Buying a House with Student Loan Debt:
Do Student Loans Affect Buying a House?

How Do Student Loans Affect Buying a House?

There are several ways that having student loan debt can affect your ability to buy a house. First, having any type of loans or debt - student or not - can affect what is known as your debt to income ratio. Lenders look at this ratio when approving loans to see if you can afford the financial burden of a monthly payment. Usually, to qualify for a mortgage, you need less than a 43% debt to income ratio.

If you have high amounts of student debt, this can push you over that limit and you may need to wait until you have paid down your loans to qualify. Buying a house with $100k student loan debt will be more difficult than buying a house with $20k student loan debt.

Additionally, if you have a high student loan payment every month, it can make it difficult to save enough money to make a down payment on a house. If your payments are higher than you can currently afford, being late on your payments or missing payments can also affect your credit score.

There are many ways that student loan debt can affect your ability to buy a house. Depending on your income level, your lender may have suggestions about what you can do to pay down your loans and qualify for a higher loan amount or lower interest rate.

Buying a House with Student Loan Debt

While buying a house with student loan debt may seem challenging, it is not impossible. Your lender will look at your overall financial health, and having student loan debt is not make-or-break when it comes to purchasing a home. There are several ways that you can improve your financial appearance.

First, you can try to reduce your debt to income ratio in other ways. If you have credit card balance or car loans, you can tackle paying off the lower loan amounts first. If you pay off one of the accounts in full, that will significantly improve your debt to income ratio and can also improve your credit score.

Having a good credit score can also improve your chances of qualifying for a home loan. You can also try to reduce or negotiate your student loan payments if you have federal loans, or explore alternative mortgage options.

Conclusion

Overall, while buying a house with student loan debt might be more difficult than someone who does not have debt, it is not out of the question. Talk to your lender about how your student loans affect buying a house.