YOUNGSTOWN, Ohio (WKBN) – While many traditional home buyers are being squeezed out of the market by inflated real estate prices and builders are working to keep up with demand amongst the shortage of skilled labor and supplies, the Federal Housing Administration (FHA) is making it easier for buyers with a load of student debt to purchase their first home.
Student debt has risen to historic levels over the past 20 years, putting those who should typically be able to afford a home out of the market completely.
Now, the FHA is relaxing the way it assesses student-loan debt when weighing eligibility for homebuying assistance.
The policy updates remove the current requirement that lenders calculate a borrower’s student loan monthly payment of one percent of the outstanding student loan balance for student loans that are not fully amortizing or are not in repayment. The new policy bases the monthly payment on the actual student loan payment, which is often lower, and helps homebuyers who, with student debt, meet minimum eligibility requirements for an FHA-insured mortgage.
“These changes remove unnecessary constraints for otherwise creditworthy borrowers and reinforce FHA’s ability to serve those who need us most, including first-time homebuyers and underserved communities,” said Principal Deputy Assistant Secretary for the Federal Housing Administration Lopa Kolluri.
FHA estimates that more than 45% of these borrowers also have student loan debt, with much of this debt impacting people of color.