I want to introduce you to Sally. Sally graduated college in 2016. Like most Americans, she took out student loans and like a lot of millennials, her first job out of college wasn’t the greatest. So, she accumulated student debt.

Fast forward a couple of years. Sally has established a great career and is ready to make the leap into homeownership. Unfortunately, when she went to apply for a mortgage, she was held back by her student loan debt. 

Sally was carrying $100,000 in student loans, and the lender told her the monthly obligation was $1,000. Technically, she couldn’t qualify for the loan amount she wanted, as her debt-to-income (DTI) ratio was too high. 

To Sally, this didn’t make sense. Her actual payment was only $75. The problem was in the way FHA calculated her obligation. This calculation seemed arbitrary and really never made sense. 

Fortunately for Sally, these rules have changed! Officially starting August 16th, FHA no longer takes 1% of the loan to calculate your debt. Loan officers can now calculate the debt-to-income ratio using the payment that shows up on the credit report. So in Sally’s scenario, she would now be qualified with a $75 payment versus a $1,000 payment. That is a monumental change! If no payment shows up on the credit report, we can now use a .5% of the total loan amount to calculate Sally’s debt obligation.

If you are like Sally and student loans are preventing you from qualifying for a loan, talk to us immediately, (727) 376-6900 or visit https://www.chissellmg.com/contact. We will run the numbers using the new calculations and let you know what you can afford! 

NMLS ID: 327290; NMLS ID: 2062741

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