Buying a home with student debt: A guide

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You can buy a home with student loans. Here’s how. 

Feel like you can’t build a life with student loans? Don’t let your student debt stop you from buying a house. We’ve got the guide to help you right here. 

Are you still paying off your student loans? You’re not alone—around 30% of all American adults are, too.

And even with the Biden administration announcing up to $20,000 of student loan forgiveness, the average American undergraduate leaves school with $25,000 in student loan debt and sometimes more, so you’re still likely to have an outstanding student loan. 

You’re also not alone in wondering whether it’s possible to go from renting to buying a home while dealing with your debt payments.

The good news is that you don’t have to be debt free to buy a home. But student loans can still affect your homebuying journey. In this guide, you’ll learn how your current loans can affect getting a mortgage and practical steps to take when buying a home with student debt.

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How your student loans can affect your home loan

Around 29% of borrowers say their student loan debts have kept them from homeownership.

Fortunately, student loans don’t automatically disqualify you from buying a house. As many as 37% of first-time homebuyers have student debt.

How do they do it, and can you do it, too? The short answer is that it depends on several factors, including your debt-to-income ratio, overall credit health, and whether you can save enough for a down payment. 

Let’s take a closer look at each factor to consider when buying a home with student debt.


Before getting a home loan, you’ll need to get a mortgage pre-approval. A pre-approval letter is a written statement from your lender outlining the amount of money they may approve for a mortgage. A lot more has to happen before your lender ultimately underwrites your loan, but a pre-approval is an important start. 

Read our guide on how to get this vital step done. The pre-approval process isn’t as thorough as the approval process, but your mortgage lender will still ask for some financial documentation and will check your credit report.

At this stage, the lender will see your student loan balance and if you’re currently making payments. They’ll also see how much you have in savings for a down payment and closing costs. Both of these can impact whether or not you get pre-approved.

a woman in white long sleeves looking at the paper on the table with her hand on her head
Buying a home with student debt is possible. The first step is getting your debt-to-income ratio as low as possible

Debt-to-income ratio

A lender will look at your debt-to-income ratio (DTI) before deciding whether to give you a loan. 

Look at all your monthly debts, including student loan payments, car loan payments, credit card debt, and personal loans. Then, add the required minimum monthly payments for all lines of credit or installment loans. Divide the total minimum monthly payments of all your debt by your gross monthly income (your income before taxes and deductions) to get your DTI.

How low your DTI needs to be depends on your lender and the type of loan you’re applying for. For example, most conventional loans require a DTI lower than 45%. In general, though, the higher your DTI, the higher your interest rate will be. And if the percentage is too high, it may be challenging to qualify for a mortgage at all.

Credit scores and home loans

Your student loan debt can also impact your credit score—another factor mortgage lenders consider. The higher your credit score, the more likely a lender will consider giving you a home loan, and the better your interest rate may be. But the opposite is true, too. The lower your score, the harder it can be to get a loan and the higher your interest rate.

Fortunately, unlike credit cards, student loans are considered installment debt, so they have less impact on your credit utilization ratio. (Your credit utilization is the percentage of your available credit that you’re using.)

Late student loan payments will show up on your credit history. But you can improve your credit score by making monthly debt payments on time. Paying your debts responsibly shows lenders you have a handle on your loans and would likely pay your mortgage on time.

Types of loans you may be qualified for

Conventional loans are more common and are usually the easiest to qualify for. This is especially true for conforming loans, which are insured by government-sponsored entities like Fannie Mae and Freddie Mac. But because student debt can raise your DTI and make saving for a down payment difficult, you may find it hard to qualify for a conforming loan.

Fortunately, that’s not your only option. There are several other types of home loans you might qualify for—even with your student debt. Usually, they’re non-conventional loans and are backed by government entities.

FHA loans

Can’t save 20% for a down payment because of student loans? See if you qualify for an FHA loan. FHA loans are less risky to lenders because the Federal Housing Administration insures them. As a result, their down payment and credit score requirements are usually more lenient. 

However, FHA loans require an upfront mortgage insurance fee (which can be rolled into your loan) and monthly mortgage insurance payments.  How long the monthly mortgage insurance payments will last depends on the loan amount and the Loan To Value.

VA loans

If you’re an eligible active-duty service member, veteran, or eligible surviving spouse, consider a VA loan backed by the U.S. Department of Veteran Affairs. Requirements for VA loans are less strict than for conventional loans. Generally, VA loans do not require a downpayment and most offer relatively low interest rates. 

The only downside is that you’ll have to pay an upfront funding fee—usually between 1.25% and 3.3% of your total loan amount (this can be rolled into the loan).

USDA loans

Are you moving to the countryside? Check if you qualify for a USDA loan backed by the U.S. Department of Agriculture. These loans are reserved for moderate- to low-income homebuyers in defined rural regions. There are income limits for USDA loans as well.

USDA loans don’t require you to have a specific credit score, thanks to their government backing. But you’ll have to demonstrate that you can handle your debts to qualify.

Mortgage rates for USDA loans are usually lower, but watch out for higher closing costs. You’ll also have to pay a 2% mortgage insurance premium at closing (which can be rolled into the loan) and throughout the life of the loan.

stressed over buying a home with student loans
Since student loans are a different kind of debt than credit card debt or car payments, it has less power to stop you from buying a home

Buy a house with student loans

If student loans are making it hard to qualify for a mortgage loan, it’s time to think of ways to improve your financial situation. There are several ways to approach this:

  • Lowering your DTI by increasing your income or decreasing your debts
  • Paying for private mortgage insurance, which may allow you to put less than 20% down for conventional mortgage loans
  • Applying for down payment assistance programs

Let’s look at each of these steps more closely.

Increase your income to lower your DTI

One way to improve your DTI is to increase your income. Consider asking for a raise at work, starting a side hustle, or freelancing during your off hours. Just make sure your additional income is consistent enough to qualify as monthly income to your lender.

Consider private mortgage insurance

You may still be able to get a conventional loan if you don’t have enough savings for a 20% down payment—as long as you’re willing to pay for private mortgage insurance (PMI).

With conventional loans, borrowers with a down payment of less than 20% typically have to pay PMI. This fee is added to your monthly mortgage payments and how long it will last depends on several factors.

Apply for down payment assistance programs

There are over 2,000 down payment assistance programs on the local, state, and federal levels. If you have a low to moderate income, you may qualify for a loan or grant from one of these programs, especially if you’re a first-time homebuyer.

Just make sure to check the requirements during your research. A program may have an income limit or a minimum credit score.  

Should you pay off your debt before buying a home?

Paying off your student loan debt can lower your DTI. But it might take even longer to save for your down payment.

If you have private student loans, you might also be able to refinance them for lower monthly payments. You may also be able to refinance federal student loans by converting them into private student loans. The downside is that lower monthly payments mean you would spend more on your student loans in the long term because it may take longer to pay them off. So carefully weigh the pros and cons and speak with your lender before deciding.

Can you buy a house with student loans?

Every situation is different. But thanks to non-conventional loan options, down payment assistance programs, and strategic financial improvements, many people find they can buy a home with student loans. 

Ready to become a homeowner? Let us help you take the first step in your homebuying journey!

About the author: Jenny Rose Spaudo is a freelance content strategist and copywriter specializing in PropTech and FinTech. She’s written for clients like Edward Jones, AAA, Guild Education, and PropStream, and her writing has appeared in publications such as Business Insider, GOBankingRates, Yahoo! Finance, and AOL. Visit to learn more and connect with her on LinkedIn.

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