Student Debt                   


FHA changing guidelines on deferred student loans

If you weren't aware, FHA is coming out with a revised underwriting manual on 6/15/15.  Currently Handbook 4155.1 is used, and while there are minor tweaks every now and then, for the most part it's remained pretty similar throughout the years.  However on 6/15/15 the new Handbook 4000.1 (not sure why it's a lower number) is going into effect, and I've noticed some bigger changes (haven't gone through every section yet), one of which is a change in deferred obligations (including student loans).

It reads:

(G) Deferred Obligations (TOTAL)
(1) Definition
Deferred Obligations refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance.

(2) Standard
The mortgagee must include deferred obligations in the Borrower’s liabilities.

(3) Required Documentation
The mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability. The mortgagee must obtain evidence of the anticipated monthly payment obligation, if available.

(4) Calculation of Monthly Obligation
The mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available.

If the actual monthly payment is not available for installment debt, the mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.

For a student loan, if the actual monthly payment is zero or is not available, the mortgagee must utilize 2 percent of the outstanding balance to establish the monthly payment.

"Mortgagee" means the lender.

This means if you are planning on applying for an FHA loan and have deferred student loans (or other deferred obligations) that would disqualify you if their payment was included in your debt ratio, you should get moving sooner rather than later, or adjust your plans to get qualified for a mortgage.

This is effective for new FHA case numbers on/after 6/15/15.  To get an FHA case # you need to submit an application and also have either an address (refinance) or an accepted purchase contract (purchase).