Banker helps young man with student loan debt buy condo

Mortgage banker: Patricia Leary

Property type: Condominium in Meriden

Purchase price: $155,000

Loan amount: $139,500

Appraised value: $155,000

Loan type: Conventional.

Backstory: Leary often works with buyers who have multiple student loans.

Leary received a call from a young man who was referred to her by a past client. He had multiple student loans, some of which were being paid by his parents. He talked with another loan officer at his bank and was told the deal was too complicated and that the bank wouldn’t work with him.

Leary started the pre-qualification process by asking questions. The first was to get his permission to look at his credit report. Once that was done, she had to ask which loans were paid each month by his parents and which ones he was responsible for.

She told the customer that he would have to apply for a conventional mortgage so that the student loans paid by the parents could be excluded from his monthly debt. To do this, the customer had to supply proof that the parents had paid for the previous 12 months.

The customer then gave Leary 12 months of canceled checks showing that the six loans were paid by his parents. Some loans were paid by his mother and some by his father so Leary compiled a chart to show that they were paid for the 12 months required.

Leary then looked at putting his loan with a Fannie Mae lender because they allow you to use the monthly payment listed on the credit report and the customer still had student loans that he was required to pay that Leary had to add to his monthly debt.

He was paying on one of the loans and the others were in deferment because he was still in school. When Leary ran the loan on the Fannie Mae desktop underwriting software, she received a refer with caution even though the debt-to-income ratio was low. It didn’t like the monthly debt, even though it was allowing the parents to be responsible for part of the debt.

Leary then looked at Freddie Mac investors to see if they would approve the loan. They have different guidelines when it comes to student loans and Leary had to show 1 percent of the current student loan balances as the payment for the loans that were currently in deferment.

This came to $691 per month, which put the debt-to-income ratio too high to get an approval. Leary then called the customer and asked him if he could call his student loan company and ask what the payment would be if he took them out of deferment. They told him $361 per month and that he could only take out his undergraduate loans and not his grad school loans.

Leary then ran the loan on LP, the Freddie Mac software, using the $361 per month payment and received an approval. She then had to ask the customer for the student loan paperwork documenting that the loans were taken out of deferment and what the new payment would be.

This paperwork had to document every loan number that was changing. This documentation then had to be sent to the credit bureaus to update the credit report with the new information before the loan could be sent to underwriting.

The loan was approved and the loan closed with the buyer putting 10 percent down on the condominium. He was very thankful that Leary worked to make this happen for him.

With student loan guidelines changing frequently on all types of loans Leary has to stay on top of all of the changes.