How to Buy a Home with Student Loan Debt
For many Americans, student loan debt can feel like one of the most significant barriers to buying a home. According to the Education Data Initiative, as of August 8, 2025, the average federal student loan debt balance is $39,075.
Balancing monthly student loan payments while trying to save for a down payment for your home can feel overwhelming. But the good news is that having student loans does not automatically prevent you from becoming a homeowner. With the right strategy, loan program, and guidance, you can successfully achieve your goal of homeownership.
In this guide, we’ll discuss how student loan debt affects the mortgage process, what options are available, and why programs like the FHA Home Loan can be a smart choice.
Can You Buy a Home with Student Loan Debt?
Yes. Lenders expect to see student loans on applications, especially for first-time homebuyers. The main factor is how those loans affect your debt-to-income ratio (DTI).
DTI shows how much of your monthly income goes toward debts compared to your overall income. Many lenders want a DTI of 43 percent or lower. FHA and other programs may allow a higher ratio if you have strengths like strong credit or a larger down payment.
How Student Loans Affect Mortgage Approval
When you apply for a mortgage, lenders look at:
- Your monthly student loan payments, even if they are deferred
- Your overall debt-to-income ratio
- Your credit score and payment history
- How much you have saved for the down payment and closing costs
If you are on an income-driven repayment plan, lenders may use the reduced payment when they review your application, depending on the loan program. The goal is to make it easier to qualify for a mortgage.
FHA Home Loan Benefits for Borrowers with Student Loan Debt
The FHA Home Loan is one of the best options for first-time homebuyers. It works well if you have student loan debt because it has flexible guidelines.
- You might be able to put down as little as 3.5 percent with a qualifying credit score.
- Credit score requirements are more flexible than conventional loans.
- FHA rules for student loan payments were recently updated to make qualifying easier for borrowers on income-driven repayment plans.
Tips for First-Time Homebuyers with Student Loan Debt
If you are planning to buy a home while still paying student loans, these steps can help:
- Build your credit by paying bills on time and lowering credit card balances.
- Lower your DTI by paying down smaller debts or refinancing loans if it makes sense.
- Look into down payment assistance programs that offer grants or forgivable loans.
- Get pre-approved early so you know what you can afford.
- Work with a local lender who understands how student loans fit into the process.
Frequently Asked Questions
Can I qualify for an FHA Home Loan if I have student loan debt?
Yes. FHA loans are designed to be flexible for first-time homebuyers. Your student loan debt will be factored into your debt-to-income ratio. Still, FHA recently updated its rules to make it easier for borrowers on income-driven repayment plans to qualify.
Do deferred student loans count when applying for a mortgage?
Yes. Even if your student loans are in deferment or forbearance, lenders must include a calculated payment in your DTI. The amount depends on the loan program you use.
What is the best mortgage for first-time homebuyers with student loans?
The FHA Home Loan is often one of the best choices because of its low down payment requirements, more forgiving credit criteria, and updated rules for student loan debt. Other programs, like Conventional Loans with first-time buyer features, may also work depending on your financial profile.
How can I improve my chances of getting approved with student loan debt?
A great starting point is to work with an expert loan officer to look at your financial health and come up with a plan if you aren’t quite ready to buy a house yet. They might advise you to lower your other debts, improve your credit score, save for a down payment, and get pre-approved early. These steps can strengthen your application, even with student loans.
Will my income-driven repayment plan help me qualify for a mortgage?
In many cases, yes. Lenders can use your income-driven payment instead of a higher calculated payment, which may improve your DTI and make qualifying easier.
Student loans do not have to stop you from becoming a homeowner. Programs like the FHA Home Loan and proper planning can make it possible to move forward sooner than you think.
At First Heritage Mortgage, we help first-time homebuyers every day, including those with student loan debt. Our team will walk you through your options, explain how your student loan debt factors into your approval, and help you take the next step toward buying your first home.
Get started today by scheduling a free consultation with one of our expert loan officers.
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