Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: FHA now allowing 0.5% on Student Loans instead of 1%

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: FHA now allowing 0.5% on Student Loans instead of 1%:   FHA now allowing 0.5% on Student Loans instead of 1% On Friday, the  Federal Housing Administration (FHA ) announced updates to its studen...

FHA now allowing 0.5% on Student Loans instead of 1%

On Friday, the Federal Housing Administration (FHA) announced updates to its student loan monthly payment calculations to take steps to remove barriers and provide more access to affordable single-family FHA-insured mortgage financing for creditworthy individuals with student loan debt.

The updated policy more closely aligns FHA student loan debt calculation policies with other housing agencies, helping to streamline and simplify originations for borrowers with student loan debt obligations.

This announcement enhances FHA’s ability to serve one of its core demographics—first-time homebuyers.

For all outstanding student loans, regardless of payment status, the payment must be calculated as follows:

  • If the payment on the credit report is greater than $0, use
    • the payment reporting on credit, or
    • the actual documented payment
  • If the payment on the credit report is $0, use
    • 0.5% of the outstanding loan balance
  • If documented that the loan has been forgiven, canceled, or discharged in full, the payment can be excluded.


Lenders may implement the changes immediately but must implement the changes for FHA Case Numbers assigned on or after August 16, 2021.
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