Buying a Home With Student Loans: Strategies That Actually Work

The average student loan borrower carries about $38,000 in debt. If that's you, you've probably wondered whether homeownership is even possible while you're still making payments.

The short answer: yes, absolutely. Millions of people buy homes every year with student loan debt. But the debt does affect how much you can borrow, what programs you qualify for, and how lenders see your application. Here's how to navigate it.

How Student Loans Affect Your Mortgage Application

Lenders care about two things above all: your credit score and your [debt-to-income ratio](/blog/dti-ratio-explained) (DTI). Student loans directly impact both.

Debt-to-Income Ratio

Your DTI is the percentage of your gross monthly income that goes toward debt payments. Lenders calculate two versions:

Front-end DTI: Housing costs only (mortgage, taxes, insurance) divided by gross income. Most lenders want this under 28-31%.
Back-end DTI: All monthly debt payments (housing + student loans + car payments + credit cards + everything else) divided by gross income. Most lenders want this under 43-50%.

Here's where student loans hurt. If you earn $6,000/month gross and have a $400 student loan payment, that's already 6.7% of your income claimed before you even add housing costs.

Example:

Gross monthly income: $6,000
Student loan payment: $400
Car payment: $300
Credit card minimums: $100
Available for housing (at 43% DTI): $6,000 × 0.43 = $2,580 - $800 = $1,780/month

That $1,780 has to cover your mortgage payment, property tax, homeowner's insurance, and PMI. Depending on the market, that might buy you a $250,000-$300,000 home.

Without the student loans, you'd have $2,180 available for housing — enough for a $350,000-$380,000 home. The student loans effectively reduce your buying power by $50,000-$80,000.

How Lenders Calculate Your Student Loan Payment

This is where it gets complicated. Different loan programs treat student loan payments differently, and the method used can dramatically affect your DTI.

If you're on a standard repayment plan: Lenders use your actual monthly payment. Simple.

If you're on an income-driven repayment (IDR) plan: This is where programs diverge.

FHA: Accepts your actual IDR payment, even if it's $0. This is a huge advantage for borrowers on SAVE, PAYE, IBR, or ICR plans.
Conventional (Fannie Mae): If your credit report shows a payment of $0 or doesn't show a payment amount, the lender uses 0.5% of the outstanding loan balance as your monthly payment. On $38,000 in loans, that's $190/month regardless of your actual payment.
Conventional (Freddie Mac): Uses 0.5% of the outstanding balance, similar to Fannie Mae, unless the credit report shows a payment greater than $0.
VA: Accepts the actual IDR payment shown on the credit report, similar to FHA.

If your loans are in deferment or forbearance:

FHA: Uses 0.5% of the outstanding balance.
Conventional: Uses 1% of the outstanding balance (Fannie Mae) or 0.5% (Freddie Mac).
VA: Uses 5% of the outstanding balance divided by 12.

The program you choose and the repayment plan you're on can swing your qualifying amount by $50,000 or more.

Credit Score Impact

Student loans affect your credit score in several ways:

Payment history (35% of score): On-time payments help. Late payments devastate. A single 30-day late payment can drop your score 60-100 points.
Credit mix (10%): Having an installment loan (student debt) alongside revolving credit (credit cards) actually helps your score.
Amounts owed (30%): High student loan balances can drag this category down, but the effect diminishes as you pay down the principal.

If you've been making on-time payments consistently, your student loans are likely helping your credit score, not hurting it.

Strategy 1: Choose the Right Loan Program

Your loan program choice matters more when you have student debt.

FHA Loans

Best for: Borrowers on income-driven repayment plans or with lower credit scores.

Accepts actual IDR payments (even $0)
3.5% down with 580+ credit score
Allows DTI up to 50% with compensating factors
Requires mortgage insurance for the life of the loan (downside)

If you're on an IDR plan paying $200/month instead of the standard $400, FHA uses the $200. Conventional might use $190 (0.5% of $38,000) — close in this case, but for higher balances the gap widens.

Conventional Loans

Best for: Borrowers with higher credit scores (700+) and lower loan balances.

Can [remove PMI](/blog/mortgage-pmi-removal-guide) once you reach 20% equity
Lower mortgage insurance costs than FHA for strong credit
The 0.5% calculation can work in your favor if your actual payment is higher

VA Loans

Best for: Veterans and active military. Period.

0% down payment
No PMI
Accepts actual IDR payments
Competitive interest rates

If you're eligible for a VA loan, it's almost always the best option regardless of student debt.

USDA Loans

Best for: Buyers in rural and suburban areas with moderate income.

0% down payment
Income limits apply
Uses actual student loan payment if documented

Strategy 2: Optimize Your Repayment Plan Before Applying

The repayment plan you're on when you apply for a mortgage directly affects your DTI. If you're not on an IDR plan and your standard payment is high, switching plans before applying can increase your buying power.

Timeline

Switch to an IDR plan at least 1-2 months before applying for a mortgage. Your loan servicer needs to process the change, and the new payment needs to appear on your credit report.
Make at least one payment at the new amount before applying.

Which IDR Plan?

SAVE Plan: Generally offers the lowest payments (5-10% of discretionary income). Interest subsidy included.
PAYE: 10% of discretionary income, 20-year forgiveness.
IBR: 10-15% of discretionary income depending on when you borrowed.
ICR: 20% of discretionary income or a 12-year fixed payment, whichever is lower.

Run the numbers on studentaid.gov's repayment estimator. The lowest payment plan gives you the best DTI for mortgage qualifying.

Important caveat: Don't switch plans solely for mortgage qualification if it costs you more in total interest over the life of the loan. The goal is to buy a home you can afford, not to game a number.

Strategy 3: Pay Down Strategic Debt First

If you have both student loans and other debt, the order you pay things off matters for mortgage qualification.

The High-Impact Approach

[Credit card debt](/blog/heloc-vs-credit-card) and car payments often have a bigger impact on your DTI per dollar eliminated. Here's why:

Paying off a $5,000 credit card with a $150/month minimum eliminates $150 from your DTI immediately.
Paying $5,000 toward your $38,000 student loan might reduce your monthly payment by $50-$60.

Knock out small, high-payment debts first. This "DTI optimization" approach gives you more buying power per dollar spent.

When to Pay Down Student Loans Instead

If student loans are your only debt
If your student loan payment is the single thing pushing your DTI over the limit
If you have a small remaining balance that you can eliminate entirely

Strategy 4: Increase Your Income (On Paper)

Lenders use documented income. There are legitimate ways to increase what shows up:

Overtime and bonuses: Most lenders require a 2-year history of overtime/bonus income to count it. If you've been getting consistent overtime, make sure your employer documents it.
Side income: Freelance, rental, or gig income counts if you've reported it on tax returns for 2 years.
Co-borrower: Adding a spouse or partner's income to the application increases your qualifying amount. Both incomes count, but so do both debts.
Raise or promotion: If you recently got a raise, a current pay stub showing the new rate helps. Some lenders can use a new salary even without a 2-year history.

Strategy 5: [Down Payment Assistance](/blog/down-payment-assistance-programs)

Many [first-time buyer programs](/blog/first-time-homebuyer-grants-2026) offer down payment assistance that doesn't add to your monthly obligations:

State and local DPA programs: Grants or forgivable loans (no monthly payment) covering 3-5% of the purchase price. Check your state's housing finance agency.
Employer programs: Some large employers offer homebuyer assistance as a benefit.
Gift funds: FHA and conventional loans allow gift money from family for down payments. This preserves your cash for an emergency fund.

Every dollar you don't have to save for a down payment is a dollar you can use to pay down debt or keep as reserves — both of which strengthen your mortgage application.

The "Should I Wait?" Question

The biggest debate for buyers with student loans: should you pay off the loans first or buy now?

Arguments for Buying Now

Home prices have historically risen 3-5% per year. Waiting 3-5 years to pay off loans could mean paying $30,000-$75,000 more for the same house.
You start building equity immediately. Rent payments build nothing.
Mortgage interest rates may rise. Locking in today's rate could save you more than the interest cost of your student loans.
You can do both: buy a home and continue paying student loans.

Arguments for Waiting

Less financial stress. Carrying a mortgage plus student loans plus all other expenses on a modest income is tight.
Better loan terms. Lower DTI means better interest rates and more options.
Larger down payment. More time to save means more equity at purchase and no PMI.
If your student loans are small ($10,000-$15,000), you could pay them off in 1-2 years and buy debt-free.

The Middle Ground

If your student loan balance is above $30,000, waiting to pay it off completely before buying often doesn't make financial sense. The [appreciation](/blog/home-appreciation-explained) you miss and the rent you pay usually exceed the interest savings.

Instead, optimize your position (right repayment plan, pay off small debts, save a down payment) and buy when you're financially comfortable — not when you're debt-free.

Frequently Asked Questions

Can I buy a house with $100,000 in student loans?

Yes, but your buying power will be significantly reduced. On conventional loans, lenders would calculate $500/month ($100,000 × 0.5%) toward your DTI. On FHA with an IDR plan, your actual payment could be much lower. You'll likely need strong income ($80,000+) to qualify for a meaningful mortgage amount. VA loans offer the best path if you're eligible.

Do student loans in deferment count against me?

Yes. Even though you're not making payments, lenders still count a calculated payment toward your DTI. FHA uses 0.5% of the balance, conventional (Fannie Mae) uses 1%. Deferment doesn't help your mortgage application.

Should I consolidate my student loans before buying a house?

It depends. Federal consolidation combines loans into a single payment, which can simplify things but doesn't lower your total debt. If consolidation lets you access an IDR plan you weren't eligible for, it could reduce your monthly payment and improve your DTI. Private refinancing to a lower rate reduces your payment but eliminates federal protections and IDR eligibility. Don't refinance federal loans into private loans just for a mortgage — you lose too many safety nets.

Will my student loans affect my mortgage interest rate?

Not directly. Interest rates are based primarily on credit score, down payment, loan type, and market conditions. However, student loans indirectly affect your rate through your credit score and the loan program you qualify for. A higher credit score = better rate, and timely student loan payments help your score.

Can I get pre-approved with student loan debt?

Absolutely. Get pre-approved before you start house hunting. The pre-approval process will reveal exactly how much you can borrow and which loan programs work best for your situation. Talk to 2-3 lenders, including one who specializes in FHA loans. You might be surprised at what you qualify for.

[How much house can I afford](/blog/how-much-house-can-i-afford) with $50,000 in student loans?

It depends on your income, other debts, and the loan program. A rough estimate: with a $70,000 salary, $50,000 in student loans on a $250/month IDR plan, no other debt, and an FHA loan, you could qualify for approximately $280,000-$320,000. Run exact numbers with a lender — online calculators often get the student loan calculation wrong.

The Bottom Line

Student loans make buying a home harder, but not impossible. The key is understanding how different loan programs treat your debt, optimizing your repayment plan, and being realistic about what you can afford.

Don't let perfect be the enemy of good. You don't need to be debt-free to buy a home. You need a manageable DTI, a decent credit score, and enough savings for a down payment and emergencies. Millions of people carry student loans and mortgages simultaneously — the question isn't whether you can do it, but whether the numbers work for your specific situation.

Get pre-approved. See the real numbers. Then decide.

Buying Home With Student Loans

Key Takeaways