Getting a Mortgage With Student Debt

May 12, 2023

More than 43 million Americans have student loans. So if you’re hoping to buy a home with student loans in tow, you’re not alone.

Fortunately, student loans are treated just like any other debt when applying for a mortgage. While having lots of debt can certainly make the process more challenging, it doesn’t disqualify you by any means.

Are you hoping to buy a home while still paying off student loans? Here’s what you need to know.  

  • How will student loans impact my eligibility for a mortgage? Lenders look at your debt-to-income ratio — how much of your monthly income all your debts (including your new mortgage payment) take up. Some loan programs allow you to have up to a 50% DTI, meaning your monthly debt payments come to 50% of your income.
  • What are the drawbacks of getting a mortgage with student loans? If you have lots of debt, you may get a higher interest rate on your loan to make up for the extra risk you present to the lender. You also may find it harder to pay off your student loans since you’re tying up more of your monthly income.
  • Should you pay off your loans before applying? You can, but remember: You’ll need funds for a down payment and closing costs. You might also consider consolidating or refinancing your loans, which can help you get a lower rate and monthly payment on them.
  • How can I manage a mortgage and student loan debt? Having a good budget can help you stay on top of all your debt payments. With federal student loans, you can also explore income-based programs, which set your monthly payment according to your income. 

Want to know how your student loans will impact your mortgage options? Reach out today to get your questions answered.