Since April of 2016 FHA has required lenders to use the greater of 1% payment based on the balance of any outstanding student loan debt or the actual payment as reported on the borrowers credit report. With the cost of education only going up perspective homebuyers with $100K or more in student loan debt have been at times locked out of home ownership due to this guideline.
Until last week a perspective buyer with $100,000 in total deferred student loan debt would need to cover a $1000 monthly payment in their debt-to-income calculations. For new homeowners, this type of debt payment puts many homes available in this extremely competitive real estate market out of reach. On Friday June 18th, 2021 FHA announced it will be reducing the required monthly payment to be reduces from 1% of the outstanding balance to .5% of the outstanding balance. So, in this same example the borrower would now only need to cover $500 per month in their debt to income calculations. This change is significant and will improve a perspective buyers purchasing power.
If you or someone you know has run into qualifying for a home purchase due to deferred student loan debt guideline in the past give us a call.
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