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Fannie Mae IBR Student Loan Guidelines

Fannie Mae IBR Student Loan Updates Make it Easier to Buy a Home

Removing Hurdles

Fannie Mae announced today that they are removing hurdles that will help homebuyers with student loans.

Previously, only Freddie Mac allowed homebuyers with Income Based Repayment (IBR) plans to qualify with a payment that does not pay off the loan at the end of a term.

This announcement by Fannie Mae will open up more options for homebuyers using conventional financing when buying their first, or next home.

Unfortunately, FHA government insured mortgages are still sticking with the old guidelines that require a fully amortized payment.

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Debt to Income Ratio

When your lender is calculating your debt to income ratio, they are considering in all of the payments from your credit report, as a percentage of your total monthly income before taxes.

This number is your debt to income ratio.  The maximum debt to income ratio for conventional financing, either Fannie Mae or Freddie Mac, is usually 45%.

This means that your monthly expense, including your new mortgage payment, cannot be greater than 45% of your gross monthly income before taxes.


Prior to this guideline change, Fannie Mae required you to use a payment that will pay off your student loan at the end of the term.

For homebuyers that are on IBR, PAYE, or REPAYE payment plans, your student loan payment is based off of your disposable income at the end of the month.

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It is not unusual for you to have a payment of $15 to $150 a month, even if you have hundreds of thousands of dollars in student loan debt.

Homebuyers that work in the public sector in local or federal government positions, or as teachers or first responders have the ability to have their student loan debt forgiven at the end of 10 years.

All of these programs mean that you are most likely not going to pay off your student loan balances by making the minimum monthly payment using one of these programs.

The new Fannie Mae guideline has specifically been changed to allow you to use the payment that is reported on your credit report.

When Do You Have to Use 1% of the Balance?

Fannie Mae has not completely eliminated the 1% rule.

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If your student loans are in deferment, or if your IBR payment is $0.00, you still have to use a calculation that will fully pay off the loan at the end of an amortized term, or 1% of the balance of the loan.

If you do not have a fully amortized payment, and if your debt to income ratio is too high using 1% of the balance of the loan, Fannie Mae offers the following calculation table that may reduce your payment.

The following table specifies the repayment period to be used when calculating a fully amortizing payment at the current prevailing rate.

Prevailing Rate Student Loan Payment Table

Total outstanding balance of all student loans Repayment Period
$1— $7,499 10 years
$7,500 — $9,999 12 years
$10,000 — $19,999 15 years
$20,000 —$39,999 20 years
$40,000 — $59,999 25 years
$60,000 + 30 years

How Do I Get My Questions Answered?

We’ve created this resource to help you sift through the endless opinions and articles that may, or may not directly answer your question correctly.

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There are several ways to ask questions, and get expert opinions on this website.

  • Submit a Question:  On the bottom of this page, you’ll see a prompt that allows you to ask questions.  These questions come directly to me, and are answered very quickly.
  • Leave a Comment:  Below every article is the option to leave a comment or question.  We see this comments and questions in real time and the always answered, usually pretty quickly.

In addition to researching your questions and providing you with expert advice, I may be able to introduce you to a lender friend that I know has experience with your specific situation and can help.

Find IBR Experts

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About the Author

Scott Schang

A 20 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

Leave a Question or Comment About this Topic

  • Michael Nasserfar says:

    Yall are sooo good at communicating information and resources to the public. Well done!!!! I look forward to seeing more.

  • Brian Milan says:

    Hi Scott, I have six digit student loans, but am on the IBR program. My credit score qualifies me for FHA at 3.5%, and I have the down payment, but every bank I have went through said they all only take 1%. Is there a lender that you know I can work with that will take my IBR payment? I live in Tennessee, and my IBR payment is already reflected on my Credit Report.

    • Scott Schang says:

      Hi Brian,

      You have to use a Fannie Mae, or Freddie Mac loan if you have an IBR payment. There are conventional loans that will allow as low as 3% down payment. There may be income limits in order to qualify for the 3% down payment unless the home is located in a no income limit area. Worse case is 5% down.

      I will introduce you to someone that has experience and can help. Keep an eye out for an email.

      Hope this helps?

  • Vanessa says:

    I’m currently working on getting my IBR payment increased from $0 to a higher amount. Once it is approved, do I have to wait until that payment is reflected on my credit report or could I provide the lender a letter showing what my monthly payment would be?

    • Scott Schang says:

      Hi Vanessa,

      For Fannie Mae, I think it would need to reflect on the credit report. This guideline just came out yesterday, and it’s going to take lenders a while to get comfortable, and figure out how to interpret the guidelines. Because Fannie’s guideline specifically states the “payment as reported on the credit”, that’s probably going to be what most lenders will follow.

      For Freddie Mac, I have a couple of lenders that will allow you to use the $0.00 payment, as long as the loan is not in deferment.

      If you would like to try to take the Freddie Mac conventional loan route, you can shoot me an email to scott@findmywayhome.com with your contact information, and I can connect you with someone that has experience with these guidelines.

      Hope this helps?

      • Vanessa Muir says:

        Thanks Scott. I am slightly confused because I didn’t think this was a new policy since you discussed this in previous articles and put me in contact with a lender that would except my monthly payment as long it was it was above $0 instead of using the amortizing payment or 1% calculation? That lenders advice was to try to increase my payment from the zero dollar amount. That is what I am working on currently and just waiting to hear back from my loan provider. If you do have a lender that will except $0 in Florida you can send them my way as well. Thank you.

        • Scott Schang says:

          Hi Vanessa,

          That program that I referred you to the lender for was Freddie Mac. This new guideline is Fannie Mae deciding to follow Freddie Mac’s stance. I do have a lender that last week was able to get a $0 payment approved with their underwriting team.

          Let me put you in touch with Mia, or have you follow up with you again. Fannie Mae would not allow the $0 payment, but Freddie Mac will, if you can find a lender that will allow it. I only know of 2 lenders that can do this right now.

          You’ll hear from someone shortly! Hope this helps?