What you should know about student loans before you buy a home or refinance.

Student loans can affect the loan process in multiple ways. They could limit you on how much you can buy or they could prevent you from buying a home all together. We will look at how student loans affect FHA, VA, USDA & conventional loans.

Student loans are looked at differently depending on what type of loan you are looking for. I will explain how FHA, VA, Conv. & USDA loans are affected by student loans.

If you are defaulting on a government sponsored student loan you will not get a FHA, VA or USDA mortgage until it is brought current. However you may be able to get a conventional mortgage depending on certain criteria.

If your student loan is deferred for 1 yr. from the closing of your mortgage VA will allow you to exclude those payments from your debt to income ratio. If you are applying for a FHA, Conventional or USDA mortgage the student loan payment will be used against you even if the payments are deferred.

FHA & USDA will use either the payment on the credit report as long as it is above zero or the income based payment plan payment as long as it is above zero or .50% of the balance of the student loan. VA will use 5% of the student loan balance divided by 12 months.

Conventional is broken out into two markets Fannie Mae & Freddie Mac. Fannie Mae will use the income based payment plan payment even if it is at zero or 1% of the balance. Freddie Mac will use the monthly payment reported on the credit report or .50% of the balance whichever is greater.

So now you can see how a student loan payments can lower what you qualify for, or even stop you all together from getting a mortgage. If you have student loan payments you need to go to a mortgage company that will allow higher debt to income ratios, like Barclay Butler Financial Inc. If you have any questions please call or text me at 224-420-9990. You can also email me at bbutler@barclaybutlerfinancial.com