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How Do You Qualify for a USDA Mortgage with Student Loans?

October 11th, 2019 by Sean Stephens

What Are Current USDA Student Loan Guidelines?

As we all know, student loan debt can have a major impact on mortgage qualifying. In today’s topic, I will explain how you qualify for a USDA loan with student loans and discuss the recent qualifying improvements. Knowing these details could mean the difference between home ownership or a missed opportunity.

As we all know, 2nd opinions are always important, so if you have financing questions and are working with another lender, we offer this free service where you can get access to an expert 2nd opinion.

So without further delay, let’s get started with the details!

How Do You Qualify for a USDA Mortgage with Student Loans?Student Loan Debt On the Rise

Unfortunately, the fact is that qualifying to buy a home with student loan debt is becoming a bigger challenge each and every day and this is not just a problem for First-Time Homebuyers.

While many of us may say that seems like common sense, the actual numbers are somewhat staggering. In a February 2017 article by Forbes it reported that “Student loan debt is now the second-highest consumer debt category” and “there are more than 44 million borrowers with $1.3 trillion in student loan debt in the U.S. alone”!

Now, after we all have taken a deep breath, let’s get into the details of what are the USDA student loan guidelines for student loan debt.

Guidelines

Tampa FL USDA Approved Lender List Under prior guidelines, USDA loans required the following calculation:

  • Fixed payment student loans which also include a fixed interest rate and repayment term may use that payment to qualify.
  • Further, if it was a non-fixed payment loan such as deferred, Income-Based Repayment (IBR), Graduated, Adjustable, or other types of non-fixed repayment agreements, one percent (1%) of the loan balance would be calculated for the qualifying monthly payment.

Additionally, because many non-fixed payment type student loans require only a minimal monthly payment, most would have to utilize the 1% calculation… but guidelines have recently changed for the better!

Great News!

Tampa FL USDA Approved Lender List

However, now for the good news, USDA guidelines were recently updated and now allow the underwriter to calculate the “higher of one-half percent (.50%) of the loan balance or the actual payment reflected on the credit report” for those non-fixed payment student loan repayment plans.

As you can see, because of this reduced calculation and added flexibility, this automatically provides a homebuyer with increased USDA qualifying ability!

In summary, when trying to qualify for a USDA loan with student loans be prepared to calculate 1% of the outstanding balance towards your qualifying ability unless you can get proper documentation that verifies you are on some type of acceptable fixed repayment plan.

Don’t Forget

Remember, we are unique because as a USDA approved lender, we have dedicated systems in place for USDA processing from pre-qualification through closing combined with high level experience to give you the advantage.

Just call or email to discuss your scenario and let us show you the “Metroplex” difference!

SeanS@mplx.org
Toll Free: 800.806.9836 x280

Let’s make it a great day, and I look forward to seeing you right here for the next tip of the week!

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