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Getting A Mortgage When You Have Student Loan Debt

Updated: Mar 1, 2018


Millions of Americans have student loan debt, which impacts their debt-to-income (DTI) ratio. DTI is a large factor when a lender is considering borrowers for a mortgage.

There are different loan programs that offer less stringent options for borrowers with student loan debt, along with low down payment options. Programs vary depending on where you live, and the lender that you are working with.

Loans Options for Borrowers with Student Loan Debt: Fannie Mae's HomeReady® loan product allows the lender to exclude the borrower's student loans from the DTI calculation if the debt is being paid by someone else and has been for at least the last 12 months. Fannie Mae allows lenders to use the actual student loan payments that borrowers are making each month (amount shown on the credit report), verses a percentage of the remaining balance, which can help lower borrowers' DTI ratios.

Other HomeReady® Highlights*:

  • Low down payment minimum of 3% 

  • Reduced mortgage insurance (MI)

  • No first-time homebuyer requirement

  • Allows non-borrowing household member to be considered as compensating factor for loan

Fannie Mae's 97% LTV loan product also allows the lender to exclude student loans from the DTI calculation if the debt is being paid by someone else and has been for at least the last 12 months. Fannie Mae allows lenders to use the actual student loan payments that borrowers are making each month, verses a percentage of the remaining balance, which can help lower borrowers' DTI ratios.

Other Fannie Mae 97 LTV Highlights:

  • Low down payment minimum of 3%

  • At least one borrower must be first-time homebuyer

  • Allows non-borrowing household members to be considered as a compensating factor for a loan

Freddie Mac's Home Possible® Advantage loan allows the lender to use whichever is greater for the DTI calculation – either the student loan debt payment listed on the borrower's credit report or 0.5% of the original student loan balance. 

Other HomePossible® Advantage Highlights*:

  • 97% LTV option

  • Reduced MI

  • No first-time homebuyer requirement

An FHA loan allows the lender to use the whichever is greater, 1% of the outstanding student loan balance or the actual monthly payment amount that is listed on the borrower’s credit report.

VA loan allows the lender to use whichever is greater for the DTI calculation – either the payment listed on the borrower's credit report or 0.5% of the outstanding student loan balance divided by 12. If the student loan debt has been paid by someone else for the last 12 months or more, it can be excluded from the borrower’s DTI calculation.

Other VA loan highlights:

  • 100% financing available to active and retired military, reservists, and surviving spouses.

  • No mortgage Insurance (MI)


*Income limits and other program restrictions likely apply.  Loan programs may change at any time with or without notice. Information deemed reliable but not guaranteed. Always consult with your lender before making any decisions.


#Mortgage