FHA Rule for Student Loans: What You Need to Know
If you’re in the market for a new home and have student loans, you may be wondering how this debt will affect your chances of qualifying for a mortgage. Luckily, there’s good news! The Federal Housing Administration (FHA) recently made changes to its rules regarding student loans that may make it easier for many borrowers to get approved.
Overview of the New Rule
Under the old FHA rule, if you had deferred student loan payments or were on an income-based repayment plan, your lender had to use either 1% of your outstanding balance or the actual payment that would be due, whichever was greater. This often resulted in a higher debt-to-income (DTI) ratio, which could push some borrowers over the limit for FHA approval.
Under the new rule, lenders are now able to use the actual amount you’re paying each month, even if it’s under 1% of your outstanding balance. This can help lower your DTI ratio and make it easier to qualify for an FHA loan.
Benefits of the New Rule
The new FHA rule is great news for borrowers with student loans because it can help them:
It’s important to note that the new rule only applies to FHA loans, so if you’re seeking a conventional loan, you’ll still need to meet the lender’s DTI requirements.
Impact of DTI Ratio on Mortgage Approval
Your DTI ratio is a key factor that lenders use to determine your ability to repay your mortgage. It’s calculated by dividing your monthly debts (including your estimated mortgage payment) by your gross monthly income. The lower your DTI ratio, the better your chances of getting approved for a mortgage.
If your DTI ratio is too high, lenders may see you as a risky borrower and deny your application. By using the actual amount of your student loan payment instead of 1% of your balance, the new FHA rule can help borrowers lower their DTI ratio and improve their chances of getting approved.
How to Qualify for an FHA Loan
To qualify for an FHA loan, you’ll still need to meet certain requirements, including:
If you meet these requirements and are interested in an FHA loan, you may want to consider working with a reputable mortgage company like Mortgage Brokers Pro . Our experienced loan officers can help guide you through the process and answer any questions you may have about the new FHA rule for student loans.
Conclusion
The new FHA rule for student loans is a positive change that can help many borrowers with this type of debt qualify for a mortgage. By allowing lenders to use the actual amount of your monthly payment instead of 1% of your outstanding balance, the rule can help lower your DTI ratio and make it easier to get approved for an FHA loan. If you’re interested in learning more about how this rule may impact your ability to qualify for a mortgage, reach out to Mortgage Brokers Pro today.