The Power is Now

FHA Eases Requirements for Home Buyers with Student Loan Debt

Homeownership Program

As part of its effort to increase housing inventory and curb home shortage in America, the Federal Housing Administration announced that it would be easing requirements for homebuyers with student debt who want to qualify for an insured mortgage.

TPI, alongside other housing groups, has been strong advocates of affordable housing and frequently called the leadership of the Department of Housing and Urban Development and the Federal Housing Administration to alter its policies concerning students’ loan debts and its calculations. Student loan debts have increased in recent years, creating a significant impact on the next generation of homebuyers in America.

According to the Housing and Urban Development, first-time homebuyers account for more than 80% of FHA-insured mortgages, with about 45% of these homebuyers having student loan debts. Worse still, the impact student loan debts have had on black home buyers and the minorities are disproportionate compared to other demographic groups, especially their Whites counterparts.

Black homebuyers are more than twice as likely as White homebuyers to have a student loan debt, ultimately unqualifying them for FHA-mortgage loans. The persistent gap in homeownership rates among Blacks has been appalling. It further illustrates how deep racial inequality has eaten into American society and why wealth inequality is also common. This has been the issue many policymakers have turned a blind eye to in recent years.

According to Housing and Urban Development Secretary Marcia Fudge, “homeownership is the cornerstone of the American dream and the best way to build generational wealth.” FHA Principal Deputy Assistant Lopa Kolluri issued a statement that the agency will continue to remove “unnecessary constraints” for otherwise eligible borrowers to make owning a home accessible for first-time homebuyers, especially the Blacks. The deadline for mortgage lenders to adopt the policy is August 16, 2020.

There is a shortage of available housing in America, particularly for people of color. Last week, TPI reports elaborated the proposed Biden’s housing plan to build more homes and expand access to Black Americans and Hispanics’ American dream of homeownership. This weeks’ announcement by the FHA has indeed given low and moderate-income buyers hope of owning their dream homes in America.

We are happy that the FHA is taking this big step in ensuring that borrowers with student loan debt can still qualify for a federally insured mortgage. The new policy will bridge the gap in homeownership between Black Americans and Whites, which has been ever-increasing for more than five decades. With more policy reforms like the FHA’s reduced student loan requirements, America hopes to have more millions of Black homeowners.

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