Qualifying For a Home With Student Debt

Can I Qualify for a Home Loan with Student Loan Debt?

The simple answer to this commonly asked question is yes, you can qualify for a home loan despite having student loan debt. Student loan debt may impact your ability to qualify for a mortgage but does not make it impossible. Thanks to a recent announcement made by Housing and Urban Development (HUD), it is now easier for borrowers with student loans to qualify for housing loans, specifically FHA loans.

The biggest factor loan companies consider after receiving a mortgage application is the potential borrower’s credit used compared to total available credit. This plays a significant role in qualifying for any mortgage and is defined as the ratio of your monthly obligation towards debt vs your monthly qualifying income.

In Conclusion

If you have a $20,000 loan balance on your deferred student loans, your monthly debt obligation will be calculated as 0.5% of $20,000, which is $100. Before this transition to 0.5%, the debt obligation used to be 1%. Now, with the extra 0.5% saved, you can put more money toward a housing loan and will help you qualify for a bigger FHA loan.

The main purpose behind this announcement is to help serve first-time homebuyers, which are one of FHA’s core demographic groups. Over 80 percent of FHA mortgages are for first-time homebuyers with 45 percent of this group being borrowers with student loan debt.