May 18, 2015
A reader asks, “I am trying to purchase a house. My loans arent scheduled to begin repayment until Nov, of 2016, well over 12 months from now. I am currently enrolled. If you factor in what my loan payment will be, I am at a 46% debt/income ratio, if not, I am under the 41% line. My question is: Will my student loans count toward the debt/income ratio, even though I dont have to start paying them for another 18 months or so?”
FHA loan rules in HUD 4155.1 Chapter Four, Section C addresses the student loan debt topic, as follows;
“Debt payments such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing must be included by the lender as anticipated monthly obligations during the underwriting analysis.”
That is the FHA loan minimum standard, but it’s important to keep in mind that lender standards also play a part–you may (or may not) find that the lender has a higher standard, or that the standard for these types of debt may depend on other financial qualifications. The length of time between loan closing and the debt coming due may be a factor above and beyond the minimum–depending on circumstances and lender requirements.
For example, a borrower with marginal credit scores may discover the lender takes a harder look at pending debt such as this.
Borrowers with perfect payment records for their financial obligations in the last 12 months or more could discover the lender takes a more favorable view in spite of the upcoming student loan debt versus a borrower who is not fully prepared (coming to the loan process without 12 months of on time payment on all financial obligations).
So while FHA loan rules do provide the baseline here, you will need to discuss your situation with the loan officer to see what may or may not be possible at that financial institution given the circumstances.
Do you have questions about FHA mortgage loans or refinance 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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