Mortgage Loan

FHA Guidelines On DTI And Student Loans

1. FHA Guidelines On DTI And Student Loans Versus Conventional Loans

* Student loan debt can be a major obstacle when qualifying for a home loan. The two largest issues that affect debt to income ratios on mortgages are student loans and car payments.

– FHA used to have extremely lenient FHA Guidelines On Student Loans
– Borrowers with deferred student loans that was deferred for at least 12 months could exclude the potential student loan payments from debt to income ratio calculations in the past but not anymore
– Unfortunately, under HUD 4000.1 FHA Handbook which was launched September 14, 2015, all deferred student loans will be counted in the debt to income ratio calculations
– Even if the student loans have been deferred for longer than 12 months, student loan payments will now count on FHA Loans
– Professionals who have graduate or professional degrees such as doctors, dentists, pharmacists, attorneys, and engineers can have substantial student loan balances
– Many consumers have student loan balance exceeding north of six figures
– I have run into borrowers who had student loans with balances greater than $300,000
– Some even higher than $500,000
– Government-backed student loans cannot be delinquent
– Cannot be in collections in qualifying for FHA Loans
– FHA does not require borrowers to pay off outstanding collection accounts or charge off accounts
– However, since FHA is a government entity, borrowers cannot be delinquent and/or have government loans or debts owed to the government such as tax liens to qualify for FHA Loans
– FHA is not a mortgage lender
– FHA’s function is to insure FHA Loans that are originated and funded by mortgage companies that are FHA lenders
– FHA guarantees and insures lenders in the event borrowers default on their FHA Loans and lender takes a loss

Borrowers with higher student loan balances who need to qualify with a lender with no mortgage lender overlays can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at We have no mortgage overlays on FHA, VA, USDA, and Conventional Mortgages. We are also experts on Non-QM Loans and bank statement loans for self-employed borrowers. We are available 7 days a week, evenings, weekends, and holidays.

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