MAJOR CHANGE IN STUDENT LOAN DEBT FOR FHA LOANS
HUD announced that they have extended the implementation date of the change to student loan debt to 9/14/15, which was previous scheduled to take effect on June 1, 2015.
HUD has prepared a new handbook with guidelines for FHA financing. A major change concerns the student loan debt and how it will impact a buyer’s qualification. The changes are listed below and are directly out of the HUD Handbook 4000.1:
1) “deferred obligations” are liabilities that have been incurred but payment is deferred or has not yet commenced, including accounts in forebearance;
2) ALL deferred obligations must be counted in the debt ratio when qualifying buyers;
3) lenders must obtain evidence of the anticipated monthly payment obligation, if available, and use that as the qualifying payment;
4) if the actual monthly payment is not available, lenders must determine the terms of the debt or use 5% of the outstanding balance as a payment; and
5) for student loans, if the actual monthly payment is $0.00 (such as in income based payment plans) or is not available, the lender must use 2% of the outstanding balance to determine the qualifying payment.
Up to now, if the student loan is deferred for at least 12 months after closing, we did not have to count the payment and, if it was in an income based payment plan with a $0.00 payment, we could use the $0.00 payment in qualifying. Many buyers will see their qualification price points drop or may not qualify at all without a qualified co-borrower.