Buying a Home with Student Loan Debt

If you’re considering buying a home with student loan debt, you’re not alone! Graduating from college often means taking on student loan debt, but that doesn’t have to stop you from achieving homeownership. With careful planning, you can balance your student loans and mortgage payments, making your dream of buying a home possible. Here’s what you need to know to get started.

What’s Your Credit Score?

A major step to buying a home with student loan debt is understanding your credit score. Lenders look closely at credit scores when determining eligibility for a mortgage. Even with student loans, you can maintain a strong credit score by paying bills on time and using various forms of credit responsibly. By keeping your credit usage below 30%, you’ll boost your credit score and help your chances of getting a mortgage. Your score reflects payment history, credit usage, length of credit history, new inquiries, and types of credit.

Check Your Debt-To-Income Ratio

When you’re buying a home with student loan debt, mortgage lenders will consider your debt-to-income (DTI) ratio to see if you can handle monthly mortgage payments. Your DTI includes all monthly debts, like credit cards, car payments, and, of course, student loans. You can calculate your DTI by dividing your monthly debts by your gross income and multiplying the result by 100. The lower your DTI percentage, the better. If needed, consider paying down debt or refinancing student loans to lower your monthly expenses before you apply for a mortgage.

Down Payment Assistance Options

Adding a mortgage to monthly student loan payments may seem difficult, but it’s possible with down payment assistance programs. Many states offer these programs to help buyers make homeownership affordable. Some federal loan programs, such as FHA and USDA loans, can also be helpful when buying a home with student loans. For example, FHA loans offer low down payments, and USDA loans require no down payment in rural areas. If you’re a veteran, VA loans are an excellent option. Talk to your lender about available options in your area.

Buying a home with student loan debt is achievable with planning and research. For questions about loans and mortgage options, contact one of our expert loan officers who can help you navigate the process and get you into a home!