Are you a recent college graduate? Are thinking about becoming a homeowner? Many recent graduates feel they may not qualify to purchase a home. College education is more expensive than ever and many students leave school with substantial student loan debt.

Let’s take a look at how lenders consider student loan debt when underwriting a mortgage application.

If the monthly payment for the student loan appears on the credit report, it will be used in calculating the debt-to-income ratio. If the credit report does not reflect the correct monthly payment, the undewriter may use the monthly payment that is on the student loan documentation.

If the credit report does not provide a monthly payment, or shows $0 as the monthly
payment, the underwriter may use one of the following:

(1) if the student is on an income based repayment plan, the lender may obtain the student loan documentation showing the monthly payment is $0 and qualify at the $0 payment.

(2) if the loan is deferred or in forbearance, the lender can calculate a monthly payment equal to 1% of the outstanding student loan balance or a fully amortizing payment using documented loan repayment terms.

So, depending on the circumstances of your loan, there may be a way to calculate the
debt-to-income ratio that could benefit you to qualify for a mortgage.

Contact Counsel Mortgage Group and we can help.


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Counsel Mortgage Group®, LLC
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