FHA redefines how student loans are considered.

New changes concerning student loans will be creating a new problem if you are not on a regular payment. Prior to the new changes, you can defer your student loans for 12 months and the payment would not be used against your debt to income ratios.

Now when applying for a mortgage, if you are not on a payment plan, up to 5% of the outstanding balance can be used to counter how much you are allowed to borrow. For example, if you are approved for a mortgage payment of $1100 per month but have $15,000 deferred in student loans, the lender can take up to 5% ($750) off that number, reducing your eligible mortgage to $350.

Our perspective on this change is that it is a positive change. Many lenders have used the deferment as a strategy to allow recent students to qualify for mortgages that otherwise would not be in their net income bracket. Since mortgages are typically 30 year notes and deferments are only good for typically one year- to ignore the potential payment is not exactly the best idea. Eventually, you are going to have to manage both payments. Might as well get it under control BEFORE you take on another long term financial commitment.

So if you are a recent graduate with student debt, make sure you have a set payment plan in place before you apply for your mortgage.

Make the Choice. Make the Change. Delta.