DEBTS

Debts  include any installment loans  (student loans , car loans , personal loans ), revolving charge cards , stock pledges, alimony , child support  and non-income producing Real Estate that has more than 9 months left to pay.  It does not include life insurance , utility bills, etc.

Loans against 401K 's, CD's etc. do not have to be included in borrowers monthly obligations.

Deferred Student Loans  should be calculated using 3% of the total balance, unless there is a payment stated on the credit report, at which time you will use the credit reported payment. 

Example:  $12,000 in deferred loans (no payment on credit) x 3% = $360 per month.

FHA rule:  The student loan must be deferred for a minimum of 12 months from the date the loan closes in order not to include the student loan payment in the back ratio.

Student Loan Deferment: a postponement of payments for certain conditions.

Student Loan Forbearance:  Can’t make payments due to unexpected personal or health reasons and don’t qualify for a deferment.  Small or no payments could be scheduled for a limited time period.

Debts ARE:

Ø     Alimony and Child Support

Ø     Car Loans (with more than 9 payments left)

Ø     Student Loans  (with more than 9 payments left)

Ø     Personal Loans  (with more than 9 payments left)

Ø     Credit Cards  (Minimum required payment)

Ø     Negative Cash Flow from Investor Property

Debts are NOT

Ø     Car Insurance

Ø     Life Insurance

Ø     Electric Bill

Ø     Gas Bill

Ø     Food Bill, etc.

DAN PALUMBO   800-817-8743  ext. #201

Dan is the published author of the Mortgage Loan Officer Training Manual.  You may order one by visiting www.mortgagetrainingmanual.com

Licensed Mortgage Banker - New Jersey Department of Banking and Insurance; Licensed by the Pennsylvania Department of Banking; Virginia Licensed Mortgage Lender