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Student Loan Guidelines for Qualifying for a Mortgage in Kentucky



Student Loan Guidelines for Qualifying for a Mortgage Loan in Kentucky (2025 Update)

If you have student loan debt and you’re planning to buy a home in Kentucky, you’re not alone. Many first-time homebuyers face this same challenge — understanding how their student loans impact mortgage qualification. The good news? Each loan program (FHA, VA, USDA, Fannie Mae, and Freddie Mac) has its own approach to handling student loan payments.

Here’s a breakdown of how lenders calculate student loan payments for each major loan type when determining your debt-to-income (DTI) ratio.

FHA Loans (Federal Housing Administration)

Student Loan Payment Requirement:

FHA requires all student loans to be included in the borrower’s liabilities, no matter the payment type or loan status (including deferment or forbearance).

Lenders must use the greater of:

  • 0.5% of the outstanding balance, or

  • The payment shown on the credit report

✅ However, if your loan servicer provides documentation showing a fully amortizing payment, that amount can be used instead.

VA Loans (Veterans Affairs)

Deferred Loans:
If written evidence shows the student loan debt will be deferred for more than 12 months after closing, no payment is required in the DTI.

Loans in Repayment:
If repayment starts within 12 months:

  • Use 5% of the balance ÷ 12 months as the calculated payment, or

  • Use the higher credit report payment if applicable

  • If documentation from the loan servicer shows a lower verified payment, that can be used even if it’s below 5%

 USDA Loans (Rural Housing)

Fixed Payments:
If your loan has a permanent, amortized, fixed payment, that’s what’s used in qualifying.

Non-Fixed or Deferred Payments:
For non-fixed loans (like IBR, graduated, or deferred payments), USDA requires lenders to use 0.5% of the current balance listed on your credit report.

Fannie Mae (Conventional Loans)

Loans in Repayment:

  • Use the credit report payment if accurate

  • If the credit report payment is incorrect, documentation from the servicer can verify the true monthly payment

Income-Driven Repayment (IDR) Plans:

  • Use the actual documented monthly payment — even if it’s $0, provided documentation supports it.

Loans in Deferment or Forbearance:

  • Use 1% of the outstanding balance, or

  • A fully amortizing payment based on verified terms

 Freddie Mac (Conventional Loans)

Loans in Repayment:
Use the greater of:

  • Payment on credit report, or

  • 0.5% of the higher of the original or outstanding balance

Loans in Deferment or Forbearance:
Use the greater of:

  • Payment on credit report, or

  • 0.5% of the higher of the original or current balance

Loan Forgiveness, Cancellation, or Employment-Contingent Repayment:
Payments may be excluded entirely if:

  • Documentation shows the loan will be forgiven, canceled, discharged, or paid off through an employment-contingent repayment program

  • The borrower currently meets all qualifications for that program

Key Takeaway for Kentucky Homebuyers

Student loan debt doesn’t automatically disqualify you from buying a home in Kentucky. The key is how your payments are calculated for your debt-to-income ratio, and that depends entirely on your loan program.

✅ If your loans are in an income-driven repayment plan, Fannie Mae or VA loans might be more flexible.
✅ If your loans are deferred or non-fixed, USDA and FHA tend to use set percentage rules (0.5% or 1%) to estimate payment.

An experienced loan officer can help determine which program best fits your situation and help structure your file correctly so your student loan debt doesn’t block your path to homeownership.

 Need Expert Guidance? Let’s Talk.

I’ve helped hundreds of Kentucky homebuyers navigate student loan challenges and secure FHA, VA, USDA, and Conventional financing. I’ll help you understand your options and guide you to the best program for your needs.

Joel Lobb – Mortgage Loan Officer

📍10602 Timberwood Circle, Louisville, KY 40223
📞 Call/Text: 502-905-3708
📧 kentuckyloan@gmail.com
🌐 www.mylouisvillekentuckymortgage.com

NMLS #57916 | 
Serving all of Kentucky: FHA, VA, USDA, and KHC First-Time Homebuyer Programs