January 28, 2015
A reader asks, “I co signed for a student loan for my daughter who has 2 1/2 years left of schooling. This puts her at around 3 years out before needing to start making payments on this debt. i’m looking to get pre approved for a mortgage in the next 6 months. Does the loan, being 3 years out before repayment begins act negatively towards a FHA loan approval?”
FHA loan rules do include scrutiny of any debt the borrower may be liable to repay as a co-signer, but individual lender standards may vary. However, the timing of the student loan debt in this case may play a positive role.
Let’s look at what HUD 4155.1 says about student loan debt in general in connection with an FHA loan application.
“If a debt payment, such as a student loan, is scheduled to begin within twelve months of the mortgage loan closing, the lender must include the anticipated monthly obligation in the underwriting analysis, unless the borrower provides written evidence that the debt will be deferred to a period outside this timeframe. Similarly, balloon notes that come due within one year of loan closing must be considered in the underwriting analysis.”
Borrowers who need more information should look up HUD 4155.1 Chapter Four Section C where these rules are located.
In this case the student loan issue might not even be a problem if lender standards permit. No two lenders have identical standards so it’s not possible to speculate what may or may not be possible, but as far as the FHA loan rules go, this reader may have a better chance at loan approval due to the timing of the student loan repayment.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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