Are you a first time home buyer wondering how your student loan debt may affect your ability to qualify for a mortgage? What’s so special about student loans when buying a house? What if my student loans are in forbearance? How do student loans differ across Conventional Loans, FHA Loans, VA Loans and USDA Loans? In this episode, we are going to take a deep dive into Student Loans and Mortgage Qualifying to help you become The Educated HomeBuyer.
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Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: firstname.lastname@example.org ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart
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[00:00:00] This is The Educated Homebuyer, everything you need to know to buy right, borrow smart and build wealth through real estate ownership.
[00:00:14] Jeb Smith, Huntington Beach Realtor: One of the most misunderstood things when qualifying for a home mortgage is student loans. And that’s because student loans can be calculated in several different ways depending on the loan program that you’re using on top of student loans out there being in forbearance, some being forgiven. So, Josh, I think it’s important to have the conversation today around student loans.
Talk about what we know, what potential home buyers need to know when going through the process and talk about it across different loan types, conventional, FHA, VA, how they all differ a little bit, how they’re similar and what people really need to wrap their heads around, if they have student loans and trying to qualify for a mortgage.
[00:00:55] Josh Lewis, Certified Mortgage Consultant: A thousand percent. We talk regularly on the show about working with experts. If you have a significant amount of student loan debt, it is more critical than almost any other situation that you work with an expert. These guidelines are pretty straightforward now relative to where they were 5, 6, 7 years ago.
And we’re going to go through a brief history of that. But with as simple as they are, my feeling was, we’ll stop having people reaching out saying, “Hey, I’m being told I don’t qualify, or being told my debt-to-income ratio is too high, or This is a problem”, when it rarely, if ever is. So, in addition to going through those guidelines, I just want to give this overview of why this is a problem? Why is this an issue?
I’ve done loans for 27 years now as, as impossible as that is to believe with such a young face here, Jeb. For the first 18 years, student loans just weren’t really an issue. What are you laughing at?
[00:01:40] Jeb Smith, Huntington Beach Realtor: Well, fortunately for most people listening, they can’t see your face. But like, let’s, let’s digress and, and keep moving forward.
[00:01:48] Josh Lewis, Certified Mortgage Consultant: So for the first two thirds of my career of doing loans, student loans were rarely an issue. So, start with the history of that. By the end of the 1990s, early 2000’s, we had 90 billion of outstanding student loan debt. $90 billion is a lot of money. Jeb, right?
[00:02:02] Jeb Smith, Huntington Beach Realtor: No, I, it’s more than I have in the bank.
[00:02:05] Josh Lewis, Certified Mortgage Consultant: But when you look at the numbers today, you go, that’s a trivial amount. Well, what happened is in the nineties to the early 2000’s, we switched primarily from grants in the US to student loans, and we also opened up those loans from low income families to middle income families. So, we have a third party payer system.
Even though you’re on the hook for the loans, you don’t really see what you’re doing as you go. So, through that timeline, what happened is by 2010, we had $830 billion, so almost a 10x increase in outstanding student loan debt. By 2012, we hit $1 trillion by 2018, $1.5 trillion. And right now, the most recent numbers are a couple years old. So, $1.7 trillion, wouldn’t be surprising to hear if we’re at $2 trillion.
Although due to COVID and the pandemic people weren’t going to school and more people dropped out so maybe not. But we’re somewhere near $2 trillion of student loan debt. The response from the [00:03:00] government and everything, what we say about politicians and the government here, this is not partisan.
I think they’re all idiots and they’ve all played a big part in getting us to this situation. So, when I say this was done under the Obama administration, it’s just a statement on the timing of when it happened, whoever was in office was going to have to deal with this. So, in 2009, the Obama administration came out with IBR plans, income-based repayment.
They’re also known as income-driven repayment. Basically, said that you had to go and apply with your student loan servicer, show them how much income you had, show what all of your debts were, and they said 15% of your discretionary income had to go to your income-based repayment.
This is essentially Jeb, like a pay option arm for mortgages. You are paying an amount, so technically you’re paying on your student loans, but you are not even paying the interest in most situations, so they’re negatively amortizing. Your loan is growing. And the payoff was if you qualify that after 25 years, you could have your loans forgiven.
So, pay a minimal amount. Watch your loan grow. Have this hang over your head for 25 years and then there’s a possibility that it will go away. In 2012, they came back with the pay as you earn plan. Dropped it to 10% of your discretionary income and forgiveness after 20 years. A couple years later, they had revised pay as you earn, which opened it up to more borrowers.
So, a long way of saying for me, prior to COVID, almost every person that I talked to with a significant amount of student loans, say more than $25,000, which there are a lot of them. If you’re listening, you are probably one of them. Anyone who has more than $25,000 of student loans is in one of these types of income based, income driven repayments.
So that’s primarily what we would’ve arrived here to talk about today, but we also have the confounding factor, Jeb of CARES Act Forbearance. So COVID has been over for about 10 years now, but we are still sitting here where every federal student loan is under forbearance, under the CARES Act. So, at some point we are being told that that pause will be taken off. But right now, many people never stepped forward and got an income-based repayment cuz when they got outta school they were automatically in forbearance. So not making a payment.
So, when we talk today, we’re going to give both of the guidelines, the guidelines for income-based repayment and guidelines for those that are under forbearance. Cuz a lot of people are in forbearance right now under the CARES Act.
[00:05:24] Jeb Smith, Huntington Beach Realtor: So let’s talk a minute here before we dive into that about forbearance, what that actually means and what that means for you as a borrower. You as a mortgage lender looking at forbearance, cuz it often comes up, a buyer calls you or a potential buyer calls you, wants to get pre-qualified and the conversation goes something like, “Hey, I have student loans but I don’t have monthly payments on ’em. They’re in forbearance. I don’t need to count those. Right?”
Because at the time that they’re making that statement or calling you, there are no payments due on ’em. There’s no interest. And for the foreseeable future, I mean we’re recording this in April of [00:06:00] 2023 and right now it’s extended through the end of June, I believe. Somewhere in that ballpark at the moment.
So, They’re in forbearance, no payments. Does that mean I still have a payment? And I know we’re gonna talk about this in more detail, but I think this is the conversation or the question that a lot of people have.
[00:06:16] Josh Lewis, Certified Mortgage Consultant: So from a lender’s perspective, first, let’s talk about what forbearance is.
Post COVID, most everyone knows because we had mortgage forbearance, where all you had to do is call up and ask for it. And for student loans, You didn’t even have to ask. You weren’t given a choice. You were dumped into forbearance whether you wanted, needed, cared. So what forbearance is, is you have a loan, you have a debt that you owe.
Forbearance says the lender is going to overlook that and for a period of time allow you to not make payments. So the type of forbearance and whether it’s accruing interest during that timeframe can vary. In terms of CARES Act forbearance for student loans, no payments and no interest and now we are going on what, three and a half years?
Yeah, about three and a half years. And Jeb, I actually have, if anyone cares, the actual verbiage right now, “student loan payment pause is extended until the Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30th, 2023, payments will resume 60 days after that.”
So I’ll believe it when I see it. We’re basically being told what, that’s the end of August of this year as best we can tell unless they modify or change that again at some point here in the next few months.
[00:07:29] Jeb Smith, Huntington Beach Realtor: And there’s a chance it gets extended again. You’re in an election season, again, not making political statements, but things like this tend to have a life of their own so you know, if you would’ve asked me a year ago, Josh, if this would be extended, I’d be like, “there’s no way, man, we’re two years into this.” Now we’re three years into this and I’m like, I don’t even know at this point.
I guess it could go on for, for another year. Like at this point, what does it matter? But that’s a whole different conversation. So let’s talk in a l Little bit more detail about what that means with regards to financing, about getting pre-approved. How does that affect your debt to income ratio? The stuff that people need to know.
[00:08:06] Josh Lewis, Certified Mortgage Consultant: Yeah. And let’s talk just briefly, Jeb, why does it matter? If you have an income-based repayment and you’re not even paying the minimum interest on the loans and that loan is growing, a lender is looking at that, or forbearance, or a deferment where you’re not making payments, they know that at some point the bill comes due.
So they’re wanting to make a good underwriting decision that says you have the ability to repay your mortgage and your other debts, including these student loans. So we’ve introduced uncertainty with these variable payments and or no payments.
[00:08:34] Jeb Smith, Huntington Beach Realtor: Let’s talk about that kind of briefly here for a moment, because you see this way more often than I do, but you might be talking to somebody that has $300,000, $400,000 in student loans, and without knowing how much the monthly payment Is on that, you know exactly, I can say it’s over a thousand dollars and, being in forbearance and then automatically having to pay that again is gonna make a huge impact or could make a [00:09:00] huge impact in somebody’s ability to repay a loan. And therefore that’s the primary reason they’re doing that…. Am I getting that right?
[00:09:07] Josh Lewis, Certified Mortgage Consultant: Yes. Yes. Because at some point, again, that bill comes due and the big thing, say we just talked about the explosion of student loan debt from say 2000 to 2020. Well, what was the common theme of that era? Really low and decreasing interest rates. So you borrowed at one rate and then it improved over time.
Anyone who’s been in forbearance the last three years can have a little bit of a shock. Many of these are variable interest rates, and they will go to market rates that are much higher. Just again, uncertainty from the lender’s perspective. If they say, “Hey, we talk about it on an FHA loan, your maximum debt income ratio, including your housing is 57%.”
Well, maybe you meet 57% today, but what if next year that loan goes higher or you are, in a situation where you need to repay a little bit more? So the income-based repayment really threw lenders for a loop. From 2009, when it was introduced to 2015, they didn’t understand it, so underwriters didn’t really know what to do with this.
They’re like, wait, that says $300,000 of student loan debt. It says the payment’s $112 a month. And they would just accept it. And then lenders started looking around going, Ooh, this isn’t, this can’t be right. And right now, every program that allows you to use an income-based repayment has made the decision that because it’s a portion of your discretionary income, a set percentage of your discretionary income, that determines that payment.
If the payment goes up, it’s because your income has gone up. So if we meet debt to income guidelines today, we should meet debt to income guidelines in the future. Now, that’s not to say that every loan program is gonna allow an IBR payment, but most of them do. And we’re gonna go through what you need to document if you are under an IBR program.
[00:10:42] Jeb Smith, Huntington Beach Realtor: And it’s also really important to note, there’s a lot of loan officers out there. There’s a lot of quote unquote mortgage professionals out there. That don’t understand student loans, that don’t understand the details of how these things are calculated. And you might be going, Jeb, how’s that possible?
It’s because there’s been changes over the years. Things happen. Just different way of looking at things where people just don’t understand it for one reason or another. And, things get overlooked and people get pre-approved based on, the mortgage professional looking at it one way when in fact an underwriters looking at it another way.
So just make sure if you have student loans, you’re working with a professional out there that understands student loans. And after hearing today’s episode, You’re gonna know as much as they should know to some degree. So you, you have the ammunition to be able to ask the right questions to make sure you know the person that you’re working with is the right person.
With that said, Josh, start at the most basic level and, talk about conventional loans.
[00:11:43] Josh Lewis, Certified Mortgage Consultant: Yeah, conventional loans can be underwritten to Fannie Mae or Freddie Mac Guidelines. For the most part, Jeb, we talk about all the time on the show those guidelines mirror each other. This is one area where they do not mirror each other, and there’s a fairly significant difference between the two.
So it can dictate, depending on your circumstances, we [00:12:00] want to go Fannie Mae or we want to go with the Freddie Mac option. So Fannie Mae’s solution here is use the payment on the credit report. If you owe $400,000 and it says $1. Use $1. It’s what it says on the credit report.
So where we run into trouble here Under CARES Act with forbearance, most people’s federal student loans, all people’s federal student loans show $0.
So if the payment on the credit report is zero, we have to determine, is that because you’re in an income-based repayment plan with a legitimate $0 repayment? Or are you in deferment or forbearance under CARES Act. So the first part, if you are in deferment or forbearance and and what, we have two options.
You can use 1% or you can go to your servicer and document what the repayment terms will be when forbearance is over if it’s less than 1%. It’s not a super common situation, but it does come up. So if you’re under some type of income-based, income driven repayment plan, what we need to do, if the payment shows a zero, is reach out to the servicer and document what the actual income-based repayment is right now.
Have someone that we’re helping on the Dream for All program right now, she literally has a $0 payment. She’s got I think $150,000 of student loans. Payment shows a $0. We had to document that and the underwriter. Under Fannie Mae guidelines allowed to use that figure. So, if we’re unable to document that, if the servicer won’t provide that documentation, you fall back to using the 1%.
1% is pretty harsh. I see people regularly with two, three, $400,000 of student loans. You owe $300,000. If we fall back to 1%, it’s a $3,000 monthly payment. Most people don’t make enough money to qualify for a house and a $3,000 pseudo payment that doesn’t actually exist. So this is where Jeb, the Freddie Mac guidelines are important.
The guidelines are the same, except if we can’t document what the payment is, we use a half of a percent. So for that person with 300,000 in student loans, instead of using $3,000, We use $1,500 and for the most part, the automated underwriting systems DU, Desktop Underwriter for Fannie Mae and Loan Prospector for Freddie Mac are going to be similar. They will either, both approve or both decline. But there’s a not insignificant proportion of loans that only one or the other will approve.
So it, it can be a little bit of a, a dicey game there between those two if we’re not able to document the IBR payment. And Jeb, I get people all the time, they go, “no. I’ve been in forbearance for like two and a half years”. I’m like, no I deal with this all day, every day. I am aware that everyone with federal student loans is under forbearance.
I am also aware that if you call your servicer, they will give you the documentation of your income-based repayment plan. And let’s say that you graduated in 2021, so you’ve been under forbearance the whole time with zero payment. So why would you even bother to set up an income-based repayment plan?
You’ll do that when the time comes, when payments are required to be made, [00:15:00] although they are not reaching out to people saying, “Hey, set up an IBR plan”. They will do it for you right now. You can go through the process of providing all of your income documentation, showing your discretionary income, and they will provide that documentation for you so that you can go into a mortgage, even if you had not previously done that.
[00:15:18] Jeb Smith, Huntington Beach Realtor: So a question, Josh. If I’m coming outta college, in theory, I’m making less money coming outta college than I would a couple years after that, right? So does it make More sense to, do it when you have less income, therefore your payment is ultimately less? Or does it really matter? Is there a possibility that the payment goes up as you make more money?
[00:15:39] Josh Lewis, Certified Mortgage Consultant: Jeb, I have the perfect example. You ask a great question. I mean, legitimately great question. The client in question that we were just talking about has a zero IBR payment. Her income was much lower last year, so that iBR payment, the letter says through February of next year it’s $0. At which point she’s gotta turn in pay stubs, W2’s, show discretionary income and get it reset and it will be much higher.
So for her, we can use that zero payment all the way through February of next year. For right now, she’s great and thankfully she’s buying and she got that dream for all program and it’s gonna work out perfectly.
But she was actually keenly aware of it and asking herself the same question as you just asked because she knows next year her IBR payment was going to be higher. And here’s the crazy thing, Jeb, by now going from a lower rent payment to a higher mortgage payment, she decreased her discretionary income and will have a lower payment going to this.
She’s a teacher. As a public servant, she will be eligible for forgiveness. So if you’re gonna get forgiven in 20 years, you really would like to have as low a payment as possible during that timeframe. And by buying a home, she has accomplished that.
[00:16:45] Jeb Smith, Huntington Beach Realtor: And a lot of you listening know that I was a mortgage broker back in the day and did loans for over 10 years. Dealing with student loans when I was in the game so to speak, wasn’t what it is today. Like Josh mentioned, all the changes over the course of the last 15 years or so.
It’s crazy now. I can understand the guidelines and I read the guidelines, but I don’t know these things like Josh does. And these questions that I’m asking right now are legitimate questions that I truly don’t know the answer to. So like you guys listening, I’m learning along with the process because there are so many little nuances when it comes to student loans and how they’re calculated and that one little calculation can honestly be the difference in someone qualifying for a loan or not qualifying for a loan.
So again, I’m gonna stress the importance of making sure that you’re working with a professional. So, sounds like we nailed Fanny and Freddie guidelines there. For the most part, Josh. What about FHA?
[00:17:39] Josh Lewis, Certified Mortgage Consultant: The cool part is once we have this baseline of understanding Fannie Freddie guidelines, it makes the rest of ’em pretty darn simple.
So, FHA for outstanding student loans, regardless of the payment status, we must use the payment amount reported on the credit report or the actual documented payment when the payment amount is above zero. So same situation, if it shows zero, [00:18:00] we have to document that it’s literally a zero IBR. Or we’re gonna go just like Freddie Mac and use half percent of the outstanding balance.
So if we can’t document it or if it’s someone that never got an IBR payment and they have a zero payment under CARES Act forbearance, right now, we’re gonna use a half percent for FHA half percent for Freddie Mac, 1% for Fannie Mae.
Another question coming, is it possible that the half a percent calculation is less than the IBR payment in some cases or is it always gonna be the IBR payment is probably gonna be less of a,
I’m sure it’s possible, Jeb. I’ve never seen an IBR payment higher than a half percent. But in the right situation with someone that made a lot of money definitely possible there. So it’s something that you want to consider. And we’re in a gray area on some of this stuff in that if that thing says $0 and they have not gotten an income-based repayment, I can use a half percent.
They could also go back to the servicer and say, “Hey, show me what my actual monthly payment is”. Well, if that’s more than a half percent, if I see it, I am supposed to give that to the lender and we use more than a half percent.
Most of my borrowers are pretty smart, and if it’s more than a half percent, they would say, “Hmm, sorry, I can’t get that documentation from my lender. But for us as a broker, as a lender, if we see something that shows that it’s more than a half percent, we can’t go, “Ooh, sorry, we didn’t see it.” But from that perspective, the guidelines read. If it says zero and we can’t document any different, use a half percent.
[00:19:27] Jeb Smith, Huntington Beach Realtor: Yeah, that was my next question. Now I’m gonna go the opposite direction, Josh, and say, what if the lender has seen an amount and you’re able to go back to your lender and get a documented amount less than that. Are you then able to turn that documented amount into the lender and get the lender to lower it and then use that new amount?
[00:19:45] Josh Lewis, Certified Mortgage Consultant: Yes. Whatever the most recent documentation is that shows what the current calculation of that payment, either under an income based repayment or a projection of what the standard repayment terms would be, post CARES Act.
[00:19:59] Jeb Smith, Huntington Beach Realtor: Now, is it fair to say that student loans are probably the most difficult thing to calculate when it comes to something reporting on someone’s credit report?
[00:20:08] Josh Lewis, Certified Mortgage Consultant: It’s the only situation where you would normally have to calculate, you know what I’m saying? You just go and look and look at the number. This is the one where we got to go, okay, what loan program? What are the repayment terms? And, it’s definitely the most complicated cuz you have to know all of those things and what all of your options are and how to navigate it.
And the good news is, Underwriters know this really well now. 3, 4, 5 years ago, I would’ve said that’s not the case. And the reason why I say that’s good news is generally once the file gets to underwriting, no matter how big of a knucklehead your loan officer is, the underwriter’s gonna know all of your options for working around it.
So either we hit a hard dead end once we get to underwriting, or the underwriter is gonna work with your loan officer to say, “Hey, you didn’t account for this properly. Here is what we need to do.”
[00:20:50] Jeb Smith, Huntington Beach Realtor: Got it. So two types of loan programs we haven’t really discussed in detail, VA and USDA, how do those differ from what we’ve heard so far?
[00:20:59] Josh Lewis, Certified Mortgage Consultant: So the biggest [00:21:00] difference of VA versus any other program, it’s the only loan program remaining that will allow you to use a deferred payment. But let me read the guideline and listen carefully:
If the veteran or other borrower provides written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered.
Now, the problem with CARES Act, Jeb, we just went through the deadlines, guidelines, dates. We have no idea when it’s gonna be over, so you are in forbearance right now, but we don’t know that it’s gonna extend 12 months beyond the date of closing.
Now, if you are in some type of a program where you know that it’s two years, three years before the payment starts, AND the servicer is able to document that for you. That’s where it gets dicey and difficult. VA’s okay with it, but we have to have written documentation that it’s 12 months past the date of closing. So not 12 months from today, not 12 months from the day of underwrite. 12 months from the day that you close escrow.
[00:21:54] Jeb Smith, Huntington Beach Realtor: Nah. Good stuff. Yeah, I mean, VA in their guidelines is by far the most lenient, the most flexible. Some of the things they allow. I’m like, when you read them, I’m almost shocked to hear how flexible and, willing to overlook things that they are. But again, these people pay the debt to the country and I guess the government’s repayment is by doing some of these things.
So here we are. So what about IBR payments when it comes to VA.
[00:22:19] Josh Lewis, Certified Mortgage Consultant: It gets interesting. They do not have written guidance on income-based repayment, but as you talked about, the flexibility that the VA has, if we as an originator call the regional loan center. They’re very helpful. They will go through it.
They will tell us how they look at it. So although this is not out there in writing, the lender can use the income based repayment if it’s verified, even including a zero payment when the payment is fixed for a minimum of 12 months from the closing date. So that letter, they want it 12 months out from the closing date.
So you can use an IBR, but it gets to be dicey. So when the payment’s fixed for less than 12 months, the lender must use a regularly calculated payment once the IBR ends. So you get into some gray areas there. So for the most part, what we tell people, VA uses an interesting calculation, which is the lowest of all of them.
It’s 5% annually. So when you take 5%, divide it by the 12 months. What does it give is 4.16%. It’s less than the 5% that FHA and Freddie use, so it’s a pretty darn good number. And VA is incredibly flexible on very high debt to income ratios. So even though they make it hard to use an IBR payment, they are really flexible in working around it for well-qualified borrowers.
[00:23:30] Jeb Smith, Huntington Beach Realtor: And lastly, Josh, let’s talk about USDA.
[00:23:32] Josh Lewis, Certified Mortgage Consultant: So, USDA is a little bit of an interesting case. The payment amount reported on the credit report or the actual documented payment. So if you have an IBR payment, it’s $1 $5, a hundred dollars, you are okay. If it’s a $0 IBR, we do fall back to the half percent.
So deferred forbearance, zero ibr, you’re gonna look at a half percent. But if we have an actual IBR payment documented on the credit report or with a letter from the servicer, we’re totally okay to use that.
[00:23:59] Jeb Smith, Huntington Beach Realtor: [00:24:00] Yeah. Now I realize like listening to this, your head’s probably spinning with the acronyms, the abbreviations of different things and talking about calculations of percentages and all of that stuff.
So, Just again, make sure you’re working with a pro. But Josh, when I say that and I’ve said it several times and I’m trying to really get the point across here, that people need to be working with a professional in all circumstances. But really when it comes to student loans it probably one of the more important cases just because of all the nuances in the programs.
But what, what is your advice to someone that is going through the pre-approval process that has student loans? Should they know all of this when calling you the first time, is it something the mortgage professional helps with what does that look like?
[00:24:44] Josh Lewis, Certified Mortgage Consultant: I, or any other loan officer, should be able to walk you through all of the options with what currently exists.
So do you have an IBR payment? Have you ever gone through the application and qualification for IBR? If not, what is the actual repayment term? If you don’t have that, you probably should get it. Otherwise we can say, here we are with CARES Act forbearance, we can use half percent. 4.16% with VA, 1% with Fannie Mae and show you what that looks like.
And if that doesn’t work we have a company called Loan Sense that we work with. If you have poor credit, you may have talked to a loan officer, said, “Hey, I have a credit repair company. You should work with them.” Loan Sense is a student loan optimization company.
So they will work with you to figure out what is the best way to consolidate your loans, if consolidation is the best thing for you, the best way to apply for an IBR program, and then also to make sure that you are getting credit under public service loan forgiveness for all of the payments that are being made.
And if you’re not under a PSLF option, depending on your career, other ways or what you can do to get those student loans forgiven and making sure you’re optimizing your repayment to put you at the best point in the future, while also being cognizant of the fact that if we refer you over there, you’re trying to get a mortgage and qualify to buy a home, and how do we get that payment as low as possible so you qualify for as much as possible.
So if you’re completely in the dark I defer to an expert on that. I know a lot about student loans a lot more than most people, but not nearly as much as Loan Sense does.
[00:26:14] Jeb Smith, Huntington Beach Realtor: Now I’m gonna throw a curve ball here at the end cuz it’s something we didn’t really touch on, Josh. But what if I’m one of those public servants that had my student loans forgiven but they’re still showing on my credit report for one reason or another.
How do I provide documentation? Is that something I do? Is that something that’s done on your end? How do we go about documenting it?
[00:26:33] Josh Lewis, Certified Mortgage Consultant: You will receive documentation when you have the forgiveness. And interestingly, Jeb, I’ve been dealing extensively with borrowers with student loans for the better part of 10 years, or at least aware of it since student loans have become a problem.
And just in the last year, I’ve had about four different clients, three of them were all attorneys with $300,000 to $400,000 of student loan debt and they all got forgiveness. And they get a letter acknowledging their forgiveness, listing the student loans, stating that the balance is zero. And [00:27:00] then within about a billing cycle, it showed up on their credit reports as a zero balance as well.
But if for some reason it doesn’t get reported, you have that letter and we can provide that as documentation to the lender.
[00:27:10] Jeb Smith, Huntington Beach Realtor: Good stuff. So hopefully provided a little bit of clarity today, when it comes to student loans and just giving you the information that you need to know.
But if you have questions, reach out. Speak to a mortgage professional. Again, like Josh mentioned, all mortgage Pros out there that are really professional, should understand this, should be able to guide you, walk you through that process, answer your questions, give you your different options, and then ultimately compare.
Right? I mean, we always talk about the numbers never lie. Compare loans side by side when you’re going through the process. Figure out what is best for you once you know your options with regards to financing, and from there, you can make a sensible decision or the best decision for yourself.
But if you have additional questions, you can reach out to Josh or myself. Our contact information is in the description below.
Josh, any final parting words today?
[00:27:57] Josh Lewis, Certified Mortgage Consultant: Just make sure you are asking the questions early. It’s sort of a confounding factor. The student loans and all of the variables around repayment.
If you have a significant amount, and again, if you have $20,000 of student loans to you, that’s a significant amount. But even under the worst case, 1% of that is $200. Generally not gonna keep you from qualifying. So when I say significant, 25, 50, a hundred, $300,000. Anything more than $20-25 grand, talk to a loan officer early.
Jeb, how often do we say it is never too early to talk to a loan officer? I’m not gonna try and tell you to go jump in a car and buy a house this weekend. We’re gonna advise you on what your options are when the time comes that you decided is right for you to buy a home. So it’s definitely a complexity you should consider and start the process even earlier to get all your ducks in a row.
[00:28:43] Jeb Smith, Huntington Beach Realtor: Awesome. So if you need that pro, there’s a link in the description below. Can refer you anywhere across the country. But for now, we appreciate you listening. We appreciate the support, adios
[00:28:54] Josh Lewis, Certified Mortgage Consultant: And vaya con dios!.
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