October 2, 2015
We recently got a reader question in the comments section about FHA loan rules covering deferred payments on student loans. In the past we’ve reported that FHA loan rules state certain types of student loan deferments (as explained in the old HUD 4155.1) did not have to be counted in the borrower’s debt-to-income ratio.
HUD 4000.1 is the new FHA Single Family Home Loan policy handbook and has plenty of updated information, modifications to rules, and restatements of current policy and supersedes HUD 4155.1.
Here’s the reader’s questions about student loans:
“I was told by my realtor recently, that my student loan debt, although its deferred for three more years under teacher forgiveness, that the lender she is working with will have to count student loan debt in my DTI, at 2% monthly.” Basically the reader wants to know, “Is this true?”
Here’s what HUD 4000.1 says about student loan deferrals, also known as “deferred liability” or “deferred obligations” and can be any type of financial obligations that is not yet due and payable as described below:
“Deferred Obligations refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance.”
HUD 4000.1 states of these obligations:
“The Mortgagee must include deferred obligations in the Borrowers liabilities…The Mortgagee must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability. The Mortgagee must obtain evidence of the anticipated monthly payment obligation, if available.”
There’s more–especially where student loan debt is specifically concerned:
“The Mortgagee must use the actual monthly payment to be paid on a deferred liability, whenever available. If the actual monthly payment is not available for installment debt, the Mortgagee must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.”
However, for student loans, the lender is instructed as follows:
“For a student loan, if the actual monthly payment is zero or is not available, the Mortgagee must utilize 2 percent of the outstanding balance to establish the monthly payment.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com–a widget designed especially for real estate websites. It displays FHA loan limits for the counties serviced by those websites.
It’s simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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