How to convince banks of future student loan payments??

[Muscleman]

I would really appreciate some help here... So I am starting intern year down in Texas this year and am trying to buy a home. I have contacted multiple banks that offer physician loans (BofA, BBVA Compass, Bank of Texas), and they all have requested a letter from my student loan servicer stating that I am in deferment or IBR for at least the next year. However, when I contact my loan servicer (nelnet), they say that because I am in my post-graduation grace period until December, that I am not eligible to apply for any payment plan (income-based repayment, forebearance, or deferment) until the last 60 days of my grace period. Thus, they are unable to write any letter verifying that I will be on an income-based repayment plan or deferment. The bank's response is that without this letter verifying lower future payments, they then have to count the amount of the standard repayment, which is too much of a hit on my debt-to-income ratio to qualify for any real loan.

So what am I missing here? How is everybody with med school loan debt able to purchase a home before you are even allowed to have an income-based repayment plan set up? What are you able to use to reassure the underwriters at the bank that you will be in deferment or IBR?

TIA for your help

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[JHU Texan]

The only way you'll get around this is to consolidate all of your loans now. This forces you to start repaying the loans immediately (waiving your grace period). The only problem you'll run into now is the time it takes for the consolidation to go through. I figured this work around right before intern year and barely closed on a house with a few days to spare because the consolidation process takes a long time (plus then getting the paperwork from the student loan servicer regarding payments).

 

[James Martin]

The only way you'll get around this is to consolidate all of your loans now. This forces you to start repaying the loans immediately (waiving your grace period). The only problem you'll run into now is the time it takes for the consolidation to go through. I figured this work around right before intern year and barely closed on a house with a few days to spare because the consolidation process takes a long time (plus then getting the paperwork from the student loan servicer regarding payments).

I agree with you.

 

[James Martin]

The only way you'll get around this is to consolidate all of your loans now. This forces you to start repaying the loans immediately (waiving your grace period). The only problem you'll run into now is the time it takes for the consolidation to go through. I figured this work around right before intern year and barely closed on a house with a few days to spare because the consolidation process takes a long time (plus then getting the paperwork from the student loan servicer regarding payments).

I agree with you.

 

[RangerBob]

Consolidating your loans usually takes two months. It seems like it'd be pretty hard to consolidate your loans and find/buy a home (considering you wouldn't be able to start applying for the home loan, which also takes a while, until you've consolidated your loans). It sounds like the above poster was able to accomplish this, but I think a lot of stars might need to align to close on a home on-time. Also, there are a lot of downsides to consolidating, particularly if you owe quite a bit.

Can't you just get a certification from Nelnet that your loans are in grace for the next six months? Then send a copy of the regulations for mandatory loan forbearance--while you can't apply for that quite yet, your loan servicer HAS TO approve a mandatory residency loan forbearance request (hence the term mandatory). I would hope if you speak with your prospective lenders they might be amenable to that.

Obviously you don't actually have to apply for forbearance (I recommend everyone do IBR/PAYE while in residency, unless you absolutely can't afford it). But showing that you're guaranteed forbearance for the duration of residency if you request it, should be good enough. The only problem is your loans wouldn't yet be in forbearance. But, you managed to get into and graduate from medical school--if the bank can't trust you to fill out a single-paged piece of paper in six months then I don't know what to say.

Also, one recommendation before trying the above: Call NelNet again. And again. and again, until you get someone who can write a statement saying "Muscleman's loans are in grace and he is eligible and will receive guaranteed forbearance or income-based repayment if he applies for it," or something to that extent. Seems pretty simple--one of their representatives should be able to do that for you. If not, ask for a supervisor. This might be the easiest way to go...

 

[TexasPhysician]

Do you know the area really well? I purposefully rented during the first 6 months of intern year to get a feel for the area and be sure I knew where the best place for me to buy was located.