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What this task is

This task collects the student loan agreement or promissory note when a student loan shows no current payment or an unknown payment amount but still has an outstanding balance. The agreement should outline:
  • The original loan amount and current balance,
  • Repayment terms, including when payments begin or resume, and
  • Any deferment, forbearance, or income-based repayment provisions.
The underwriter uses this information to determine a qualifying payment amount that should be included in the borrower’s debt-to-income calculations.

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When this task is required

This task is required when:
  • A liability is identified as a student or educational loan, and
  • The monthly payment is reported as zero or is missing, while the unpaid balance is greater than zero, and
  • The loan is being considered a qualifying liability for the mortgage (not excluded under special program rules).
In these cases, the lender cannot rely on a “$0 payment” and must instead determine a reasonable payment based on documentation or program formulas.

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Why this task is required

Even when a student loan is deferred or not yet in repayment, most mortgage guidelines require the lender to account for a future payment. The loan agreement helps the underwriter:
  • Understand when payments will start or restart,
  • Identify the expected payment amount or calculation method, and
  • Apply the correct agency or investor rule (for example, a percentage of the balance if no payment is stated).
Without this documentation, the lender may have to:
  • Use conservative assumptions that increase the imputed payment, or
  • Treat the file as incomplete, delaying underwriting decisions.
By reviewing the agreement, the lender can more accurately and fairly estimate the borrower’s future obligations and ensure the resulting DTI is sound.

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Documents needed to resolve this task

To satisfy this task, provide:
  • The student loan agreement, promissory note, or most recent modification:
    • Showing loan type, balance, interest rate, and repayment terms.
    • Including any sections that describe deferment, forbearance, or income-based repayment.
  • If available, a recent statement or servicer letter that clarifies:
    • The projected payment amount once repayment begins, or
    • How the payment will be calculated under the current plan.
These documents allow the underwriter to determine an appropriate qualifying payment and incorporate it correctly into the borrower’s total obligations.