FHA announces the publication of Mortgagee Letter and Student Loan Payment Calculation of Monthy Obligations

INDIANA – The Federal Housing Administration (FHA) announced the publication of Mortgagee Letter (ML) 2021-13Student Loan Payment Calculation of Monthly Obligation. This ML updates the monthly mortgage payment calculation for borrowers with student loan debt who apply for FHA-insured mortgages. This updated guidance will provide greater access to mortgage credit for those who are traditionally burdened with student loan debt.

This updated policy affirms FHA’s commitment to enhancing its programs by breaking down longstanding barriers to affordable homeownership opportunities, including student loan debt, and will:

  • Further HUD’s mission of providing access to mortgage credit while ensuring borrowers maintain a long-term ability to repay their debt.
  • Remove potential roadblocks for borrowers who are making student loan payments and are struggling to qualify for an FHA-insured mortgage due to their debt-to-income (DTI) ratios being based on an implied repayment, rather than on an actual monthly repayment amount(s).
  • Revise the way in which FHA calculates monthly student loan liabilities for borrowers making payments and those without payments currently due when determining DTI ratios for qualifying potential borrowers for FHA-insured financing.
  • Align FHA standards to current industry standards and better reflect the myriad of student loan repayment alternatives offered through the U.S. Department of Education.
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