Student Loans and Your Mortgage Approval: What Lenders Consider
Student loan debt is one of the more common factors buyers worry will disqualify them from a mortgage, and while it does factor into the approval calculation, it doesn't automatically rule someone out. How it's counted, though, depends on the loan program and repayment plan type, which is where a lot of confusion comes from. How student loans count toward DTI Student loan payments count as debt in the back-end debt-to-income ratio calculation, the same as a car loan or credit card minimum payment. The complication is that the actual monthly payment used in that calculation isn't always the payment the borrower is currently making. The income-driven repayment complication Borrowers on income-driven repayment (IDR) plans sometimes have a very low, or even $0, monthly payment. Different loan programs handle this differently — some allow the lender to use the actual reported payment amount (including $0), while others require using a calculated percentage of the loan ba...