Home Buying in Fairfield>Question Details

Nick Morgan, Renter in Fairfield, CT

How does changing my student loan repayment plan affect my back-end ratio for an FHA loan?

Asked by Nick Morgan, Fairfield, CT Mon May 27, 2013

My wife and I are looking to buy our first home and have a few questions: How are student loan payments calculated for back-end-ratios? If you lower your monthly payments by choosing an extended repayment plan, can you qualify for a larger mortgage? Do lenders look at past payments when considering you or only your current monthly payment requirements?

I ask because I'm considering switching my student loans from a 10-year repayment plan to a 25-year plan in order to qualify for a higher FHA loan. Is this something I should do several months in advance of applying for an FHA loan and will it even make a difference? Thank you!

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Nick, yes it does make a difference. Lenders will use the monthly payment you have atthe time they pull your credit. Even then, if you were paying the 10 year monthly payment, and made the changes to a 25 payment, then the lender simply orderes a supplemet to the credit report they already have to reflect the new lower monthly payment. How much this will increase the amount you qualify for all depends on how much lower the student loan payments are and what you qualified to begin with.

I suggest you meet with a Loan Officer who can help you by reviewing your 2011 & 2012 tax returns, recent paystubs, bank statements and credit report and let you know exactly what you approve for and what yoru options are. It's also important for you to keep in mind that as of June 1st, all new FHA loans will carry the monthly mortgage insurance not just for 5 years anymore, but rather for the life of the loan. So perhaps you want to consider a conventional loan, which only requires a minimum 5% (slightly higher than the 3.5% required for FHA) and doesn't call for you to carry mortgage insurance for the life of the loan.

If you need an experienced and dependable Loan Officer, I am always available. Good luck!

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(631) 659-2011 Office
(516) 918-5383 Fax
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