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Federal Housing Administration Takes Steps to Remove Barriers to Homeownership For Those With Student Loan Debt
In 2021, there are 45 million borrowers who collectively owe approximately $1.7 trillion in student loan debt in the United States, making student loan debt the second highest consumer debt category as it surpassed both credit cards and auto loans. On Thursday, June 17, the Federal Housing Administration (FHA) announced an updated policy for calculating monthly obligations for those with income-adjusted payments in deferment based on 0.5% of the outstanding student loan balance. The update aims to more closely align the FHA student loan debt calculation policies with other housing agencies, helping to simplify originations for borrowers with student loan debt. Lenders can opt into the change immediately, but it becomes mandatory for mortgages assigned case numbers by the FHA starting Aug. 16. Previously, the FHA had used 1% of the outstanding student loan amount in debt-to-income calculations to determine whether consumers with student loan debt could qualify for a mortgage. Starting Aug. 16, for outstanding student loans, regardless of payment status, the Mortgagee must use: The payment amount reported on the credit report or the actual documented payment for payments above zero 0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero Paving the Path to Homeownership For Those With Student Loan Debt The recent policy updated for FHA Single Family Title II forward mortgages removes the current requirement for lenders to calculate a borrower’s student loan monthly payment of one percent of the outstanding student loan balance for those ...
As we move into the latter half of the year, questions about what’s to come are top of mind for buyers and sellers. Near record-low mortgage rates coupled with rising home price appreciation kicked off a robust housing market in the first half of 2021, but what does the forecast tell us about what’s on the horizon? Mortgage Rates Will Likely Increase, but Remain Low Many experts are projecting a rise in interest rates. The latest Quarterly Forecast from Freddie Mac states : “We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.” However, even as mortgage rates rise, the anticipated increase is expected to be modest at most, and still well below historical averages . Rates remaining low is good news for homebuyers who are looking to maximize their purchasing power . The same report from Freddie Mac goes on to say: “While higher mortgage rates will help slow the pace of home sales and moderate house price growth, we expect overall housing market activity will remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021….” Home Price Appreciation Will Continue, but Price Growth Will Likely Slow Joe Seydl, Senior Markets Economist at J.P. Morgan , projects home prices to continue rising as well, indicating buyers interested in purchasing a home should do so sooner rather than later. Waiting for rates or home prices to fall may not be wise: ...
Unexpected data breaches can leave consumers’ Personally Identifiable Information (PII) exposed, putting them at risk of identity theft and fraud. With cybersecurity remaining a major concern, credit bureaus such as Equifax, TransUnion, and Experian, offer free credit freezes for consumers who believe they are at risk. While a credit freeze is a popular way to protect against credit fraud, it’s important to understand the ways it can inhibit your mortgage application for a new home or refinance. What is a Credit Freeze? A credit freeze, also known as a security freeze, suspends anyone from accessing your credit information. Credit freezes prevent you, or any potential identity thieves, from opening any new loans or lines of credit in your name. A credit freeze is a great way to protect yourself against credit or identity fraud. The process of freezing your credit is as simple as contacting TransUnion, Equifax, and Experian by phone or online to request the freeze. The transaction is typically completed within one business day, and does not cost anything or affect your credit score. You may also stop receiving unsolicited mail and other offers, as credit freezes prevent bureaus from selling any of your personal data. Although credit freezes have the intention of stopping someone from opening fraudulent lines of credit with your personal information, they also prevent lenders from accessing your credit report. In other words, a credit freeze can protect you in the case of a stolen identity, but it also prevents your mortgage lender from accessing your credit report to complete your mortgage application. How to Unfreeze Your ...
Every transaction type and borrower’s individual financial profile can influence their borrowing costs. The following variables are used by lenders to determine a borrower’s mortgage interest rate: 1. Property Use Primary residences typically have the lowest interest rates when compared to second homes and investment properties. 2. Property Type Single-family homes and condominiums with 25% or more in a down payment or equity have lower interest rates than condos with less than 25% down, multi-family dwellings, and co-ops. 3. Credit Score In general, borrowers with higher credit scores receive better interest rates than those with lower scores. A borrower with an 800 mid-score might have a rate as much as 1.5% lower than a borrower with a 640 mid-score. 4. Down Payment In many cases, a larger down payment (30-40%) can lead to a lower interest rate. 5. Discount Points and Origination Fees Borrowers can pay discount points and origination fees to buy down their interest rate. Loans with discount points are lower than zero-point options. 6. Loan Term Shorter-term, fixed-rate loans have lower interest rates than longer-term programs. For example, 15-year fixed-rate loans have lower rates than 30-year fixed-rate loans. In certain interest rate markets, Adjustable Rate Mortgages (ARMs) also have lower rates than 30-year fixed-rate loans. 7. Loan Amount Conforming loan amounts (under $548,251) have the lowest interest rates. These are the average rates that Fannie Mae and Freddie Mac publish weekly. High Balance conforming loans (between $548,251 and $822,375) vary depending on the county the ...
If you are a business owner or if you are looking to start a new business, one of the most overlooked resources available to you is your business credit. There are so many benefits to establishing and building your business credit including: · Separate Liabilities from your personal to your business · Minimize personal DTI / Debt to Income Ratio · Get access to high limit credit accounts in the business name · Get access to Government programs and Grants · Open doors for vendor, business, and investor relationships · Reduce cost on business insurances and landlords scrutiny · Increase the value of your business for future Sale Getting Started The first step in establishing business credit is making sure your business is Credible in the eyes of the banks, lenders, and the business credit bureaus; Dun & Bradstreet, Experian, and Equifax Business credit divisions. There are 10 items or data points that must be in place so that your business is “Credible”. Tier 1 Once your business is Credible, we then move on to earning a “Paydex” score. To earn a Paydex score you will need 3-5 business credit accounts to report to D&B. At this point, Round 1 ...