Some Great FHA News

 In Qualifying for a Mortgage

The amount mortgage lenders have to use to determine your debt-to-income ratio (DTI) has just been changed for FHA loans, and the change is a very good one.

Here’s what you need to know.

In the past, lenders were required to use the payment shown on a borrower’s credit report.  If the payment amount on the report was zero, as is the case when a student loan is in deferment (as all student loans are now because of the pandemic), we had to count 1% of the outstanding balance when calculating the DTI.  That prevented many borrowers from being able to qualify for an FHA mortgage.

Effective immediately, FHA has lowered the amount we need to count against you from 1% to 0.5%.  That means we only have to count half as much against you as we did before.  As an example, if you have $50,000 in outstanding student loans, we used to have to count a payment of $500 when calculating your DTI.  Now, we only have to count a payment of $250.  

The bottom line is many more people with student loans will be able to qualify for an FHA loan.

If you want to see how easy it is to get approved for a mortgage – for either a purchase or a refinance transaction – contact us today.

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