Student Loan Deferment and VA LoansWhen you’re getting ready for a VA loan, one of the things it’s good to do is to examine your debt picture–the lender will calculate your debt to income ratio to see if you can afford the VA loan combined with all your other monthly financial obligations. Student loans can and do factor into this in an important way. Many new borrowers have high amounts of student loan debt or high potential amounts. What can you do to prepare for the loan?
Understanding that the lender wants to know if you can afford the cost of your monthly mortgage payment and your other monthly debt, the amounts of both will be added up. But some borrowers manage to keep student loans from being added to this debt picture. How?
According to the VA official site, “If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt need not be considered in the analysis.”
So according to VA loan rules, deferment of your student loans could help. But how does a borrower do this? For private student loans you would need to discuss that situation with the lender as each financial institution has different rules and requirements. But for Federal student loans such as a Stafford loan or a Perkins loan, loan forbearance or deferment is possible. It’s not automatic–you must request this through your lender. For Perkins loans you would contact the school you attended under the loan.
Loan forbearance may not be considered the same as loan deferment. According to the U.S. Department of Education official site, “For mandatory forbearances, if you meet the eligibility criteria for the forbearance, your lender is required to grant the forbearance.
You can request a mandatory forbearance for the following reasons:
- 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 percent 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 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.”
Discuss student loan forbearance with your lender to see how that may affect your VA loan application.
Do you have questions about VA home loans or refinance loans? Ask us in the comments section.