One important piece of advice many experts give to those preparing for a new home loan application is to examine your debt picture–how much in monthly payments you have going out compared to how much money you have coming in. Your participating VA lender will run the numbers on a VA loan applicant’s debt to income ratio -- can the applicant truly afford the home loan when the amount of that financial obligation is combined with all other monthly financial obligations?
One area that leaves some feeling particularly vulnerable is student loan debt, especially for those who have high amounts of private student loan debt. Some VA loan applicants manage to keep student loans from being added to this debt picture--do you know about how a student loan deferment could help your chances at a VA home loan?
According to information published by the VA official site at www.va.gov, “If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt need not be considered in the analysis.”
Student loan deferment procedures may vary depending on the type of debt you have. For private student loans you would need to discuss that situation with the lender--not all financial institutions have the same rules. When it comes to Federal student loans such as a Stafford or Perkins loans, loan forbearance or deferment is possible, but is definitely not automatic–you are required to apply for the deferment through your lender. For Perkins loans you would contact the school you attended under the loan.
It’s not safe to assume that the procedure known as student loan forbearance is considered the same as loan deferment. According to the U.S. Department of Education official site, “For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.” The Department of Education says a mandatory student loan forbearance is possible for reasons including the following:
- You are serving in a medical or dental internship or residency program, and you meet specific requirements.
- The total amount you owe each month for all the student loans you received is 20 percent or more of your total monthly gross income (additional conditions apply).
- You are serving in a national service position for which you received a national service award.
- You are performing teaching service that would qualify for teacher loan forgiveness.
- You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
- You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.”
If you need help with these issues, discuss your options on student loan forbearance and/or deferment with your loan officer to see how that may affect your VA loan application.