Kentucky Student loans can affect your ability to qualify for a Kentucky mortgage loan. In the chart below, we will point out the main qualifying guideline differences for each loan program that most people choose for their new home loan.
- Kentucky Fannie Mae and Freddie Mac Conventional loans: This is by far the easiest loan program on student loans. However, they do require a 620 minimum credit score to be considered for this loan program. They will take the payment listed on the credit report if even the payment is less than 1% of the outstanding student loan balances.
2. Kentucky FHA Loans: This is one of the most difficult programs to qualify for if have a large amount of student loan balances. FHA will use 1% of the outstanding balance which can make it difficult to qualify if you have a lower income and high student loan balances. The good thing about FHA loans is that they will do down to a much lower credit score than Fannie Mae on the credit score requirements, so keep this in mind. FHA will go down to a 580 credit score if you have 3.5 percent down payment and will allow for gifts for down payments.
3. Kentucky VA loans: VA can be easier to qualify for if you are a veteran or active duty soldier that has a VA COE. VA states that if the student loan debt is deferred for 12 months from the first new house payment, then the student loan payment does not have to be calculated into the borrower’s debt to income ratio, thus making it much easier to qualify for a mortgage payment if you have a lot of student loan debt.
If the student loans are currently in repayment, then you can use the actual repayment plan, or use 5% of the total outstanding balances, divide by 12 months. They will not allow for an IBR (income based repayment) payment, so keep this in mind.
Kentucky USDA Mortgage Loans: USDA will not allow for an IBR repayment plan payment when qualifying for a mortgage loan. They will take 1% of the outstanding loan balance or the fully amortized payment payment whichever is higher, to figure the qualifying house payment on USDA Mortgage loans debt to income ratio requirements.
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