August 17, 2017

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FHA Loan Rules: Student Loan Debt And Mortgage Applications

2015-20
A reader asks, “if I have a student loan with a 0 payment and can not get the payment what % will fha use for the student loan payment?”

The answer to this question depends greatly on the status of the student loan. Is the student loan in deferment? And if so, for how long?

FHA loan rules in HUD 4155.1 Chapter Four Section C state:

“Debt payments such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing must be included by the lender as anticipated monthly obligations during the underwriting analysis.”

FHA loan rules in Chapter Four also add, “Debt payments do not have to be classified as projected obligations if the borrower provides written evidence that the debt will be deferred to a period outside the 12-month timeframe.”

So much depends on whether there is a student loan deferment, and whether or not it falls in or outside the 12-month window mentioned above. If the student loan is not in deferment, but has been paid in full but the status of that loan has not been finalized yet, the borrower and lender may need to work together to determine the right course of action.

The lender will, in any case, need documentation to support a claim that the loan has been paid off or is in deferment, so be prepared to provide any supporting paperwork associated with the status of the student loan.

Do you have questions about FHA home loans? Ask us in the comments section.

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