Have student loans destroyed my chances of becoming a homeowner?

[Kreepin]

I really want to take advantage of a foreclosure in the current market. I'm 28 and VERY much interested in purchasing my first home. FICOs are decent (high 680s) and I have about 5K saved for a deposit w/ very little revolving debt.

HOWEVER, my undergrad and professional school loans amout to roughly $95K. I just graduated about a year ago, so they're curently in deferment. You could once factor student loans out of your debt-to-income if they were in deferment for a least a year. But, with the current state of the real estate market, I'm curious to know if the interworkings have changed as far as overlooking this debt.

In short, are lenders still factoring out student loans in deferment or is that a thing of the past? If not, there's no way in hell I'll become a homeower absent a wife and 2nd income.

[Denita]

I have several clients of mine that are in your position - heavy student loans that are in deferment and little cash, but looking for a primary residence. You are in luck! It is a buyers market and FHA loans are very favorable to buyers right now. Get with an experienced lender that knows FHA, find out what you can buy and go for it. Good luck! PS - since it is a buyer's market, have the seller pay your closing costs and maybe even buy down your interest rate. There are even down payment assistance programs out there to help the first time homebuyer.

[Goose123]

Sorry to be the bearer of bad news, but the FHA will count those loans against you..... unless they are deferred for 12 month or more.

Conventional loans include deferred loans in your ratio no matter how long they are deferred for.

On either loan you might get an approval with a back end ratio of 49%-50% with a 680 score. The question is, why would you want to? That wouldn't leave a lot to pay the everyday expenses.

[jq26]

Kreepin', I'm in your boat. When I graduate next year, my loans will be roughly 80-85k. Many people are in the exact same situation. Besides, if your loan interest rate is low enough, it doesn't make sense to pay student loans off anyway.

I think the goal here is to boost your income enough that even though the loans are in your dti calculation, you still qualify for the mortgage you need. Or try to save a sizable down payment so that you don't have to carry such a sizable mortgage.

I think Goose is correct- why would you want to? You'd be really stretching with a large SL payment and a large mortgage payment. You could be setting yourself up for trouble.

[firstsource]

OR

You could always go to enough school to keep the deferment. I would suggest that once you Really graduate that you start making payments, but keeping the deferment going will do wonders for your DTI. You will be "trapped" for home loans in staying with FHA, but that is the only logical lending programs for most people anyway.

Charles

[momof5]

For vets only...the VA still excludes them. The only time they are included is when you are actually in repayment.

I just got my VA loan and my SLs (in deferrment) were not included. Then again, I only had $4500 worth of SLs when I applied. So I am no where near that level!

[Goose123]

Uh-mm, not really. From the VA lender handbook:

g. Deferred Student Loan Payments If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that time frame, the debt need not be considered in the analysis.

You must have gotten lucky and found a loan officer and underwriter that don't know how to do their job. You can get by a lender, but they will not get by the VA. That means the VA won't guarantee the loan, so they are stuck with it.

Question is - do you keep your eligibility since the VA won't be guaranteeing it?

I would have to call the VA on that one.

[momof5]

Actually by your post, it would be irrelevant because as I have stated before, mine are new loans. I am almost finished with my pre-reqs for nursing school (within the same college) and then I have 4 more semesters straight, then 6 mo before repayment so I have about 3 years.

Even if the loan officer was incorrect and it should be considered if within 12 months, mine isn't. So my VA is just fine, thank you very much.

[Goose123]

For vets only...the VA still excludes them. The only time they are included is when you are actually in repayment.

Your loan met VA guidelines then, the above statement does not. I didn't want the OP, or others reading this thread, to get incorrect information.

Congratulations on your new VA loan. Keep an eye on VA rates. One of the benefits of your loan is a VA interest rate reduction loan (IRRL). Go to the VA's web site to learn more about it.

[amortgageman]

Question is - do you keep your eligibility since the VA won't be guaranteeing it?

I would have to call the VA on that one.

Let's see........If you haven't used your eligibility, are you still eligible??????

[Goose123]

For vets only...the VA still excludes them. The only time they are included is when you are actually in repayment.

I just got my VA loan and my SLs (in deferment) were not included. Then again, I only had $4500 worth of SLs when I applied. So I am no where near that level!

This made me think she got her VA loan while SL were in deferment less than 12 months. That was the OP's question.

Eligibility would have depended on whether it was oversight or fraud. Oversight and the VA would have caught it Fraud would get by the lender and the VA.

BTW, you can use $36,000 of the eligibility on one loan and still be "eligible".