To: All FHA Approved Mortgagees Mortgagee letter 2016-08 subject Student Loans Purpose The purpose of this Mortgagee Letter (ML) is to provide guidance on calculating student loan payments. effective Date This guidance is effective for all case numbers assigned on or after June 30, 2016; however, Mortgagees may begin using the policy in this ML

Borrowers with high student loan balances can see if they can qualify for Conventional Loans versus FHA Loans and use the IBR payment versus the 1.0% of the student loan balance. With VA Loans, 5% of the student loan balance is taken and divided by 12.

Current FHA Student Loan Guidelines. Student loan payments fall into a few categories: Graduating, fully amortized, income based repayment, deferred, and forbearance. More recently, FHA has taken a firmer stance on qualifying FHA borrowers with student loan payments. Many still believe the old guidelines apply.

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FHA HUD 4000.1 manual (994 pages). VA Mortgage and IBR Student Loan Guidelines. Lender may use the Income Based Repayment (IBR) payment if it’s verified (including $0.00) that the payment is fixed for a minimum of 12 months from the closing date.

If you are making monthly student-loan payments, you might struggle to qualify for a mortgage insured by the Federal Housing Administration. That’s unfortunate because FHA loans have a big benefit: They require only a 3.5 percent down payment, even for borrowers with FICO credit scores are as low as 580.

FHA Guidelines Deferred Student Loans no longer allows income based repayment; conventional loans does accept IBR Payments on Student Loans; Nor Deferred Student Loans that is deferred for more than 12 months; FHA Guidelines Deferred Student Loans requires underwriters to calculate 1.0% of the student loan balance or a fully amortized monthly payment over an extended term; Most.

Deferred student loans don’t necessarily break your chance at mortgage approval. Make sure you shop around with several lenders to see how they will handle your deferred student loans. fannie mae has their guidelines, which are somewhat flexible, but some lenders prefer to use only the maximum student loan payment for DTI calculation.

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Benefits of FHA Loans: Low Down Payments and Less strict credit score requirements. Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing.

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