. You just have to add this payment into to your Debt-To-Income which may decrease your buying power. However, the good news is if you decide not to go through Fannie Mae products, Sub-Prime along with some Alt "A" Lenders do not count this if you can show that you have at least one year of deferment still available. Please be aware that if you chose to go outside of Fannie Mae this will effect your rate.
If you are in the process of applying for a Mortgage please make sure your Mortgage Professional is aware of this so you can ensure a smooth transaction.
For More information: Mortgage Advice in South Florida or My Favorite Mortgage
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Full-Time Mortgage Broker in South FL. Palm Beach County. Specializing in Hard Money / Private Money, Foreign Nationals, Jumbo and Super Jumbo Loans. In addition I work with Today's Premiere Lenders.
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Matthew, I work with several Physicians and some lenders for them do not have to count them. They base it on future income. Are you aware of those programs? We have 2 in Ann Arbor that do it this way.
Missy, I am aware of some of these programs. I would double check to make sure if they are Fannie Mae loans. I was just writing on Fannie Mae because many lenders outside of this will lend. Thank you
Hey Matthew,
Great points about deferred payments. I've run into that issue before myself on previous clients.
Sean Allen
Sean, Thank you. It has been awhile for me I am just glad that I have some great A/E's around me to remind me. Thank you for your comment
Matt, Wish you were here about a month ago.. Sigh.. we could have used you!!
Lysa, Sorry story of my life.. always a day late..lol.. Just kidding. You can always call me if you have a quesiton
Matt,
Good deal. I often find Clients that don't understand about the deferment of student loans, although I have had clients call and consolidate, and Re Defer these loans..
Nice,
Tom Weiss
I thought those were Sallimae loans?
Tom, It is easy to defer them but hopefully at some point they will be paid.
Neal, Some are Sallie Mae. However, this about deferment and it does not matter who is deferring them.
I am surprised that Govt loans still exclude the payment.....
Tom, It amazes me aswell. Thanks for your comment
Hi Matt, this is very interesting and great information. Thanks for sharing it with us.
Stephanie, Thank you, It is my pleasure.
Actually we lost a deal because of a deferred student loan last month. :(
Matthew- Hey, I did not know that! Thank you for writing this post. Great info to pass along. Katerina
Matt, this is a great post! This is not something many buyers "think about" until years later...good info here!
Lysa, Sorry about that.. Should have called me first..:-) just kidding. You know if you ever have any questions I would be more than happy to answer them for you
Katerina, My pleasure..
Susie, Very true they don't think about it until they go and try to buy something