FHA Acts to Remove Homeownership Barriers for Those With Student Loan Debt

Housing Finance
Published
Contact: Curtis Milton
[email protected]
Director, Single Family Finance
(202) 266-8597

At NAHB’s urging, the Federal Housing Administration (FHA) today announced updates to its student loan monthly payment calculations to take steps to remove barriers and provide more access to affordable single-family FHA-insured mortgage financing for creditworthy individuals with student loan debt.

This update is the result of a coalition letter NAHB signed onto last year with the Mortgage Bankers Association in which we requested that FHA amend its policy regarding student loan debt calculation to allow for the use of the actual monthly student loan payment made by the borrower.

Previously, FHA presumed a monthly payment of 1% of the outstanding student loan balance, which is almost always larger than the actual payment being made by the potential borrower. NAHB contended that the previous policy disqualified creditworthy borrowers due to inflated debt-to-income ratios resulting in limited financing options or disqualifying borrowers entirely.

The new policy more closely aligns FHA student loan debt calculation policies with other housing agencies by basing the monthly payment on the actual student loan payment, which is often lower, and helps home buyers with student debt to meet minimum eligibility requirements for an FHA-insured mortgage.

Specifically, the new policy bases the monthly payment on the amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or 0.5% of the outstanding loan balance, when the monthly payment reported on the borrower’s credit report is zero.

This change in policy results in a more accurate student loan payment calculation and will make it easier for home buyers with student debt to qualify for a federally insured mortgage.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Sponsored Content

Apr 18, 2025

Empowering New Home Buyers and Builders with Data and Exposure

Homebuyers are increasingly relying on a research-driven approach to their new home buying experience. Homes.com is meeting that need with its new home marketplace.

US Economy | Material Costs

Apr 17, 2025

Trade War Will Create Further Economic and Financial Market Stress

NAHB Chief Economist Robert Dietz provided this economic and housing industry overview in the bi-weekly newsletter Eye On the Economy.

View all

Latest Economic News

Economics

Apr 17, 2025

Housing Starts Decline Amid Economic Uncertainty

Constrained housing affordability conditions due to elevated interest rates, rising construction costs and labor shortages led to a reduction in housing production in March.

Economics

Apr 16, 2025

Builder Confidence Levels Indicate Slow Start for Spring Housing Season

Growing economic uncertainty stemming from tariff concerns and elevated building material costs kept builder sentiment in negative territory in April, despite a modest bump in confidence likely due to a slight retreat in mortgage interest rates in recent weeks.

Economics

Apr 14, 2025

Where Do Builders and Remodelers Buy Building Products?

The most common sources for products used in home building and remodeling are specialty retailers, lumber yards, and wholesale distributors, according to two recent NAHB surveys. The surveys include one of single-family homebuilders in the October 2024 NAHB/Wells Fargo Housing Market Index (HMI) and one of remodelers in the Q3 2024 NAHB/Westlake Royal Remodeling Market Index (RMI). Both surveys asked respondents where they purchase building products, regardless of who ultimately purchases them (themselves or subcontractors).