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How Do You Qualify for a USDA Mortgage with Student Loans?

September 25th, 2015 by Sean Stephens

Now in today’s world, student loans seem more like the norm than the exception. That’s why it’s critical to know how to qualify for a USDA mortgage with student loans. These details could be the difference between homeownership or a missed opportunity.

As we all know, 2nd opinions are always important, so if you have financing questions and are working with another lender, we offer this complimentary service where you can get access to an expert 2nd opinion.

I recently saw an Equifax report that discussed the difficulties students are experiencing when trying to qualify for a mortgage with student loan debt. With more and more prospective first time home buyers entering the market, that reminded me of the importance of today’s topic.

qualify for a USDA mortgage with student loansUSDA Mortgage with Student Loans

Student loans are calculated in the USDA qualifying ratio but payment calculations depend on whether the student loan repayment has a fixed rate or not.


Fixed-rate student loans have a fixed interest rate and repayment term. This payment is used when calculating the debt to income ratio.

Non-Fixed Rate

Here are examples of repayment plans who’s rates are subject to change and are classified as non-fixed rate.

  • Income-Based Repayment Plans (IBRs)
  • Graduated Plans
  • Adjustable Rates
  • Interest Only, and
  • Deferred Plansqualify for a USDA mortgage with student loans

Non-fixed rate student loans such as deferred, Income-Based Repayment (IBR), Graduated, Adjustable, or other types of non-fixed repayment agreements, are not used toward one’s debt to income ratio. Instead, with a 2019 update, the “higher of one-half percent (.50%) of the loan balance or the actual payment reflected on the credit report” are used.

Thus, when trying to qualify for a USDA mortgage with student loans be prepared to calculate .5% of the outstanding balance towards your qualifying ratios. While that can be frustrating, compared to other programs it still offers a flexible alternative.

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