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FHA is changing the way they calculate payments in the DTI for student loans

ShanetheMortgageMan
Super Contributor

FHA is changing the way they calculate payments in the DTI for student loans

FHA made an announcement yesterday that they are changing the way payments are calculated when including in your DTI.   They are basically alligning themselves with Freddie Mac's guidelines (which are different than Fannie Mae's guidelines).  https://www.hud.gov/sites/dfiles/OCHCO/documents/2021-13hsgml.pdf is the mortgagee letter and below is the text straight from it.  Lenders can start using the new calculation immediately (although not an absolute requirement until August 16th).

 

Screenshot 2021-06-18 081504.png

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What this means is if a payment is reporting to credit, that payment can be used to qualify.  If there is a payment listed on credit and it's more than the actual documented payment, then as long as you can document what the actual payment is then that actual payment can be used.

 

If there isn't a payment amount reported to credit (either blank or $0) then .5% of the balance will be used to qualify.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 1 of 13
12 REPLIES 12
tooleman694
Valued Contributor

Re: FHA is changing the way they calculate payments in the DTI for student loans

This is huge!!!! WOW, so many people will be able to buy now.

Message 2 of 13
2ndtimearound1
New Contributor

Re: FHA is changing the way they calculate payments in the DTI for student loans

A tear just fell from my eyes. This is major for so many people. Good vibes to everyone getting FHA loans! 

Message 3 of 13
Alwayslearning2
New Visitor

Re: FHA is changing the way they calculate payments in the DTI for student loans

This is good news. When they say documented payment, does that mean I should stop paying extra if I want them to use the lower payment in my DTI? My required payment is a little more than $250, but I've been paying more.

Message 4 of 13
ShanetheMortgageMan
Super Contributor

Re: FHA is changing the way they calculate payments in the DTI for student loans


@Alwayslearning2 wrote:

This is good news. When they say documented payment, does that mean I should stop paying extra if I want them to use the lower payment in my DTI? My required payment is a little more than $250, but I've been paying more.


Pretty sure that it means the minimum required payment, not the payment amount you actually make.  

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 5 of 13
Alwayslearning2
New Visitor

Re: FHA is changing the way they calculate payments in the DTI for student loans

Thanks! This is really good news.

Message 6 of 13
LaHossBoss
Senior Contributor

News for SLs on IBR and FHA calculations!

News for FHA Mortgages and SLs on IBR 

 

They are finally tossing out the ridiculous 1% calculation and using the *actual* payment amount for SLs!

 

Effective 8/16/21 (when FHA case number was assigned).




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Message 7 of 13
CyberChick
New Contributor

Re: News for SLs on IBR and FHA calculations!

I just saw that, too.

 

They are using the real number with proper documentation. OR regardless of payment status - they are using.5% vs. 1% of balance. THis impacts EVERYONE not just those with IBR plans.


This goes into effect immediately and all FHA loans should have the new calc by August.

 

This is great news for people with tight/high DTI.

Message 8 of 13
arealswellgirl
Valued Member

Re: FHA is changing the way they calculate payments in the DTI for student loans


@2ndtimearound1 wrote:

A tear just fell from my eyes. This is major for so many people. Good vibes to everyone getting FHA loans! 


Mine too...I literally went through hell in 2019 being forced to use the 1% amount instead of my actual reporting. I was even pressured to pay off a $20k car loan to get my dti down because there was nothing else to pay off! I'm tired of SL rules constantly changing, but happy for future FHA applicants, it's the only fair thing to do.

Message 9 of 13
RESSECUP
Regular Contributor

Re: FHA is changing the way they calculate payments in the DTI for student loans

this is great news, but with the current deferments (care act) I am showing at zero, would if I can get documents showing what my IBR payments are would they still use that or go by the zero amount? 

Message 10 of 13
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