Buying a house with student loans isn’t easy, but it’s not impossible.

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Question: My husband and I want to buy a home. I have over $100,000 in loans, but I’m on Income Based Repayment and pay $0. Do lenders accept that amount? How can I make my loans not hinder me from buying or building a home?

Jessica in Kentucky

Tendayi Kapfidze, LendingTree Mortgage Expert, responds…

Student loans can make buying a home more difficult – but it is possible, Jessica. There are multiple factors to consider here.

First, since you’re on an Income-Based Repayment plan with a $0 monthly payment, that suggests your discretionary income is relatively low. So you may have trouble qualifying for a home loan.

You must also consider what type of mortgage loan you are eligible for. There are several ways the different agencies calculate debt-to-income (DTI) ratio for student loan borrowers on Income Based Repayment plans.

Qualify for a mortgage with these programs

Buying a house with student loans is possible with the help from any of the below. See if you qualify for a mortgage and apply if you meet the requirements.

Fannie Mae (conventional) loans

In 2017, Fannie Mae changed their guidelines to allow mortgage lenders to use $0 as a monthly student loan payment when calculating DTI. There are slight differences based on how your payment appears on your credit report…

  • If the credit report shows a $0 monthly payment, then Fannie Mae will allow the $0 monthly payment to be used for qualifying purposes.
  • If the credit report does not show a $0 monthly payment, but you can provide documentation from the student loan servicer confirming the $0/month payment, then the $0 payment can be used.

FHA loans

It gets more complicated with loans from the Federal Housing Administration (FHA). They consider additional factors:

If the $0 monthly payment shows on your credit report, then $0 is the amount used in the DTI calculation. Otherwise, the monthly obligation is calculated by one of the following: The greater of 1 percent of the outstanding balance, or the monthly payment reported on a credit report, or the actual documented payment, assuming the loan balance will fully amortize over the term of the loan.

You can read the exact language from the U.S. Department of Housing and Urban Development here.

VA loans

The Department of Veterans Affairs (VA) has yet another calculation.

If you or your husband are active duty or veterans of the military, you may be eligible for VA financing. For student loans in repayment, or those scheduled to begin repayment within 12 months from the date of VA loan closing, the monthly payment must first be calculated by finding 5 percent of the total balance divided by 12 months. Then, there are two additional considerations…

  1. If the payment on the credit report is greater than the calculation above, the reported amount must be used.
  2. Or the payment on the credit report is less than the calculation above, documentation from the student loan servicer indicating the payment is lower and the terms of repayment is required.

If the veteran provides written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing, a monthly payment does not need to be considered.

Learn more from the VA here.

Other ways to qualify for a mortgage

If your husband qualifies with just his income and he is taking out a conventional mortgage loan, your student loan debt (or any of your other debts) would not be counted against him.

Unfortunately, the same is not true if you are applying for an FHA or VA loan. Even if you don’t apply for the mortgage with your husband, these government loan programs require that your debt be counted against him since you are married.

Denny Ceizyk is a staff writer for LendingTree. He contributed to this report.

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About the Author

Tendayi Kapfidze

Tendayi Kapfidze

Tendayi Kapfidze is chief economist at LendingTree, an online lending exchange. Kapfidze leads the company’s analysis of the U.S. economy, with a focus on housing and mortgage market trends. His analysis has been featured in The New York Times, The Wall Street Journal, The Washington Post, and USA Today, and he’s appeared on CNBC. Kapfidze earned his B.S. in Engineering Management at Saint Louis University and his M.S. in Applied Economics from Johns Hopkins University. He is a member of the Economic Club of New York.

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