Hey Kyle here with winthouseylove.com today we're talking about FHA student loan guidelines for 2021
and some new changes that have happened so FHA loans and student loans have not always
mixed together very well and if you try to apply for a loan with student loans you've realized how
much fha can keep you from being able to one be approved at all or reduce the amount that
you can get approved for because of the way FHA looks at student loans and this all comes into
what's called the Debt-to-Income ratio so even though your payment might be here that you're
actually paying on student loans FHA is actually going to disregard that most the time except for
what's just changed with the rules now FHA is actually going to come in line a little bit more
with what you pay in student loans whereas before it kind of ignored what you paid
and said we're gonna make up our own rules for what we think you should be paying on
these student loans very strange but there's a new change that has made affordability increase a ton
for people so this is the 2021 update that has happened the old rule with FHA basically said that
you had to use in the Debt-to-Income ratio the greater of the credit report payment
one percent of the balance and no income driven repayment is allowed and so this is a killer
for people right because if you're on let's say income driven repayment let's say it's at zero
dollars a month or 100 a month FHA would say we know that you're paying this but we don't care
and we're going to take a higher amount we're going to take the one percent of the balance
into your debt to income ratio the debt to income ratio is how much you're able to afford
how much or more how much a lender thinks you can afford how much they're willing to give you in a
loan now a new rule just came out that changed the entire game and so now fha's rules are very
similar to a Freddie Mac Conventional loan and so the new rule says regardless of the payment
status so whether it's being paid or it's deferred or it's in forbearance what you can use is either
the credit report payment the documented payment above zero dollars so this can be something like
income driven repayment if it is zero dollars use point five percent of the balance so if you're on
income driven repayment at zero dollars a month then you're going to use point five percent right
so for instance let's say you have thirty thousand dollars in student loan debt that'd
be 150 per month payment included in the debt to income ratio now keep in mind nothing changes with
what you're paying on your student loans the only thing that changes is what's included in
the debt to income ratio that's 150 per month that's included meaning 150 less per month in
your monthly payment that a lender would approve you for and income driven repayment is allowed
before income driven repayment was only allowed on conventional and va loans va loans are only for
veterans and conventional is harder to qualify for fha goes all the way down to a 500 credit score
you can do 10 down if you have a 580 credit score it's 3.5 down and you can use income driven
repayment with student loans so here's an example with 50 000 in student loan debt it's important to
remember here um this is all how much FHA is going to count towards the monthly debt to income ratio
so let's look at three scenario differences here with the old rule and the new rule as
well so let's say that you have a student loan payment and it's showing 200 per month on your
credit report so basically the way it's set up how much you're paying on your student loan is 200 per
month that's reported on your credit report you could find that on a free credit reporting site
so with the old rule they're going to use one percent of the balance the greater one percent
even though it was 200 in the credit report they're using the greater 200 or one percent
which is 500. So they would use 500 per month and set the 200 that you're paying with the new rule
they'll just say great your credit report says 200 we'll use the 200. Let's say you were on
an income driven repayment plan so you still have 50 000 in student loans but income
driven repayment says that you only pay a hundred dollars per month with the old rule again they're
not going to use income driven repayment. They're going to use that greater of one percent so 500
with a new role you can use a hundred dollars per month that's four hundred dollars per month
in added flexibility that you can take on in your monthly debt that's four hundred dollars extra
in a mortgage payment that you could take on if you wanted to
now let's say you have a zero dollar per month income driven repayment you're on income
driven repayment and you actually don't have to pay your student loans at all at the moment
with the old rule it was five hundred dollars with the new rule it's point five percent which is 250
per month again this is not actually changing what you pay on your student loans this is only how the
lender calculates your monthly debt with that so this change right in here is actually a 40,000
increase in purchase power approximately that means that if you could qualify at this 500
a month with FHA you can now get 40,000 more in purchase price if you needed it right so if
you could you were able to get approved for a 350 000 house you can now get approved for a 390,000
house keeping everything the same or maybe you're at the point where you're saying I actually wasn't
even able to qualify at this point but because I saved this extra 250 per month in here because
of the new change I can now get approved for an FHA loan whereas before I couldn't have
so the one weird thing about FHA loans that doesn't exist for conventional
is if you default or you're delinquent on these loans and there are two different types of loans
with your student loans so you have private student loans and then you have federal
student loans so if you have a private student loan that's defaulted or delinquent it's going
to be treated like a typical defaulted account and basically what this means is you want to have 12
months on-time payment that's going to be the most ideal to get you approved FHA now if it's federal
debt then we have a bigger issue so you cannot get an FHA loan if you have federal debt in the cavers
system and the caper system basically you're on that if your loan is delinquent or in default
okay basically it's a system that the government has they're gonna make a repository of everyone
who's delinquent and default of federal debt and basically say you can't get more federal
debt if you haven't paid back the current federal debt on time so caver's basically
is just short for credit alert interactive voice response system and this is going to stick
even if it's not on your credit report so if you have a federal loan in debt
a federal student loan in debt and it's not on your credit report still will show up on capers
the lender will pull a cables report before they give you an fha loan so you need to get
out of cavers to make this work so there are three options with the department of education
number one I spelled this wrong you can negotiate a settlement this will take one to two weeks
to get out of default here you can apply for a loan consolidation this will take two to three
months to get out of default or you can enter loan rehabilitation which would take nine months
to get out of default there so hopefully that's not a circumstance that you're running into but
this is an option if you need it it is entirely possible to get approved for an fha loan with
student loans especially with the new changes that have happened so if you want to learn more about
FHA loans and seeing can I actually qualify with all of the other things considered go ahead and
click on this video over here it's going to help you learn more about the ins and outs of FHA loans