This is a question we get a lot. So, we figured it’d be good to do a podcast and a post to get you oriented when you start trying to sort out how to get a mortgage if you have student loans. As always, feel free to give us a call at (602)-535-2171. You’re more than welcome to skip the post and get right to asking us for help. Let’s dive in.

Pay off student loans or buy a home? Do I have to choose?

The good news is that even with student loans you can qualify for a mortgage if you meet certain loan requirements, including the maximum debt-to-income (DTI) ratio.

Mortgage Options for Homebuyers with Student Loans

If you have student loans, there are multiple mortgage programs you might qualify for. These include the Fannie Mae HomeReady loan, the Freddie Mac Home Possible loan, a FHA loan, and a VA loan.

Fannie Mae HomeReady Loan

The Fannie Mae HomeReady loan is a low-down payment option for lower-income borrowers, with cancellable mortgage insurance.

Freddie Mac Home Possible Loan

The Freddie Mac Home Possible loan is a similar low-down payment option for lower-income borrowers, with the flexibility to apply sweat equity toward the down payment or closing costs.

FHA Loan

The FHA loan is backed by the Federal Housing Administration (FHA) and requires a down payment of just 3.5 percent.

VA Loan

The VA loan is for active-duty and veterans, with no down payment or mortgage insurance required.

How do Fannie, Freddie, the FHA, and the VA handle student loans?

Fannie Mae, Freddie Mac, the FHA, and the VA all handle student loans a bit differently. Let’s take a deeper look.

How does Fannie Mae handle student loans?

Fannie Mae will count the monthly student loan payment as listed in the credit report. But, if the loan is deferred or showing $0 payment on the credit report, they will calculate a 1% (of balance) as a minimum payment. For example, if the loan amount is $10,000 the minimum monthly payment we will count is $100/month.

How does Freddie Mac handle student loans?

Freddie Mac will count the monthly student loan payment as listed in the credit report. But, if the loan is deferred or showing $0 payment on the credit report, we will calculate a .5% (of balance) as a minimum payment. For example, if the loan amount is $10,000 the minimum monthly payment we will count is $50/month.

How does the FHA handle student loans?

The FHA will count the monthly student loan payment as listed in the credit report. But, if the loan is deferred or showing $0 payment on the credit report, we will calculate a .5% (of balance) as a min. payment. For example, if the loan amount is $10,000 the minimum monthly payment we will count is $50/month.

How does the VA handle student loans?

The VA will use the greater of the monthly student loan payment as listed in the credit report OR 5% of balance as payment.

So, how do you get a mortgage when you have student loans?

If you have student loans and want to improve your chances of being approved for a mortgage, here are some tips.

• Switch to an income-driven repayment plan

• Shop around and choose a reputable lender

• Consider adding a co-borrower to the loan

• Widen your home search options

Still have questions?

That’s totally fine! This is a big topic and this is just a jumping off point to help you get oriented. Contact us today at (602)-535-2171, or email team@azmortgagebrothers.com, to go over your options. It’s so much more valuable to lean on your mortgage lender to build a strategy and a game-plan around the market conditions, your close date, and other factors like the amount of money down, your DTI, etc. We’re here to help!

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Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

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