“How to Buy a Home When You Have Student Loan Debt”

Susie Braskett
Oct 16
3 min read

For many Americans, student loans are the biggest obstacle between them and homeownership. But here’s the truth — you can absolutely buy a home even if you have student debt.

It takes smart planning, discipline, and the right financial strategy. Here’s how to make it happen.

1. Know Your Debt-to-Income (DTI) Ratio

Your DTI ratio compares how much you owe each month to how much you earn.Lenders use it to gauge your ability to handle a mortgage.

How to calculate it:Add up all your monthly debts (including student loans, car payments, and credit cards), divide that by your gross monthly income, then multiply by 100.

Most lenders prefer a DTI of 43% or lower, but if you have strong credit or a larger down payment, some will approve higher ratios.

2. Understand How Lenders View Student Loans

Even if your loans are deferred, lenders still count them when evaluating your mortgage application.Here’s what they typically consider:

If you’re on an income-driven repayment plan: They use your actual monthly payment.
If your loans are in deferment or forbearance: They may use 0.5%–1% of your loan balance to estimate your payment.

Tip: Talk to your lender early so you understand how your specific loan situation will be calculated.

3. Focus on Building a Strong Credit Score

A higher credit score can help offset your debt. It shows lenders that you’re reliable with payments — even with student loans.

To improve your credit:

Make all payments on time
Pay down credit card balances
Avoid taking on new debt before applying for a mortgage

Most lenders look for a score of 620 or higher, but 700+ can help you qualify for better rates.

4. Save for a Down Payment — Even a Small One Helps

You don’t need 20% down to buy a home. Many loan programs allow much less:

FHA Loans: 3.5% down
Conventional Loans (Fannie Mae/Freddie Mac): 3%–5% down
VA Loans: 0% down for eligible veterans
USDA Loans: 0% down in qualified rural areas

Even a modest down payment shows commitment and can reduce your monthly mortgage costs.

5. Get Pre-Approved Before You Start Shopping

Pre-approval tells you exactly how much you can borrow — and helps you shop confidently. It also shows sellers you’re serious, which can make your offer stand out in a competitive market.

Bring your pay stubs, W-2s (or tax returns if self-employed), loan statements, and other financial documentation to your lender for a clear picture.

6. Explore First-Time Buyer and Assistance Programs

Many states and cities offer down payment assistance, grants, or special programs for buyers with student debt.Examples include:

State housing finance agencies (HFAs)
Employer-assisted housing benefits
Programs like Fannie Mae’s Student Loan Cash-Out Refinance

Your realtor or lender can help you find what’s available in your area.

7. Create a Long-Term Plan

Buying a home doesn’t mean you have to pay off student loans first — but you’ll want to ensure you can comfortably handle both.

A few smart steps:

Refinance student loans if you can lower your interest rate
Build a 3–6 month emergency fund
Choose a home that fits your lifestyle and your long-term budget

Final Thoughts

Student loan debt doesn’t have to delay your dream of homeownership. With careful preparation, strong credit, and professional guidance, you can qualify for a mortgage — and still stay financially secure.