Student Loan Guidelines for Qualifying for a Mortgage in Kentucky (Update)
Learn how student loan payments impact your Kentucky mortgage approval. FHA, VA, USDA, Fannie Mae, and Freddie Mac all treat student loans differently — here’s what you need to know before applying.
Loan type
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Student Loan Payment Requirement
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Must be included in the borrower’s liabilities regardless of the payment type or
status. The payment amount must be either:
▪ The greater of:
· ..5% of the outstanding balance on the loan or
· Monthly payment reported on the borrower’s credit report, or
▪ The servicer’s documented payment provided the payment will fully amortize
the loan over the repayment term period
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Deferred
A payment does not need to be included if written evidence supports that the
student loan debt will be deferred beyond 12 months of closing.
In Repayment
Include loans with payments starting within 12 months. Calculate threshold
payment as a rate of 5% of outstanding balance divided by 12 months. If credit
report payment is higher, use credit report payment. If current documentation
from student loan servicer reflects actual terms and payment for each loan,
the verified payments may be used even if less than the threshold payment
calculation.
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Fixed Payment
A permanent amortized, fixed payment is used when documentation supports fixed payment, interest and term.
Non-Fixed payment
Use .5% of the loan balance reflected on the credit report. Payment arrangements
that are deferred or non-fixed (Income Based Repayment (IBR), graduated, adjustable, interest only, etc.) may not be used.
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Loans in Repayment Period
▪ If provided, use the credit report payment
▪ If credit report is incorrect, obtain student loan documentation from the servicer
to verify the payment used for qualification
Income Driven
Repayment Plan
Use the student loan documentation to verify the actual monthly payment. Borrower
may be qualified with a $0 payment if the documentation supports it.
Loans in Deferment or
▪ A payment equal to 1% of the outstanding student loan balance (even if this
amount is lower than the actual fully amortizing payment) or
▪ A fully amortizing payment using the documented loan repayment terms
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Loans in Repayment
Period
Use the greater of payment reported on credit report or .5% of the higher of original
or outstanding loan balance as shown on credit report.
Loans in Deferment or
Forbearance
Use greater of payment reported on credit report or .5% of the higher of original or
current outstanding loan balance as shown on the credit report.
Cancelation
Discharge
Employment Contingent
Repayment
Programs
Payment may be excluded if file contains documentation that indicates:
▪ Monthly payment is deferred and/or in forbearance and full balance of the loan will be forgiven, canceled, discharged or will be paid if qualified for an employment-contingent repayment program and
▪ Borrower currently meets requirements for the student loan forgiveness/cancelation program
Obtain documentation from the student loan servicer to show the loan will be forgiven, canceled, discharged or that the borrower qualifies and is approved under an employment contingent repayment program that will extinguish the debt.
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Kentucky Mortgage & Student Debt
FHA Loans
Most Popular for First-Time Buyers
📊 Payment Calculation
Use GREATER of:
• 0.5% of balance
• Credit report payment
• Documented payment
⏸️ Deferred Status
Payment ALWAYS included in DTI calculation
💡 Key Note
Even $0 payments count—uses 0.5% calculation
VA Loans
For Veterans & Service Members
📊 In Repayment
Use GREATER of credit report payment or 5% of balance ÷ 12
✅ Deferred Advantage
NO payment included if deferred 12+ months past closing
💡 Key Note
Documentation is key—get written proof of deferment
USDA Loans
Rural Kentucky Homebuyers
📊 Fixed Payments
Use documented payment that amortizes loan
📊 Variable/Deferred
Use 0.5% of loan balance or full amortizing payment
💡 Key Note
Standard 10-year repayment gets most favorable calculation
Fannie Mae
Conventional Program
📊 In Repayment
Use credit report payment (verified if needed)
✅ IDR Plans
Can use $0 payment if documented on IDR plan
💡 Key Note
Most flexible with income-driven repayment options
Freddie Mac
Conventional Program
📊 In Repayment
Use GREATER of credit report payment or 0.5% of balance
⚠️ More Restrictive
0.5% calculation often results in higher imputed payment
💡 Key Note
May have higher DTI impact than Fannie Mae
🎯 Quick Comparison: Same $50,000 Student Loan
FHA (Deferred)
$250/month
0.5% × $50,000 = Always counted
VA (Deferred)
$0/month
Excluded if 12+ months deferred
USDA (Deferred)
$250/month
0.5% × $50,000 = Counted
Fannie Mae (IDR)
$0/month
IDR plan can show $0
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