Federal government seeks to increase homeownership for people with student loan debt
YOUNGSTOWN, Ohio (WKBN) – As many traditional home buyers are squeezed out of the market by inflation in house prices and builders struggle to meet demand despite labor shortages qualified and supplies, the Federal Housing Administration (FHA) is making it easier to buy their first home for buyers with heavy student debt.
Student debt has reached historic levels over the past 20 years, completely pushing those who would normally be able to afford a home out of the market.
Now, the FHA is relaxing the way it assesses student loan debt when it assesses eligibility for home buying assistance.
Policy updates remove the current requirement that lenders calculate a borrower’s monthly student loan payment of one percent of the outstanding student loan balance for student loans that are not fully amortized or which are not in the process of being reimbursed. 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 strain on otherwise creditworthy borrowers and strengthen FHA’s ability to serve those who need us most, including first-time homebuyers and underserved communities,” said Lopa Kolluri , Senior Assistant Deputy Secretary of the Federal Housing Administration.
The FHA estimates that over 45% of these borrowers also have student loan debt, with much of that debt affecting people of color.