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TaxRobin, Senior Advisor
Category: Finance
Satisfied Customers: 15328
Experience:  15 years of experience in financial advising with emphasis on tax issues.
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Wondering how good my mortgage lender is. I have a credit

Customer Question

Wondering how good my mortgage lender is. I have a credit score of 620 mostly because of a past bankruptcy 2 yrs ago and student loans of about 180k. I have a car loan, but no other debt. 2014 I made about 5k/month, now I'm making 6-7k and in November
I will be taking home 8k/month because I am paying off business debt. (I own a business) I am doing "income based repayment" with my student loan and have a monthy payment of $0 now, but it will go up to around $300 as my income goes up. There is supposed
to be a new regulation coming down that will have to take into account my full student loan payment ($1800/month) which would disqualify me for a mortage b/c of the dti. Is this true? (Looking at buying a home for 270k.)
Submitted: 1 year ago.
Category: Finance
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'm PDtax, and can assist.

Expert:  PDtax replied 1 year ago.

Income based repayment (IBR) is supposed to get different treatment for loans closing after September 14, 2015. Depending on the type of loan you are applying for, the back student loan debt may have to be included in your monthly debt to income ratio. The good news is you might still qualify, since certain loans use a 2% student loan debt service for the income portion of the math.

Expert:  PDtax replied 1 year ago.

And, as you have seen, some use a 1% payment mandate, which would account for your $1800 per month allowance for student loans.

Resolving the issue will require working with the lender, and a letter outlining your repayment plan for your student loans might just do the trick. The key will be getting your student loan lender to commit to a repayment plan in writing, which the mortgage lender can use to support your application.

Your lender holds the keys here. Your type of mortgage will dictate. The student loan is not an immediate 'red flag' like it once was, but the odds are better if you are negotiating with a local lender or credit union that will retain your mortgage, and thus have more flexibility when it comes to approvals.

Thanks for asking at Just Answer. Positive feedback is appreciated. I'm PDtax.

Customer: replied 1 year ago.
Actually, I was hoping a mortgage professional could offer their opinion. Although you seem like you understand the issue, I need to know if the new regulation will really be happening or if it is going to be postponed like it has once already.
Expert:  TaxRobin replied 1 year ago.


PDTax is correct. The new regulation really depends on the type of mortgage you are applying for.

A huge benefit in regards ***** ***** student loan payments will go away on 9/14/2015. This was originally to happen 6/15/15 but it had been delayed.

For case files assigned prior to this date, borrowers that have student loan payments which are deferred great than 1 year after the closing date do not have to count any payments in their debt ratio.

On 9/14/15, this all changes and this will make qualifying for a mortgage loan tougher.

There is no indication that this will be delayed again.