Tagline
623-208-6098

First-time home buyers might face greater debt scrutiny

In an attempt to reduce risks for the mortgage industry -- especially with relation to loans backed by the Federal Housing Administration -- the FHA has created some clarifications to its handbook for single-family borrowers. The handbook, which was updated as of September 2015, helps lenders understand what debt can and can't be considered when calculating debt-to-income ratios.

Previously, lenders did not have to include deferred debt in the calculation, which was good news for anyone with a deferred student loan. Because so many of these loans were deferred almost automatically, younger individuals were qualifying for FHA loans on properties despite what could be considered crippling student loan debt on the horizon.

The initial belief was that, as young professionals sought work and moved up the ladder, they would be able to afford both the mortgage and the student loan payments. In reality, however, many young professionals became enmeshed in a debt situation that pitted high mortgage and student loan payments against a salary that was often lower than expected.

The new changes might make it more difficult for those with large student loans to qualify for a mortgage, making it important for students and younger people to plan for debt carefully and seek debt relief when necessary. Understanding how debt relief, including deferments, might impact your future credit and ability to borrow is important.

While student loans can't be included in some relief activities, such as bankruptcy, you can use debt relief to free up income to pay down student loans faster. Without large loans hovering over your financial status, you are often freer to seek mortgages and other arrangements in the future.

Source: National Mortgage News, "FHA Closes Loophole for Student Debt in Revamped Lender Handbook," Bonnie Sinnock, Nov. 10, 2015

No Comments

Leave a comment
Comment Information
  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
Schedule A Consultation Today

Attorneys You Can Depend On And Trust

The Dodds Law Firm, PLC, is located in Surprise and serves clients throughout the West Valley area. To schedule a consultation with a lawyer, call 623-208-6098 or toll free at 877-827-9906. You can also contact us online.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy