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Fannie Mae IBR Student Loan Guidelines

Fannie Mae Student Loan Guidelines

Deferred Payments

Fannie Mae does not currently allow you to have deferred student loan payments when qualifying for a home mortgage.

If you are still in school and not making payments on your student loans now, there are several methods that your lender can use to determine what payment will be used for qualifying purposes.

Payment Calculation Options

UPDATED April 25th, 2017 – Fannie Mae has recently updated its guidelines to allow borrowers to use the payment that appears on your credit report.  That can be an IBR, PAYE, or REPAYE payment that does not pay off your loan at the end of the term.

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If your loan is in a deferred status, or in forbearance, your lender must use one of the options below to determine the repayment amount:

  • 1% of the outstanding balance; or
  • the actual payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower; or
  • a calculated payment that will fully amortize the loan(s) based on the documented loan repayment terms; or
  • if the repayment terms are unknown, a calculated payment that will fully amortize the loan(s) based on the current prevailing student loan interest rate* and the allowable repayment period shown in the table below.

*Current prevailing student loan interest rate can be found on a variety of websites.  Click Here for an example

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The following table specifies the repayment period to be used when calculating a fully amortizing payment at the current prevailing rate.

Prevailing Rate Student Loan Payment Calculation Table

Total outstanding balance of all student loans Repayment Period
$1— $7,499 10 years
$7,500 — $9,999 12 years
$10,000 — $19,999 15 years
$20,000 —$39,999 20 years
$40,000 — $59,999 25 years
$60,000 + 30 years

IBR Income Based Repayment

UPDATED April 25th, 2017 – Fannie Mae has recently updated its guidelines to allow borrowers to use the payment that appears on your credit report.  That can be an IBR, PAYE, or REPAYE payment that does not pay off your loan at the end of the term.

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You DO NOT Have to Use 1% of the Balance

This is a common misunderstanding by inexperienced loan officers. In most cases, you can document your payments in one of the other ways recommended above.

You only need to use a 1% calculation if you cannot obtain any other documentation showing what your payments will be once you start repayment.

Not all loan officers know the guidelines, and not all lenders follow the same guidelines.

It is possible that your loan officer does not have any experience with the guidelines, or the lender has chosen to create their own guidelines.

If a lender tells you something different than what you’ve read here, don’t be discouraged.  Not all loan officers or lenders are created equal.  Don’t take no for an answer!

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How Do I Get My Questions Answered?

We’ve created this resource to help you sift through the endless opinions and articles that may, or may not directly answer your question correctly.

There are several ways to ask questions, and get expert opinions on this website.

  • Submit a Question:  On the bottom of this page, you’ll see a prompt that allows you to ask questions.  These questions come directly to me, and are answered very quickly.
  • Leave a Comment:  Below every article is the option to leave a comment or question.  We see this comments and questions in real time and the always answered, usually pretty quickly.

In addition to researching your questions and providing you with expert advice, I may be able to introduce you to a lender friend that I know has experience with your specific situation and can help.

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Find IBR Experts

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About Your Expert

Scott Schang

As a 19 year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues, and making sense of complicated real estate and mortgage topics on this website since 2007

Leave a Question or Comment About this Topic

  • Antonio says:

    Hi Scott,
    Can you recommend a lender that understands AND uses these guidelines on an IBR for a Fannie Mae loan in Chattanooga, TN? If they use the “calculated payment that will fully amortize the loan(s) based on the current prevailing student loan interest rate*”, then my ratios will be at 50.34%

    Thanks,

    • Scott Schang says:

      Hi Antonio,

      YES! I have a great lender friend that has a lot of experience with these guidelines. Freddie Mac has always allowed you to use an IBR payment, it’s simply a problem of loan officers not knowing their business. I will send an introduction in a separate email.

      Hope this helps?

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