Student Loan Debt


Last time, we discussed the steps in converting your primary residence when you are buying a new home. Today, we will focus on student loan debt. With the increasing cost of a college education, more students are graduating with student loan debt. Some people assume that as long as the student loan is in a deferment period, then the student loan debt would not be taken into consideration when buying a home.

This may or may not be true depending on the loan program and length of deferment.

  • Conventional loans: If a student loan is in deferment, and no payment is listed on the credit report, then a monthly payment will be created for underwriting purposes by taking 2% of the total student loan debt as the monthly payment. That is often WAY higher than the actual payment once the loan is no longer deferred. In these situations, we have our clients contact their student loan company and get a payment figure they owe once the loan is out of deferment. We then use that as the payment for underwriting.
  • FHA loans: If you have 12 months of deferment (or more) remaining by the closing date, then you can ignore the future student loan debt when buying a home. If the deferment period is less than 12 months, then we resort back to the same process as conventional loans… use 2% of the balance OR get documentation from the student loan company showing the future payment.

When it comes to buying a new home, deferred student loans can’t be ignored. When buying a home, you need to make sure student loans are taken into proper consideration during the prequalification process. If you are buying a home in the state of Georgia, I can help get you started in the process. My contact information is listed at the bottom of this page.


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