Mortgage Change With Real Impact: FHA to Loosen Standard Regarding Student Loans

Mortgage Change With Real Impact:
FHA to Loosen Standard Regarding Student Loans
     In recent months, it appears that mortgage lending practices are trending in favor of Borrowers ...  
     This is great news after years of restrictive guidelines implemented as a result of the mortgage crisis and real estate downturn.
     Some examples of this trend to more favorable borrowing practices are:
  • Fannie Mae re-invents their 3% Down financing program, known as HomeReady, that showcases more options that help Borrowers obtain financing for their Personal Residence
  • Private Mortgage Insurance on Conventional Loans has become less costly to Borrowers putting less than 20% down payment on their home purchase
  • And FHA just announced an upcoming update pertaining to Student Loans and how they view them.  A new method for calculating and accounting for "unknown re-payments" Student Loan debt will be put into practice. 

      Beginning on June 30, 2016 ... FHA will significantly reduce the calculations Lenders must apply for certain Student Loan Payments.  For many home buyers that have been kept out of the home buying market as a result of their Student Loan debt, this is very welcome news.  
     The simply stated version of this revised Underwriting Guideline, is found below:
       Consistent with industry practice, the revised guidance allows the same calculation criteria to be applied regardless of the student loan payment plan type (such as income-based payment plans) or deferral status, and also includes:
  • A 50 percent reduction in the percentage used to calculate monthly student loan obligations, or the use of the actual documented payment when the payment fully amortizes the loan over its term. This may result in increased purchasing ability for some borrowers, while ensuring borrowers have the long-term ability to meet debt obligations.
  • The separation of student loan policies from other deferred obligations and installment loans, including future incorporation into the Single Family Housing Policy Handbook 4000.1. This separation provides greater clarity for mortgagees on the unique treatment of student loan payment calculations versus the calculations required for other deferred obligations.
     But the bottom line regarding these changes is:  

     If you thought your Student Loan debt would keep you from being approved to buy a home .... or you thought the amount you'd qualify for would be less because of Student Loan debt ... relief may be arriving on June 30th
     As always, it's best to contact me so we can do a full analysis of your current financial situation.  Only then can you get an up-to-date answer as to current Mortgage and home buying options available to you.

     *  Hoping to Buy or Refinance a home in Chicago or elsewhere in the Chicagoland area or Wisconsin?  Contact me!  I'll put my 37 years of Mortgage experience and expertise hard to work on your behalf.
     I can be easily found at:

                                                        Gene Mundt
                                                 Mortgage Originator  -  NMLS #216987  -  IL Lic. #031.0006220  -  WI Licensed
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656


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Gene it is time FHA begins to make a move in the right direction.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 4 years ago

Good morning Gene. Student loans are a serious issue and have kept many from being able to buy a home. Have referred many clients to lenders that are able to refinance these debts and lower payments. 

The FHA changes are certainly welcomed.


Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) over 4 years ago

That is great news, Gene.  Thanks for spreading the news.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) over 4 years ago

Thanks for keeping us informed on the latest changes.  This is good stuff.

Featured in Banana Tude!

Posted by Belinda Spillman, Colorado Living! (Aspen Lane Real Estate Colorful Colorado) over 4 years ago

Love the update and info!

Posted by Valerie McEvoy, Oklahoma Real Estate and Homes (Preferred Referrals LLC) over 4 years ago

Hi Gene - That is good news indeed. The student loan situation has been the 400 lb. gorilla, and it's good to see some recognition that it needs to be addressed.

Posted by Dick Greenberg, Northern Colorado Residential Real Estate (New Paradigm Partners LLC) over 4 years ago

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