Reporting a debt with $0 minimum payment on loan application

Question

I am planning to buy a house later this year, and will be applying for a mortgage. I'm aware that part of the application will be reporting the amount I pay now for other outstanding loans (student loan, car payment, etc.). My understanding is that I don't need to report what I'm actually paying each month, just the minimum monthly payment for each loan.

However, I'm not sure how to report on my student loans. When they first went into repayment, my minimum payment was $360/month. I have been paying $400 every month since then. Because of that, each month my minimum payment has slowly gone down to $0.

So, am I able to claim $0 as my minimum payment, or is there another number I should be claiming. Obviously, if I stopped paying the loan, the minimum payment would go up again, but I don't know when that would happen or by how much. Occasionally, I will skip a payment (because I need some extra money for the month), and the minimum the next month is still $0. I've never done this more than one month in a row, though.

I assume that the less debt I claim the better it looks on the mortgage application, as it means I have more money free for paying the mortgage.

Answer 1

The fact that you still have a student loan balance would be reason enough not to list $0 monthly payment. Unless you paid it off already sooner or later you'll have to resume whatever the minimum payment is. The mortgage lender will look at your paperwork, then your credit and their BS meter will go off. And to say "I don't know because I paid so far ahead" is a cop out too.

Just call the student loan company and they'll tell you what the minimum payment is for your loan (all student loans have one that they give the borrower at the beginning of repayment) and be done with it.

If you pay ahead on the student loan and get them off your back sooner then that's great. But until it is paid off, writing in 0 as a monthly payment will just make a liar out of you because sooner or later your monthly payment won't be 0 as long as you have a balance.

And let's postulate for a moment that your sleight of hand does make it past the bank and they give you a bigger mortgage. Isn't it possible that when you finally start making your student loan payments again that you'll be unable to meet your mortgage payments? Just worry about living within your means. And trust me, even when telling the whole truth a lot of lenders will probably offer you a bigger loan than you can afford.

Answer 2

Your numbers for current debts are used by the lender to determine if you can afford the mortgage.

They want to see that principal, interest, taxes, and insurance are at a manageable level. They also want to know that all other debts can be covered by 10% of your monthly income.

It doesn't matter if you think you can afford it they want to make sure you can. That 10% has to cover the minimum payments on credit card debt, car loans, school loons, other loans not related to your housing.

The lender will see the debt on the credit report and want to make sure that the minimum payment fits into their limits. The fact that you don't have to make a payment next month probably doesn't make them feel comfortable. In the last hosing crisis the issue was that they ignored their own guidelines and constructed loans that had lower payments the first year, and then ignored the fact that in year two they couldn't make the higher payments.

If you barely make their limits with a zero payment for the student loan, they will be concerned when you have to make the higher payments. Regardless of what you want to write down, they may insist on a more realistic number.

Answer 3

As stated earlier you won't have to fill it out, but most institutions have a % of the balance they use based on the type of loan. I was told that my mortgage uses 2% for students loans and 3% for LoC, so you can use those as estimates. Just take 2% of what you owe and that's the min payment they would use.