You can buy a home with student debt, and many people do. What matters to a mortgage lender is not your balance but the monthly student loan payment it counts in your debt-to-income ratio (DTI), and each loan program has its own rule for that number when you are on an income-driven plan or in deferment. Pick the right program and document your real payment, and the same household can qualify for tens of thousands of dollars more in loan amount.
Key takeaways
- Lenders count a monthly student loan payment in your DTI even when you are paying nothing today because of deferment or forbearance.
- As of October 2026, Fannie Mae accepts a documented $0 income-driven payment; Freddie Mac and FHA count 0.5% of the balance when the payment is $0; VA uses 5% of the balance divided by 12 unless the loan stays deferred at least 12 months past closing.
- In our example, a $45,000 balance in deferment counts as $450 a month under Fannie Mae but $225 under FHA or Freddie Mac. A documented $180 income-driven payment beats both.
- The 2025 tax and spending law ended new enrollment in several income-driven plans and created the Repayment Assistance Plan, which has a $10 minimum payment. Expect fewer true $0 payments going forward.
How student loans enter the mortgage math
Your DTI is your total monthly debt payments, including the new mortgage payment with property tax and insurance, divided by your gross monthly income. A lender compares that ratio to the limit for the loan program. For conventional loans sold to Fannie Mae, the Selling Guide sets a 36% maximum for manually underwritten loans, up to 45% with strong credit and reserves, and up to 50% when the loan is approved through Fannie Mae’s automated system (as of October 2026).
Student loans are installment debt, so they go into the numerator like a car loan. The catch is that student loan payments are unusually changeable. A payment can be $0 under an income-driven plan, paused under deferment, or higher than the credit report shows. So each program writes a specific rule for which number the underwriter uses. That number, not your balance, is what affects how much house you can buy.
What each loan program counts as your payment
The table below summarizes the published rules as of October 2026. These are the agency minimums; an individual lender can apply stricter “overlays,” so ask any lender you talk to how it calculates student loan payments before you apply.
| Program | Payment above $0 on credit report or statement | Income-driven plan with a $0 payment | Deferment or forbearance |
|---|---|---|---|
| Conventional (Fannie Mae) | Use the reported payment, or the payment on your latest servicer statement if the report is wrong | $0 may be used if documentation shows the actual payment is $0 | 1% of the outstanding balance, or a fully amortizing payment based on the documented loan terms |
| Conventional (Freddie Mac) | Use the reported or documented payment | 0.5% of the outstanding balance, unless documentation supports a different payment above $0 | Same 0.5% rule when the reported payment is $0 |
| FHA | Use the reported or documented payment | 0.5% of the outstanding balance | 0.5% of the outstanding balance (applies regardless of payment status) |
| VA | Use the reported payment if it is higher than 5% of the balance divided by 12 | A lower documented payment may be used with a servicer statement dated within 60 days of closing, at the lender’s discretion; otherwise 5% of the balance divided by 12 | Excluded if deferred at least 12 months past closing; otherwise 5% of the balance divided by 12 |
Two details trip people up. First, Freddie Mac changed its approach in 2025: loans run through its automated system must now carry a monthly payment above $0, and a $0 student loan payment is replaced with 0.5% of the balance unless your file documents a different, higher current payment. Second, VA’s 12-month deferment exclusion requires written evidence that the deferment will last at least a year past your closing date. A deferment that ends in six months gets counted.
If you are eligible for more than one program, compare them on this point. FHA’s rules are covered in more depth in how to qualify for an FHA loan, and VA’s in how to apply for a VA home loan.
Worked example: the same borrower in two situations
Take a single borrower earning $8,000 a month before taxes, with a $350 car payment and $45,000 in federal student loans. The target home costs $320,000 with 5% down, so the mortgage is $304,000.00. At the Freddie Mac Primary Mortgage Market Survey (PMMS) 30-year average of 7.40% for the week of October 15, 2026, principal and interest come to $2,104.83 a month. We assumed $450 a month for property tax and homeowners insurance, for a housing payment of $2,554.83. To isolate the student loan rule, the example holds the housing payment the same across programs and leaves out mortgage insurance, which every low-down-payment option here would add in practice.
Scenario A: the borrower is on an income-driven plan and the servicer statement shows a $180 monthly payment. Scenario B: the same loans are in deferment, so the credit report shows $0 due.
| Program | Scenario A: counted payment | Scenario A: DTI | Scenario B: counted payment | Scenario B: DTI |
|---|---|---|---|---|
| Fannie Mae | $180.00 | 38.6% | $450.00 | 41.9% |
| Freddie Mac | $180.00 | 38.6% | $225.00 | 39.1% |
| FHA | $180.00 | 38.6% | $225.00 | 39.1% |
| VA (deferment ends within 12 months of closing) | $180.00 (with servicer statement) | 38.6% | $187.50 | 38.7% |
Deferment looks like a break, but under Fannie Mae it costs this borrower 3.3 percentage points of DTI compared with simply documenting the $180 income-driven payment. Under FHA and Freddie Mac the gap is smaller because their placeholder is 0.5% of the balance rather than 1%. If the VA deferment ran at least 12 months past closing, the student loan would drop out entirely and DTI would be 36.3%.
What that means for how much you can borrow
Now flip the question: at a 45% DTI ceiling, how large a mortgage could this borrower carry? With the $180 documented payment, the room left for housing is $3,070.00, or $2,620.00 for principal and interest after the $450 of tax and insurance. At 7.40% over 30 years, that supports a loan of about $378,405. With the Fannie Mae deferment rule, the counted $450 shrinks the principal-and-interest budget to $2,350.00 and the maximum loan to about $339,409. That is a difference of about $38,996 in borrowing capacity from the same debt. Under the 0.5% FHA or Freddie Mac rule, the maximum is about $371,906.
Borrowing the maximum is rarely wise; the point is that a paperwork choice changes your options. All figures are EarlyPayoff calculations and ignore mortgage insurance, HOA dues and any other debts.
How the 2025 law changes federal repayment plans
The budget reconciliation law signed July 4, 2025 (often called the One Big Beautiful Bill Act) reshaped federal student loan repayment. As of October 2026, the main changes that matter for a mortgage application are these:
- The SAVE plan has ended. After a court approved a settlement in early 2026, the Department of Education stopped enrolling borrowers in SAVE and told the roughly 7.5 million enrolled borrowers to choose another plan. Servicers began sending notices on July 1, 2026, with at least 90 days to pick a plan before being placed in a standard plan.
- The Repayment Assistance Plan (RAP) is now available. It bases payments on adjusted gross income and subtracts $50 per dependent, but the payment cannot fall below $10 a month. Forgiveness comes after 360 qualifying payments.
- Older plans are being phased out. Under the law, ICR and PAYE end for existing borrowers by June 30, 2028. IBR remains, and the law removed its partial-financial-hardship test.
For home buyers, two practical effects follow. If you were on SAVE, your payment is likely to change, so get a current servicer statement showing the new amount before you apply; an old statement can stall underwriting. And because RAP has a $10 floor, a borrower on RAP will usually have a small documented payment instead of $0. That can actually help with Freddie Mac and FHA, where a documented payment above $0 is used instead of the 0.5% placeholder. Details of servicer implementation are still evolving, so confirm your plan and payment on your servicer’s site. Our guide to applying for income-driven repayment explains the plan choices.
Steps to take before you apply
- Pull your credit reports and check what payment each student loan shows. A wrong or missing payment triggers the placeholder rules.
- Download your latest servicer statement showing the payment, plan, balance and status. VA requires it to be dated within 60 days of closing if you rely on a payment below its threshold.
- Think twice before requesting deferment right before you buy. Under Fannie Mae it can raise your counted payment; under VA it only helps if it lasts at least 12 months past closing.
- Ask lenders which agency rules they use and whether they add overlays. Quote the same scenario to at least three lenders.
- Run your own DTI with each possible counted payment so you know your range before a lender tells you.
When buying now is a bad idea
Qualifying and affording are different tests. Income-driven payments rise with income and must be recertified each year, so the low payment that helped you qualify may not last. If your budget only works at today’s student loan payment, a raise or a plan change could squeeze you. Build in room for a higher payment and for home maintenance before you commit.
Refinancing federal loans into a private loan to lower the payment is another move to weigh carefully. You lose access to income-driven plans, federal deferment and forbearance, and forgiveness programs such as Public Service Loan Forgiveness, and you cannot move back. Read how to refinance student loans before you consider it. Buying is also a poor fit if you have no emergency savings after the down payment and closing costs, if any federal loans are in default, or if you expect to move within a few years, since selling costs can erase early equity.
Frequently asked questions
Can I get a mortgage if my student loans are in deferment?
Yes, but the lender will still count a payment. As of October 2026, Fannie Mae uses 1% of the balance or a fully amortizing payment, FHA and Freddie Mac use 0.5% when the reported payment is $0, and VA uses 5% of the balance divided by 12 unless the deferment runs at least 12 months past closing.
Does a $0 income-driven payment count as $0?
Only for some programs. Fannie Mae allows $0 if documentation shows the actual payment is $0. Freddie Mac and FHA substitute 0.5% of the balance. VA may accept the lower documented payment with a recent servicer statement, at the lender’s discretion.
Should I pay off student loans before buying a house?
Not necessarily. Cash used to pay off loans is cash not available for a down payment, closing costs or reserves. Run the DTI math both ways; sometimes paying off a small loan entirely removes a payment that matters more than the cash it costs.
Will switching to the Repayment Assistance Plan hurt my mortgage application?
Not inherently. What the lender needs is a current, documented payment. Because RAP has a $10 minimum, it produces a payment above $0, which Freddie Mac and FHA generally use instead of a 0.5% placeholder. Make sure the new payment appears on your servicer statement before you apply.
Do private student loans follow the same rules?
The same agency rules apply to how the payment is counted, but private loans rarely offer income-driven payments. Expect the lender to use the payment on your credit report or statement, or the deferment placeholder if payments have not started.
Sources
- B3-6-05, Monthly Debt Obligations, Fannie Mae Selling Guide, accessed Oct 2026
- B3-6-02, Debt-to-Income Ratios, Fannie Mae Selling Guide, accessed Oct 2026
- Loan Product Advisor Feedback Message Updates: Student Loans, Freddie Mac, accessed Oct 2026
- Mortgagee Letter 2021-13: Student Loan Payment Calculations, HUD, accessed Oct 2026
- VA Lender’s Handbook (M26-7), Chapter 4: Credit Underwriting, U.S. Department of Veterans Affairs, accessed Oct 2026
- Primary Mortgage Market Survey, Freddie Mac, accessed Oct 2026
- Next Steps for Borrowers Enrolled in the SAVE Plan, U.S. Department of Education, accessed Oct 2026
- GEN-25-04: Federal Student Loan Program Provisions Effective Upon Enactment, Federal Student Aid, accessed Oct 2026
- RISE Committee Discussion Paper: Repayment Assistance Plan statutory text, U.S. Department of Education, accessed Oct 2026
This article is general education, not individualized financial, tax or legal advice.
