Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
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Updated: September 18, 2024
This article provides information about The Transforming Student Debt to Home Equity Act, a proposed bill that has not yet been passed into law. Please note that details are subject to change as the legislative process continues.
According to the National Association of REALTORS®, 51% of renters say that student loan debt keeps them from buying a home. Congress wants to address this.
A bill called The Transforming Student Debt to Home Equity Act gives renters with student loans the ability to buy.
The bill cites studies of student debt as one of the most significant hurdles to homeownership. Renters with student loan debt are less likely to become homeowners than the general population.
Furthermore, when renters with student loan debt become homeowners, they buy homes at lower values. The result is that buyers with student loans accumulate less home equity and build less wealth than the broader home-owning population.
We explain how the Transforming Student Debt to Home Equity Act aims to fix these problems and who qualifies.
The Transforming Student Debt to Home Equity Act is a homeownership program that helps renters with student loan debt purchase their first home. The bill got introduced in the House of Representatives in April 2022. It is not yet a law.
Non-white renters get disproportionately burdened by student debt compared to white renters. Therefore, non-white homeowners with student debt build wealth more slowly than other homeowners.
For example, the National Association of REALTORS® reports that renters with student loans purchase homes valued 19% below what other buyers purchase. This is even after controlling for differences in income, demographics, and family assistance with down payments.
The Transforming Student Debt to Home Equity Act helps change that.
The Transforming Student Debt to Home Equity Act gives first-time home buyers who make on-time student payments access to:
It relaxes interest rates and underwriting standards so renters with student loan debt can transition into long-term homeownership.
The program also helps strengthen communities.
The Transforming Student Debt to Home Equity Act makes homes owned by the government and local land banks available to buyers at below-market prices. These lower prices mean that first-time home buyers can accelerate local tax base growth and spending within an economy.
The typical new home buyer spends $10,000 locally.
The Transforming Student Debt to Home Equity Act has the backing of Fannie Mae, Freddie Mac, and the U.S. Department of Housing and Urban Development (HUD).
The Transforming Student Debt to Home Equity Act is an incentive program for first-time home buyers with student debt. The program uses mortgage loans from Fannie Mae and Freddie Mac to help renters buy their first home.
To qualify for the program, you must be pre-approved and mortgage-eligible; and meet the guidelines as written in the bill.
The Transforming Student Debt to Home Equity Act is available to first-time home buyers who want to purchase a residential property as their primary residence. Buyers can buy 1-4 units and condos and may not have owned other residential property during the preceding 36 months.
The Transforming Student Debt to Home Equity Act uses conforming mortgage guidelines published and maintained by Fannie Mae and Freddie Mac. Eligible home buyers should be able to verify income, assets, and employment; and show a decent history of paying bills on time. A three percent down payment is required.
Mortgage pre-approvals are like trial runs for your full mortgage approval. Get pre-approved to see if you’d qualify.
The Transforming Student Debt to Home Equity Act requires that home buyers move in and maintain their primary residence for a minimum of three years. The bill doesn’t specify the penalty for breaking this provision.
The Transforming Student Debt to Home Equity Act is for renters with federal student loans, including Stafford loans, Perkins loans, and Direct PLUS. Renters with privately-held student loans are not eligible.
The Transforming Student Debt to Home Equity Act reduces wealth and homeownership gaps. It is available to renters with low- or moderate-income for an area. The program requires that applicants earn no more than 20 percent of the area’s median income.
The Transforming Student Debt to Home Equity Act requires that home buyers not have student loans in default or are subject to a judgment when applying for their mortgage. The applicant must also not be subject to wage garnishment.
The Transforming Student Debt to Home Equity Act requires home buyers to attend a HUD-approved homeownership education course online or in person before the settlement date.
As of November 14, 2024, the Transforming Student Debt to Home Equity Act is a bill and has not yet passed into law. Eligibility requirements are subject to change.
First-time home buyers with student loans can access other first-time home buyers programs along with, or instead of, the Transforming Student Debt to Home Equity Act. It may be preferable, even. The $15,000 First-Time Home Buyer Tax Credit and $25,000 Downpayment Toward Equity Act can be combined with the student loan program or used independently.
Learn more about all of the other government programs for first-time buyers.
Yes, renters with student loan debt can get buy a home. Mortgage approvals don’t distinguish among debt types, so a student loan debt — in repayment or deferred — is treated like other monthly debts.
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A new bill called The Transforming Student Debt to Home Equity Act gives renters with student loans the ability to buy a home.
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