Milestones
Buying Your First Home With Student Debt
Student loans rarely stop a mortgage. Here is how they are actually counted.
A generation has been told that student debt makes homeownership impossible. For most borrowers, that is simply not true. Student loans are a line in your debt-to-income ratio, not a locked door.
How student loans are counted
Lenders include your student-loan payment in your debt-to-income ratio. How they calculate that payment — your actual payment, or a percentage of the balance when you are on an income-driven or deferred plan — varies by program, and the difference can be meaningful. Choosing the right program can lower how your student debt counts against you.
Moves that help
- Know your documented monthly payment; an income-driven plan can lower the figure lenders use on some programs.
- Pay down a car loan or a credit card to make room — sometimes easier than touching the student loan.
- Consider a program, like FHA or certain conventional options, whose student-loan calculation is friendlier to your situation.
- Boost documented income — a side income with history can offset the debt.
Pro tip
Two lenders can count the exact same student loan differently and reach different approvals. If student debt is the sticking point, the program you choose may matter more than the balance you owe.
Do not assume you are disqualified. Run your real ratio with a lender who knows how each program treats student loans. The answer surprises people — in a good way — more often than not.
Common questions
Do student loans prevent me from getting a mortgage?
Rarely on their own. They count in your debt-to-income ratio, but how the payment is calculated varies by program — and the right program can make your student debt weigh much less. Most borrowers with student loans still qualify.
Does being on an income-driven repayment plan help?
It can. Some programs will use your actual lower income-driven payment rather than a percentage of the balance, which improves your ratio. Which program you choose makes the difference.