Do Student Loans Affect Buying a House?

Tips on Home Buying with Student Loan Debt

Read Time: 4 Minutes

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It’s likely that you’ve landed on this page because you either have student loan debt and want more information about how that comes into play when buying a home or you’ve simply gone down an information-seeking rabbit hole about mortgages! Either way, we’re glad you’re here, because contrary to popular belief, buying a home with student loan debt IS possible. In fact, it’s common.

Calculate Your Debt-to-Income Ratio


Your debt-to-income ratio (DTI) is simply one of the ways a lender gets an understanding of your financial situation and how comfortable you are taking on a mortgage to repay (in addition to any other debt you may have, including student loans, car loans, credit cards, your monthly mortgage or rent payment, and so on).


To calculate your DTI, add up your monthly debts and recurring expenses then divide the number by your gross monthly income (pre-tax). Then you have your debt-to-income ratio in the form of a percentage. Typically, lenders like to see a percentage close to 43%. The lower the DTI, the less risky you are in the eyes of a lender.


Start Saving

We get it. When you have student loan debts and you’re juggling other expenses in life, saving money can seem stressful and out of reach. The good thing is any amount saved is better than none.


Pro Tip: Outline a monthly budget and stick to it. This way, you can get on the right track toward your homeownership dreams. We’ve rounded up a list of the best budgeting apps, including a variety so you can use one that aligns with you, your lifestyle, and your goals! Check them out to see which one is the best fit for you!


Calculate Your Desired Mortgage


While you’re researching mortgages and homeownership, it’s helpful if you know how much home you can afford. By working with a loan officer on getting pre-approved for a loan amount, you simplify your home search by focusing on houses within your budget. A pre-approval puts you in a stronger position to buy, narrows down your mortgage loan options, and gets you on the fast track to closing.

To get an idea of how much you’re comfortable spending on a mortgage payment each month, you can run the numbers on our mortgage calculator. If you’re ready to get in touch with one of our loan officers, apply now!


Identify the Costs of a Mortgage

At this point, you’ve likely landed on a number or tentative range that you feel comfortable spending each month on a mortgage payment (principal and interest). On top of repaying the loan amount monthly, there are additional costs of buying a home.


Additional costs include closing costs (typically 2-5% of the purchase price), the appraisal and home inspection (both typically range from $300-500 each), mortgage insurance (typically required if the down payment is less than 20%), and more. It’s also important to prepare for any home improvements, regular maintenance, and upkeep in and outside the home!


Increase Your Credit Score


Your credit score is a huge factor that lenders consider when qualifying you for a mortgage. While you can’t erase credit history, you can maintain your credit score, learn what causes your score to drop, and improve it if needed!

What causes a drop in credit score?

  • Maxed out credit cards.
  • Missed payments.
  • Negative items on a credit report (bankruptcy, collections, etc.).
  • Paying off a loan.
  • Closing out credit card accounts.
  • Credit inquiries (or credit pulls).


Ways to improve credit:

  • Make payments on time each month.
  • Pay more than the minimum amount due.
  • Keep credit utilization (credit cards) below 30% of your available credit limit.
  • Build credit from scratch by opening small lines of credit that can be paid off easily.
  • Avoid large purchase when you’re planning to apply for a mortgage.
  • Regularly monitor your credit.


The moral of the story is: Having debt (yes, even student loan debt) does not mean buying a home is impossible. After all, we’ve learned that having some debt is positive, as it can show lenders that you’re paying off borrowed money responsibly.

Everyone’s financial situation is different. If you’re ready to discuss your homeownership goals with a loan officer, walk through questions, or want to understand how you can get in the best position to apply for a mortgage, get in contact with one of our loan officers today!


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