Cool Tools News Spool

Tag: RD

  • Qualifying for mortgage easier with new student loan guidelines

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    Given all the media coverage about student loan debt keeping millennials out of the home purchase market, I thought it would be good to review some updated loan guidelines from Fannie Mae and USDA concerning this type of debt.

    One important point to remember is that both loan programs treat deferred student loans the same as loans in active repayment, meaning we have to include the loans in our debt calculations.

    Also, the guidelines recognize that income-based and graduated repayment plans, which have become popular, may not provide an accurate estimate of the loan’s impact on the borrower’s finances because the payment may rise. As a result, the guidelines require that we use a fixed percentage of the loan balance in our debt calculations.

    On a very positive note, the updated guidelines cut that fixed percentage from 2% to 1% of the loan balance. This is a big deal because it reduces the impact of student loan debt by 50%. Further, if the actual payment is less than the 1% calculation, the guidelines state that we can use that payment, but only if it fully amortizes the loan. If the actual payment is greater than 1%, we must use the actual payment.

    While USDA already has implemented the new guidelines, the changes won’t apply to Fannie loans until 4/1.

  • USDA will stop accepting mortgage applications

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    We’ve talked in the past about the pending changes to the USDA rural development mortgage program. In order to implement the changes in its computer system, USDA has decided not to accept applications during the last week of Nov. The reason stems from the large backlog of applications in many states. USDA doesn’t feel it can maintain two processing systems, so it will process the applications it receives by the 21st under the old system. It will process applications it receives starting on Dec 1st using the new system. During the last week of Nov, USDA will play catch up.

    Given that the outage period is during Thanksgiving week, I hope the impact will be minimal, except on the USDA employees who get to work overtime. However, there is one area of concern. USDA acknowledged that if it is unable to work through the backlog of applications, any that are not processed will be returned to the lenders unapproved. For these applications, borrowers would have to sign new documents, and lenders would have to underwrite the applications again before submitting them to USDA for approval. This potentially could add another week or two to the loan processing time.

    The takeaway from this is that if you have a customer using a USDA loan, and you want to close in early Dec, encourage all parties to act with urgency. You want USDA to receive that loan package well before the Nov 21st cutoff date, if possible.