How Much House Can You Afford When Paying Off Student Loans?

If you’re like many Americans, you may have student loans, and you may also hope to own your home at some point. You might worry that carrying student debt and getting a mortgage are mutually exclusive, but that’s not necessarily the case.

Understanding your debt-to-income ratio and other aspects of your financial profile can be vital. It can give you a sense of how much room there is in your budget for a home loan and highlight how to improve your odds of being approved for a mortgage.

In this guide, you’ll learn about mortgage and student loan debt, including how mortgage lenders evaluate your finances, the way student loans impact your profile, and strategies that may boost your chances of getting a home loan application approved when you have student debt.

Getting a Mortgage When You Have Student Loans

Currently, Americans hold more than $1.8 trillion in student loan debt. The average federal student loan debt per borrower is more than $39,075, while the average total balance, including private student loan debt, may be as high as $42,673, according to the Education Data Initiative.

Here’s what you should know about student loan debt and mortgage qualification: When a lender is considering you for a home loan, they want to feel confident that you will pay them back on time. A key factor is whether they think you can afford the mortgage payment with everything else on your plate. To assess this, a lender will examine your debt-to-income ratio (also known as DTI), or how high your total monthly debt payments are relative to your gross monthly income.

For the debt component, the institution will look at all your liabilities. These can include:

•   Car loans

•   Credit card payments

•   Student loans

Many industry professionals say that your debt-to-income ratio should ideally be below 36%, with 43% the maximum. If you have a high student loan payment or a relatively low income, that can affect your DTI and your chances of qualifying for a mortgage.

Can You Get a Mortgage With Student Loan Debt?

Student loan debt and getting a mortgage is possible. However, while carrying student loans doesn’t disqualify you from getting a mortgage, it can make it more difficult. That’s because student loan debt will increase your DTI ratio, which can make it harder to qualify for funds from lenders.

For example, say you hypothetically earn an annual salary of $60,000, making your gross monthly income $5,000. And you owe $650 per month on a car loan and have a credit card balance with a $500 monthly minimum payment.

And let’s say you have student loans with a minimum payment of $650 a month. All your debt payments add up to $1,800 a month. So your debt-to-income ratio is $1,800/$5,000 = 0.36, or 36%. That’s right at the limit that some conventional lenders allow. So you can see how having a student loan payment can affect your ability to qualify for a mortgage.

Another way that student loans can affect your chances of buying a home is if you have a history of missed payments. If you don’t make your minimum student loan payments each month, that gets recorded in your credit history.

When you consistently stop paying your student loans, your loans can become delinquent or go into default. Skipping payments is a red flag to your potential mortgage lender: Since you haven’t met your obligations on other loans in the past, they may fear you’re at risk of failing to pay a new one as well.

That said, if you have an acceptable DTI ratio and a history of on-time payments on your student loans, you likely have a good shot at being approved for a mortgage. It’s not a matter of having to make a choice between paying off student loans or buying a house — you can do both as long as you meet the parameters.

Estimate How Much House You Can Afford

Taking into account the debt-to-income ratio you just learned about, you can use a home affordability calculator to get a general idea of how much you can afford. This tool is one you can use to help estimate the cost of purchasing a home and the monthly payment.

How Student Loan Debt Affects Your DTI Ratio

As noted, student loan debt can increase your DTI ratio. How much it will increase your DTI number will depend on how big your loan debt is.

In addition, other debts you owe are also factored into the DTI equation. Consider these two scenarios:

•  Person A earns $120,000 and has $80,000 in student loan debt, plus a car payment, plus $15,00 in credit card debt.

•  Person B earns $80,000, and has $10,000 in student loan debt, no car payment, and $3,000 in credit card debt.

It’s likely that Person B will have an easier time qualifying for a home loan than Person A since Person A will have a higher DTI ratio.

Understanding Front-End vs Back-End DTI

When you’re purchasing a home, lenders generally calculate two types of DTI — front-end DTI and back-end DTI.

Front-end DTI looks specifically at how much of your income will go toward your future estimated housing-related costs if you are approved for a mortgage, including mortgage payments, homeowner’s insurance, and property taxes.

Back-end DTI factors in all your debt, including student loan debt, credit card debt, and car loan debt, in addition to housing debt.

How Lenders Use DTI to Assess Risk

Lenders use your DTI to evaluate your ability to take on and manage new debt. They do this by comparing your total monthly debt payments to your gross monthly income. The lower your DTI ratio, the better, as it indicates that you’re in a stronger financial position to take on more debt. As mentioned, many lenders prefer a DTI of 36% or below. A higher DTI signals that you have a high proportion of debt relative to your income, which could make you a riskier borrowing proposition.

Strategies to Improve Your DTI Ratio

There are a number of ways to improve your DTI ratio that will also help strengthen your financial situation overall.

•  Reduce your debt. Whether it’s student loans, credit card balances, or a car loan, tackling some of your debt could help lower your DTI. Debt-reduction methods include: prioritizing paying off high-interest loans, which tend to weigh more heavily in your DTI calculation, and making extra loan payments to help reduce what you owe and repay debt faster.

•  Increase your income. Earning more money will improve your DTI ratio and it can help you pay off debt, too. Consider asking for a raise, looking for a new higher-paying job, or taking on a side hustle.

•  Consider debt consolidation. A debt consolidation loan for high-interest debt such as credit card debt could give you a fixed lower interest rate, which could make it easier and potentially faster to repay what you owe.

Improving Your Chances of Qualifying for a Mortgage

Your student loan debt is just one part of the picture when you go shopping for a home loan. Lenders look at many other aspects of your financial situation to assess your trustworthiness as a borrower. By focusing on improving these factors, you may be able to increase your chances of getting a mortgage.

Paying Down Credit Card and Consumer Debt

Paying down high-interest credit card debt, as well as other consumer debt such as student loans and car loans, can help lower your DTI and improve your chances of getting a mortgage.

To do this, you could pay more than the minimum due on your credit cards and/or loans, direct extra payments on your credit card or loan debt, or put more money toward the principal balance on your student loans or auto loan. By paying down the balance on your debts, you can potentially pay off debt faster and reduce the amount of interest you’ll pay overall.

Building Your Credit Score Through Timely Payments

Your credit score is an important measure lenders use to evaluate how risky it would be to lend to you. Your credit score is determined by many factors, including whether you’ve missed payments on bills in the past, which accounts for the biggest percentage (35%) of your score.

If your credit score is below 650 or 700, you may want to work on building it. Starting by consistently making your payments on time may help. If keeping up with payments has been challenging for you in the past, you can set up automatic payments to your credit card so you don’t miss or forget a due date.

How Student Loan Refinancing May Help

If you have student loans and you’re trying to buy a home, another way to potentially improve your debt-to-income ratio is to consider student loan refinancing to help pay off your student debt.

With student loan refinancing, you replace your existing student loans — whether federal, private, or a mix of the two — with a new loan from a private lender that comes with fresh terms.

Refinancing can help borrowers obtain a lower interest rate than they previously had, which may translate to meaningful savings over the life of the loan. You may also be able to lower your monthly payments through refinancing, which can reduce your debt-to-income ratio. A student loan refinancing calculator can help you determine how much refinancing might save you.

Refinancing isn’t for everyone, since you can lose benefits associated with federal student loans, such as access to deferment, forbearance, loan forgiveness, and income-based repayment plans. But for many borrowers, especially those with a solid credit and employment history, it may be an effective way to reduce debt more quickly and improve their chances of getting a mortgage.

Recommended: Preapproval vs Prequalification

Tools to Estimate Home Affordability With Student Loans

Before you apply for a mortgage with student loan debt, you can take some steps to see how much of a mortgage you can afford — including the mortgage principal and interest — without being overburdened. These tools and resources can help.

Using a Mortgage Calculator with Debt Inputs

Online tools such as a mortgage calculator can be a good place to start. Look for a calculator with debt inputs that factor in your existing monthly debt, such as your student loans, car loan, and credit card payments. Once you input your debts along with your income, the calculator can give you an estimate of a home price you can afford.

Working with a Mortgage Advisor

A mortgage advisor could help you assess your overall financial situation, including your debts, income, and credit. The advisor will also likely talk to you about your goals for buying a house. They can then typically help you determine the best type of home loan for your needs, such as fixed rate or variable rate, and give you options from their network of lenders.

The advisor also usually helps would-be buyers prepare and submit their loan application when the time comes.

The Takeaway

Student loans and a mortgage aren’t mutually exclusive. Paying for your education doesn’t have to cost you your dream of owning a home.

If you’ve been making student loan payments on time and your overall debt is manageable relative to your income, your loans might not be an issue at all. If your student loans do become a factor, you can take steps to get them under control, potentially improving your chances of qualifying for a mortgage. Options might include making extra payments on your loans or refinancing them.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can I refinance student loans to improve my mortgage eligibility?

Refinancing student loans might improve your mortgage eligibility. If you obtain a lower interest rate, you could potentially pay down your student loans more quickly, which could lower your debt-to-income (DTI) ratio. However, refinancing federal loans means you are no longer eligible for loan forgiveness and other federal programs.

Can a cosigner help if I have student loans and want to buy a house?

A cosigner with a strong financial profile and credit history could help improve your chances of being approved for a mortgage by lowering your debt-to-income ratio and making you less risky as a borrower from the lender’s perspective.

Will a history of on-time student loan payments positively impact my mortgage application?

A history of on-time loan payments is an asset. It can help build your credit score, which is one of the factors lenders use to assess whether to approve your mortgage application.

How much of a mortgage can I qualify for if I have student loan debt?

How much of a mortgage you can qualify for if you have student loan debt depends on your debt-to-income (DTI) ratio, which is the amount of debt you have compared to your gross monthly income. Most lenders prefer a DTI under 36%, with a maximum of 43%. You can use a mortgage calculator that factors in your existing debts, such as student loans, along with your income to get an estimate on how much of a mortgage you may be able to afford.

Should I delay home buying until after my student loans are paid off?

While it depends on your specific situation, you don’t have to delay buying a home until after you pay off your student loans. If you have an acceptable debt-to-income ratio, a steady job, and a history of on-time payments on your student loans, you may be able to qualify for a mortgage.

---

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOSLR-Q126-008