How are student loans considered in the "debt to income ratio" -OR- mortgage loan app. process? Help

[yaya2486]

Hi there,

I'm trying to learn more about the mortgage loan application process so I can fix my credit and prepare for it when the time is right for me to buy my first home.. I went to college and am repaying student loans back. Can someone give me a better clarification as how student loans factor into the mortgage loan application process, pertaining to the debt to income ration factor? 

With student loan total amounts, do the mortgage loan lenders look at the TOTAL amount of student loans I have? Or do they look at the total Monthly payments I am making towards my student loans only?

Thank you in advance! Any help would be greatly appreciated. 

[Sbrooks1]

It matters what type of repayment plan you are doing and what type of financing-- FHA etc

[Sbrooks1]

We need more info , in other words, to give you any guidance!

[andyaycw]

If you're applying for a Conventional Fannie Mae/Freddie Mac loan, the minimum requirements allow lenders to use 1% of the loan amount as a qualifying payment amount in your DTI. So for instance, a $50,000 student loan would have a $500 payment if using what Fannie/Freddie allow. 

Notice I say "minimum" because some underwriters may ask for documentation over and above what Fannie/Freddie dictate depending on company overlays and/or the individual underwriter who reviews your file. 

I've made the following assumptions:

1. No company overlays requiring >1% to be used as a qualifying payment (I can see some underwriters would ask for a copy of the student loan Note to determine actual repayment amounts and timeframes to determine standard repayment schedules, income-based repayment (IBR), graduated repayment plans, etc..)
2. Credit report does not currently show a payment amount (the underwriter may still want to see a copy of the Note depending on the details, e.g. if your credit report shows a $25 payment on a $100,000 student loan, a good underwriter will ask for the Note. Some other underwriters, regardless of the payment appearing, will ask for a copy of the Note to cover themselves just to verify it is a standard repayment plan and not an IBR or graduated repayment plan where future payments could increase)
3. The stuednt loan payments are currently being deferred (e.g. still a student in school, and therefore no payments are required)

[Sbrooks1]

I really thought the 1% was with IBR or deferred loans ,

[Anonymous]

Sbrooks- your right, it is 1% for IBR or deferred or the actual payment amount as long as the amount fully amortizes the loan.