New Changes at FHA Help Make Homebuying
Easier for Those With Student Loans
Do you have student loans?
Do you dream of becoming a homeowner?
But a recent change by FHA (Federal Housing Administration) may have changed that for you and others with student loan debt ...
The Administration's recent policy change for federal mortgage lending rules ... specifically those surrounding HOW a lender calculates a student loan monthly payment ... should help to remove barriers to homeownership for many hopeful homebuyers.
The changes, made on June 17, 2021, (during National Homeownership Month), remove requirements in place. These past requirements required mortgage lenders to use a calculation based upon 1% of the outstanding student loan balance held.
Thankfully, that will no longer be the case ...
The new updated changes dictate that calculations now be based on the actual payments made by student loan holders. Those payment amounts are often lower than the previous calculations made. If the Payment reads Zero $ on the Credit Report, then the Loan payment gets calculated at half the amount it once was - now just 1/2% of the outstanding Loan Balance for that payment scenario (meaning more buying power and lower Debt to Income levels).
This policy change has the potential to be a game-changer for many borrowers that are otherwise credit-worthy. Many of those dreaming of becoming a first-time homebuyer will find that goal is now within their grasp.
Note: A mortgage lender can implement these changes immediately, but the changes are mandatory for all FHA Case Numbers assigned on or after August 16, 2021.
FHA statistics show that:
- First-time homebuyers (on average) make up over 80% of FHA-insured mortgages each year
- 45% of these borrowers have student loan debt
This beneficial change helps FHA expand its services to its most focused upon demographics ... first-time homebuyers.
It's also seen as a step towards addressing racial discrimination as it tackles many inequities and disparities currently found in the housing system. Student loan debt has long been a deterrent to homeownership for minorities.
If you're interested in buying a home in the near future but hold student loans, here are steps you should take right away:
- Gather all your Student Loan information
- Review it and your Student Loan portfolio in advance of the time you hope to buy a home
- Determine the amount of debt owed (balances), the status of the loan debt (deferred, in repayment), etc.
- Contact an experienced mortgage loan officer. They will help you better position yourself (regarding debt, etc.) prior to seeking mortgage pre-approval
With this move, FHA places itself in step with other guidelines in the industry, in terms of student loan debt and how it impacts monthly debt.
Reach out to your mortgage lender today to see if this new FHA change benefits you and to discover what opportunities exist for you to buy ...
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