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VA Student Loan Underwriting Guidelines

Deferred Payments

VA Guaranteed loans are the only underwriting guidelines that will allow you to have deferred student loan payments when qualifying for a home mortgage.

You do not have to count your future student loan payments if you can document that your payments will be deferred for a minimum of 12 months from the date that your loan is funded and recorded.

This can be challenging, and may require a letter from the student loan holder stating that your payments will be deferred for at least that long.

Most student loans are reviewed once a year, and will only stay in deferment if you are still enrolled in school and still meet deferment qualifications.

Payment Calculation Options

If no monthly payment is reported on a student loan on your credit report, the lender must document what the payment would be if you were to start making payments.

Examples of documentation of the required payment amount include:

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  • Payment listed on current credit report (IBR payments are OK)
  • A statement from the student loan lender stating what the payment will be in the future; or
  • A copy of the installment loan agreement; or
  • If no other documentation can be obtained showing what your future payments would be, the lender must use 1% of the loan balance as the monthly payment for qualifying purposes.

IBR Income Based Repayment

VA does not have a specific guideline that addresses using an IBR, or income based repayment amount when qualifying for a home loan.

Our experience has been that some lenders are allowing you to use the payment if it is documented on the credit report.  Other lenders are not interpreting it that way and require an amortized payment.

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A lender friend of mine that specializes in VA financing received the following guidance from the VA earlier in 2016.

  • Lender may use the Income Based Repayment (IBR) payment if it is verified (including $0.00) when the payment is fixed for a minimum of 12 months from the closing date.
  • When the payment is fixed for less than 12 months from the closing date, the lender must use the regularly calculated payment once the IBR ends.
  • When no payment is reported or available, the lender must use a payment calculation using 5% of the current balance, divided by 12 (months) as the qualifying payment.

The VA also depends on the underwriter to make their decision based on the overall risk, or compensating factors, and will ultimately always try to do what is in the best interest of the Veteran.

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You DO NOT Have to Use 1% of the Balance

This is a common misunderstanding by inexperienced loan officers. In most cases, you can document your payments in one of the other ways recommended above.

You only need to use a 1% calculation if you cannot obtain any other documentation showing what your payments will be once you start repayment.

Not all loan officers know the guidelines, and not all lenders follow the same guidelines.  It is possible that your loan officer does not have any experience with the guidelines, or the lender has chosen to create their own guidelines.

If a lender tells you something different than what you’ve read here, don’t be discouraged.  Not all loan officers or lenders are created equal.  Don’t take no for an answer!

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Need a Second Opinion?

You can catch us most days taking questions through live chat on the lower right corner of this article, or answering questions in the comment section below.

Please feel free to ask any questions below, on chat, or by email.

This is a great opportunity for you to anonymously ask an experienced professional that has no financial interest in how how your question is answered.

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

  • Mark Franks says:

    I have a student loan in the amount of 80,000. The loan I am applying for is a VA loan. I recently consolidated my loan into one payment, before I had several loan accounts with Navient. The problem I have is my loan officer said since there is no payment amount showing on my credit report they would have to Calculate my loan payment amount at 1% of the loan payment, which is $800.00 per month. This make my Debt to income 50%. I have the payment email information from Navient stating my payments will start in January, it is now November. The payment amount that was set after the loan consolidation was $173.00 . Can the mortgage company use the amount set by Navient, instead of the $800.00 per month. They said the underwriter will not accept the letter from Navient, the payment amount needs to be shown the credit report. What can I do or what can be done.

    • Scott Schang says:

      Hi Mark, first and foremost, THANK YOU for your Service. This is a little alarming because the VA calculation is not 1%. That means that your loan officer may not have a lot of experience with VA guidelines.

      VA basically has 2 options. Your actual payment documented with proof that you’re in a repayment plan. If there is a payment reporting on the credit report, that can be used.

      If there is no payment, like now, there is a calculation to determine what payment is used when calculating your debt to income ratio. Here’s the formula:

      Student Loan Balance x 5% divided by 12

      For instance, your loan balance is $80,000 x 5% = $4000 / 12 = $333.33 – <— This is what should be used to as your payment. If you're at 50% DTI, which is totally ok with VA, with a $800 payment. You should easily qualify with a proper calculation for a VA loan.

      I don't know what your relationship or timeframe is, but I don't like this kind of thing. It sounds like an inexperienced person afraid to admit that they don't have much experience with VA loans.

      If you like your lender, tell them to look up the guidelines. If you would like the guidelines, or if you would like an introduction to someone that I know and trust for a second opinion, feel free to shoot me an email to scott@findmywayhome.com and tell me how I can help.

      I hope this helps?

      • Mark Franks says:

        Mr. Schang,
        I want to thank you for clearing up that issue for me and my wife. Thank you for taking your time to help us. God truly has used you to help us, thanks. Going forward we have passed the information you gave us to our loan officer. If that doesn’t workout, you mentioned recommending someone to us, we are open for recommendations.Thanks again for what you have done, may God bless you.