Buying a Home with Student Debt | Mortgage Specialists

We get questions regarding buying a house with student loan debt all the time. “Can I get a mortgage when I have student debt?” “How can I save for a down payment while paying off student debt?” “I have a mortgage and student debt, should I start paying one off early?” Let’s dive into it.

Student debt has been named as a contributor to declining homeownership rates among young adults. According to Education Data Initiative:

39% of Generation Z say their student loan debt is delaying them from owning a home.
60% of Millennials say their student loan debt postponed them from buying a home.
53% of Generation X stated their student loan debt is delaying them from owning a home.
37% of Baby Boomers said their student debt postponed them from buying a home.
Among home-owning Millennials who have or had student loan debt within the last two years, 70% say student loan debt postponed their home purchase; 23% delayed for 5 years or more.

And that’s not surprising because of the sheer amount of debt owed. The typical amount of education debt in 2024 among those with any outstanding loans is $37,850.

Can I even get a mortgage when I have student debt?

Yes, you probably can. The answer to this question varies on a case-by-case basis. A good indicator of whether you can afford a mortgage with your student debt is to look at your debt-to-income ratio.

Your debt-to-income ratio is how lenders assess your creditworthiness. In the simplest of terms, your debt-to-income ratio is the percentage of your monthly income needed to cover your monthly payments, such as debt and housing expenses. You want your ratio to be as low as possible, but most will qualify for a loan with a debt-to-income ratio below 43%.

How can I save for a down payment while paying it off?

Saving while paying off debt can be tricky. If interest rates are low and investments are good, we recommend only making minimum payments on your loans. That being said, each person’s financial situation is a little different, meaning you may be able to pay a little extra on your loans.

It is important to keep in mind that with debt, you’re not only looking at your current financial situation, but also your situation in the years to come. So, you need to make a decision that makes sense now and helps to prepare you for the future. Meaning, you could pay off all of your student debt right now, and be completely rid of it, but if you do, you’ll likely miss out on several years of saving for a mortgage and retirement – and all of the interest that would have accrued. Not to mention the appreciation on your home if you had purchased sooner.

I have a mortgage and student debt, should I start paying one off early?

Both mortgages and student debt are considered ‘good debt.’ That being said, they are still debts that will need to be paid off eventually. And, in paying them off early, you will save money on interest and have more financial freedom in general.

We’d recommend against paying either off early if you haven’t done one or more of the following items:

Paid off all of your consumer debt.
Saved an emergency fund of 3-6 months’ worth of expenses.
Contributed the full amount your employer will match to your 401K account.

Have additional questions about how your student debt could affect your ability to qualify for a mortgage? Give us a call at 402-991-5153. We’re here to answer your questions whether you’re ready to buy right now or not.