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

Education | Remodeling

May 02, 2025

How to Diversify Your Remodeling Business for Growth

To celebrate National Home Remodeling Month, NAHB will host two Shop Talks, sponsored by Westlake Royal Building Products, to help remodelers diversify their business and build greener.

Sponsored Content

May 02, 2025

Home Builders: How to Scale Your Projects to Sustain Profitable Growth

Too many builders still feel like they’re grinding. They build a few homes at a time, reinvest their profits, and hope the next project pays off a little more than the last. It doesn’t have to be that way. The builders who scale create lasting wealth. And the key to faster scaling is smarter financing.

View all

Latest Economic News

Economics

May 01, 2025

Housing’s Share of the Economy Grows Higher to Start the Year

Housing’s share of the economy grew to 16.4% in the first quarter of 2025, according to the advance estimate of GDP produced by the Bureau of Economic Analysis. This is the highest reading since the third quarter of 2022 and is up 0.2 percentage points from the fourth quarter of 2024.

Economics

Apr 30, 2025

U.S. Economy Contracted in First Quarter of 2025

The U.S. economy contracted in the first quarter of 2025 for the first time in three years, driven by a sharp surge in pre-tariff imports, softening consumer spending, and a decline in government spending.

Economics

Apr 30, 2025

House Sharing is Not Just for Young Adults

A record-high 6.8 million households shared their housing with unrelated housemates, roommates or boarders in 2023. While college-age and young adults make up the largest subset of house sharers (close to 41%), this type of living arrangement is gaining popularity among older householders fastest, with the 55+ segment accounting for 30% of all house-sharing households in 2023.