Yes, you can buy a house with student loan debt. Many homeowners have student loans. The key is understanding how student loans affect your debt-to-income ratio, your credit and your overall budget, so you can prepare before you apply.
The short answer: student loans are counted as monthly debt in your debt-to-income ratio, which affects how much you can borrow. You can still qualify for a mortgage with student loans if your income, credit and down payment support it. Use our mortgage calculator to estimate your payment.
How student loans affect your debt-to-income ratio
Your debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. Student loans are counted as a monthly debt, even if they are in deferment.
How lenders count student loan payments can depend on the loan program:
- If your loan is in repayment, the lender usually uses your actual monthly payment.
- If your loan is in deferment or forbearance, the lender may use a percentage of your balance or a calculated payment to estimate your monthly debt.
Ask your loan officer how your student loans will be counted, because it can affect how much you can borrow.
How student loans affect your credit
Student loans are installment loans that appear on your credit report. They affect your credit in a few ways:
- Payment history: on-time payments help your credit; late payments hurt it.
- Credit mix: having a mix of installment and revolving credit can help your score.
- Debt-to-income: your student loan payment is part of your DTI, not your credit score, but it affects how much you can borrow.
Keep your student loan payments on time and avoid new debt before you apply for a mortgage.
How to prepare to buy with student loans
- Know your numbers: list your student loan balances, monthly payments and servicers.
- Check your credit: review your credit reports for errors and pay every bill on time.
- Lower your DTI: pay down other debts, such as credit cards, to lower your ratio.
- Save for your down payment: a larger down payment can strengthen your file.
- Avoid new debt: do not take on new loans or credit cards before you apply.
- Talk to a loan officer: a licensed loan officer can review your full situation and explain your options.
Income-driven repayment plans
If you are on an income-driven repayment plan, your monthly payment may be lower, which can help your DTI. However, lenders may calculate your student loan debt differently depending on the loan program. Ask your loan officer how your repayment plan will be handled.
Can I still get pre-approved with student loans?
Yes. Many buyers with student loans get pre-approved every year. Pre-approval is based on your full financial picture, not just your student loans. The lender looks at your credit, income, debts, assets and the property.
Read our mortgage pre-approval checklist to prepare your documents before you apply.
Frequently asked questions
Do student loans stop me from buying a house? No. Student loans are part of your debt-to-income ratio, but many buyers with student loans qualify for a mortgage.
How are student loans counted in my DTI? Lenders usually count your actual monthly payment, or a calculated payment if your loan is in deferment. Ask your loan officer how your loans will be counted.
Should I pay off my student loans before buying a house? Not necessarily. Paying off student loans can lower your DTI, but it also uses cash you may need for a down payment. Compare your options with a loan officer.
Does an income-driven repayment plan help? A lower payment can help your DTI, but lenders may calculate your debt differently depending on the loan program. Ask your loan officer how it will be handled.
Ready to see what you can afford?
When you are ready, get a free quote or get pre-approved with Alex.
You can also call Alex Al-Ammar at (313) 992-9898 or email Alex@vestalending.com.
This article is for general information only. It is not legal, tax or financial advice. How student loans are counted depends on the loan program and lender. Speak with a qualified professional about your individual situation.
