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How federally guaranteed student loan affects your debt-to-income-ratio?

Fri Dec 7, 2007 11:12PM | By Joe

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Q: I am paying $420 monthly for a federally guaranteed student loan and soon will be applying for a home mortgage. Need to know how my student loan payment affects debt ratio.

A: In my experience I never had a case when the student loans wouldn't count, guaranteed or not. But before I said that they always do, I found this post which basically states the following -

1.) If you are going for a conforming mortgage, one that conforms to either Fannie Mae or Freddie Mac guidelines, Federally Guaranteed Student Loans will count towards your debt ratio whether you are in repayment or in deferment. This is in the guidelines and while there may be conforming lender or two that will not count them, they can not sell those loans as part of a Fannie Mae or Freddie Mac guaranteed MBS (Mortgage Backed Security). The lender would have to portfolio them.

2.) If you are going for an FHA/VA/USDA Rural Development then as long as you can document that the loan(s) will be in deferment/forbearance for at least the next 12 months after closing they are not supposed to be counted towards debt ratio.

3.) If you are going for a nonconforming/subprime mortgage each lender will have their own rules. Generally the rules will be in line with FHA. However, some lenders will require that 2 yrs deferment/forbearance be documented otherwise the loans will be counted.

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