When applying for an FHA, can your student loans be in forbearance or not?

Posted on Mar 10, 2013 in FHA Information

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Question by noseyone: When applying for an FHA, buy can your student loans be in forbearance or not?
We have gotten conflicting responses on this from so-called experts. We want to apply for an FHA, but my spouse’s student loans were in forbearance. The loans have been in repayment now for three months. How much longer do we have to wait to apply for an FHA? No guessing please – I want solid facts! Thanks.

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  1. There is nothing that says you cannot apply for an FHA loan while student loans are in forbearance. The contingency would be what minimum monthly payment the underwriter will require be added to the borrower’s liabilities – even if no payments (or minimum interest payments) are currently being made on the student loans.

    If the loans are now being paid back, then we will count them as any other debt on the credit report. We will add them into your monthly required debt payments and then calculate your debt to income ratio. Just as we will include your auto loan payment, your Sears payment, etc.

    During the period when the payments were in forbearance, it is still possible the (full) payment would have been included in your debt to income ratio depending on the remaining term of the forbearance. But once you are again paying on the loan as per your initial agreement, absolutely, those payments will be included in your liabilities.

    Again, as for where you stand now, there is no issue. If the required, full student loan payments are being made, that amount will be included in your liabilities to determine whether you qualify.

    Previously, you may have received different “expert” responses because not only does FHA have guidelines and requirements, so do individual lenders. The lender gives final approval on your loan, not FHA. FHA is often misunderstood in that it is an insurance program, not a lending program. When you get an FHA mortgage from the “Bank of Carol”, FHA does not lend the money to you. The Bank of Carol lends the actual money from their assets. FHA insures the loan against default with the mortgage insurance paid by the borrower.

    If the student loans become a problem, you can apply in just your name if your income and credit will get you qualified.

    Good luck.