When applying for a VA loan, it’s important to have a strong understanding of all your monthly expenses. For many Veterans, this includes monthly student debt payments.
Can you get a VA loan with student loans?
Yes, but your student loan payments may have an impact on how much money you have left each month to put toward a home loan payment. When applying for a VA home loan, keep in mind your expenses — including student loan payments — to determine if it’s the right option for you.
Student loans and your debt-to-income ratio
During the application process, your participating VA lender will determine your debt-to-income (DTI) ratio — an important estimate of how much money you have to spend after all other monthly financial obligations are taken into account.
If student loan repayments are scheduled to begin within a year of closing a VA loan, lenders are encouraged to consider those payments when calculating the DTI ratio. Monthly student loan payments can hurt your DTI ratio, which may leave you less money to spend on a mortgage each month. Lenders may see a high DTI ratio as a riskier investment, therefore potentially hurting your chances of securing a loan.
There are, however, other options to ensure your student loan debt doesn’t affect your chance of getting a loan.
Student loan deferment
If you are able to defer or push off your student loan payments so they do not fall within a year of your VA loan closing, then the debt might not be considered in the DTI ratio.
Student loan deferment procedures may vary depending on the type of debt you have. For private student loans, you would need to discuss that situation with the lender — not all financial institutions have the same rules.
When it comes to federal student loans, such as Stafford or Perkins loans, loan forbearance or deferment is possible, but not automatic — you are required to apply for the deferment through your servicer.
Student loan forbearance
Student loan forbearance, like deferment, allows you to temporarily stop student loan payments. You may look into student loan forbearance if you don’t qualify for deferment.
There are some situations in which the Department of Education says a mandatory student loan forbearance is possible, including the following:
- You are serving in a medical or dental internship or residency program, and you meet specific requirements.
- The total amount you owe each month for all the student loans you received is 20% or more of your total monthly gross income (additional conditions apply).
- You are serving in a national service position for which you received a national service award.
- You are performing a teaching service that would qualify for teacher loan forgiveness.
- You qualify for partial repayment of your loans under the U.S. Department of Defense Student Loan Repayment Program.
- You are a member of the National Guard and have been activated by a governor, but you are not eligible for a military deferment.
If you need help with these issues, discuss your options on student loan forbearance and/or deferment with your loan officer to see how that may affect your VA loan application.