Qualifying for a Mortgage with Income Based Repayment (IBR) Student Loans

by on 3.16.16 in Qualifying

UPDATED: 7/16/2016 – Student loans and mortgage qualifying are indeed a hot topic. Since first posting this article in March 2016 both FHA and Fannie Mae have made significant changes to their treatment of Income Based Repayment student loans.

Some of the changes will help those with IBR student loans while others most certainly will not. Updates are highlighted in RED.

If you have questions about your specific situation and potential options, comment in the thread at the end of the article and I’ll do my best to get you the answers you need.

As more Millennial’s are looking to buy their first home, many are faced with the challenge of student loan debt and how lenders calculate payments when determining debt to income ratios. Unlike other types of debt that include monthly payments of principal and interest, student loans often have reduced or deferred payments that do not include principal repayment.

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Specifically, Income Based Repayment (IBR) plans limit your federal student loan payments to a percentage of your income. These plans can go a long way towards making payments manageable for young professionals just entering the workforce at entry level salaries. For those with very low income, payments can be as little as $0.

This is where things get interesting for mortgage lenders seeking to make sound underwriting decisions. Should they calculate debt to income ratios using the payment set under the IBR plan? Or, since the payments must eventually rise if the loan is ever to be paid off, should they use some type of proxy for a fully amortizing payment?

The answer depends on the type of mortgage you are applying for. Since the vast majority of borrowers with student loan debt aren’t looking at Jumbo loans, we’re going to focus on the different ways Fannie Mae, Freddie Mac, FHA, VA and USDA answer this question.

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If you love details, you can read the entire guideline in italics. If you like to get right to the point, skip to the BOTTOM LINE in bold.

IBR Using a Conventional Fannie Mae Loan

For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must include a monthly payment in the borrowers recurring monthly debt obligation when qualifying the borrower.

The lender must use one of the options below to determine the repayment amount:

  • 1% of the outstanding balance;
  • the actual payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower:
  • a calculated payment that will fully amortize the loan(s) based on the documented loan repayment terms: or
  • if the repayment terms are unknown, a calculated payment that will fully amortize the loan(s) based on the current prevailing student loan interest rate and the allowable repayment period shown in the table below.

The ‘current prevailing student loan interest rate’ can be found on a variety of websites. For example. see U.S. Department of Education Federal Student Aid in E-1-03. List of Contacts.
The following table specifies the repayment period to be used when calculating a fully amortizing payment.

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Calculating a Student Loan Repayment

Total outstanding balance of all student loans Repayment Period
$1— $7.499 10 years
$7.500 — $9.999 12 years
$10.000 — $19,999 15 years
$20.000 —$39.999 20 years
$40.000 — $59.999 25 years
$60,000 + 30 years

Note: The lender is responsible for determining that the payment on the credit report or other documents provided by the student loan lender or borrower are fully amortizing payments.
Example: Calculating an Amortizing

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Payment Balance: $17.500
Repayment period: 15 years
Interest rate: 4.29%
Monthly Amortizing Payment: $132.00

BOTTOM LINE: Use 1% of the outstanding student loan balance. Use the actual amortizing payment. If you are unable to document the actual amortizing payment, use the calculated payment using the method above as it will nearly ALWAYS be less than 1% of the balance. If ALL ELSE FAILS, use 1% of the outstanding balance.

IBR Using a Conventional Freddie Mac Loan

When a monthly payment on an installment debt is not reported on the credit report or is listed as deferred, the Seller must obtain documentation verifying the monthly payment amount included in the monthly debt payment-to-income ratio. If no monthly payment is reported on a student loan that is deferred or is in forbearance, and there is no documentation in the Mortgage file indicating the proposed monthly payment amount (e.g., the loan verification letter), 1% of the outstanding balance will be considered to be the monthly amount for qualifying purposes.

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Examples of documentation of the required payment amount include:

  • A direct verification obtained from the creditor
  • A copy of the installment loan agreement obtained from the Borrower, or
  • If payments are currently deferred, the payment amount that will be required once the deferment or forbearance period has ended, as stated in a copy of a financial institution’s student loan certification or the installment loan agreement

While the Freddie Mac seller guide has not changed since the publishing of this article, we have spoken directly to Freddie Mac and received confirmation that they will in fact use the IBR payment when calculating debt to income ratios.

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BOTTOM LINE: Use 1% of the outstanding student loan balance. Use the documented IBR payment as long as it is greater than zero. For any loans with no payment, including IBR loans, the lender must fall back to the forbearance guidelines and use 1% of the outstanding balance unless you are able to provide documentation verifying the proposed monthly payments will be less than 1%.

IBR Using a Government FHA Loan

FHA 4000.1 Section II. A. 4. B. (H)

(4)  Calculation of Monthly Obligation

Regardless of the payment status, the Mortgagee must use either:

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  • the greater of:
  • 1 percent of the outstanding balance on the loan; or
  • the monthly payment reported on the Borrower’s credit report; or
  • the actual documented payment, provided the payment will fully amortize the loan over its term.

BOTTOM LINE: Use the required payment under the income based repayment plan! Unless you are able to provide documentation from your lender showing the actual payment that would amortize your loan in full over a fixed loan term is less than 1% of the balance, the lender will use 1% of your outstanding loan balance as the payment.

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IBR Using a Government VA Loan

Student Loans (1/4/2016)

  • Deferred Student Loans: Student loans that will be in repayment within 12 months of closing must be considered in the ratios in qualifying. Documentation of the monthly payment must be provided. If documentation is provided supporting the debt will be deferred more than 12 months after closing, the debt may be omitted from the ratios in qualifying.
  • Student loans in Repayment:

Standard Repayment Plan: The required monthly payment is to be used for qualification purposes.

Income Based Repayment Plan: Use the current payment as shown on the income based repayment agreement, or credit report for qualification purposes.

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Graduated Repayment Plan-Graduated Payments: Use the payment that will be in effect three (3) years from the Note Date for qualification purposes.

If a monthly payment is not reflected on the credit report or there is need for the payment amount required for qualification purposes, documentation, as evidenced by a letter from creditor or repayment schedule, is required to verify monthly payment.

BOTTOM LINE: Use the required payment under the income based repayment plan!

IBR Using a Government USDA Loan

If the borrower has a student loan with an income based repayment, you must use 1% of the balance. Below you will find the guideline directly from the USDA underwriting manual:

Student loans. Lenders must include the greater of

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  • One percent of the outstanding loan balance. OR
  • The fixed payment as reflected on the credit report.

Income Based Repayment (IBR) plans; graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change and do not represent a fixed payment or repayment planThese types of repayment plans are unacceptable to represent a long term fixed payment repayment plan.

WHAT DOES IT ALL MEAN?

VA and USDA loans are both limited. Unless you are a veteran or buying in a “rural” area as defined by the USDA, these loans aren’t an option. If they are, the good news is both have straightforward, borrower friendly treatment of IBR plans.

For most people, the question will come down to which programs you qualify for and then which offers the most favorable income based repayment calculation. If you need to use FHA due to lower credit scores or higher debt to income ratios, things just got a lot tougher.

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After offering guidance earlier this year allowing the use of IBR payments, the current guidelines require documentation of the actual amortizing payment or 1% of the outstanding balance will be used. In either case, the payment used for qualifying will be higher than the current IBR payment. If your loan balance is relatively large, this treatment will likely erase much, if not all, of the benefit of FHA’s higher debt to income ratios.

If you are able to qualify using Fannie Mae or Freddie Mac programs, you have a good bit more flexibility. In most cases, a borrower that can be approved through Fannie Mae’s automated underwriting system (AUS) will also be approved through Freddie Mac’s AUS. This is great news if you have an IBR payment that is greater than zero. Freddie will use the IBR payment reported on the credit report so you should be home free.

If you are working with a lender that ONLY offers loans underwritten to Fannie Mae guidelines OR you have an IBR payment of $0, Fannie has an option that will not be as bad as using 1% of the balance.

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Let’s look at an actual scenario for a borrower I’m working with right now.

She’s looking to buy a home for $350,000. Her income is just over $72,000 per year. She just went through the annual review on her IBR plan and for the next 12 months she pays $146 a month on roughly $117,000 of student loan debt. If you’ve been paying attention up to this point, you see where this is going.

Since she has good credit and her debt to income ratios are under 45% using the IBR payment, we’re in luck. We can use Freddie Mac guidelines and pull the $146/month from the credit report and she’s good to go.

WHAT IF, her IBR payment had been set at zero? In that case, we could look at going FHA. Under current guidelines we simply use 1% of the $117,000 loan balance as the monthly payment. The bad news is this pushes us over the maximum FHA debt to income ratio of 56.9%. That doesn’t work so let’s move on to Fannie Mae.

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Assuming her lender would not give us documentation of a fully amortizing payment AND her loan documentation doesn’t provide enough information for us to calculate the amortizing payment, we have to use the calculated method using the ‘current prevailing student loan interest rate’.

Using the chart above we see that we use a 30 year term and the current prevailing interest rate is 4.29%. That leaves us with a monthly payment of $578. Even though the calculated payment is much higher than the actual IBR payment, we can keep the debt to income ratio just under the maximum 45% and approve the loan.

The bottom line is, “it’s complicated.” But there are options and if you’re working with an experienced loan officer who understands the intricacies of student loan qualifying guidelines, there should be an option for you. As always, we’re here to help. If you have any questions, or specific scenarios reach out directly or in the comments section below.

107 Comments
  1. I have 171K in student loan debt and because of the recent legislature changes, I thought I would never be able to buy my house. I have rented the same house since 09 and the owners want to sell it to me, and I want to buy it from them. We started with an FHA loan, but the lender had to back-pedal. He got me qualified for a conventional loan. My IBR payment is $150/month and that sure does beat the 1700 payment that 1% is estimating.

    Regardless of student loan repayment status, if you have a high student loan debt, conventional is the ONLY want to go. Thanks for this article Josh. Great (and up-to-date) info here!

    PS, we close on the house tomorrow! 🙂

    comment by Rebecca from FL
    on 2.14.17 at 9.49 am
  2. Hi Scott, do you have any lenders in MIssissippi that will finance with Freddie Mac and use my IBR payments?

    comment by Tee
    on 2.7.17 at 7.59 pm
    1. Hi Tee, I have reached out to my network to see if I have anyone. I will shoot you an email directly with an introduction sometime today!

      comment by Scott Schang
      on 2.8.17 at 7.45 am
      1. I have been searching for a mortgage. I have student loans at 140k, getting an amortized payment is impossible because it’s against federal guidelines. I am on an IBR of $0 but did get an estimated IBR of $317. I need this payment to show on my credit report and also need a lender in Ct who is familiar with this. Also with down payment assistance. Thank you

        comment by Natasha Royal
        on 2.25.17 at 5.01 am
        1. Hi Natasha,

          A Conventional loan using Freddie Mac underwriting guidelines will allow you to use your IBR payment, as long as the payment shows up on your credit report, or you can get a statement from the lender showing what the payment will be.

          As far as down payment assistance goes, I’m not sure about that. Because you are restricted to what kind of loan you can use that will not require a fully amortized student loan payment, this may create challenges in finding any programs that fit into that box.

          Freddie will allow as little as a 3% down payment under certain circumstances (based on income and geographic location). I would recommend that you try to find that down payment, either by a gift from a relative, or maybe your 401k? Steven can discuss ways to get your closing costs paid for, but the down payment is going to make this infinitely more challenging.

          If you do not have to rely on an assistance program to cover your minimum down payment, you will have many more options available to you to buy your home. Does this make sense?

          Hope this helps?

          comment by Scott Schang
          on 2.25.17 at 8.00 am
  3. Are there any programs that do not use the 1% in the calculations, but rather your actual payments that you are currently paying? As in income based repayments?

    comment by Carissa Wilson
    on 1.23.17 at 2.06 pm
    1. comment by Scott Schang
      on 1.23.17 at 2.08 pm
  4. Hi Scott,

    I have a question. I am one of those w/a high student loan debt. Unless I strike gold it is unlikely I will ever pay off my loans. I am trying to buy a home, and need down-payment assistance. I am told that FHA will require DTI based on student loan payments that will never come to fruition. Is there down-payment assistance w/conventional loans? I am told the rules for calculating DTI/Student loans changed just a few days ago. I am in WA state, do you have suggestions? Thank you for anything you can provide.

    comment by Laura
    on 1.17.17 at 7.04 pm
    1. comment by Scott Schang
      on 1.17.17 at 9.54 pm
  5. Hi, My husband and I have a total of 117,000 in student loans. We made about 79k together last year. Our income based payments are 180, 40, and 137. Our other debt includes a 319 car payment and 116 credit card payment. We have been searching for someone that knows how to approve our loans through Freddie Mac, but are running into issues. Most have told us that Freddie Mac and Fannie Mae have similar debt calculation policies and they must use 1% of the loan, even though the lower income based payment shows on our credit report. Even after one loan officer told us they use the amount on the credit report, we were denied because she tried to get me approved for an FHA loan, which obviously uses the 1% guideline. We are going through another bank that told us they just found out that they can go through an exception process for Fannie Mae that will allow us to use the payment on the credit report, but we are skeptical. Is there a document online that I can forward to the loan officers to convince them that Freddie Mac loans have different guidelines and we should be approved through Freddie Mac? It is really frustrating because we hear different information from every bank or loan institution we call. Do you have a recommendation for a loan officer in Indiana that can help us? Thanks!

    comment by Melissa Mcmillin
    on 1.14.17 at 12.31 pm
    1. comment by Scott Schang
      on 1.14.17 at 2.13 pm
  6. Hi, I apologize that I am getting confused with the “documentation of a fully amortizing payment.” What does that documentation look like? Is that as simple as asking the Federal Loans repayment program to send you your IBR monthly repayment amount on an official record?

    Here’s our issue: My husband’s student loans are just over $200,000. My student loans are right at $50,000. We are told that out debt to income ratio is 59% because they calculate our combined student loans at 1% a month, and that it isn’t possible for an FHA loan of $180,000. We have 10k for a down payment. My husband’s salary is 53k and mine is 31k. We both just graduated from law school in 2016. However, with the REPAY plan, and the fact that we file taxes as married but separate, his payments are only $65 and mine are $30. We are just starting to pay them this month, but we have the documentation of our payment amount. It is not showing up on our credit report, though.

    Does this mean we just need to wait another month or two and our payment amount will be on the credit report, and then they will calculate our student loans at a smaller amount each month? Will this solve our problem and we can get a loan? please help! Thank you

    comment by Christy
    on 1.3.17 at 7.35 pm
    1. FHA will not allow you to use an Income Based Repayment (IBR) for qualifying. FHA is going to require you to use a payment that will pay off the loan by the end of the loan term.

      However, because you are on the REPAY program, you do not have an amortized loan, and your loan will not ever be paid off if I understand the terms correctly? Doesn’t this program allow you to have the loans forgiven after a period of time?

      The only option you would have is a conventional loan using Freddie Mac underwriting guidelines. They will allow you to use the statement showing what your payment will be, or will let you use the payment as it is documented on your credit report.

      I hope this helps?

      comment by Scott Schang
      on 1.3.17 at 7.48 pm
  7. Hello,

    I have a student loan debt in the amount of 153,000. I am on a revised pay as you earn repayment plan for my student loans. My payment is 45 s month. I am trying to get an fha a loan, but they are using the standard payment that will amortize which is 921. The repayment plan I am own is strictly based of my income every year. I gave to submit my tax returns and they calculate what I will pay. I also work in a public service field so after 10 years my remaining balance will be forgiven. Is there any way around this?

    comment by Jaw
    on 12.14.16 at 8.18 pm
    1. You will want to work with a lender that can offer Freddie Mac loans. Freddie Mac is a conventional loan, no different from Fannie Mae, other than subtle guidelines nuances. The ability to use an Income Based Repayment is one of those differences.

      If you would like, shoot me an email to [email protected] and I can introduce you to a loan officer that can help in your State (please include the State you’re buying in)

      Hope this helps?

      comment by Scott Schang
      on 12.15.16 at 9.18 am
  8. I am in a similar situation as most people on here. Do you know of anyone in Kansas that can help me get a Freddie loan? Thanks

    comment by Dr. Greg Scott
    on 12.11.16 at 12.01 pm
    1. I just sent you an email. What you are looking for specifically is a loan officer / lender that knows that Freddie Mac allows you to use the payment from a statement, or your credit report. Fannie Mae, and FHA are going to require that you use a fully amortized payment.

      Hope this helps?

      comment by Scott Schang
      on 12.12.16 at 3.28 pm
  9. comment by Josh Lewis CMC
    on 11.17.16 at 3.30 pm
  10. LisaJohnson7 Hi Lisa, sorry for the slow response. Email me at [email protected] and let me know where you are located and I’ll connect you with someone familiar with the IBR guidelines.

    comment by Josh Lewis CMC
    on 11.17.16 at 3.24 pm
  11. comment by Josh Lewis CMC
    on 11.17.16 at 3.23 pm
  12. FYI-I live in Louisiana. Sorry for all the additional comments.

    comment by TMcIntyre
    on 11.3.16 at 3.33 pm
  13. Also, my husband pays $400/mo on IBR.

    comment by TMcIntyre
    on 11.3.16 at 3.22 pm
  14. Hi,
    I’m trying to purchase my first home and am having difficulty qualifying. I have 200,000 is student loan debt and am on an IBR plan of $234/mo (prior to this new monthly payment, I paid $0.00/mo. for 2 years). I have a714 credit score and make $50,000/yr; in May of 2017 my salary increases to $60,000. I’m trying to get a conventional loan to purchase a condo or townhouse, but I’m also open to whatever type of home I can get. I have been unable to get the the amortization schedule from my student loan servicer. Also, I’m just recently married and my husband has $200,000 in student loan debt and makes 100,000/yr. We have no other debt. Do I have any other options, indivually or in combination with my husband?

    comment by TMcIntyre
    on 11.3.16 at 3.16 pm
  15. Hi,
    I am in a situation where I am having the worst luck with my student loan. I have 68k in loans and I am currently in a IBR program with a zero payment. I am in a situation such as many others with my debt to income ratio being too high and I am at a lost as to what to do. I have a car which will be paid off in 2018 (I am listed as the cosigner) but now I wonder if there is a way that I can get around this since I am the cosigner? Quickens loans is the only one who would work with me but I want to work with someone who will allow down payment programs. Any advice?

    comment by LisaJohnson7
    on 11.3.16 at 11.11 am
  16. Josh…I’m having a challenging time as others qualifying for a mortgae with student loans. Will you send me the name of someone in Florida that is knowledgeable of this process and can assist me?

    comment by Rcwilli3
    on 10.22.16 at 2.20 am
  17. Hi Josh,
    Thank you for this article. Unfortunately, I’m having the same issue with my student loan debt at $55,000 which they are all deferred to 2019.. I’m still in school will be done in the spring, and I’m trying to get approved for my home. I received an conditional approval, and my home is scheduled to be completed in late January. Well apparently now my DTI is too high due to my student loan debt. It’s the only debt I have besides my car loan which is $14,000. We are working on a plan, but I’m not to confident that it will work. Should I apply for the IBR payment with my student loan? What is your suggestion. My credit score is in the high 600s.

    comment by queen528
    on 10.19.16 at 9.21 am
  18. arielsmom08 Hi there! With a zero IBR payment, “most” programs require we use 1% of the balance to qualify OR provide evidence of the fully amortizing payment. With IBR loans it can be difficult, if not impossible, to get the servicer to provide you with documentation of the amortizing payment. Shoot me your contact info to [email protected] and I can connect you with our partner in NC.

    comment by Josh Lewis CMC
    on 10.18.16 at 10.57 am
    1. Josh, is it easier to qualify for a mortgage if my IBR payment is $0 or at $132 with a student loan debt of approximately $68500? I am preparing to attempt mortgage pre-qual/approval so I figured if my payment was at $0, I would be forced to use the 1%, so I requested a recalculation and my credit report will update in a month and half with the new payment amount. Did I do the best thing or made a mistake in my recalculation timing in regards to mortgage approval?

      I also noticed another commenter from the Triad area in NC requested a referral to a lender who can help. Would you be able to send me that information as well?

      comment by Kim H.
      on 1.3.17 at 9.37 pm
  19. comment by Josh Lewis CMC
    on 10.18.16 at 10.54 am
  20. Josh Lewis CMC jarod347 Hi Josh, thank you for your reply! Unfortunately, there isn’t much that is reasonable about my student loan debt (I have $160,000 and my wife has $50,000). Right now we pay zero for my loans through an IBR, but we are paying the full amount for my wife’s. I have just resubmitted our income docs and also applied for an IBR for my wife’s loans. It looks like we will pay about $90 a month for mine and about $10 a month for hers. What is your sense about those payments being “reasonable”?

    We live in Oregon.

    Thanks so much!

    Jarod

    comment by jarod347
    on 10.18.16 at 10.40 am
  21. Hi Josh! This is all new to me, and I literally have just started looking into buying for the first time. I recently got approved for the $0 IBR plan, and I guess my question is, is that a bad thing? It seems fob what I’ve interpreted, is that is not always the goal. Could you possibly put me in touch with a lender in NC? Triad specifically is where I’m located.

    comment by arielsmom08
    on 10.17.16 at 10.36 pm
  22. NancyFarmer Hi Nancy, check your inbox. I just sent you an email with contact info for a great lender who can assist you in FL.

    comment by Josh Lewis CMC
    on 10.17.16 at 10.27 am
  23. These changes are huge! I sent you an email in hopes of attaining a referral for a lender in Florida. Thank you!

    comment by NancyFarmer
    on 10.17.16 at 6.09 am
  24. comment by Josh Lewis CMC
    on 10.15.16 at 1.13 pm
  25. Josh Lewis CMC I sent you an email please reply , I sent it again today.

    comment by agates105
    on 10.13.16 at 12.35 pm
  26. Thanks for the detailed article, Josh. I am going through a denial issue solely based on DTI ratio due to an IBR student loan. (They are using the 1% instead, and not as reported on the credit history report. Yes, is more than 0.) The only recommendation was to switch to a standard payment. Then they may use that to get me into a Freddie Mac with 5% down IF I can get an amortization document. During a consult with a different lender, I was offered a 3% down Freddie Mac but they still need a standard plan and the amortization document. Am I being too hopeful trying to find a way to get me approved with an IBR student loan in MI?

    comment by lady_s
    on 10.11.16 at 11.47 am
  27. Hi Josh,

    I’m wondering what if even a $1 IBR payment (as an example) is enough to not fall under the zero payment category. Is there a number where the lenders have to round down to zero or is anything above zero good?

    Thanks!

    Jarod

    comment by jarod347
    on 10.11.16 at 11.31 am
  28. Scratch that… the site has it listed as II.A.4.B.(H)… which is still incorrect.
    Correct = II.A.4.(H)

    comment by DanMetcalf
    on 10.7.16 at 3.17 pm
  29. The section of the HUD code I found from the actual PDF of the HUD document is wrong.  I had to search for some of the words.  I was able to find it under HUD  Handbook 4000.1 Section II.A.4.(H)… the “II.A.B.(H)” from the document above is incorrect.  There is no “B”.  The only reason I’m being that specific is because I’m in the middle of trying to qualify for a mortgage with a VERY high repayment if used under the standard 1-5%.  I have to get a letter from my lender to prove what my payment is for the IBR.  Graduate level medical field loans ARE NOT CHEAP!  LOL!

    comment by DanMetcalf
    on 10.7.16 at 3.16 pm
  30. Hallallen Sorry Bruce, it got filtered. Check your inbox. I have a great referral for you.

    comment by Josh Lewis CMC
    on 10.6.16 at 3.30 pm
  31. Good morning Josh,I sent you a email did you get it? My wife and I have a new found hope in getting a home now. Thanks for your work in this area.

    comment by Hallallen
    on 10.6.16 at 4.30 am
  32. Hi, thanks for this incredibly informative site and forum! I just graduated from college as a non-traditional student (i.e. older with a longer credit history) and was pre-approved for a mortgage but all while my student loans are/were still in their grace period. I have a credit score that is right around 700 and I have almost no debt other than my $60K in student loans. I will be a first-time homebuyer, and I am thinking that I will have to go with a FHA loan. What I am wondering is, when my loans come due in a month, and I had hoped to go on an IBR that has been quoted as $175 a month, will that possibly disqualify me from my pre-approval and/or a mortgage? Are there any other options that could/would make sense instead of IBR for a typical case similar to mine? Will FHA still take that 1% instead of my IBR payment, no matter what?

    comment by dudditz9
    on 10.5.16 at 1.51 pm
  33. mvanswol There are options, depending on the details of your student loan. If the new payment is showing up on your credit report, and is greater than $0, you should be able to use any of the Freddie Mac 3% down options. We have a great lender we can refer you to in MA with experience with student loan payments. It’s a common misconception most borrowers have that credit unions make “portfolio” loans from deposit funds and are able to make their own underwriting decisions. While this is true for the largest of credit unions, most operate as a traditional mortgage lender and underwrite to Fannie/Freddie guidelines so they can sell the loans in the secondary market. If your credit union is “debating” on what to do with the loan, it’s likely they don’t have a lot of experience with the options available OR they don’t sell to both Fannie and Freddie so they may be limited. 
    Shoot me an email with your contact info and I’ll have our MA resource reach out to you to discuss your options: [email protected]

    comment by Josh Lewis CMC
    on 10.5.16 at 10.08 am
  34. I am having similar issues as most everyone on this site.  I am trying to get a mortgage with IBR plan.  I have tried with a credit union, but they are struggling to figure out what they are going to do.  I am a first time home buyer and trying to get into a program with a low down payment option.  I have been told that the information I have provided them from my student loan company about what my revised payment would be now that I have been promoted to teacher status was not sufficient and they are now debating whether they will accept a graduated plan or the 1% of the remaining balance.  The 1% option will significantly lower my buying power in MA.  I have a good credit score over 700 and am concerned about the affect shopping for a mortgage will affect this score.  I would love to hear any advice or recommendations you might have.

    comment by mvanswol
    on 10.5.16 at 9.33 am
  35. comment by Josh Lewis CMC
    on 10.4.16 at 8.56 am
  36. I live in  Florida

    comment by Hallallen
    on 10.4.16 at 5.19 am
  37. Hi My name is Bruce, my Wife and I  was told by our FHA loan originator that because we both have a IBR and we showed documents that my IBR repay was $46.00, and my wife is  $45 at this time, I have $62K IN student loan debt and my wife has $61k, we was told that the Mortgage Company is going with 1% which is  $620 for me and $610 for my wife and because of this we didn’t  qualify for a  $225k mortgage. My wife and I credit scores are in the  700 range.are there any other options for us.Thanks

    comment by Hallallen
    on 10.4.16 at 1.25 am
  38. Hello Scott, my name is Mo and just recently, my wife and I applied for and were approved for a home loan. But just today, our lender called us and told us that there was an oversight on their part and that they forgot to calculate our debt to income ratio using the 1% of our balance (since we are on the IBR plan). Our application had already been approved by the underwriter twice but they overlooked this issue. On our credit reports, it shows what we are paying on the loans and the balances but the report does not specify that we are on an IBR plan. Can you help? We are freaking out now. This news has left us dejected, angry, frustrated, sad and confused. When can I call you so that we can talk about this further. Please help.
    Thanks.

    comment by diakamo
    on 9.30.16 at 7.23 pm
  39. Josh Lewis CMC josemnz83 Thanks for the response! I am located in TX. Unfortunately, since my loans are still in deferment, I do not have any payment reflected on my credit report. I suppose I could try to make a payment somehow but even if I made it today, it would likely take minimum 30 days for any activity to show up on credit report. It looks like waiting it out sounds like the best action. However, if I do that, will the underwriter not be concerned that the IBR will not fully amortize the loan at $100 monthly payments?

    comment by josemnz83
    on 9.30.16 at 4.49 am
  40. josemnz83 Jose, the Freddie Mac option should work perfectly for you as long as your IBR payment is not $0. They won’t accept the estimate as they require the payment to be reflected on the credit report. If you have documentation showing the actual IBR payment is different than what is showing on the credit report, we have a workaround but you wouldn’t be able to use an estimated IBR payment. Where are you located? We may be able to help or put you in contact with a lender who can. You can email me at [email protected].

    comment by Josh Lewis CMC
    on 9.29.16 at 11.14 pm
  41. Hi. My name is Jose. I was preapproved for a conventional loan with 5% down, NO PMI, and 3.625 interest rate. I have 128k in student loan debt. I graduated in May and am scheduled to begin payments in December. Loans are currently in deferment. Underwriter requested that I pay off 16k of my student loans so that I am eligible for the Freddie Mac and that I am ineligible for Fannie Mae because they must use 1% of my student debt. However, I recently learned of IBR and Public Service Forgiveness Programs. I requested an “IBR estimate” and was told that payment would be about $100–way less than the $750 payment on a 25 year extended plan. Will Freddie Mac accept the new IBR “estimate?” Or do I have a better chance of paying the 16k and continuing the loan as is?
    Additional facts: All three of my credit scores are above 800 and I have no additional debt. Salary is 70k per year. Thanks. I am very happy that I found this forum. Probably should have looked for it before finding the house that I like : )

    comment by josemnz83
    on 9.29.16 at 8.11 pm
  42. Thanks. Just sent you a msg.

    comment by Debpotter1426
    on 9.26.16 at 5.09 pm
  43. comment by ScottSchang
    on 9.26.16 at 2.15 pm
  44. Scott. Looking for help in Rochester NY with my daughter who is on IBR repayment plan of zeto. Any lenders using the IBR repayment in loans in NY? Any help would be greatly appreciated. At a roadblock right now.

    comment by Debpotter1426
    on 9.26.16 at 1.38 pm
  45. Hi there, my husband and I are in less of a predicament than the others but we are still looking for advice. We just moved back to Minnesota from Arizona and we decided to rent out the home that we currently own in AZ. We bought it on an FHA loan with 3.25% interest rate. We’d like to keep our home there as an investment, but with the 1% calculation on the student loans, we can’t qualify for another home loan here in MN anytime soon if we keep the house. We are both teachers on the REPAYE plan and we will eventually file for Public Service Loan Forgiveness. Do you have any advice for making it easier to qualify for a loan when we have already owned a home for 8 years and we’d like to purchase another? I have seen you mention that Freddie Mac still calculates the current payments. Does that include REPAYE? When will we be able to use our rental income on an application? Also, do you know any lenders in MN that are familiar with this process? Thank you!

    comment by Fratch
    on 9.22.16 at 7.08 pm
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