Mortgage  Question?
»
»
How Student Loan in Forbearance is Treated for Mortgage

How is a student loan in forbearance treated when you apply for a mortgage?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

If your student loan is in forbearance you are not required to make your monthly loan payment. There are a number of ways to qualify for a forbearance including financial hardship, medical bills or a job change. You are also eligible for a student loan forbearance if you meet the following requirements:

Your total student loan payments are more than 20% of your monthly gross income

You are in a medical or dental residency program

Selected AmeriCorps positions

Selected teacher positions

You are in the National Guard and have been deployed

You qualify under the Department of Defense Student Loan Repayment Program

Although forbearance enables you to pause making your student loan payments for up to a year, the loans still affect your ability to qualify for a mortgage. Despite not being required to make a payment, lenders factor the student loans into your debt-to-income ratio which impacts the mortgage you can afford.

Lenders include a payment because you are likely to be required to make student loan payments in the future and they need to confirm that you can afford both your mortgage and student loans. The higher the student loan payment included in your debt-to-income ratio, the lower the mortgage amount you qualify for.

As we outline below, how a student loan in forbearance is treated when you apply for a mortgage depends on the loan program and other considerations.

Conventional Mortgage - Fannie Mae Guidelines: the monthly payment for the student loan is calculated as either 1.0% of the outstanding loan balance or the full payment amount according to your loan documents. For example, if you have $45,000 in student loans outstanding, the monthly payment that is included in your debt-to-income ratio is $450 ($45,000 * 1.0% = $450).

Conventional Mortgage - Freddie Mac Guidelines: the monthly payment is calculated as either 0.5% of the outstanding loan balance or the full payment amount according to your loan documents. For example, if you have $45,000 in student loans outstanding, the monthly payment that is included in your debt-to-income ratio is $225 ($45,000 * 0.5% = $225).

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the mortgage you can afford including your student loans

Fannie Mae and Freddie Mac are not lenders but rather set eligibility requirements for conventional loans, which are mortgages that are not backed by the government. In short, a conventional mortgage is the most common loan program in the U.S. and the type of mortgage most borrowers choose.

Most lenders are able to apply both sets of conventional mortgage student loan guidelines so we advise you to understand the methodology your lender uses before you apply for the loan. Working with a lender that uses the 0.5% payment calculation approach may enable you to qualify for a higher mortgage amount.

Conventional mortgage are provided by traditional lenders such as banks, mortgage brokers and credit unions. We recommend that you contact multiple lenders in the table below to determine the mortgage you can afford.

%
Current Mortgage Rates as of November 21, 2019
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

%

Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

FHA Mortgage: the monthly student loan payment included in your debt-to-income ratio is the greater of 1% of the outstanding loan balance or the loan payment stated on your credit report. Using the higher of the two payments decreases the mortgage you are eligible for.

%
Current FHA Mortgage Rates as of November 21, 2019
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

%

Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

USDA Mortgage: the student loan payment included in your mortgage application is also the greater of 1% of the outstanding loan balance or the loan payment stated on your credit report.

VA Mortgage: If the student loan is expected to be in forbearance for at least one year after the mortgage closes, the loan can be excluded from your debt-to-income ratio. Otherwise the lender includes the greater of 1% of your outstanding loan balance or the loan payment on your credit report in your mortgage application. Please note that student loan debt for permanently disabled veterans is automatically eliminated unless you opt out of the program.

%
Current VA Mortgage Rates as of November 21, 2019
  • Lender
  • APR
  • Loan Type
  • Rate
  • Payment
  • Fees
  • Contact
View All Lenders

%

Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

To summarize, just because your student loan is in forbearance and you are not making a monthly payment does not mean the lender excludes the loan when you apply for a mortgage. Because the payment that is attributable to your student loans varies by mortgage program we recommend that you work with your lender to select the program that best positions you to qualify for the mortgage you want.

Sources

Student Loan Forbearance Guidelines: https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance#forbearance-eligibility

« Return to Q&A Home

More FREEandCLEAR Mortgage Resources

Resources

How To Get a Mortgage with Student Loans

Learn how to qualify for a mortgage with student loans including how lenders factor your payments into your application depending on if your loan is deferred, in forbearance or on an income-based repayment plan. 

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

Harry Jensen LinkedInLinkedIn | Email Harry JensenEmail