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Know Your Options!

Can you believe it is already August?! Time for the kids to go back to school, for parents to count the number of vacation days they have left and, most importantly, for us to start the countdown to the kickoff of football season! (Amen!)

But while you have been at the ball field, the beach or just sitting on the couch patiently waiting for football season to begin, the guidelines for consumers to obtain a mortgage to purchase a home has changed a little bit—mostly good changes, though.

Student Loans
Let’s begin with the always-confusing-when-getting-a-mortgage student loans. You have probably heard lenders say in the recent past that they must count one percent of your total balance against your debt to income. Well, there are still instances where that is true. However, for those former students who are on an income-driven repayment plan, as long as you can provide documentation that your payment is $0, the lender may qualify you using $0.

This is currently only the case on conventional loans, but most loan programs will allow lenders to use the payment shown on a credit report or documentation of the fully amortized payment.

Quick note: Deferred loans and loans in forbearance are not viewed as income-driven payment, so you will need documentation of your fully amortized payment or use one percent of the total balance.

VA is currently the only program that will allow lenders not to count a deferred payment or payment in forbearance, as long as it is 12 months out from the closing date.

Conventional Loans
Fannie Mae has stated that as of July 29, 2017, lenders will see more automated approvals for borrowers with a debt-to-income ratio up to 50 percent. This will give good borrowers more loan options and hopefully more home options. Also, lenders will see more self-employed borrowers requiring only one year of tax returns for qualification.

Lenders will use the automated underwriting system to determine the borrower’s eligibility.

Down Payment Assistance
THDA is the most common down-payment assistance program used in Tennessee. In addition to their standard program, THDA is offering up to $15,000 in assistance to qualified buyers purchasing in the targeted zip codes. Contact your lender or visit thda.org for more information.

There are many different home loan programs available for all different types of borrowers. Many will qualify for more than one program.

Know your options!

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About the Author

Bernard James, a Community Reinvestment Loan Officer with Guaranty Trust Company in Murfreesboro, aims to help area families and individuals achieve the financial goals that they have set. Contact him at (615) 631-2877 or bernard.james@guarantytrust.com.

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