Was Your Pre-Approved Home Loan Denied Because of Student Loans?
Ashley has a question about qualifying for a home loan with student loans and an IBR payment plan. That’s an income-based repayment plan.
So, Ashley leaves me a question or left a question on our website and so she has a 665 credit score and she was in the process, she was given a pre-approval and then during the underwriting process, she was two weeks away from closing on this home and the underwriter came back and said, no, she doesn’t qualify.
Now in Ashley’s question, there are some interesting things here. She says that she had some challenges with her credit back during a messy divorce, but she’s cleaned up all of those things and now she has an IBR payment of only $49.
Now, there’s a couple of things that could be happening here, Ashley and I would not take no for an answer in this scenario. I do not know all the circumstances around your situation, but it sounds like you had some old challenges because of a divorce.
Sometimes those liabilities that are on your credit or not your responsibility as defined through the divorce decree. If you split up the assets and your ex was responsible for those debts and then they stopped paying on those debts and they showed up on your credit, that could be overlooked by the underwriter potentially.
There’s definitely that option. The other option is, and I see this way more often than not. What happens more often than not is the loan officer and the underwriter just don’t understand student loan guidelines.
Now, I guess the second part of your question is that they offered you an FHA loan and you know the guidelines for student loans for FHA loans.
So the very fact that they’re recommending an FHA loan and you know that with the 1% calculation that you wouldn’t qualify, leads me to believe that potentially this loan officer and underwriter just either, one or two things.
- They either do not have enough experience and they don’t understand the underwriting guidelines or,
- they work for a company that chooses to be more strict about student loan guidelines when qualifying for a mortgage and they’re not gonna let this go.
I would not be too stressed. Now, obviously, you’re extremely stressed because you were two weeks from closing on your home and they come back and they say no.
That to me is an indication that they just don’t know what they’re doing. So, don’t be frustrated. I’m glad you found us. I did introduce you to somebody, to a friend of mine on the website and hopefully, we got you pointed in the right direction.
But when you run into these types of situations, again, if they start telling you things and you know that what they’re telling you is wrong, there’s a really good chance that they just didn’t know what they were talking about from the very beginning and their no could very possibly not actually mean no.
It could just mean that they don’t know what they’re doing. So yeah, I would not take no for an answer in this particular situation, based on everything that you’ve said, it seems like this is something that you can navigate yourself through, at the very least, if you’re not ready now, it seems like you should be soon.
So yeah, this is a tough one, but yeah, I would not be too concerned about this until you get a second opinion from somebody that actually has experience with the student loan guidelines. There’s nothing here that leads me to believe that a second opinion would not potentially produce a different result.
So. thank you for your question. I know this is really frustrating and I wish there was a way to know if the lender you’re talking to knows what they’re talking about or not, but unfortunately, sometimes you get too far along the process until you figure that out.
So, I hope this was helpful and I hope you get back on track and get connected with somebody that understands student loan guidelines when qualifying for a mortgage. Thank you for your question, Ashley. I hope this helps.