Those coming out of college or on their first job will be getting hit hard again. This time by the Federal Housing Administration. As if student loans aren’t supplying enough stress in young adults’ lives, the FHA has set some new boundaries and rigid barriers. If you’re fresh out of college and looking to purchase your first home, their rules may prevent you from doing so. According to FloridaRealtors, the FHA will no longer allow students’ debt to be deferred for the first year (at the least).
In addition, 2% of your outstanding student loan will be taken into your DTI (debt-to-income) when trying to purchase a home and will be accounted for in your monthly payment. The DTI ratio is used to assess whether buyers/borrowers will be able to repay their loan. If you don’t make the cut, you won’t be purchasing a house.
Along with these, another rule that went into effect on September 14th will affect all of those looking for a new home. Borrowers will now need 6 months working at a job after an extended period of absence before they become eligible. There is no reason or excuse that will be deemed fit enough to get around the rule. This includes raising children, which will not be popular among the public. Previously, children were viewed as an “acceptable employment situation”. The FHA devised the rule to magnify employment gaps and to tighten them.
Although these new rules will be strict on recent graduates and first-time homebuyers, they will help support the housing market overall and are intended to help prevent another crisis from happening like the 2008 housing market collapse.
All of the FHA’s intentions can been seen as necessary precautions, but time will tell if it actually aids the housing market by keeping it in the green zone or if it only creates more burdens for the new generation. For now, it appears this may mark the start of a larger influx of grads moving into their parents’ houses. Hopefully, it is only a short delay on their journey.