Most lenders of student loans defer payments while the borrower is in school.
When you apply for a mortgage, the lender will consider your income, credit history and debts. However, some deferred debts, such as student loans, may appear on your credit report even if you aren't making payments yet. Depending on the type of loan you're applying for, deferred student loans may or may not count toward your debt-to-income ratio.
About Debt-to-Income
Debt-to-income ratio is the ratio of your debts to your gross monthly income. To qualify for a loan, your debt-to-income ratio must fall within the lender's guidelines. Lenders of conventional loans typically require your mortgage payment to equal no more than 28 percent of your gross monthly income, and your mortgage payment combined with other revolving debts can't exceed 36 percent of your gross monthly income. Lenders of Federal Housing Administration loans or other nonconventional loans may allow higher ratios.
Student Loans as Revolving Debts
If you are currently making payments toward student loans, lenders will include them in your debt-to-income ratio. Even if you can show that your loans are deferred, most lenders of conventional loans and all lenders backed by Fannie Mae or Freddie Mac will include student loan minimum payments as part of your monthly debts. However, lenders of FHA loans will allow you to exclude deferred student loans from your monthly debts if you can show evidence that payments won't begin within the next year.
Credit Score
Most lenders consider your credit score when you apply for a mortgage loan. If you have deferred student loans, they will appear on your credit report and may negatively affect your credit score. However, credit bureaus view installment loans, which are loans with set monthly payments, more favorably than they do revolving loans, which are loans that allow the borrower to control the payment. Since student loans are installment loans, they won't be as detrimental to your score as other debts, such as debt owed to credit card companies.
Considerations
If the payment schedule shows that you will pay your student loans in full within the first few months of the mortgage, many lenders will allow you to exclude them from your monthly debts. Some lenders may allow you to have a higher debt-to-income ratio if you make a large down payment or have an excellent credit history.
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