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Buying a house with student loans can be a challenge, but it doesn’t mean it’s impossible. Having student loan debt increases your debt-to-income (DTI) ratio and can hurt your credit score, which lenders classify as being at a greater risk of loan default. 

However, there are steps you can take to improve your financial health and your ability to qualify for a mortgage.

If you’re thinking of buying a house with student loans, then here’s how it can affect your ability to get a mortgage and ways to minimize its impact.

You don’t need to have zero debt before applying for a mortgage, but mortgage lenders will look at your overall debt when determining your eligibility for a loan. If you have outstanding student loan debt, then it may be more challenging to buy a house.

Here’s how buying a house with student loans can affect your ability to qualify for a mortgage:

It takes 20 years for the average student borrower to pay off their student loan, with some professional graduates taking 45 years to repay their student loan. So waiting to buy a house until after you’ve repaid your student loans could take a while. 

However, whether or not you should pay loans first or save for a down payment on a house depends on your financial situation. 

Here are some reasons to save for a down payment first:

Some reasons to pay off your student loans first:

Interested in applying for a home loan? Find a Total Mortgage branch near you and speak to one of our mortgage advisors to explore your borrowing options.

If you have student loan debt, you may be wondering whether it can affect your ability to get an affordable mortgage. Existing debt can affect your interest rate, and whether or not you can qualify for a loan at all, but it doesn’t mean you should forget about your dream of homeownership.

There are steps you can take to improve your chances of qualifying for a mortgage or getting a better interest rate.

Before applying for a mortgage, make sure to check your credit report for any errors and to see if your score qualifies for a mortgage. Unless you’ve missed a payment, then student loan debt shouldn’t have a big impact on your credit score.

To help boost your credit score, make sure to pay all of your bills on time and not close any older credit card accounts. The older the average age of your credit accounts, the better your credit score. Closing any lines of credit can also increase your credit utilization and cause your credit score to dip.

Lenders generally want to see a DTI ratio under 43%. If your DTI is too high, you can lower it by decreasing your monthly debt and increasing your income.

Try to pay off accounts with the lowest balance to lower your debt. You can also boost your monthly income by asking for a raise at work or picking up a part-time job. 

There are several options to reduce your monthly student loan payment, and ultimately your DTI ratio. Consider an income-driven repayment plan if you have a federal student loan or refinance your student loan with a private lender for a better interest rate.

Depending on where you live, you may also qualify for down payment assistance programs. You can also check out other mortgage options, such as an FHA, USDA, or VA loan. FHA loans allow buyers to make a down payment as low as 3.5% while USDA and VA loans have no down payment requirement.

Buying a house with student loans is possible, but it could mean you’ll need to take extra steps to ensure you’re capable of qualifying for a mortgage.

If you’re ready to take the next step, consider Total Mortgage’s loan program options. Have questions? Schedule a time to chat with one of our mortgage experts.

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