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Can I Still Buy a Home with Student Debt?

The student debt crisis has progressed to a point where many recent graduates assume that they will never pay off their loans in their lifetimes. This causes stress and anxiety for these young professionals and leaves many of them wondering if they’ll ever be able to do the things they had always dreamed of, such as buying a home.

But while it can feel like buying a home is out of reach when your monthly loan payments continue to accrue interest, there are ways for even those with the most crushing levels of debt to purchase a home. In this article, we will examine a few of the ways in which new graduates with crippling levels of student debt can purchase a home and live the life they have always wanted.

Improve Your Debt-to-Income Ratio

When applying for a mortgage, lenders look very closely at what is known as your “debt-to-income ratio”. As the name implies, this is a measure of how much you owe (for credit card payments, car loans, and of course student loans) as compared to how much income you generate.

By improving this ratio, you appear as a more appealing candidate when applying for a mortgage. Lenders will see that, while you may have massive debt, you are doing everything you can to create a more manageable debt-to-income ratio. This goal can be accomplished in a number of ways including:

·         Loan Consolidation.

·         Making Payments on Credit Cards.

·         Not Opening New Credit.

Follow the Advice of Fannie Mae

The Federal National Mortgage Association, nicknamed Fannie Mae, is the government-backed source for any information needed with regards to mortgages and housing concerns. The program suggests a few options for those looking to purchase a home while maintaining a large amount of student debt:

·         Ask Friends and Family for Help. If you are able to do so, having someone else pay off a portion of your debt will not factor into your debt-to-income ratio and will fall under the category of “debt-paid-by-others”.

·         Use the Student Loan Payment Calculator. This option enables lenders to factor in information about a mortgage applicant’s loan payments, leading to an improved mortgage application

·         Consider Your Refinancing Options. With “Student Loan Cash-Out Refinancing”, you will have more options for paying down your debt while at the same time refinancing your mortgage rate to a more manageable level.

Use a Co-signer

The last option that we’ll discuss today, is that of using a co-signer for your mortgage. While this is an excellent option for many borrowers, the use of a co-signer can bring its own set of issues. For example, if at some point you decide that you no longer need to or want to have a co-signer on your loan, you will be forced to refinance the loan. Refinancing generally comes with hefty costs, so if you end up deciding to use a co-signer, just know that you will likely have some extra costs down the road.


There’s no doubt about it, buying a home with student loan debt is a daunting prospect. But with careful adherence to the steps outlined above, and partnering with a good mortgage professional, you’ll be in your dream home before you know it.

Infographic provided by The Sherry Riano Team, FHA home improvement loan

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