2021 – If you have student loan debt, this federal agency made it easy for you to get a mortgage. Here is how.

• The Federal Housing Administration has announced new calculations for determining mortgage aid.
• The new rules will make it easier for people in debt to buy a home.
• HUD sec. Marcia Fudge said the new calculations would especially help black borrowers.
• Check out Insider’s business page for more stories.

If you have student debt, you may have trouble getting a mortgage as well. This is a potentially big problem since 45 million Americans collectively owe $ 1.7 trillion in student debt. But the Federal Office for Housing and Urban Development (HUD) is trying to reduce the burden.

Last week the Federal Housing Administration (FHA) – an agency within the HUD – announced Updates to the calculations related to monthly student loan payments. Essentially, they are intended to prevent borrowers ‘debts from becoming overvalued, which should both increase borrowers’ creditworthiness and increase their chances of getting a mortgage.

Under the old rules, FHA mortgage lenders would calculate a borrower’s monthly loan payment as 1% of their outstanding balance for loans that are not being paid back, including borrowers with approved deferral and borrowers with income-oriented amortization plans. The new rules remove this computation requirement and allow lenders to use actual monthly loan payments from borrowers, making it easier for a borrower to get a mortgage application approved.

For example as Forbes reportedUnder the old rules, if a borrower has a $ 100,000 student loan outstanding but was approved for $ 245 monthly payments, then under the old rules, the FHA would charge the borrower’s monthly payment at $ 1,000 what could prevent the borrower from taking out a mortgage.

“Ownership is the cornerstone of the American dream and the best way to build generational wealth,” HUD Secretary Marcia Fudge said in a statement. “I am proud that the FHA is taking steps to make it easier for borrowers with student loan debt to obtain a federally insured mortgage. This new policy will make a huge difference for individuals across our country and is another step in our mission to promote equity, “and home ownership.”

According to the press release, the new policy will help homebuyers with student debt meet the minimum requirements for an FHA-insured mortgage and improve the agency’s ability to serve first-time home buyers, who make up 80% of FHA’s demographics each year.

FHA estimates that more than 45% of the demographic of first-time home buyers also have student debt, with a large portion of that debt falling on black borrowers. Fudge expressed this disproportionate impact of student debt in an interview with Axios on Sunday.

“Who Has Student Debt? Poor people, blacks, browns, ”said Fudge. “We are the people who bear the most debt. And so the system is already skewed that we are not creditworthy. “

Fudge said that part of the problem is due to failure to enforce the Fair living law, which was passed in 1968 prohibits housing discrimination. Black Americans fall significantly behind white Americans when it comes to home ownership. Insider reported last year that black families pay over $ 60,000 more in home ownership than white families.

And the student debt crisis only makes the problem worse. Thirty-six civil rights groups published Student Debt Relief Principles in April that “will help black and brown borrowers build wealth and enable our economies to thrive as millions of Americans are able to raise families, buy houses and small ones To set up a company ”. Companies.”

They found that when they graduate, black borrowers typically owe 50% more than white borrowers, and after four years, black borrowers owe 100% more. Fudge wants the new FHA calculations to ensure that the disproportionate burden on student debt doesn’t deter black borrowers from owning homes.

“For people of color, especially blacks, home ownership is wealth,” said Fudge. “For us it is not just wealth, but generational wealth.”

Read the original article on Business Insider

–