Changes to FHA lending rules are good for those with student debt.

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With this new rule change, an FHA loan may now be available to those who failed to qualify a few months ago, or they “could get tens of thousands to $ 100,000 more, depending on the scenario,” said Amerifirst’s Matt Moore. Poland.

According to Housing Director Tiffany Sokol, outstanding student debt is the # 1 factor deterring Youngstown Development Corporation clients from owning a home.

But now, recent changes to federal loan requirements mean that debt-ridden buyers have slightly more purchasing power. For those who have struggled to buy a home due to student loan arrears or have recently been denied a loan, it may be time for a second look, local experts say.

“When you see statistics on underdeveloped home purchases among young people, a lot of it really has to do with student loan debt,” Sokol said, referring to articles that raise questions like “Why don’t millennials buy homes?”

“In so many cases, the answer is that they can’t because their student debt affects the debt-to-income ratio and how banks view them as a credit risk,” she said.

This is why a change by the US Department of Housing and Urban Development a few weeks ago in how graduate student loan payments are accounted for in FHA loans to low- and middle-income homebuyers could have such a transformative impact, local experts say.

More monthly commitments, such as paying for a vehicle or student loan, reduce the likelihood that loan applicants will qualify. The new HUD rule significantly reduces the impact of borrowers’ loan payments on their FHA loan qualifications.

The previous rule took 1 percent of borrowers’ total debt into account when calculating their debt-to-income ratio. This meant that the government would treat a graduate in debt of $ 50,000 as having a monthly loan payment of $ 500 for loan qualification purposes.

But low-income borrowers who use income-based repayment plans that can bring their payments down to $ 0, or whose loans are on hold, ended up looking like they were paying more under the old rule. According to Matt Moore, a mortgage specialist with America first Poland

The new rule reduces the calculation of the default loan payment to half a percentage point, so that the $ 50,000 student loan outstanding will be calculated as a monthly loan payment of $ 250. This could be a “huge problem” for a loan applicant who in the past was unqualified or unable to get enough money to buy the home they wanted, Sokol said.

According to the data, in Ohio, about 1.8 million student borrowers have owed more than $ 63 billion in debt. March report from Policy Matters Ohio about student loan forgiveness and how graduates can manage their debt. According to this report, 60 percent of Ohio graduates had student debt of $ 30,000 in 2019.

Loan officers can also take into account the borrower’s actual monthly payment if it appears on their credit report, Moore said. If it is lower, it also helps by improving the debt-to-income ratio of borrowers.

“Under this administration, they are trying to ease some of the lending requirements, as in other areas,” Moore said. “I doubt many people know about this. This is a relatively new development, and … we are trying to convey information to home buyers in [Mahoning] Valley.

With this new rule change, an FHA loan may now be available to those who could not apply for a few months ago, or they “could get tens of thousands to $ 100,000 more, depending on the scenario,” Moore said.

“Fifty thousand dollars or 100 thousand dollars in Mahoning Valley is very important. It will also help add value to housing here in the Valley, “which Moore says is already a hot local housing market.

At the start of the COVID-19 pandemic, housing supply hit an almost all-time low as fewer people opted to list their homes for sale and relocate “amid all the uncertainty,” Moore said. But demand from new home buyers has not increased. This is part of what has led to such a “significant” increase in the cost of housing in recent years. The other part is low interest rates.

“People should go to a local lender and see what options they have,” Moore said. “This is not exactly a radical decision, but it is a big step in a positive direction – an increase in the number of households here in the Valley, and throughout the country.”

YNDC, which offers free HUD approved housing advice, according to Sokol, has been advocating such “positive” changes for a year now.

“We are very pleased to speak with all of our clients who will come over the next month,” she said. “For many of them, this could change their view of home ownership.

“This change will affect a lot of people,” Sokol said.



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