Higher DTI ratios make it harder to get a mortgage or make a mortgage costlier to the borrower.
Student loan payments-along with payments on other debt-are factored into this DTI ratio, which is then used, along with the borrower’s credit score and the loan-to-value ratio (the ratio of the loan amount to the market value of the property), to determine the borrower’s eligibility for a mortgage. In determining whether to issue a mortgage and what type of mortgage to issue to a borrower, mortgage underwriters look at the borrower’s debt-to-income ratio (DTI), the ratio of a borrower’s debt service payments (monthly obligations to repay debt, including interest and principal) to their income. The importance of student loan debt to mortgage borrowing The programs should be aligned to the fairest and most logical standard for addressing IDR plans. This is confusing to borrowers and has disadvantaged some potential first-time homebuyers. However, the three different government agencies and the two government-sponsored enterprises each use a different way of accounting for IDR plans when underwriting mortgages. And more than 8 million of them use income-driven repayment (IDR) plans for their student loans, which require special calculations for determining mortgage lending. Many of the 44.7 million Americans with student loan debt are also in their prime homebuying years.
