Historically, homebuyers with student loan debt have had trouble qualifying for mortgages due to their debt-to-income ratio. Recently, the Federal Housing Administration (FHA) adjusted its guidelines to allow more borrowers to qualify for FHA home loans, specifically those with student loan debt.
The new policy removes the previous requirement that a lender must calculate a borrower’s student loan monthly payment based on 1% of the outstanding student loan balance. The policy now bases monthly payment calculations on the actual student loan payment, which is often lower than 1%, allowing more borrowers to qualify. Additionally, if a student loan borrower’s calculated payment is $0, the lender automatically applies 0.5% of the outstanding student loan balance as the assumed payment.
Housing and Urban Development Secretary Marcia L. Fudge commented, “Homeownership is the cornerstone of the American Dream, and the best way to build generational wealth. I am proud that FHA is taking action to make it easier for borrowers with student loan debt to qualify for a federally insured mortgage. This new policy will make a big difference for individuals throughout our nation and is another step in our mandate to promote equity and opportunity for homeownership.”
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If you have any homebuyers who may be helped by these new guidelines, please let me know! I would love to help them achieve their dreams of homeownership.Tags: Mortgage News