How to get around student loans? Or am I stuck?

5 Replies

Hi BP Forum,

I'm new to real estate and I am hoping to buy an investment property within the next 1-2 years. I am currently a student in graduate school in Southern California studying to be a pharmacist, and I am stuck with deferred student loans where the first payment due is in 6/2018. Here's a quick rundown of my numbers:

Credit score: 729

Annual Income: ~$2600/month

Desired home price: 60-85k

Downpayment: 20-30%

Expected Mortgage Payment: ~$260/month

Monthly debt: $0

Deferred Student Loan debt, starting 6/18: $1550/month for a 10 year plan, $900/month for 30 year plan

My main problem that I have found from calling lenders is explaining my DTI. My student loan company will not give me a monthly quote for a 30 year repayment plan until 60 days from my first due payment, so many of the lenders I have called will only use my 10 year repayment plan as the debt portion of the DTI, and thus I would not qualify for a loan. One lender from Bank of the West told me if the property already has a tenant, they can use the cash flow and add it to my income. Unfortunately, a house worth 60-85k in the area I am looking to invest in will definitely need some rehab work before having a tenant live in it. Another lender told me that I do have potential to be approved, pending an appraiser verifying the house would cash flow based on the rent in the area, but, I did not tell him the part about my loan company not giving me a true quote on a 30 year plan. How can I have them use the 30 year plan? What do you all suggest? Would a written "plan" stating that I would change my repayment plan to 30 years for my student loans be enough for an underwriter? I really hope I'm not stuck in a hole due to student debt. I know that FHA will be changing their guidelines on Sept. 14, so FHA is the same option as a conventional loan now for me.

Any help/suggestions are appreciated. Thanks so much.

Check with more lenders. Traditional money tends to look at fact, not projection. Try and look into Private money as well. People can flex based on what they are comfortable. You can also look for portfolio lenders, though with no RE history you are probably not going to have much luck. But if you find one they do not have to follow the Fannie/Freddie guidelines because they are not selling the note. Look at finding properties where the owner is willing to carry the note.

There are many, many ways. You have 1-2 years to research them all, so best of luck :)

Thanks Bryan! I've been trying to speak with a few lenders and they just tend to shy away when I tell them the amount I owe. I'm not really sure which way to go at this point since nobody seems willing to work with my deferred loans. If I added a co-signer to the loan, would we be able to combine our DTIs?

Hi @Mahmoud Hassanyn

First question. Are the student loans federal or private? The reason i ask is because i was i a similar boat a couple of years ago. If the standard 10 Year repayment was used i would not qualify for anything (2 masters degrees are quite expensive). However i was able to put my student loans into income based repayment which cut my monthly payments by 3/4ths. This is then reported on my credit and the bank can use it to calculate DTI. It is a little tricky while you are in deferment but you night be able to get an income based repayment plan from the gov with monthly amount.

Now if they are all private loans it is much harder. If they wont give you an amount for the 30year it will be very hard to get the bank to calculate things in your favor.

@Mahmoud Hassanyn I had crazy student loans... June 2018 is so far away I wouldn't even worry about it. Good job thinking ahead, but buy your property now when you have "no debt."

Originally posted by @Nnabuenyi Anigbogu :

Hi @Mahmoud Hassanyn

First question. Are the student loans federal or private? The reason i ask is because i was i a similar boat a couple of years ago. If the standard 10 Year repayment was used i would not qualify for anything (2 masters degrees are quite expensive). However i was able to put my student loans into income based repayment which cut my monthly payments by 3/4ths. This is then reported on my credit and the bank can use it to calculate DTI. It is a little tricky while you are in deferment but you night be able to get an income based repayment plan from the gov with monthly amount.

Now if they are all private loans it is much harder. If they wont give you an amount for the 30year it will be very hard to get the bank to calculate things in your favor.

 Yes, they are federal student loans. I have found the 25 year and extended 25 year repayment plans on studentloans.gov which have cut my monthly payment to 900 dollars or 690 dollars with the extended plan. Hopefully the lenders can use that.

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