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IBR Student loan payments home loan guidelines

Qualifying for a Mortgage with Income Based Repayment (IBR) Student Loans

NOTE:  This article has been updated.  You can find the most current guidelines to qualify for a mortgage with student loans here.

Video: How to Qualify for a Mortgage with Student Loans

Mortgage Experts discuss qualifying with student loans

Josh Lewis, Scott Baade, and Scott Schang recently had this discussion live.  Watch the video or read the transcript here.

Getting a Mortgage with IBR Student Loans

Qualifying for a mortgage when you have income-based repayment (IBR) student loans can put you on quite a roller coaster.  The underwriting guidelines have changed several times over the years, and have left many lenders unable to keep up.

How Do IBR Student Loans Affect My Ability To Get A Mortgage To Buy A Home?

Your IBR Student Loan repayments are considered as part of the debt you owe which is one of the elements underwriters use to determine whether to approve your mortgage application or not. 

Complete Guide to Qualifying for a Mortgage with Student Loans

The loan payments you owe are part of your debt-to-income ratio (DTI) which adds up all your debt payments due each month and divides them by your monthly earnings. If that ratio is too high, your loan will usually be denied. 

The challenge with IBR loans in the process of calculating your debt-to-income ratio is that:

  • Required IBR loan payments change each year based on your income and family size
  • Each type of loan (VA/FHA/USDA) has its own policies about how to determine what amount you should be repaid on your IBR-based student loan each month. They’re struggling with the issue of how much should you be expected to pay each month (i.e. how much that payment should be included in your debt-to-income ratio) across the life of your 30-year mortgage when your IBR payments could be different every year, and in fact, they could literally be zero some years if your income is low enough.

Here are the latest decisions made by the loan agencies as to how they will calculate IBR loans as part of the loan qualification process.

After the most recent update, here are the loan programs that will allow you to use income-based payments:

  • Fannie Mae Conventional MortgageAllows IBR payment.  Fannie Mae student loan guidelines state that you must document repayment status with the credit report or loan statement. IBR payment can be $0.00
  • Freddie Mac Conventional Mortgage – Allows IBR payment. Freddie Mac guidelines state that you must document repayment status with the credit report or loan statement.  IBR payment must exceed $1.00
  • FHA MortgageAllows IBR Payment.  FHA student loan guidelines state that you must document repayment status with the credit report.  IBR payment must exceed $1.00 – Updated 8/2021
  • VA MortgageAllows IBR Payment.  VA student loan guidelines state that you must document repayment status with the credit report or loan statement. Payment must be fully amortized or calculate the balance by 5%, divided by 12.
  • USDA MortgageNo IBR payment. USDA student loan guidelines state that payment must be fully amortized or use 1% of the balance as a qualifying payment.

Loan officers that have been unable to keep up with these guidelines will most often quote the 1% of the balance calculation when qualifying a home buyer.

Get Introduced to a Student Loan Mortgage Expert Now

As you can see by scrolling through the hundreds of questions and answers below, there is a lot of misinformation out there about this topic.

Article Originally Published March 16th, 2016 with updates (indicated below)

We’ve been following this issue since the beginning.

As more Millennials are looking to buy their first home, many are faced with the challenge of student loan debt and how lenders calculate payments when determining debt to income ratios.

Unlike other types of debt that include monthly payments of principal and interest, student loans often have reduced or deferred payments that do not include principal repayment.

Specifically, Income-Based Repayment (IBR) plans limit your federal student loan payments to a percentage of your income. These plans can go a long way towards making payments manageable for young professionals just entering the workforce at entry level salaries. For those with very low income, payments can be as little as $0.

This is where things get interesting for mortgage lenders seeking to make sound underwriting decisions. Should they calculate debt to income ratios using the payment set under the IBR plan?

Or, since the payments must eventually rise if the loan is ever to be paid off, should they use some type of proxy for a fully amortizing payment?

The answer depends on the type of mortgage you are applying for. Since the vast majority of borrowers with IBR student loan debt aren’t looking at Jumbo loans, we’re going to focus on the different ways Fannie Mae, Freddie Mac, FHA, VA, and USDA answer this question.

If you love details, you can read the entire guideline in italics. If you like to get right to the point, skip to the BOTTOM LINE in bold.

IBR Using a Conventional Fannie Mae Loan

UPDATED April 25th, 2017 – Fannie Mae has recently updated its guidelines to allow borrowers to use the payment that appears on your credit report.  That can be an IBR, PAYE, or REPAYE payment that does not pay off your loan at the end of the term.

If no payment is reported on the Credit Report, the lender must use one of the options below to determine the repayment amount:

  • 1% of the outstanding balance;
  • the actual payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower:
  • a calculated payment that will fully amortize the loan(s) based on the documented loan repayment terms: or
  • if the repayment terms are unknown, a calculated payment that will fully amortize the loan(s) based on the current prevailing student loan interest rate and the allowable repayment period shown in the table below.

The current prevailing student loan interest rate’ can be found on a variety of websites. For example. see U.S. Department of Education Federal Student Aid in E-1-03. List of Contacts.

Complete Guide to Qualifying for a Mortgage with Student Loans

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

Calculating a Student Loan Repayment

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


Note: The lender is responsible for determining that the payment on the credit report or other documents provided by the student loan lender or borrower are fully amortizing payments.
Example: Calculating an Amortizing

Payment Balance: $17,500
Repayment period: 15 years
Interest rate: 4.29%
Monthly Amortizing Payment: $132.00

BOTTOM LINE:  Use the actual amortizing payment. If you are unable to document the actual amortizing payment, use the calculated payment using the method above as it will nearly ALWAYS be less than 1% of the balance. If ALL ELSE FAILS, use 1% of the outstanding balance.

IBR Using a Conventional Freddie Mac Loan

Here is the section from Freddie Mac’s underwriting requirements for student loans that applies to IBR loans:

When a monthly payment on an installment debt is not reported on the credit report or is listed as deferred, the Seller must obtain documentation verifying the monthly payment amount included in the monthly debt payment-to-income ratio.

If no monthly payment is reported on a student loan that is deferred or is in forbearance, and there is no documentation in the Mortgage file indicating the proposed monthly payment amount (e.g., the loan verification letter), 1% of the outstanding balance will be considered to be the monthly amount for qualifying purposes.

Get Introduced to a Student Loan Mortgage Expert Now

Examples of documentation of the required payment amount include:

  • A direct verification obtained from the creditor
  • A copy of the installment loan agreement obtained from the Borrower, or
  • If payments are currently deferred, the payment amount that will be required once the deferment or forbearance period has ended, as stated in a copy of a financial institution’s student loan certification or the installment loan agreement

While the Freddie Mac seller guide has not changed since the publishing of this article, we have spoken directly to Freddie Mac and received confirmation that they will in fact use the IBR payment when calculating debt to income ratios.

BOTTOM LINE:  Use the documented IBR payment as long as it is greater than zero. For any loans with no payment, including IBR loans, the lender must fall back to the forbearance guidelines and use 1% of the outstanding balance unless you are able to provide documentation verifying the proposed monthly payments will be less than 1%.

IBR Using a Government FHA Loan – Updated June, 2021

Here is the section from FHA’s underwriting requirements for student loans that applies to IBR loans:

FHA 4000.1 Section II. A. 4. B. (H)

(4) Calculation of Monthly Obligation For outstanding Student Loans, regardless of payment status, the Mortgagee must use:

  • the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or
  • 0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero.

BOTTOM LINE:  As of June 2021, FHA is following Freddie Mac’s IBR student loan payment calculation guidelines.

IBR Using a Government VA Loan

Here is the section from the VA’s underwriting requirements for student loans that applies to IBR loans:

Student Loans (5/1/2017)

  • Deferred Student Loans: If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis.  If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt need not be considered in the analysis.
  • Student loans in Repayment:

If a student loan is in repayment or scheduled to begin within 12 months from the date of a VA loan closing, you must consider the anticipated monthly obligation in the loan analysis.

Complete Guide to Qualifying for a Mortgage with Student Loans

The anticipated monthly obligation should use the greater of:

Calculated payment at a rate of 5% of the outstanding balance divided by 12 months (example:  $25,000 student loan balance x 5% = $1,250 divided by 12 months = $104.17); or the payment reported on credit report

Standard Repayment Plan: The required monthly payment is to be used for qualification purposes.

If a monthly payment is not reflected on the credit report or there is a need for the payment amount required for qualification purposes, documentation, as evidenced by a letter from the creditor or repayment schedule, is required to verify monthly payment.

BOTTOM LINE: Use the above formula to calculate any payments that are not in repayment.

IBR Using a Government USDA Loan

If the borrower has a student loan with income-based repayment, you must use 1% of the balance. Below you will find the guideline directly from the USDA underwriting manual:

USDA Guaranteed Loan – Updated September 2019

  • Non-amortized Payment – Use payment on credit report 0r .50%, whichever is greater.
  • Amortized Payment – Ok with all lenders
  • Deferred or forbearance use .50% of the loan balance


VA and USDA loans are both limited. Unless you are a veteran or buying in a “rural” area as defined by the USDA, these loans aren’t an option. If they are, the good news is both have straightforward, borrower-friendly treatment of IBR plans.

For most people, the question will come down to which programs you qualify for and then which offers the most favorable income-based repayment calculation. If you need to use FHA due to lower credit scores or higher debt to income ratios, things just got a lot tougher.

After offering guidance earlier this year allowing the use of IBR payments, the current guidelines require documentation of the actual amortizing payment or 1% of the outstanding balance will be used. In either case, the payment used for qualifying will be higher than the current IBR payment.

If your loan balance is relatively large, this treatment will likely erase much, if not all, of the benefit of FHA’s higher debt to income ratios.

Get Introduced to a Student Loan Mortgage Expert Now

If you are able to qualify using Fannie Mae or Freddie Mac programs, you have a good bit more flexibility. In most cases, a borrower that can be approved through Fannie Mae’s automated underwriting system (AUS) will also be approved through Freddie Mac’s AUS.

This is great news if you have an IBR payment that is greater than zero. Freddie will use the IBR payment reported on the credit report so you should be home free.

If you are working with a lender that ONLY offers loans underwritten to Fannie Mae guidelines OR you have an IBR payment of $0, Fannie has an option that will not be as bad as using 1% of the balance.

Let’s look at an actual scenario for a borrower I’m working with right now.

She’s looking to buy a home for $350,000. Her income is just over $72,000 per year. She just went through the annual review on her IBR plan and for the next 12 months she pays $146 a month on roughly $117,000 of student loan debt. If you’ve been paying attention up to this point, you see where this is going.

Since she has good credit and her debt to income ratios are under 45% using the IBR payment, we’re in luck. We can use Freddie Mac guidelines and pull the $146/month from the credit report and she’s good to go.

WHAT IF, her IBR payment had been set at zero? In that case, we could look at going FHA. Under current guidelines we simply use 1% of the $117,000 loan balance as the monthly payment. The bad news is this pushes us over the maximum FHA debt to income ratio of 56.9%. That doesn’t work so let’s move on to Fannie Mae.

Assuming her lender would not give us documentation of a fully amortizing payment AND her loan documentation doesn’t provide enough information for us to calculate the amortizing payment, we have to use the calculated method using the ‘current prevailing student loan interest rate’.

Using the chart above we see that we use a 30 year term and the current prevailing interest rate is 4.29%. That leaves us with a monthly payment of $578. Even though the calculated payment is much higher than the actual IBR payment, we can keep the debt to income ratio just under the maximum 45% and approve the loan.

The bottom line is, “it’s complicated.” But there are options and if you’re working with an experienced loan officer who understands the intricacies of student loan qualifying guidelines, there should be an option for you. As always, we’re here to help. If you have any questions, or specific scenarios reach out directly or in the comments section below.

Frequently Asked Questions

What Are IBR Student Loans (Income-Based Repayment Student Loans)?

Income-Based Repayment (IBR) Student Loans reevaluate how much you owe in monthly student loan payments based on your income and family size. These amounts are reviewed annually, and a new required monthly payment amount is set for the next year. This is different from normal student loans that have a set payment amount each month, regardless of your actual ability to pay that loan. 

How Do I Qualify For Income-Based Repayment On My Student Loans?

If you are a federal student loan borrower struggling to make ends meet, an Income-Driven Repayment (IDR) plan may be the right solution for you. You can either apply online, use a Student Loan Counseling Service, or contact your loan service provider to discuss whether you may qualify and what option would be best for you. Whether you meet the IBR qualifications or not will depend on a number of factors:

  • The type of loan you have
  • Whether you have ever defaulted on your loan (defaulted loans are not eligible)
  • Your income level
  • The size of your family
  • The average income in your geographic area
  • Whether you borrowed before 2014 or not (loans prior to 2014 have a higher required repayment)
  • Whether you are a student or parent borrower (parent PLUS Loan borrowers are not eligible)

Will An Income-Based Repayment Plan Affect My Ability To Qualify For A Mortgage?

Probably yes, depending on your specific situation. Though they won’t prevent your qualification for a mortgage, they will affect your ability to qualify. If you are considering whether you should participate in an IBR program or not, you may want to consider your potential and plans to purchase a home in the future. 

What Do FHA Student Loan Guidelines Say About IBR Student Loans?

FHA mortgage guidelines currently do not allow for IBR payments.  FHA student loan guidelines state that payment must be fully amortized or use 1% of the balance as a qualifying payment.

Do Student Loans Count In Debt-To-Income Ratio When Applying For A Mortgage?

Yes, they do. The challenge is that different types of loans (FHA, VA, USDA, etc.) account for them differently if they are IBR Student Loans. You can read the specific requirements above or Contact Us for more information if you are considering buying a home soon.

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

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  • Pam says:

    I have 82k in student debt and make 29k a year in state job. My loans are not in repayment yet because I am in my last semester of school. I have 3.5% to put down on a home now before I graduate. My lender said I can get a FHA loan and the loan is for $209k after my down payment. Now the lender is asking for a fully amortized repayment schedule for all my many student loans. He also said I may have to go into an extended repayment plan. But I want to be in a repayment plan that I pay as I earn. Why does he need this documentation? and why is he asking me to ask my student loan lender to put me in an extended repay plan when I can PSLF after 10 years?

    • Scott Schang says:

      Hi Pam, it doesn’t sound like your loan officer has experience with the student loan underwriting guidelines. It’s true that FHA is going to require a fully amortized payment, or they are going to use 1% of your student loan balance when calculating your debt to income ratio. That’s a $820 payment.

      We actually do this a lot. Fannie Mae will accept an Income Based Repayment (IBR), even if that payment is $0. Fannie Mae also has a program called HomeReady, which only requires a 3% down payment.

      I would suggest that you contact the student loan lender and apply for an IBR payment. Chances are, that payment will be very small, or $0.

      If you would like, I can introduce you to an mortgage professional that has extensive experience with these guidelines, and has helped many people in your situation.

      Simply shoot me an email with your contact information and State you’re buying in to scott@findmywayhome.com and I’ll make that introduction.

      Hope this helps?

  • Turi says:

    Hi, I’m currently on the hunt looking to purchase a home. I have a huge amount of student loan debt to the the tune of $89K. When my loans were in deferment, a FHA rep stated that while my credit was good, my DTI ratio exceeded their limits, as they calculated the 1%, which would make my payments $890 monthly. However, now my loans are now in repayment status under the REPAYE plan, and will eventually be under the PSLF program where the remaining debt will be repaid after 10 years. My current SL payments are now $18, I gross around 27K a year and a credit score of 715. What are my options?

    • Scott Schang says:

      Hi Turi, FHA does not allow REPAYE or any income based payment plan. Your best option is a Fannie Mae Conventional loan, which will allow any payment as long as the loans are in a repayment status of some sort. REPAYE is perfectly fine.

      With your credit score of 715, a Conventional loan would probably be your best option.

      If you would like help a loan officer that has experience with these guidelines, I’m happy to make an introduction.

      Simply shoot me an email to scott@findmywayhome.com with your contact info and what State you’re buying in, and I can get you pointed in the right direction to someone that I know and trust.

      Hope this helps?

  • Katie says:

    My situation is a mess. We ‘closed’ and moved into our new home at the end of September, in November the lender stated that they did not factor my student loan debt correctly into our back-end ratios and FHA will not insure the loan! I worked with my SL lender to get on an IBR plan which reduces our ratios and puts us back in range but NOW the lender wants me to prove that the loan will fully amortize over the 30 years (which it will not) if I stay on this IBR plan. We put 10% down on this house, our credit scores (are in the high 700’s) and income is $170’s per year. This is a huge mess, my current IBR payment is 1900 per month, is there any recourse for this nightmare?

    • Scott Schang says:

      Hi Katie,

      This sounds like more of a lender problem than your problem. The lender is making this your problem because they made a mistake. Any “mess” is something that they are trying to clean up, and it’s not your fault.

      What they are trying to do now is refinance the loan and re-underwrite the loan using different guidelines.

      This is not complicated, your only option for using your IBR payment is to use a Fannie Mae loan using DU automated underwriting.

      Your income is going to be too high to qualify for a 3% down payment, so you’re going to be looking at a 5% down payment. If your current lender is telling you 10% down payment, it may be because they are trying to get your debt to income ratios down.

      Shoot me an email to scott@findmywayhome.com – I can introduce you to a loan officer friend of mine that has experience with IBR payments and helping folks in your situation.

      There might be more to the story that I’m not seeing, but I don’t think this is as much of a mess as you feel like it might me right now.

      Hope this helps?

      • Katie says:

        Thank you for the response. They are trying to reapprove the loan with different terms. If we go with another lender does the original lender have to give our down payment money back? We have already given them 55k for the down and closing plus we have added 15000 in improvements to the home since living here.
        I can reach out tomorrow to discuss in detail.

        • Scott Schang says:

          The lender does not have your down payment, you have 10% equity in your home (plus any equity that you’ve accumulated since the closing date).

          You are 100% safe, and in the right. The lender is scrambling to save their own butt, and whether they figure it out, or you go with another lender, it let’s them off the hook.

          Any money you spent in closing costs is spent. If you allow your current lender to refinance you, I would make sure that they cover any costs associated with a refinance.

          You can absolutely reach out tomorrow, I’ll be around. The one thing I want you to take from this is that you’re in the drivers seat, and you have options. All options should work in your favor if you know what your options are. The lender is counting on you not asking questions at this point.

          Let’s talk about it a little bit, and then you can decide what the best course of action would be.

  • Alexandra Martinez says:

    I was interested in a home loan and I am under the income based repayment program with my loans to be forgiven in approx 4 years. I am looking for a mortgage in Flagstaff Arizona. Any help would be excellent.
    Thank you.

    • Scott Schang says:

      Hi Alexandra,

      I have a very experienced lender friend that can help. I have your email, I’ll make an introduction by email. Either Grant, or someone on his team can definitely help you!

  • Natasha Royal says:

    I am currently on an IBR payment 146k in student loans. My monthly payment is about $150 a month for my student loans. My dti is good, credit 709. However a lender entered my info for a loan and it was rejected. The lender said it may be since my loans are higher than thAn what they were initially were due to interest. He now has to go through a manual underwriting and says it’s only a 25% I may get approved. What are my other options if I’m not approved.

    • Scott Schang says:

      Hi Natasha, your simply doesn’t have any experience with these guidelines. Using conventional financing, you can use your IBR payment. If they are talking about manual underwriting, they are using FHA.

      Send me an email to scott@findmywayhome.com and let me know what State you’re in. Let me introduce you to someone that has experience with these guidelines.

      Hope this helps?

      • Josh Day says:

        I am in the same predicament as most of the commenters. I will be making around $70,000 when I graduate my doctorate program and begin working in November. I have a total of $196k in student loan debt. I have no other debt and a credit score of 746. According to some online calculators, my payment on IBR will be roughly $100/month due to family size and retirement savings lowering income. I am interested in a small multi family (2-4 plex) to reduce my portion of the mortgage. How will this impact my IBR? I had thought about using an FHA203K loan to build in some equity, but it sounds like it is best to pursue another type of loan due to 1% of debt being using for FHA. Are there other loans that allow you to roll rehab costs into the loan besides FHA203K loan? Any help would be appreciated. Thanks!

        • Scott Schang says:

          Hey Josh, FHA is not going to allow you to use your IBR payment for your DTI. You’re not going to have as low of a down payment as FHA, but have you looked at conventional? Both Fannie Mae and Freddie Mac allow you to use your IBR payment when calculating your debt to income ratios.

          If you need an introduction to an experienced lender, I can help. Just shoot me an email to scott@findmywayhome.com let me know what State you’re in.

          Hope this helps?

  • Rachel says:

    Hi! I am in the same predicament as most of the commenters. I make $93500. I have a total of $193k in grade school debt. Some additional credit card debt and a credit score of 725. I pay $864/ month for consoldated loan and 107 for a private loan.I am possibility interested in a 2 family to reduce my portion of the mortgage. How will this impact my ibr? Is better to look at a single family loan. I had thought about an FHA loan but it sounds like it is best to pursue another type of loan. Any help would be appreciated. Thanks

    • Scott Schang says:

      Hi Rachel,
      You would not be able to use an IBR payment when calculating your debt to income ratio for an FHA loan. Freddie Mac Home Possible will allow you to buy a 2 unit property using your IBR payment.

      The hard part of this is going to be finding a lender that has experience with these guidelines, and that’s where I can help 🙂

      If you would like an introduction to someone that can help, shoot me an email to scott@findmywayhome.com and let me know what State you’re buying in.

      Hope this helps?

  • Elisha says:

    I’m going to hop on this awful IBR bandwagon… I have about 68k in loans, I’m approved for PSLF and my payment on the IBR is $0. Every option I’ve tried here in Idaho has or me over the DTI limits. So do I wait out the 3 years until my loans are forgiven? It seems like there should be consideration for PSLF program during underwriting?!?!?!

    • Scott Schang says:

      Hi Elisha,

      The lender you’ve spoken to may not understand the guidelines. Using a conventional loan, you can use your $0 on your IBR loan. As long as the loans are not deferment or forbearance, you can use the $0 payment.

      I have your email address, I will introduce you to a lender friend of mine in ID that has experience with this!

      Hope this helps?

  • Patricia says:

    I can’t find any information out there so far about GRADUATED repayment. My current payment is $256 for 2 years; then it jumps up and has a new stable payment for two years, then increases agin, etc. Can I use $256 for FHA even though it will eventually increase- it still fully amortizes over the 10years.

    • Scott Schang says:

      Hi Patricia,

      FHA is going to require that your payment be fully amortized to pay off at the end of a pre-determined term. It would make sense that using the payment that eventually pays off the loan at the end of the term, would be a way to approach this. Do you know what the final graduated payment is?

      The next challenge is going to be to find a FHA underwriter that agrees with me on that. I have not personally run into this specific situation, but I would definitely take this to an underwriter and fight for it.

      The other option would be Conventional financing. Is there any reason why you cannot use a Fannie Mae or Freddie Mac conventional loan? Both of these underwriting guidelines allow you to use the reported payment when calculating your debt to income ratio.

      If you would like an introduction to a lender that I know and trust, and has experience with student loans, shoot me an email to scott@findmywayhome.com with the State you’re buying in, and let’s see if we can get you some solid answers.

      Hope this helps?

      • Patricia says:

        It would eventually be more than the 1%. My underwriter wants to use the 1% rule for approx $455, in the last two years of repayment i think it is around $700 each month. I am looking for a loophole- obviously, because I think the way the rule is worded and the way my verification is also worded I should be able to use the $256 payment. The rule says the actual payment if it full amortizes- which it does, and my verification letter says term: 119 months, based on the current principal balance and interest rate, your accounts total monthly payment amount will be 255.56. Obviously if I apply for a home loan in two years the amount would be different. I’m just wondering who has the final say? Will FHA deny the loan? will the underwriter get in trouble when my payment increases? No where on my verification letter does it say it is a graduated repayment. It is a grey area in my opinion- thanks for being a sounding board and I appreciate any further input you might have.

        • Scott Schang says:

          I spoke to an underwriter this morning about this. They stated that FHA will not allow a graduated payment, and that the 1% will be required.

          Your question about who has the final say? At the end of the day, it’s HUD/FHA. If HUD does not insure the loan, the lender who originated the loan is on the hook for an uninsured FHA loan. To a lender, that means you’ve got this loan on the books that you cannot sell, so that you can get your money back to lend to another borrower. It’s called an unsellable loan, or a buyback if the lender if forced to buy the loan back sometime in the future.

          Different lenders have different levels of tolerance for risk. Some lenders have their underwriters taking a very conservative stance, other lenders could take a less aggressive approach. My experience has always been that the rule is that an underwriter is going to take the absolutely most conservative approach to interpreting the guidelines.

          It is my opinion that if you are using FHA financing, your debt to income ratios will be calculated using 1% of the balance as a payment.

      • Michelle says:

        Hi. I was wondering the same thing about the level/graduated plan. It is a 30 yr plan as well, with a higher payment amount similar to what an amortization would be. But, Navient does NOT offer amortized statements or estimates. They have even sent my LO a letter stating that they do not do amortization. This is a nightmare…. Here is what Navient sent me. I was hoping to be able to uss the $710 graduated plan payment:

        Eligible Plans
        Current Monthly Payment Amount
        Est. Initial Monthly Payment Amount for This Plan
        Current Est. Total Amount to be Paid
        New Est. Total Amount to be Paid
        Est. New Payoff Date
        HR – REPAYE
        HP – Pay As You Earn
        H – Income Based Repayment
        K – ICR
        G – Graduated
        G – Graduated Extended
        L – Level (Standard)
        L – Extended Repayment Level/Fixed

        • Scott Schang says:

          Hi Michelle,

          Lenders that follow Fannie Mae underwriting guidelines will allow you to use the payment that is being reported on your credit report. As long as the student loan is not currently deferred or in forbearance, you can use your actual payment, regardless of whether or not it is fully amortized.

          If you are trying to qualify for a FHA mortgage, they will only accept a fully amortized payment. I am going to introduce you to Mia Schultz in IL. Mia is a professional loan officer and an expert with these guidelines.

          If you would like to learn more about Mia, check out this interview I did with her – I think you’ll see the drastic difference between how she works vs most others out there – Watch Mia Schultz interview HERE

  • Elle says:

    Hi, my husband owes 55k in student loans. He has decent credit. And he recently got a job with our county so he’s on the public service loan forgiveness program and since May qualified for a $0 monthly payment since he makes $43,200 and we are a family of 5. As of February when we spoke with a lender, we didn’t qualify because the debt to income ratio and he wasn’t on the program yet. Just wondering if you could tell me how being at $0 now would change from when he was ok deferment. I have bad credit due to hospital bills unfortunately. But like someone else who said who also happens to be frol Wisconsin, we’ve thought about divorcing so I don’t have to be included in the usda since I owe like $9k in hospital bills.

    • Scott Schang says:

      Hi Elle,

      As long as the student loan is not currently deferred, you can use conventional financing with a little as 3% down payment. Conventional financing will allow you to use a $0 IBR payment when qualifying.

      USDA is going to require you to use 1% of the loan balance when calculating your debt to income ratios. That basically adds a $55 debt to your liabilities for the purposes of qualifying.

      Divorcing should not be an option, and would not be an issue with a Conventional loan. If you medical bills are in collection status, most automated underwriting systems will not require that medical collections be paid.

      With a Conventional loan, you do not have to be on the loan, and your credit score will not hurt your ability to qualify.

      Hope this helps?

      P.S. I have a fantastic lender that has a lot of experience with IBR payments. I will make an introduction by email.

      • Jackie Ponich says:

        “I have a fantastic lender (in Wisconsin) that has a lot of experience with IBR payments. I will make an introduction by email.” You wrote this to a person from Wisconsin. I am on the 6th or 7th lender/loan rep who insists that I have to calculate the 1% into my total debt. I pay zero on the IDR repayment plan. Is that the same as IBR? I would love your person’s name also so I can get on with my life and buy a residence instead of spending my days researching, emailing and worrying no one will give me the loan. Thank you!!

        • Scott Schang says:

          Hi Jackie,

          Yes, I have a great lender in WI that can help. They can also help with your other question regarding automated underwriting decisions.

          I will send an introduction by email now. You should see their contact info in the next 10 minutes.

          Hope this helps

    • Scott Schang says:

      I figured that out and fixed it 🙂

  • Nicole says:

    HI I just had my lender tell me tat I can not get approved for an FHA loan because my student loans are 75,000 and with the 1% it will put me over the debt/income ratio limit. I can not get a traditional loan because I am only 2 years out of bankruptcy. Is there any way around this. My student loans are currently in IBR status with $13 a month payments.

    • Josh Lewis says:

      Hi Nicole,
      FHA currently requires the use of 1% of the student loan balances unless a fully amortizing payment can be demonstrated. With IBR, you won’t be able to do that unless your lender can provide you documentation of what the actual amortizing payment would be. In our experience, the only way we’ve seen that happen is when the borrower switches from IBR to a traditional repayment plan.

      Depending on your exact qualifications there are a few options that allow the IBR payment for qualifying, including Fannie Mae and Freddie Mac which both have 3% down options. Where are you located? If you’d like, we can connect you with an expert lender in your area who is well versed in IBR guidelines.