ShareThisFHA Guidelines on Student Loans Changing June 30, 2016
The FHA guidelines on student loans is changing again effective June 30, 2016. I believe this is going to have a big impact on buyer’s purchasing power. If you have student loans and have been pre-approved. I would highly recommend that you re-examine your pre-approval amount with your lender if you plan on purchasing after July 1st. FHA seems to be getting tougher on student loans which could mean that they are seeing higher default rates for buyers that have student loan debt.
Last year before September 2015, your lender could exclude student loan debt if you could show it was in forbearance or deferment for 12 months from the date of your settlement. In September 2015 FHA changed the guideline again.
The new guideline starting this month is lenders must use the GREATER of, 1% of the outstanding balance on the loan or the monthly payment reported on the borrower’s credit report OR the actual documented payment providing the payment will fully amortize the loan over its term.
Here is an example of how this will affect a buyer’s purchasing power. A buyer owes $40,000 in student loan debt. The payment base on 1% of the balance of $40,000 is $400 per month. The lender will have to add $400 to the buyer’s monthly debt when qualifying. This can have a big impact on a buyer’s purchasing power.
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