FHA Loan and How Much of the Student Loan Effects your Debt-to-Income Ratio

Each type of loan views student loans in a different light. Earlier this year, FHA changed the way they view student loans which helped people in their qualifications dramatically. They now mirror how Freddie Mac views student loans.

  1. If the loan is in forbearance the payment is now calculated at .5% of the balance instead of 1% of the balance.
  2. If the loan is currently on an IDR plan with a payment greater than $0 the payment on the IBR plan is used to qualify.
  3. If the loan is currently on an IDR plan with a payment of $0 the borrower would qualify with a payment of .5% of the balance.

FHA, VA and Conventional Loans in Relation to Authorized User Credit Accounts

FHA Loans

Authorized User Accounts User must be included in the DTI unless you can document the primary card holder has made all required payments in the last 12 months and there is no history of delinquency.

Borrower Authorized User Accounts may be used as a credit reference on Manual Loans provided you can meet all of the items listed below:

  • Proof of 12 months of payment from Borrower
  • No history of delinquency
  • Must count in DTI

VA Loans

Authorized User Accounts must be included in the DTI.  If you do not want to include in the DTI, you can obtain a credit supplement removing the borrower as an Authorized User and you no longer need to consider the debt.

Conventional Loans

An authorized user tradeline must be considered if the owner of the tradeline is the borrower’s spouse and the spouse is not a borrower in the mortgage transaction.

You may obtain a credit supplement to remove the Borrower as an Authorized User and not consider in the ratios.

Consideration of Authorized User Accounts

For manually underwritten loans, credit report tradelines that list a borrower as an authorized user cannot be considered in the underwriting decision, except as outlined below.

An authorized user tradeline may be considered if:

  • another borrower in the mortgage transaction is the owner of the tradeline; or
  • the borrower can provide written documentation (e.g., canceled checks, payment receipts, etc.) that he or she has been the actual and sole payer of the monthly payment on the account for at least 12 months preceding the date of the application.

If written documentation of the borrower’s monthly payments on the authorized user tradeline is provided, then the payment history — particularly any late payments that are indicated — must be considered in the credit analysis and the monthly payment obligation must be included in the debt-to-income ratio.


by Andrew Augustyniak, Peoples Mortgage Co