Getting 12 percent of my student debt erased

[BMBiology]

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Good luck buying a house in the future if you have a boatload of student loans. Some lenders are no longer accepting income based repayment as your monthly student loan debt. Instead they are using 1% of your outstanding student loan debt as your monthly debt.

For example, let’s say you have 200 k in outstanding student loans and your income based repayment is $800/month. Instead of using $800 as your monthly student loan debt, they are using 1% of $200 k = $2,000. This would increase your debt to income ratio and therefore, you would not qualify for a mortgage.

 

[JustFillIt]

I figured out a good plan to avoid student loans. As long as you are enrolled as a student at a community college then they put the loan payments on hold. I will just take classes till I die and that means no paying off student loans.

This is a great idea... would 1 class a semester work?

 

[JustFillIt]

Good luck buying a house in the future if you have a boatload of student loans. Some lenders are no longer accepting income based repayment as your monthly student loan debt. Instead they are using 1% of your outstanding student loan debt as your monthly debt.

For example, let’s say you have 200 k in outstanding student loans and your income based repayment is $800/month. Instead of using $800 as your monthly student loan debt, they are using 1% of $200 k = $2,000. This would increase your debt to income ratio and therefore, you would not qualify for a mortgage.

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Just FYI this is misleading..

I just closed on a house last week.. we move in April 15th... I have almost 200k in student loans. No one even asked the question. No hesitation at all.

Process was smooth as butter. I used Chase bank as my lender and I have a great mortgage contract.

 

[BMBiology]

Just FYI this is misleading..

I just closed on a house last week.. we move in April 15th... I have almost 200k in student loans. No one even asked the question. No hesitation at all.

Process was smooth as butter. I used Chase bank as my lender and I have a great mortgage contract.

Some lenders including big players like Fannie Mae are already changing how they calculate student loan debt...don’t be too surprise when all of them adopt 1% of outstanding student loan.

 

[deleted898085]

Some lenders including big players like Fannie Mae are already changing how they calculate student loan debt...don’t be too surprise when all of them adopt 1% of outstanding student loan.

I remember they always look at your monthly payment. They don't look at your total debt.
I don't think they'll change that.

 

[BMBiology]

I remember they always look at your monthly payment. They don't look at your total debt.
I don't think they'll change that.

It is already happening:

Buying a Home When You Have Student Loans

Want to buy a home despite having student loan debt? Here are a few important things you should know before looking for a lender.

thecollegeinvestor.com

 

[deleted898085]

It is already happening:

Buying a Home When You Have Student Loans

Want to buy a home despite having student loan debt? Here are a few important things you should know before looking for a lender.

thecollegeinvestor.com

That's the question some of my classmates have asked me. I told them not to worry about it. They'll look at your payment. But we'll see what the bank will say when they actually get a house loan.

 

[confettiflyer]

$90 saved a month from age 18 to 65 will turn into $400k @7%.

What’s the actual future value of that though? Why is it either or? I make enough money to cover $90 a month saved AND have burnt ass sugar bomb coffee on the daily.

Cashmeoutside!

But seriously, I earn money so I can enjoy it, not turn into some miserly geezer trying to move to some cave in Nevada to save on taxes. Nor am I gonna start drinking Folgers (I vomited a little) because it’s cheaper than Blue Bottle, Philz, or Ritual. Not like I’m drinking Civet cat coffee, hah.

But if you make like $40k/yr you should probably not be doing what I’m doing.


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[wagrxm2000]

What’s the actual future value of that though? Why is it either or? I make enough money to cover $90 a month saved AND have burnt ass sugar bomb coffee on the daily.

Cashmeoutside!

But seriously, I earn money so I can enjoy it, not turn into some miserly geezer trying to move to some cave in Nevada to save on taxes. Nor am I gonna start drinking Folgers (I vomited a little) because it’s cheaper than Blue Bottle, Philz, or Ritual. Not like I’m drinking Civet cat coffee, hah.

But if you make like $40k/yr you should probably not be doing what I’m doing.


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I usually toss 2% inflation in so 9% real.

Obviously you and I, it wouldn't matter. If I really wanted Starbucks, I would get it.

However, I'm sorry but if you are making $50k a year, you shouldn't be at Starbucks daily AND complaining you can't save.

Plus it doesn't have to be Starbucks money, just put $3 aside each day. That $400,000 could be spent down over 20 more years to add a decent chunk to social security.

 

[confettiflyer]

I usually toss 2% inflation in so 9% real.

Obviously you and I, it wouldn't matter. If I really wanted Starbucks, I would get it.

However, I'm sorry but if you are making $50k a year, you shouldn't be at Starbucks daily AND complaining you can't save.

Plus it doesn't have to be Starbucks money, just put $3 aside each day. That $400,000 could be spent down over 20 more years to add a decent chunk to social security.

Exactly. I hate when people blindly try to apply advice not applicable to our level of income. Set the amount you need to save, spend your mental efforts reducing your ER’s and selecting the appropriate equities allocation (go get caffeine it helps you to be productive) and leave it alone.

Spend the rest on hookers and blow, if you so desire.


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[BMBiology]

That's the question some of my classmates have asked me. I told them not to worry about it. They'll look at your payment. But we'll see what the bank will say when they actually get a house loan.

Certainly someone who has a boatload of student loan debt is more of a risky borrower. It would not surprise me if more banks start to treat them differently.

 

[confettiflyer]

Certainly someone who has a boatload of student loan debt is more of a risky borrower. It would not surprise me if more banks start to treat them differently.

That could run afoul of Fair Housing law, the long-standing accepted method is to use 1% of a total loan balance, but some lenders will accept the more advantageous IDR (ICR, PAYE, IBR, etc...) payment.

High student loan balance customers are probably better customers...people comfortable with debt might be more comfortable taking out CC’s, HELOC’s, etc... that’s a gold mine for banks, who are securitizing their loans anyway and letting thise security holders take on the default risk.


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[BMBiology]

That could run afoul of Fair Housing law, the long-standing accepted method is to use 1% of a total loan balance, but some lenders will accept the more advantageous IDR (ICR, PAYE, IBR, etc...) payment.

High student loan balance customers are probably better customers...people comfortable with debt might be more comfortable taking out CC’s, HELOC’s, etc... that’s a gold mine for banks, who are securitizing their loans anyway and letting thise security holders take on the default risk.


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That is what I am saying. If more lenders go back to using 1% of total loan balance then a lot of people would not qualify. If you have $200,000 in student loans and they count your student loan debt as $2,000 instead of $800 under IBR then you are going to have a tough time getting a mortgage.

 

[confettiflyer]

That is what I am saying. If more lenders go back to using 1% of total loan balance then a lot of people would not qualify. If you have $200,000 in student loans and they count your student loan debt as $2,000 instead of $800 under IBR then you are going to have a tough time getting a mortgage.

Not *too* tough. Under normal guidelines, up to 43% of your gross pay can be used for all debts to qualify.

So a pharmacist making the average starting rate of $78/hr in CA who holds a $200k student loan and no other debt can qualify for a mortgage + tax/insurance payment of $3813 and some change.

That’s definitely enough for a condo or median home outside of SF proper and Silicon Valley (you’ll need to marry another professional with a similar/higher salary to afford a home there).

Obviously home price, down payment, and mortgage rate are going to influence that (for those asking how much house does that mean).


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[BMBiology]

Not *too* tough. Under normal guidelines, up to 43% of your gross pay can be used for all debts to qualify.

So a pharmacist making the average starting rate of $78/hr in CA who holds a $200k student loan and no other debt can qualify for a mortgage + tax/insurance payment of $3813 and some change.

That’s definitely enough for a condo or median home outside of SF proper and Silicon Valley (you’ll need to marry another professional with a similar/higher salary to afford a home there).

Obviously home price, down payment, and mortgage rate are going to influence that (for those asking how much house does that mean).


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You know most new pharmacists don’t make close to $78/hr right? More like $55/hr so that is $55 x 40 hours x 52 weeks = $114,400/year. In addition, most lenders are reluctant to let you borrow 43% debt to income unless you have an extensive work history so let’s assume 40% (I am being generous).

So 40% of $114,400 is $45,760 or $3813 a month. Let’s assume your calculated student loan payment is $2500 (based on 1% of $250,000 student loan debt) + $500 (car payment) = $3000. You got $813 left for a mortgage, property tax, home insurance....not going to happen.

 

[confettiflyer]

You know most new pharmacists don’t make close to $78/hr right? More like $55/hr so that is $55 x 40 hours x 52 weeks = $114,400/year. In addition, most lenders are reluctant to let you borrow 43% debt to income unless you have an extensive work history so let’s assume 40% (I am being generous).

So 40% of $114,400 is $45,760 or $3813 a month. Let’s assume your calculated student loan payment is $2500 (based on 1% of $250,000 student loan debt) + $500 (car payment) = $3000. You got $813 left for a mortgage, property tax, home insurance....not going to happen.

Is that the going rate outside CA? sheesh.

But no I’m holding fast to 43% as that is the listed guideline for practically every lender (I’ve never seen 40%, in fact FHA goes to 50% but I don’t like those loans)...and people need to not have $500 car payments, so even with a low rate as above....

$4300/mo -$2500 = $1800/mo which sounds reasonable for a single person outside of CA. Double it for two pharmacists married.

Go to car max and buy a used car!


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[mentos]

Mind sharing how you got to 3%? still trying to figure out how to get number that low.

I just saw this ad on FB. Rates are very low right now so you should be able to get under 3%.