Buying a Home When You Have Student Loan Debt

If you have student loan debt, you might be unsure if you can also buy a home while still paying off your student loan debt. It's true that In most cases, you can buy a home while also holding student loan debt, but because you have debt, there are a few things you need to keep in mind as you decide if now is the right time for you to buy.

First, take a good look at your income. Is your income 1) stable, 2) consistent and 3) enough to pay for both a mortgage, home costs, and repay your student loan debt? Make a budget and see how your income stacks up to your anticipated expenses.

This is one of the most important parts of getting approved for a mortgage. Lenders will take a very close look at your income to make sure that you can pay for both your debt and your mortgage each month. If your income isn’t stable or enough to cover the cost of student loans and a mortgage payment, focus on growing your income or reducing your costs.

Second, understand what your debt-to-income (DTI) ratio is. This is another one of things your lender will pay close attention to. Most lenders want to see a DTI ratio below 43%--the lower the better! It’s also important to keep in mind that most conventional loans will not allow a DTI over 45%, but there are other loan programs, especially those for first-time homebuyers, that might better support your situation.

To calculate what your DTI is, add up your monthly debt and housing/rent payments then divide that by your gross (before tax). Turn the resulting number into a percentage and you have your monthly DTI ratio. If your DTI is too high, you can look into consolidating your student loan debt and focus on making payments to get your total debt amount down, which will in turn reduce your DTI.

As you can see, it’s possible to make your dream happen and become a homeowner even if you have student loan debt. If you’re ready to learn more and see if buying a home right now is right for you, I'm ready when you are.