It Just Got a Whole Lot Easier to Buy a Home if You Have Student Loan Debt

Hello Hampton Roads,

It just got a whole lot easier to buy a home if you have federal student loan debt!  Student loan debt is one of the biggest obstacles to homeownership for many people as the debt tends to increase the buyer's debt to income (DTI) ratio and limit the amount one can borrow.  The higher the DTI, the harder it is to get a loan.  Even FHA loans, with low or no downpayment, which were designed to make homeownereship easier, are out of reach for borrowers with high student loan debt.

Though the CARES Act of March 2020 suspended payments and interest until September 2021, lenders still had to count 1% of the outstanding loan balance towards a borrower's monthly debt even though no payments were being made. However, with the new FHA policy, this is no longer the case as the monthly debt is calculated based on the actual student loan payment being made.  Lenders must use the actual payment amount on the credit report or documented payment, or in case where no payment is made, instead of counting 1%, lenders must use 0.5%.  These changes become mandatory as of August 16, 2021 but lenders have the option to implement them immediately.

"As our country comes together to acknowledge Juneteenth and acknowledge National Homeownership Month, we are reminded of a basic truth: that, too often in our history, the march towards freedom has been a long, halting and uneven journey. Homeownership is the cornerstone of the American Dream and the best way to build generational wealth. I am proud that FHA is taking action to make it easier for borrowers with student loan debt to qualify for a federally insured mortgage. This new policy will make a big difference for individuals throughout our nation and is another step in our mandate to promote equity and opportunity for homeownership." -- Marcia L. Fudge, HUD Secretary


This change opens the door for many first time home buyers which are a core demographic served by  FHA loans.  Eighty percent of FHA loans are used by first time buyers and it is estimated that 45% of those borrowers have student loan debt.  If you previously wanted to buy a home or tried to, but couldn't becuase of your student loans, you may be able to qualify now and take advantage of low interest rates, and great loan programs.

Let's talk about your home buying plans!

Thanks for Reading,



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