I'm a 3L trying to buy a house instead of rent and my lender says that, unless I have a confirmed student loan payment amount, they use 1% of my outstanding student loan balance as the metric when deciding how much of my monthly income would go towards that loan. Presently, 1% would be $2,750. The lender said I could submit acceptance into PAYE at a certain $ amount to substitute for the $2,750, so I'm filling out that application (while selecting the option in the app that my application not end deferment). Based on my 2015 tax return, the app autofilled $31,900 as my AGI.
Since I know I'm starting a $160k job in the fall, am I obligated to apply using that number instead? The difference in monthly payment is over $1200, which represents a difference of more than $200k in what I can borrow, but I don't want to end up with a fine or some shit.
Is this how PAYE AGI works, or will I get fined? Forum
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Anonymous User
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Anonymous User
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Re: Is this how PAYE AGI works, or will I get fined?
PAYE is based on your annual gross income from last year, unless your income this year will be substantially different. The definition of substantially different is left very vague but the general consensus is that it only applies to decreases in income, not increases. That being said, I don't think your income for this year will be substantially different from last year since you will only be working in Biglaw for a few months. So you are totally fine putting down last year's income as your AGI for PAYE. You will have to recertify in a year and then you will have a slightly tougher decision since your income will be substantially different under the normal definition of the term, but maybe not under how it's used for PAYE.Anonymous User wrote:I'm a 3L trying to buy a house instead of rent and my lender says that, unless I have a confirmed student loan payment amount, they use 1% of my outstanding student loan balance as the metric when deciding how much of my monthly income would go towards that loan. Presently, 1% would be $2,750. The lender said I could submit acceptance into PAYE at a certain $ amount to substitute for the $2,750, so I'm filling out that application (while selecting the option in the app that my application not end deferment). Based on my 2015 tax return, the app autofilled $31,900 as my AGI.
Since I know I'm starting a $160k job in the fall, am I obligated to apply using that number instead? The difference in monthly payment is over $1200, which represents a difference of more than $200k in what I can borrow, but I don't want to end up with a fine or some shit.
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ClubberLang
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Re: Is this how PAYE AGI works, or will I get fined?
You may want to talk to a financial advisor. With 275k in debt, I don't think buying a home is a very good decision. You should wait until some of the debt is paid down and you are more established in your career, imho.
