Industry Standards Change Notice

Dear Valued Clients,

Welcome to our dedicated space for staying in the loop with the latest enhancements to your homebuying journey! In the ever-evolving real estate market, changes in financing requirements, industry standards, and trends are constant, creating challenges in updating our printed planners as frequently as we'd like.

As the author of "Next Stop, Homeownership" and a dedicated Florida real estate advisor, my commitment is to ensure you have the most up-to-date information at your fingertips. To bridge this gap, I've curated a dedicated online resource for east and immediate access to the latest information.

Our online resource will be promptly updated as changes unfold, providing you with the latest insights for a seamless home buying experience. Additionally, announcements regarding newly released editions of the homebuyer planner will also be made here.

Below, you'll find a comprehensive list of all the changes and the updated information.

[1] Credit Score Requirement for FHA

Printed Information - "Those with lower credit scores can be eligible for FHA loans, sometimes with a score as low as 580." (page 47)

Updated Information - Depending on the lender you choose, you can qualify with a score as low as 500, but you'll need to make at least a 10 percent down payment.

[2] Mortgage Insurance Premium for FHA

Printed Information - "Consequently, mortgage insurance does raise the monthly payment as is paid throughout the life of the loan." (page 47)

Updated Information - If your origination date is between July 1991 and December 2000, you cannot cancel your FHA mortgage insurance premiums. You’ll need to keep paying them for the life of the loan or refinance into a new loan. For those who received their loan between January 2001 and June 3, 2013, your MIP will be automatically canceled when you reach a loan-to-value ratio (LTV) of 78 percent. If your loan originated after June 3, 2013, and you made a down payment of at least 10 percent, your MIP will be canceled after 11 years. However, for down payments of less than 10 percent, you’ll have to pay MIPs until your mortgage is paid in full or refinanced into a new loan.

[3] Student Loans and FHA

Printed Information - "FHA guidelines don't allow student loans in deferment to be excluded from your DTI ratio. If the monthly payment for your student loan is less than 0.5% of the total remaining balance, the lender is required to increase your monthly payment to 0.5% of the balance and use that to qualify your loan application. This means that regardless of whether your loan(s) are on deferment or an income-based repayment plan (I BR), the entire 0.5% is calculated as debt in your DTI ratio. Let's say, for example, your monthly IBR payment is $50 on a student loan balance of $45,000. FHA guidelines require that your monthly payment be calculated at $225 and will use that increased amount to determine how much you qualify for in a home purchase price. For many borrowers, that jump in debt is critical and can severely reduce the amount the lender can approve for a loan. If the DTI ratio is pushed past the 43% mark, it can potentially disqualify the borrower (s) for a home loan altogether. An alternative for borrowers with high student loan debt would be to seek a conventional loan that uses the IBR payment in DTI calculations. " (page 47)

Updated Information - Under new FHA student loan guidelines effective June 2021, understanding your loan impact is simpler. Regardless of your payment status, your student loan is considered in one of two ways:

The monthly payment listed on your credit report or documented payment (if it exceeds $0), or
If your credit report shows a $0 monthly payment, 0.5% of the current outstanding student loan balance. This applies even during deferment, forbearance, or income-driven repayment plans.

For example, if you have a student loan balance of $20,000 but your required payment is $0, the calculation now involves 0.5% of the loan balance or $100. This is cut in half from what the previous 1% rule would have yielded. These changes aim to make the FHA loan process more transparent and accessible for borrowers with varying student loan circumstances.

Last updated January 16, 2024