Ahem are there any mortgage underwriting professionals here at the Dope?
I am getting conflicting information about how Income Based Repayment (on federal student loans) must be handled from an underwriting viewpoint.
Moved MPSIMS --> IMHO, forum for financial (and other) advice.
Here’s the weird thing.
IT APPEARS that if I were on a deferment, if I could document that it will continue for at least 12 months, then my student loans can be completely ignored in determining what I’m eligible for.
But IT APPEARS that since I am on Income Based Repayment, underwriters MUST take into account my entire loan when determining eligibility.
This seems completely nuts. IBR is a far more financially stable position to be in than a deferral. Who knows what will happen once that deferral is over! But on IBR your payments will always be tied to your income. If you’re going to ignore student debt on a deferral, you should be ignoring it on IBR as well.
Anyone know anything about this, enough to explain why this isn’t crazy, or why this is factually incorrect?
We have a loan approved, but I have been doing some quick shopping around to see if we could get a better one, if someone else would treat IBR differently. In each case the story has been the same. The customer facing loan officer starts out super optimistic, thinking it should be no problem. Then the underwriter does their thing. And after that, no loan, or no loan better than the one we already have.
Frustrating.
Work for a mortgage company, not an underwirter but I deal with an underwriting a lot. Here’s what the Fannie Mae guidelines are. (Most loans work off of this. I haven’t checked Freddie but they’re probably the same if not more restrictive).
So, no, your loans won’t be ignored in deferment.
ETA: Found Freddie’s, they use 2% of outstanding balance to determien monthly debt.
Apropos of probably nothing, are you in a profession where your student loans can be forgiven?
Why would you want more debt than you can reasonably afford based on mortgage underwriting criteria?
Because the guidelines in this case apparently start from a false assumption.
Yep, I work at a non-profit, and if I keep this up for six more years the loan will be forgiven (tax free). That’ll be nice but we can’t wait six years to get out of this three room 1400 sq ft apartment.
Thanks, that is useful information. It seems to be inconsistent with information I’m getting from people I know who have gotten a mortgage while on IBR in a similar situation to me, but it is entirely possible that somehow these other sources have simply misunderstood what happened in their own cases. (But we’re still talking, in each case, about a single income, similar to my income, with a huge loan, with an extremely substantially reduced IBR payment. In these other cases, the lenders simply used the IBR amount, ignoring the full payment amount. Unfortunately in each case the lender was local to a particular area so I can’t just go apply where my friends applied. 
But on that note I put in queries at two lenders local to me.)
Not an underwriter and not directly relevant, but…
My wife is on IBR and we bought a house a few years ago with an FHA loan. Our combined incomes and the mortgage amount were such that there’s a good chance that’s why this didn’t come up as a problem for us. But at the time, her student loan payments were $0. The underwriters would/could not accept a $0 payment for a loan that was not in deferment. Fortunately, the payment was in the process of being adjusted to a trivial but non-zero amount and we just had to give them the letter from the student loan lender saying that there would be a payment amount in the future. I don’t know what would have happened otherwise.