Can I Buy a House With Student Loan Debt?

Student loans are undoubtedly a daunting financial obstacle, so it’s only natural to feel like they’re holding you back from owning a home. But buying a house with student loan debt is possible. Whether or not you should get a mortgage with student loans will depend on the amount of debt you have and what your personal financial situation looks like, including factors like your income, savings and credit score.

Steven Park, a mortgage loan officer with Zillow Home Loans, says owning a home while paying off student loan debt is far more common than many might think.

“If you have a stable source of income and can manage your finances, student loan debt shouldn’t stop you from home ownership,” Park says.

Minimum payments for student loans can be very manageable alongside a mortgage payment, Park adds, depending on how much you owe. And while being debt averse and wanting to pay everything off might seem like the responsible thing to do, it may ultimately lead to missed opportunities.

We asked Park some of the biggest questions about buying a home while paying off student debt.

Can you get a mortgage with student loans?

It’s not uncommon for a first-time home buyer to have anywhere from $30,000 to $100,000 in student loan debt and still qualify for a mortgage, Park says.

Like any other kind of debt, the student loans will simply be part of an applicant’s total debt obligations and credit profile for qualifying purposes. The same considerations apply to car payments, credit card payments and any other personal loans.

Carrying student loan debt should not prevent you from considering buying a home. Instead, talk to your loan officer about how your student loan payments may factor into your application.

Check out your finances with Zillow's Affordability Calculator

Factors that impact buying a house with student loans

Here are some important factors your loan officer may review with you.

Your debt-to-income (DTI) ratio

A debt-to-income ratio is the percentage that compares your monthly debt payments to your monthly gross income, giving you a realistic perspective on what you can and can’t afford.

A DTI ratio of 36% or less is generally considered ideal because it will show your lender that you’re not overstretched financially. That said, many lenders will lend with DTI ratios higher than 36%, depending on the borrower’s credit profile, desired loan amount, and other factors. You can use Zillow’s DTI calculator to get a realistic estimate of your personal debt-to-income ratio.

Outstanding student loans have the potential to reduce your purchasing power, depending on the broader financial situation you’re facing. Consider paying off your student loans if your debt-to-income ratio is high.

But they also might not be hurting your purchasing power at all. It depends on your income, the actual purchase price of the home, any other debts you might have on your credit report and the cost of your new monthly house payment. 

Your credit score

Loan officers will consider your credit score when you apply for a mortgage. Paying student loans on time can affect your credit score, which is why it’s important to make timely payments to keep your score strong. 

Your savings

When money that you would normally put into savings is going to your monthly debt payments, it can be harder to save for other things — like a down payment or closing costs on a home. Some mortgages do require as little as 3% for a down payment — or even 0% down with a VA loan — but the more you have saved, the more flexibility you’ll have when it comes to purchasing power.

While it may not seem that way, saving for a down payment can still be an option while you’re paying off student loans. Budget and allocate money to buckets that make sense for your lifestyle, so that you can pay down your student loan debt and also reach your home buying goal. Here are 21 creative ways to save.

How to buy a house with student loan debt

Before diving into the process, do yourself a favor and get pre-qualified so you can see exactly how your student debt might affect which loans you do and don’t qualify for. 

Once you’ve done this, there are other steps you can take to move the process along.

Check your credit score and work on improving it if needed

Your credit score is an important part of whether or not you’ll be eligible to buy a home. If you went through a period of time where you weren’t able to pay off your loans and they’re damaging your credit score, look for additional ways to improve your score. For example, focus on paying your credit card bills on time.

If you want more information on how your credit score affects qualifying for a mortgage, check out these Zillow resources that outline how your credit score is calculated and exactly what kind of credit score you’ll need if you’re considering buying a house.

Understand what’s in your price range with our BuyAbility tool

Two important things you need to know before buying a home is where your credit score is at, and your DTI. Once you have that, you can use Zillow Home Loan’s BuyAbility tool to get a picture of what you can likely afford when it comes to buying a home.

Visit the Home Loans tab in your Zillow app to find the tool. Once you’re there, enter basic financial details like the range of your credit score and how much you have saved for a down payment. BuyAbility will use that info to calculate the home price you can likely afford in your area, based on current mortgage rates. And that will tell you just where you stand in affording the home you want.

If you want a more detailed picture of your debt-to-income ratio, check out Zillow’s DTI calculator, too.

Aim to decrease the number of debts you owe

Say goodbye to as much debt as you can. Tackling other debt before you take on a mortgage will help set you up for homeownership success. Learn about more ways to pay off debt.

This will help improve your DTI, which ultimately affects which homes you will and won’t be able to afford. Pay off any manageable outstanding debts — like small credit card bills, medical bills or outstanding car payments.

It can be helpful to zoom out and take a look at your current budget. If it’s already tough to pay your existing debts, adding a mortgage and other homeownership costs to your spreadsheet could be even harder. If you don’t know where to begin, Zillow’s Affordability Calculator can be a good starting point to figure out what you can buy.

Get pre-qualified for a loan

Once you know how much house you can afford, you know how much money you need to borrow for your mortgage. Very few home buyers purchase a home without financing. In fact, a 2022 Zillow study showed that 78% of buyers used a mortgage to finance their home purchase.

While optional, getting pre-qualified will give you confidence in how much you could qualify for with your current income and debts. You can get pre-qualified with us at Zillow Home Loans in as little as five minutes, with no impact to your credit.

Consider first-time home buyer or DPA programs

There are first-time home buyer programs, including down payment assistance (DPA) programs, that may help make financing a home more attainable, especially if you’re managing paying off student loans.

Zillow’s guide to first-time home buyer programs will help give you more information on resources you should look into as you explore your options.

Can I buy a house with more than $100K in student loan debt?

Whether or not you can buy a house with more than $100K in student loan debt will depend on your total financial picture. Debt is all relative to the stability and size of your income, Park says. “Luckily, the mortgage industry will prevent someone from overburdening themselves with payments that are too high relative to their income,” he adds.

To decide whether you qualify for a mortgage, lenders will determine your student loan payment based on your credit report and then factor that into your DTI. Your DTI will help determine the maximum loan amount you would qualify for.

Once you take a look at what you can afford based on your current income and monthly student loan payments, you can decide if there’s an alternative path that might help you achieve your home buying goal. Mortgage loan officers won’t be able to give you financial advice, so you should consider speaking to a financial advisor for some clarity on your options. 

For example, financial experts might point to income-driven repayment plans to help you optimize your income and monthly student loan debt — and ultimately, your DTI — in a way that may benefit you when you apply for a mortgage. You might actually be paying more towards your student loan than you need to be, based on how much money you’re making and how much you owe, and an income-driven repayment plan can help resolve that, ultimately making your payments more manageable and an ideal mortgage within reach.

Should you pay off student loans before buying a house?

When considering whether to buy a house or pay off student loans, it’s important to look at where you live and where you stand financially. “Home ownership is not for everyone at every stage of their lives,” Park says. 

You have to ask yourself: Do I have what it takes to pay the down payment? Can I afford the monthly payment? Will I be able to continue to make the same payment for the next 10 years?"

"If you can answer 'Yes" to all of these questions, you will most likely benefit from owning a home, and you should start looking for a house,” Park says.

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