Getting A Mortgage With Student Loan Debt

As the cost of attending college skyrockets, so does student loan debt. Getting a mortgage with student loan debt might seem impossible, but it’s not. There are many home loan programs to choose from, and getting a mortgage with student loan debt is easier than you think.

Can people with student loan debt buy a house?

Yes! Just because you have student loan debt doesn’t mean mortgage lenders won’t approve your loan application. In recent years, mortgage lenders have gone out of their way to improve their loan programs so that getting a mortgage with student loan debt is not impossible.

Should I Payoff My Student Loans Before Buying A House?

If you can, sure! But only if that fits in with your short- and long-term financial goals; most importantly, you can afford to pay them off. However, know that if you are buying a home, it’s usually not required. There are many mortgage options for people with student loan debt.

Mortgage options for people with student loan debt

Here are the options for getting a mortgage with student loan debt.

Fannie Mae Home Loan Guidelines For Student Loan Debt

Fannie Mae is a mortgage industry giant with innovative solutions to solve the problem of getting a mortgage with student loan debt. Their underwriting guidelines are straightforward, and they’ve offered new programs to help solve the problem (see “Innovative Solutions” below).

Fannie Mae loan guidelines for student loan debt are as follows: if your student loan payment is deferred or in forbearance, Fannie Mae will allow a loan applicant to get a mortgage by using a monthly payment estimate of 1.00% of the balance.

If you have a monthly payment, Fannie Mae’s home loan guidelines for student loan debt require underwriters to use that payment to calculate your debt-to-income ratio. Fannie Mae will allow underwriters to use the payment listed, even if that payment is below industry norms. This is a big win for those seeking to get a mortgage with student loan debt since some student loan companies will only require a small minimum payment on student loans.

Innovative Solutions From Fannie Mae And A Relief For Parents

Fannie Mae’s makes it easier for parents who co-signed for their child’s student loan debt. With Fannie Mae, getting a mortgage with student loan debt just got easier.

Under their guidelines, a mortgage company might be able to ignore student loan debt where the child is the primary borrower. Also included in this guideline are car loans and credit cards that parents co-sign for their children (but not mortgages parents co-sign for). The borrower has to prove they’re not the primary borrower for the accounts before a lender will exclude them from the debt-to-income calculations.

Per Fannie Mae

“Innovative Solutions for Making Homeownership Affordable for Borrowers with Student Loan Debt
Because there is rarely a “one size fits all” approach to this issue, the policies announced today provide options to borrowers based on their individual circumstances:

• Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
• Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
• Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.”

Source

Freddie Mac Home Loan Guidelines For Student Loan Debt

Freddie Mac is another industry giant leading the way on how underwriters calculate student loan payments into a loan application debt-to-income ratio. While a lesser-known entity compared to Fannie Mae, Freddie Mac is a big player when it comes to getting a mortgage approved with student loan debt.

Freddie Mac loan guidelines for student loan debt are as follows: a loan applicant with student loan debt is able to use the minimum student loan payment that is listed on the credit report, or if the loan is deferred or in forbearance, then the underwriter can use 0.5% of the balance as the monthly payment.

Freddie Mac offers both fixed-rate and adjustable mortgages through approved lenders.

FHA Home Loan Guidelines For Student Loan Debt

Most homeowners and homebuyers are familiar with FHA home loans, but not many know that they are run by a government agency called Housing and Urban Development (HUD). The FHA home loan solution for people wanting to get a mortgage with student loan debt is similar to the Freddie Mac solution.

FHA home loan guidelines for student loan debt are as follows: a loan applicant with student loan debt can use the student loan payment listed on their credit report, or if the loan if the student loan is being deferred or in forbearance, then the underwriter for the loan application can use 0.5% of the balance as the monthly payment.

FHA home loan guidelines for student loan debt are straightforward, and these guidelines help thousands of loan applicants get approved for a mortgage every year. FHA home loans are great options for loan applicants who are first-time homebuyers and/or those with less-than-perfect credit.

VA Home Loan Guidelines For Student Loan Debt

Ensuring our veterans have access to low-rate mortgage products is a huge priority for the mortgage industry. VA home loans serve that need. The first requirement for obtaining a VA home loan is that you previously served our country in the armed forces.

It’s no surprise that VA home loans, run by the Department of Veteran Affairs, offer their own solution for getting a mortgage with student loan debt. VA home loan guidelines for student loan debt are as follows: if present on the credit report, use the monthly student loan payment or 5.00% of the balance divided by twelve months (whichever is higher). If the student loan payment is deferred, then the debt is not included in underwriting.

That last guideline is so important; under the VA home loan guidelines for student loan debt, the underwriter can ignore the debt if that debt is in forbearance.

USDA Home Loan Guidelines For Student Loan Debt

Did you know the United States Department of Agriculture (USDA) has home loan options? If you’re like most people, you probably answered no. Well, they do, and the home loans under the USDA have a specific purpose: to help rural homebuyers buy a home.

Since most loan programs require numerous comparable sales in the area (when evaluating the estimated value), rural homebuyers typically struggle to get approved. That’s where the USDA steps in to help rural buyers by removing that requirement.

USDA home loan guidelines for student debt are as follows: the monthly student loan payment that is listed in the credit report (or student loan monthly coupon statement), or if the loan payment is listed as zero (which means the loan is deferred or in forbearance) then the underwriter is required to use a monthly payment that equals 0.5% of the total balance.

Rural homeowners benefit significantly from the USDA home loan program. USDA home loan guidelines for student debt allow more rural homebuyers to buy their first home.

The bottom line on getting a mortgage with student loan debt

Home loan guidelines for people with student loan debt have never been more straightforward. Getting a mortgage with student loan debt is more accessible today, and more loan applicants are getting approved to buy a home.

A loan applicant with student loan debt has many home loan options; talk with your loan officer about which option is best for you and your financial goals.