Yes, You Can Buy a Home With Student Loan Debt

Buying a home is a major milestone, but if you're one of the many Americans currently carrying student loan debt, you might be wondering if it's even possible. The truth is, while student loans can affect your financial picture, they don’t automatically disqualify you from getting a mortgage. In fact, plenty of borrowers become homeowners while still paying off their student loans. 

The key is knowing how your student debt plays into the mortgage process and taking steps to strengthen your overall financial health. Here’s what to know about buying a home with student loans:

Can You Get a Mortgage and Buy with Student Loans? 

Absolutely, you can! Student loans are only one small part of the financial equation lenders review when you apply for a mortgage. What matters most is how well you manage that debt – along with your income, credit score, savings, and other obligations. Lenders will look at: 

• Your monthly student loan payment amount 

• Your debt-to-income (DTI) ratio 

• Your credit history and score 

• Your employment history and income stability 

• Your available savings for a down payment and closing costs 

Expert Tip

If your loans are in good standing and you’re making consistent, on-time payments, that can actually help demonstrate financial responsibility.

Student Loans and Mortgage Eligibility  

Student loan debt can influence your mortgage application in a few major ways: 

1. Increases Your DTI Ratio:  Your debt-to-income (DTI ratio) is a critical factor in mortgage approval. Lenders use it to determine whether you can afford your potential mortgage payments on top of existing debts. If your student loan payments are high, that could push your DTI too high for some loan programs. 

2. Impacts Your Monthly Budget:  High student loan payments may reduce how much you're able to save for a down payment or affect the size of the mortgage you can comfortably afford. 

3. Appears on Your Credit Report:  Late or missed student loan payments can negatively affect improve your credit score, which may result in a higher interest rate or even loan denial. 

Expert Tip

Some lenders may accept income-driven repayment (IDR) plan amounts in your DTI calculation rather than your full loan balance.

This can make qualifying easier, especially if your student loan payments are relatively low compared to your income.

Consider Your Loan Options 

Despite common perceptions, not every mortgage is the same, and some loan programs are more flexible for borrowers with student loans. 

FHA loans

• Designed for first-time or lower-income buyers. 

• Require just a 3.5% down payment. 

• More lenient credit score requirements.  

• Use 0.5% of your student loan balance or the actual payment on your credit report to calculate DTI. 

Conventional Loans

• Require 3–5% down for most first-time buyers. 

• May offer better rates if your credit score is strong. 

• Use the actual payment amount or 1% of the loan balance for DTI, depending on the lender and whether the loan is deferred. 

VA loans

• Available to eligible veterans, active-duty military, and some surviving spouses. 

• Offer 0% down and no private mortgage insurance (PMI). 

• Generally have flexible DTI guidelines and favorable student loan treatment. 

USDA Loans

• Require 0% down. 

• Available in qualifying rural and suburban areas. 

• Great for buyers with modest incomes, but property eligibility and income caps apply. 

Talk with our team to review your qualifications and compare loan types based on your student loan situation. 

Check Your Credit Score 

Your credit score really helps lenders assess your risk as a borrower, so it plays a big role in determining your mortgage approval and interest rate. Even with student loans, a good credit score can work in your favor. 

Here’s what makes up your score: 

• Payment History (35%): On-time payments build your score, while missed payments hurt it. 

• Amounts Owed (30%): This includes your credit utilization on revolving accounts (like credit cards). 

• Length of Credit History (15%): The longer your history, the better. 

• New Credit (10%): Too many recent inquiries can drop your score temporarily. 

• Credit Mix (10%): A healthy mix of credit cards, installment loans (like student loans), and other accounts can help. 

And to improve your credit score: 

• Always pay student loans and credit cards on time. 

• Attempt to keep your credit utilization below 30%. 

• Avoid applying for new credit before your mortgage. 

• Dispute any errors on your credit report quickly. 

Review Your Savings 

Having enough money saved is just as important as managing your debt. Lenders want to see that you can cover upfront homebuying costs – especially if you're also managing student loans. 

Expert Tip

Start saving for the down payment, closing costs, and even an emergency fund for, ideally, three-to-six months' worth of expenses post-closing.

Keep your savings in a separate, high-yield savings account so it doesn’t get mixed with your daily spending. This makes it easier to track your progress and keeps you from spending it accidentally. 

Decrease Your DTI 

Your DTI ratio is one of the most important numbers in your mortgage application. It tells lenders how much of your monthly income goes toward debt payments. 

How to calculate your DTI ratio: 

1. Add up your monthly debt payments (student loans, car loans, credit cards, etc.). 

2. Divide that number by your gross monthly income (before taxes). 

3. Multiply by 100 to get your DTI percentage. 

So now you may be asking yourself what a “good DTI ratio” looks like. We can confidently say that below 36% is ideal, but many lenders accept up to 43%, though some allow higher depending on the loan type and your other financial strengths. 

Expert Tip

Lower your current DTI ratio by making extra payments toward credit card balances or personal loans, refinancing student loans, and avoiding new debt before applying for a mortgage.

Down Payment Assistance? 

Coming up with a down payment while juggling student loan payments can certainly feel overwhelming but just know that you have options. 

Down Payment Assistance (DPA) programs are offered at the federal, state, and local levels, and often take the form of grants, forgivable loans, or deferred loans, meaning the borrower is temporarily allowed to postpone their payments. 

Different DPA programs exist for all types of homebuyers, including first-time buyers, teachers, healthcare workers, public servants, and students, so feel free to reach out to our team for a full list of programs available in your area. 

Consider a Co-Borrower 

If your debt or income limits your mortgage approval, you might benefit from applying with a co-borrower. 

Co-borrowers can be a spouse/partner, parent, trusted family member, or even a friend. Combine your income with another party to help you qualify for a larger loan. Their stronger credit can improve your loan’s terms, and the shared financial responsibility can east that payment burden. 

Keep in mind: 

• Both parties are legally responsible for the full loan amount. 

• Both names appear on the title – meaning shared ownership. 

• Missed payments affect both credit scores. 

We strongly suggest having an open and honest conversation with any potential co-borrower before moving forward. 

Consider a Starter Home 

And you can always start smaller. A “starter home” can be a smart move when you’re balancing debt and savings. 

Starter homes typically have a lower purchase price and monthly payment, as well as fewer upfront costs. They also provide an opportunity to build equity before upgrading in the future, and generally don’t come with many maintenance or renovation needs.  

Expert Tip

Condos, townhomes, or smaller single-family homes are great starter options. And they’re often more affordable in competitive markets.

Lastly, Review Your Loan’s Terms 

Before applying for a mortgage, it’s worth revisiting the terms of your student loans to better understand where you stand financially. 

Take time to review your current monthly payment, interest rate, loan balance, and repayment plan. Depending on your situation, you might benefit from refinancing to secure a lower interest rate, switching to an income-driven repayment plan to reduce your monthly payment, or making extra payments to lower your overall balance.  

While student debt may be part of your financial picture, it doesn’t have to hold you back from homeownership. With the right planning, guidance, and preparation, your path to buying a home is still very much within reach.