Buying a House With Student Loans: What Actually Matters to Lenders

Student loans are one of the biggest reasons first-time homebuyers doubt themselves. But here’s the truth: People buy homes every single day while carrying student loan debt. Lenders don’t expect you to be debt-free — they just need to understand how that debt fits into your financial picture.

Here’s a clear look at how buying a house with student loans actually works, what lenders evaluate, and how to position yourself for a “yes.”

1. Lenders Don’t Care That You Have Student Loans (They Care About the Payment)

The balance doesn’t matter nearly as much as the monthly payment that hits your budget.

Lenders are looking for one thing:

How does your student loan payment affect your debt-to-income ratio (DTI)?

DTI = your monthly debt payments ÷ your monthly gross income.

What counts as “debt payments”?

• Student loans

• Auto loans

• Credit cards (minimum payment only)

• Personal loans

• Any other recurring debt that shows up on your credit report

Most lenders want your total DTI below 43%, but FHA will allow higher (sometimes up to ~50% depending on other factors).

Why this matters:
A $50,000 student loan with a $150/mo income-driven payment impacts your application way less than a $20,000 loan with a $500/mo payment.

2. How Lenders Calculate Student Loan Payments (It Depends on Your Loan Type)

If You Have Federal Student Loans

Lenders use your actual payment shown on your credit report unless it shows $0.
If it's $0 (common with IDR plans), they’ll use one of these depending on the mortgage type:

• Conventional (Fannie/Freddie):
  Use 1% of the balance or the payment on your loan documents if it’s not truly $0.

• FHA:
  Uses 0.5% of the loan balance if a real payment isn’t reported.

• VA Loans:
  Often more flexible. They use the actual payment or a formula that’s usually lower than FHA’s.

If You Have Private Student Loans

Lenders rely on the payment that shows on your credit report.
If it’s variable or deferred, they may calculate a temporary estimated payment.

3. Income-Driven Repayment Plans Can Help You Qualify

If you're on an IDR plan (SAVE, REPAYE, PAYE, IBR), lenders will typically accept the payment as long as it’s not $0.

Tip:
If you're close to qualifying, updating your IDR plan before applying for a mortgage can lower your DTI in a way lenders legally acknowledge.

4. What Lenders Want to See Beyond the Loans

Student loans aren’t a dealbreaker—but they will expect stability in these areas:

✔️ Consistent income

W-2 income is the easiest.
Self-employment needs more documentation (usually 2 years).

✔️ A clean payment history

Late payments hurt more than loan balances.
If you had past delinquencies but are now in good standing, that recovery does help.

✔️ Manageable DTI

Your other debts matter as much as your student loans.
Paying down credit cards can move your DTI more than lowering loan balances.

✔️ Some savings (not perfection)

You don’t need a massive down payment — just enough to show you can comfortably close and cover emergencies.

5. If Your Student Loans Are Holding You Back, Here Are Some Options

Option 1: Explore or renew your IDR plan

This can reduce your payment and your DTI.

Option 2: Pay off (or pay down) small, high-DTI debts

Even $500 off a credit card minimum payment can make a bigger difference than tackling loans.

Option 3: Consider FHA if your DTI is on the high side

FHA is friendlier for buyers with debt, lower credit scores, or limited down payments.

Option 4: Add a co-borrower

Their income helps your DTI, but their credit and debts get included too.

6. Bottom Line: Yes, You Can Buy a House With Student Loans

Lenders see student loan debt every day.
What they care about is your overall financial stability, not whether you took out loans to get your degree.

With a clear plan, steady income, and manageable monthly payments, homeownership is absolutely possible.

And if you still have questions or want help figuring out where you stand, Entitled is built for that exact moment in your journey.