Student Loans and Mortgages

 In Common Questions, Qualifying for a Mortgage

Many people have student loans, and very often, they think those student loans will affect their ability to qualify for a mortgage.

Here’s what you need to know about student loans.

Student Loans and Mortgages

Student loans have to be paid back, just like other forms of debt.  But having student loans does not necessarily mean you cannot qualify for a mortgage.  The main thing to keep in mind is that the total amount you owe doesn’t matter at all. The only thing we care about is the monthly payment.

Types of Mortgages

Depending on what type of mortgage loan you are applying for, the amount we have to count in your debt-to-income ratio is different, and it may affect whether you can qualify for a loan or not.

For conventional loans (non-government loans), if your credit report shows a minimum monthly payment greater than $0, we can use that payment when calculating your debt-to-income ratio.  

If the minimum payment showing on the credit report is $0, we don’t have to count any payment, provided you are on an income-based repayment plan, and the actual payment (as documented by your monthly student loan statement), is actually $0.

But if you are not on an income-based repayment plan (and the credit report shows a payment of $0), we have to use 0.5% of the outstanding balance as the monthly payment, unless the actual payment (as shown on your student loan statement) is less than 0.5%.

If there are less than 10 payments left on your student loan, we do not have to count anything in the debt ratio.

For government loans (FHA and VA), we have to count the greater of 1% of the outstanding balance or the actual payment.


If you can document that someone else has paid your student loans for the past 12 months, we do not have to count them against you when calculating your debt-to-income ratio.  Very often, a parent will pay their children’s student loans for them. Acceptable documentation includes copies of the checks used to pay the loans, or copies of the bank statements showing that someone else has been paying them for you.

As you can see, the rules for student loans are complicated.  Rather than trying to figure them out by yourself, contact us and we will be able to tell you how your student loan debt needs to be counted.

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