One of the things that trip our clients up the most is student loan indebtedness. Most lenders, whether it be loan officers at other banks that aren’t familiar with working with professionals that have student loans, don’t really identify how to correctly classify those student loan payments, and so a situation that we see very frequently is someone that’ll have $200,000 in student loans, and they’re in deferral, or some sort of an income driven repayment, The loan officer mistakenly submits that loan application, or pre-qualifies that loan application, with a zero payment on those student loans. Well regrettably, when that loan application finally makes its way to an underwriter, the underwriter doesn’t make the same mistake, and says we have to qualify them with a payment, even if they’re in deferral or some sort of an income driven repayment.
Typically, conventional and FHA underwriting guidelines require that you qualify with one to two percent of the outstanding balance on your student loans. So, that $200,000 student loan balance, instead of having a zero impact on your qualifying, is two or $4,000 a month, and that can really impact the debt to income ratio, and cause clients to get declined. It’s the number one reason why I think you have to work with somebody who’s familiar with student loans, and working with professionals. If you have any additional questions, don’t hesitate to message us. We’re here, and we’d absolutely love to hear from you.