Friday, June 25, 2021 / by Randy Durham
The Federal Housing Administration announced updates last week on modifications to its student loan monthly payment calculations to provide more access to single-family loans. Previously, FHA used 1% of your loan balance to calculate your monthly student loan obligation, without factoring in that many borrowers are on income-based repayment plans. The new FHA policy bases the monthly payment calculated into your debt to income ratio based on your actual payment. For example, if are on an income-based repayment plan and you owe $30,000 total but only pay $175 a month, FHA will use that number for your monthly payment, instead of 1% of $30,000 (or $300 a month).
This is great news for creditworthy individuals who don’t qualify for a conventional mortgage. This new adjustment also helps many more first-time homebuyers achieve homeownership. You can read more about the new policy on the Department of Housing & Urban Development here.