Small Multifamily Investor with Student Debt

[Barbora Oborna]

I was wondering if anyone has had any experience getting approved for an FHA loan while having a large amount of student debt that is still in repayment. I have a steady well-paying job and good credit but my DTI is quite high (currently owe one years salary in student debt). Right now, I pay around a third of my income in rent and slightly less a month on my debt (accelerated payoff of 5 years). I am looking to finance a duplex/triplex where my total mortgage cost would come in around my current rent payment and therefore I feel comfortable that I would be able to afford the payments even without a tenant in the building. However, I am worried that the banks would not see it that way and would instead focus on the fact that a large portion of my income would go to debt payments each month. Has anyone been in a similar situation?

[Bryan O.]

Hi @Barbora Oborna. When I did my FHA loan recently I don't think they bothered looking at my rent amount since they knew that it wasn't relevant because I had to owner-occupy the new unit. They may have looked at the amount and compared it to what I was going to pay for the new unit though. Not sure.

Regarding student debt, if you want to make it look prettier, go file for an income sensitive repayment plan. From what I've seen, they will often re-amortize you for 10 years, obviously dependent on total amount vs. your income. But that can dramatically reduce your payments and make you look much better on paper.