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UPDATE: Improved USDA Guidelines on Student Loans!

May 29th, 2020 by Sean Stephens

USDA Student Loan Guidelines Have Improved!

As we all know, student loan debt can have a majoImproved USDA Student Loan Guidelinesr impact on mortgage qualifying!

In today’s topic, I’ll explain how improved USDA guidelines on student loans have led to qualifying improvements.

Understanding the details can mean the difference between homeownership or a missed opportunity!

As we all know, 2nd opinions are always important, so if you have financing questions and are working with another lender, we offer this free service so you can get access to an expert 2nd opinion.

Student Loan Debt

Improved USDA Guidelines on Student LoansUnfortunately, qualifying to buy a home with student loan debt is becoming a bigger challenge each and every day, and this is not just a problem for First-Time Homebuyers.

As we dig into the actual details, the actual numbers are somewhat staggering. In fact, recent data shows that the US has more than 42.8 million borrowers with $1.64 trillion in student loan debt.

Now, after we all have taken a deep breath, let’s get into the details of current USDA guidelines on student loans.

USDA Guidelines on Student Loans

USDA student loan guidelines have improved by reducing the amount needed for qualifying on certain student loans. This provides the ability to increase your overall budget and price range.

Fixed-Payment Student Loans

A fixed-rate loan has an interest rate that remains the same for the life of the loan.

For fixed payment loans, “A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed. The fixed payment will fully amortize/pay in full the debt at the end of the term.”

Non-Fixed Rate Payment Student Loans

USDA Guidelines on Student Loans in FL, AL, TN, TXA non-fixed rate loan has a variable interest rate that varies as market interest rates change.

For non-fixed payment loans, “payments for deferred loans, Income-Based Repayment (IBR), Income-Contingent (IC), Graduated, Adjustable, and other types of repayment agreements which are not fixed must use the greater of the following”:

  1. “One half (.50) percent of the outstanding loan balance documented on the credit report or creditor verification”, or
  2. “The current documented payment under the approved repayment plan with the creditor.”

Unlike prior USDA guidelines which required taking a full one percent (1%) of the balance on non-fixed payment loans,  current USDA student loan guidelines have improved by reducing the minimum payment to one-half percent (.50%) of the balance.

Additional USDA Student Loan Guidelines

USDA student loan guidelines provide for the following:

  • Student loans in the applicant’s name alone but paid by another party remain the legal responsibility of the applicant. The applicable payment must be included in the monthly debts.
  • Student loans in a “forgiveness” plan/program remain the legal responsibility of the applicant until they are released of liability from the creditor. The applicable payment must be included in the monthly debts

Summary

In summary, USDA guidelines on student loans have improved by reducing the amount needed for qualifying on certain student loans. This means you have the ability to increase your overall budget and price range.

How to qualify for a USDA loan with student loans in Florida, Texas, Tennessee, and AlabamaRemember, we are unique because as a USDA approved lender, we have dedicated systems in place for USDA processing. From pre-qualification through closing our high-level experience is your advantage.

Simply call 800-806-9836 Ext. 280 or email SeanS@MPLX.org to discuss your scenario, and let us show you the “Metroplex” difference!

Lastly, download any of our FREE USDA Resources here! These complimentary USDA guides and fact sheets are helpful resources that are always available for you.

Thanks for continuing to recommend us for all of your mortgage needs, and I look forward to seeing you right here next week!

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