It used to be that when I was qualifying a mortgage borrower and they told me that their student loans were deferred, I could normally count on not using that debt against them in their debt ratios. However, as we all know underwriting guidelines are stricter these days, and now many times deferred student loans still have to be counted against mortgage borrowers' debt ratios, even when no payments are being made and they are in deferred status. You have to follow the below rules which will vary depending on what type of financing you are taking:
FHA loans: student loans need to be deferred for at least 12 months in order to not count them against a mortgage borrowers' debt ratios.
VA loans: student loans need to be deferred for at least 12 months in order to not count them against a mortgage borrowers' debt ratios.
CONVENTIONAL loans: you always have to count deferred student loans, no matter what the deferment status, no matter how long they are deferred for.
Many times a credit report will show a deferred student loan with no monthly payment listed. The lender will have to document the monthly payment amount if it is a Conventional loan or one of the aforementioned government loans that is not deferred for 12 months or more. The payment needs to be documented to know what to count against your debt ratios. The mortgage borrower will need to somehow document what the monthly payment will be when the loan comes out of deferment status, and what the timeframe on the deferment and repayment is.
And sometimes a bank will have their own rules on top of any Fannie Mae, Freddie Mac, FHA and VA rules. In the mortgage industry these additional rules are called “overlays.” You should ask any mortgage loan officer you may work with to confirm if the loan you are choosing has any loan overlays.
