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FHA Guidelines: Deferred Student Loans

Breaking News Concerning FHA Underwriting of Deferred Student Loans

By Finnegan McCue

Washington, DC– On June 17th, the US Department of Housing and Urban Development updated its student loan guidelines.

The policy updates apply to FHA home loans and change the way lenders calculate an applicant’s student loan payment when the loan is in deferral. Currently, lenders qualify applicants with a payment of 1% of the outstanding student loan balance. Even though the actual payment on the student loan documents or credit report is usually lower.

The new policy bases the monthly payment on the actual student loan payment. This should help more homebuyers with student debt qualify for an FHA mortgage.

Effective August 16th, 2021, lenders will qualify borrowers with deferred student loans this way:

The monthly payment reported on the borrower’s credit report or 0.5% of the outstanding loan balance when the payment is reported as $0.

The actual documented monthly payment when the payment is greater than $0.

The FHA hopes that the new guidelines will assist borrowers who take advantage of the various repayment plans that allow lower payments. Plans that previous underwriting guidelines ignored.

The adjustments to the policy should allow many FHA borrowers to borrow more than they could have previously. Most importantly, the new standard should increase the number of qualified borrowers and provide more opportunities for homeownership.

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