Buying a home with student loans in New Hampshire

How do student loans affect getting a mortgage?

Lenders compare your monthly debts with your income, a measure called debt-to-income ratioDebt-to-income ratio (DTI) Your monthly debt payments divided by your gross monthly income. Lenders use it to judge what you can afford. See the full glossary× (DTI). Each student loan adds a monthly payment to that total, and the payment the lender counts isn't always the amount you actually pay. A loan in deferment, for example, still counts under most programs.

Because conventional, FHA and VA loans each use a different method, the same student loans can count for very different amounts depending on the program. That's one reason to compare programs before you shop. The credit guide explains DTI in more detail.

How do conventional loans count student loans?

Fannie Mae loans use the payment on your credit report. If the report is wrong, the lender can use the payment on your latest student loan statement. When the credit report shows no payment:

• On an income-driven repayment plan with a documented payment of $0, the lender can count $0.
• For a loan in deferment or forbearance, the lender counts either 1% of the balance or a fully amortizing payment based on the loan's documented terms.

Freddie Mac loans use the credit report payment when it's above zero. When it shows zero, the lender counts 0.5% of the outstanding balance, unless the file documents a different payment.

Lenders sell conventional loans to either company, so which set of rules applies can change your numbers.

How do FHA loans count student loans?

FHA uses the payment on your credit report, or your actual documented payment, when it's above zero. When the payment is zero, including loans in deferment, the lender counts 0.5% of the outstanding balance. HUD lowered this from 1% in 2021. The FHA guide covers the rest of the program.

How do VA loans count student loans?

If your student loans are deferred for at least 12 months past closing and you have it in writing, the payment doesn't need to be counted. Otherwise the lender figures 5% of the balance divided by 12 and counts that, unless your credit report shows a higher payment, or a recent statement from your loan servicer documents a lower one. The VA guide covers eligibility.

What if someone else pays my student loans?

Parents or an employer sometimes make the payments. Fannie Mae lets the lender leave the payment out of your DTI when someone else has been paying it, with the most recent 12 months of canceled checks or bank statements showing no late payments. The person paying can't be someone with an interest in the sale, such as the seller or an agent. Other programs have their own rules, so ask Tom before you count on it.

How can I lower the payment a lender counts?

• Get current statements. A statement showing your actual payment can replace a higher estimate in some programs.
• Know your repayment plan. Income-driven plans have changed in the past two years. Check studentaid.gov for the plans open to you, and keep the paperwork that shows your payment.
• Hold off on new debt. A car loan or new credit card adds to the same DTI.
• Compare programs. Tom can run your loans under conventional, FHA and VA rules to see which leaves the most room.
• Consider a co-borrower. Adding a co-borrower's income can help; the co-borrower guide explains the trade-offs.