There is much confusion about how to deal with student loans debt in relation of what to hit the bwr in the DTI for monthly payment. Especially in the current market, many student loans are in deferment or may be forgiven in the near future.
As a general rule, unless the borrower has a letter stating the student loan is forgiven, an amount needs to be hit on the DTI for the loan. If the borrower has applied for debt relief, it must be completed and officiated before a lender will remove the monthly payment. One caveat on this is with Freddie Mac; they will allow the removal of student loan payments if the borrower can document that the student loan that is deferred or in forbearance will be forgiven (proof must be received from the student loan servicer).
Below is a cheatsheet to use on how to handle student loans with various loan types and scenarios:
| Loan Type | Credit shows | Amount To Use In DTI |
|---|---|---|
| Fannie (DU) Conventional | Monthly Payment | Amount shown on credit report |
| Fannie (DU) Conventional | $0.00 or Blank | If bwr is on “income-driven” plan, the bwr documented amount (even if its zero) |
| Fannie (DU) Conventional | $0.00 or Blank | If the loan is deferred or forbeared, use 1% of the balance or documented fully amortized payment |
| Freddie (LP) Conventional | Monthly Payment | Amount shown on credit report |
| Freddie (LP) Conventional | $0.00 or Blank | .5% of the balance |
| FHA | Monthly Payment | Amount shown on credit report |
| FHA | $0.00 or Blank | Amount shown on credit report .5% of the balance or documented fully amortized payment |
| VA | Monthly Payment | Amount shown on credit report |
| VA | $0.00 or Blank | With proof of 12 mos+ deferral, $0.00 |
| VA | $0.00 or Blank | With <12 mos deferral, 5% of the balance divided by 12 |