Did you know that homeownership was lower for black college graduates than for white high school dropouts? 👈🏾 This little, yet disturbing fact is extremely relevant. “As our country comes together to remember Juneteenth and acknowledge National Homeownership Month, we are reminded of a basic truth: that, too often in our history, the march toward freedom has been a long, halting, and uneven journey,” said Housing and Urban Development Secretary Marcia L. Fudge.I cannot begin to explain just how pivotal this change is. So many have been denied the opportunity of homeownership due to student loan debt. Black college graduates have 46% more student loan debt on average, compared to white college graduates.


Lenders may implement the changes immediately but must implement the changes for FHA Case Numbers assigned on or after August 16, 2021.

So what are the changes? The policy change centers on the removal of the current requirement that FHA mortgage lenders calculate a borrower’s monthly student loan payment as 1% of their outstanding student loan balance for loans that are not fully amortizing or are not in repayment.

Prior to this change, FHA borrowers would have 1% of their student loan debt calculated against them. This meant that if someone had $50,000 in student loan debt, $500 would automatically be added as a monthly debt, severely affecting the borrower’s debt-to-income (DTI) ratio. May times, it would not allow the potential buyer to qualify for enough to purchase, or the DTI would be too high and the option to purchase is removed altogether due to not qualifying. With the new changes, FHA will calculate student loans very similarly to the way conventional loans do. If the borrower is on an income-based repayment (IBR) or income-driven repayment (IDR) plan of $1/month or more, then FHA will calculate that amount. If the borrower is not on an IBR or IDR, then 0.5% of the student loan balance will be calculated towards the monthly DTI.


Click here to read the press release by the U.S. Department of Housing and Urban Development.

For the full mortgagee letter regarding the changes, click here.