By Victoria Thompson
Have you made a federal student loan payment in the last three months? About 11 percent of federal student loan borrowers have not and are therefore in default. That default rate only represents the borrowers entering repayment. (See freep.com/story/news/local/michigan/2016/10/02/rate-student-loan-defaults-slows-michigan/91330184/ , Oct. 2, 2016.) More than 8.1 million Americans are behind on federal student loan payments. If you risk facing this dilemma, consider these possibilities.
You could rehabilitate your loan. Rehabilitation of a Direct Loan or Federal Family Education Loan (FFEL) Program involves making nine monthly payments within a ten-month period; for a Perkins loan, the period is nine months. Once rehabilitation is complete, the loan is out of default and you are again eligible for different repayment options, forbearance, deferment, loan forgiveness, and additional federal student aid. (See studentaid.ed.gov/sa/repay-loans/default/get-out, Jan. 15, 2017.)
You could consolidate your loan(s). This move transfers your debt into a new fixed-interest-rate Direct Consolidation Loan, which you can repay through an income-based plan. Alternately, you can make three straight full monthly payments on time on a defaulted loan and then consolidate it, which allows you to repay the resulting Direct Consolidation Loan under any repayment plan for which you qualify. (See studentaid.ed.gov/sa/repay-loans/default/get-out, Jan. 15, 2017.)
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Victoria Thompson is a partner at Resolute Family Wealth Advisors. She can be reached at 720-464-5697, email@example.com.
By Wanda Norge
Here are some specialty loan programs that could help you buy or refinance.
Asset Income/Asset Depletion
This a great option for clients who need to show additional income for mortgage qualifying purposes. Lenders that offer these loans will have varying guidelines; however, typically assets may be used as income as follows:
• There can be no “double-dipping” – meaning that the asset account being used as income cannot be used for down payment or reserve requirements. It can only be one or the other – asset or income.
• The account being used as income must not have a penalty for early withdrawal.
• Typically the account must be an investment type account and not a checking, savings, or money market account.
• The assets are not typically required to be pledged in any format. Post-closing, the borrower is allowed to use all the funds if they choose to. It sounds risky, but it is assumed that if a borrower has the ability to establish an account with sufficient value, they are responsible enough not to wipe out their assets.
• There may be seasoning requirements on the asset account before it can be considered as qualifying income. Note that most seasoning requirements will be overlooked in divorce situations as the asset is considered as “seasoned” during the marriage.
It does not need to be a divorce situation, but let’s look at the ability for Frank to purchase a new home after his divorce is final. Due to the fact that Frank has to pay Jane 50 percent of his gross income each month, he no longer qualifies for a new mortgage. Frank has an investment account with $500,000 in it. Frank may qualify for the new mortgage by dividing $500,000 over 120 months per investor guidelines. This gives him an additional $4,167 of monthly income for mortgage qualification purposes. Formulas used will vary.
Bank Statement Loans
“Ability to repay” is a key requirement when qualifying for a mortgage. Many self-employed clients write off a lot of expenses. This results in showing little, if no income, on their tax returns used to do the income calculations.
There are loans that will use the income deposits shown on the personal or business bank statements for calculating proof of income. Formulas used for determining the income and debt ratios vary, but can be a great way for a self-employed borrower to qualify.
More loans are available to meet special life circumstances again, but these loans are not the same as pre-crisis sub-prime loans. Qualifying for them still requires meeting “ability to repay” guidelines, sufficient reserves and down payment requirements.
• One day out of foreclosure, short sale, bankruptcy
• Mortgage lates OK
• Credit scores as low as 500
Mortgages are available for W2 employees working in this industry.
There is no harm in asking if a loan exists for your situation.
Wanda Norge is a Mortgage Consultant, Certified Divorce Lending Professional (CDLP) with Equilane Lending, LLC (NMLS: 387869), lending for 15 years. Contact her at 303-419-6568, firstname.lastname@example.org or visit www.wandanorge.com. (NMLS:280102, MB:100018754)