"your debt to income is too high" -loan officer

"I don't owe anything monthly" -you

"your student loans"

"they're deferred"

"not to underwriting they're not. We can't help you"

That sounds like an extreme example, but student loans have prevented people from getting approved, even when they're deferred.

I'm writing this because I want you to know the basic underwriting rules when it comes to student loan debt, and the strategies to get you approved.

Here's what I'll cover:

• How it affects conventional loans
• FHA loans
• USDA loans
• VA loans
• how to approach it if you're on an income driven repayment plan

How it affects debt to income

The minimum monthly payment will count against your debt-to-income ratio.

If you technically don't have a monthly payment, underwriting will set a monthly payment anyway.

If you have deferred student loans, here's how underwriting will calculate it:

Conventional Fannie Mae:

1% of the balance will count against your debt-to-income (DTI) ratio. $100 student loan balance will count $1 per month against your DTI.

Conventional Freddie Mac

0.5% of the balance will count against your debt-to-income (DTI) ratio. A $100 student loan balance will count $0.50 against your DTI

FHA

0.5% of the balance will count against your debt-to-income (DTI) ratio. A $100 student loan balance will count $0.50 against your DTI

USDA

0.5% of the balance will count against your debt-to-income (DTI) ratio. A $100 student loan balance will count $0.50 against your DTI

VA

5% of the balance, then divided by 12 will count against the debt-to-income ratio (DTI) $100 student loan balance x .05 then / 12 = $0.41 counted against your DTI

If you have a set minimum payment already, then they'll just use that.

Income driven repayment plans

What if on your credit report it shows $0, and I'm on an income driven repayment plan, which is currently also $0?

A lot of loan officers don't know how to handle this one correctly.

If you have a lot of student loans on an income driven repayment plan, and the underwriting rules are killing your debt to income ratio, have me connect you with a mortgage broker that knows you to handle it. 

Fill out this form.

You'll have to go through Fannie Mae conventional.

Freddie Mac wants to know that the loan will be forgiven.

FHA wants the loan forgiven.

VA may allow it if deferral is at least 12 months after your closing date.

USDA won't allow it.

Your best bet is to go with the Fannie Mae conventional loan if those student loans are affecting your ability to qualify.

Again, this is a very specific situation that needs an educated loan officer. Let me help you find one.

Summary

I hope this helped you understand how each loan program treats student loans, and how to approach it if you are on an income driven payment plan. Reach out with any questions, I'm rooting for you.

Sam