Mortgage and Real Estate Blog


Calculating student loans for mortgage debt ratios

A common question people applying for home mortgage loans is how does their deferred student loan effect mortgage qualifying

First understand that while a student loan may be deferred, lender reasoning is that eventually you will have to start making a payment, so we must calculate something into your debt ratio.

Student loan debt ratios

How and what we calculate for a payment depends on the type of loan you are applying for.

If the credit report is reflecting the loans are in deferral, then for USDA, FHA, and Fannie Mae conventional loans, the minimum monthly payment is calculated at 1% of the outstanding balance. For example, a $50,000 student loan balance would results in a 'fake' $500 payment for mortgage loan qualifying purposes.

For Conventional Freddie Mac loans, the payment is calculated at 0.50% so that same $50,000 loan results in a $250 payment.

VA loans will treat the deferred balance at 1/12th of 5% of the loan, so the same $50,000 loan results in a payment of $209.


If a payment is showing on the credit report, we use the payment on the credit report for Fannie Mae and Freddie Mac loans.

FHA loans and USDA loans use the greater of the actual payment OR 1% of the outstanding balance, WHICHEVER IS GREATER.

VA loans says if a payment is reporting on the credit report, but is less than the payment on the standard formula, you must get written proof of the lower payment, or use the 1/12th of 5% of the balance rule.

Experience the Cambria Mortgage difference by calling (651) 552-3681, or visiting

Cambria Mortgage, Joe Metzler


YES, the counter top people! Equal Housing Lender. NMLS 274132, 322798. Cambria Mortgage lends in the following states: MN, WI, SD, ND, IA, FL, TX, CO, This is not an offer to lend or to extend credit, nor is this a guaranty of loan approval or commitment to lend. The information here may not be up-to-date and may no longer be accurate. Products and interest rates are subject to change at any time due to changing market conditions. Actual rates available to you may vary based upon a number of factors. Consumers must independently verify the accuracy and currency of available mortgage programs. All loan approvals are subject to the borrower(s) satisfying all underwriting guidelines and loan approval conditions and providing an acceptable property, appraisal and title report. (C) 2020 Joe Metzler

Comment balloon 0 commentsJoseph Metzler • October 19 2020 08:50PM


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