Why student debt isn’t a dealbreaker
For many buyers, student loans feel like the biggest obstacle to homeownership—but in reality, millions of people purchase homes every year while still paying off their education. Lenders don’t automatically disqualify you for having student debt. They simply look at how that debt fits into your overall financial picture.
Here’s what really matters and how student loans influence the approval process.
How Student Loans Affect Your Debt-to-Income Ratio
Your debt-to-income ratio (DTI) is one of the key factors lenders use to determine affordability. This ratio compares your monthly debt payments to your monthly gross income.
Your student loan payment—whatever number appears on your credit report—gets added to your monthly debt total.
But here’s the good news:
Lenders don’t always use the standard payment. In many cases, they use the actual income-driven repayment amount, even if it’s significantly lower.
Income-Driven Repayment (IDR) Plans Help More Than You Think
If you’re enrolled in an IDR plan, the lender may use:
- Your current IDR payment
- Your documented monthly repayment amount
- A percentage-based calculation when no payment is reporting
This can dramatically lower your DTI and increase your qualifying power. Even borrowers with large student loan balances often qualify comfortably when IDR plans are factored in.
What If Your Loans Are Deferred or in Forbearance?
Different loan programs treat deferred loans differently.
- Conventional loans usually use a percentage of the loan balance if no payment is reporting.
- FHA loans may use 0.5% of the balance as a placeholder.
- VA loans often use actual payments or documented calculations.
This ensures lenders have a realistic expectation of future obligations.
Your Credit Score Matters More Than Your Loan Balance
Having student loans does not automatically reduce your credit score. In fact, making on-time student loan payments can improve your credit profile, especially for younger buyers building credit history.
Lenders care more about:
- Your payment history
- Whether you’ve avoided late payments
- How your overall credit profile looks
The size of the loan balance matters far less than the consistency of repayment.
How Affinity Home Lending Helps Buyers with Student Loans
Our team works closely with buyers to:
- Use the lowest allowable qualifying payment
- Analyze IDR options
- Help document reduced payments
- Structure your application to maximize approval strength
Student loans don’t have to stand between you and your first (or next) home.