July 7, 2022

How student loans impact mortgage eligibility

Student loans don’t have to be a barrier to home ownership. Student loan payments are calculated differently for each type of loan program. Understanding the pros and cons of each program can help you create an individualized home purchase plan based on your specific circumstances.

FHA Loan*

  • Requires 500 Credit score or higher
  • Loan limits vary by county
  • Downpayment as low as 3.5%
  • Student loan payments are documented using your credit report or loan statement
  • If the documented payment amount is $0, the monthly payment is calculated as .5% of the outstanding loan balance

VA Loan*

  • Requires a Certificate of Eligibility from the Us Department of Veterans Affairs
  • Requires 500 Credit score or higher
  • Loan Limit $647,200 with cost-of-living adjustments available up to $1.5M in some areas.
  • No downpayment
  • Student loan payments are documented using loan statements
  • A monthly payment does not need to be considered if the loan will be deferred at least 12 months beyond close of escrow.
  • For loans that are not in deferment, the student loan payment is calculated as 5% of the student loan balance divided by 12.
  • In cases where the calculated payment is more than the payment in your credit report, loan statements can be used to corroborate the lower payment amount.

Fannie Mae Conventional Loan*

  • Requires 620 credit score or higher
  • Loan limit $647,200
  • Downpayment as low as 3%
  • Student loan payment amounts are documented using a credit report or student loan statement.
  • On an income driven repayment plan, if the documented payment amount is $0 the monthly payment can be reported as $0.
  • For loans in deferment or forbearance with no monthly payment due, the payment is calculated as 1% of the outstanding loan balance or the payment according to repayment terms can be used.

Freddie Mac Conventional Loan*

  • Requires 620 credit score or higher

  • Loan limit $647,200

  • Downpayment as low as 3%

  • Student loan payments are documented using your credit report or loan statement

  • If the documented payment amount is $0, the monthly payment is calculated as .5% of the outstanding loan balance.

  • Student loan payments can be excluded from DTI calculations under the following documented circumstances:

    - 10 or fewer monthly payments remain until the student loan is forgiven, cancelled, discharged or repaid through employment-contingent repayment.

    - Payment is deferred or in forbearance and the loan will be fully forgiven, cancelled, discharged or repaid through employment-contingent repayment at the end of the deferment or forbearance.

    -Evidence of continued eligibility for forgiveness, cancellation, discharge or repayment is documented is provided by the loan program or employer.

As you can see, there are quite a few considerations when financing a home purchase and for those with student loan debt, it can be a bit overwhelming. Talking through your options with a Boles Group loan officer will help you put together a home purchase plan that makes sense for your goals and situation. Call 480-279-0032 to get started.

*Credit score requirements, loan limits and other listed requirements are accurate at the time of publishing and subject to change.

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Bay Equity Home Loans – Boles Group is licensed to originate home loans for purchase or refinance in 19 states (AZ, CA, CO, Fl, GA,HI, ID, MN, MT, NC, NM, NV, OK, OR, TN, TX, WA,WI, WY). Boles Group lending professionals have the knowledge and experience to create solutions where other lenders create problems. The team prides itself on responsive, accurate communication and is highly regarded by clients and business associates alike.