More than 43 million Americans have student loan debt, with the average borrower paying around $200/month. Student loans can open the door to a valuable education and a rewarding career, but carrying and paying off that debt can be a financial burden and a barrier to homeownership. While it can be more challenging to get approved for a mortgage with existing debt, it is still very possible. Here’s a brief guide on how to manage your student debt to help improve your ability to qualify for a mortgage and buy a home.

Understand your debt

Before you begin considering applying for a mortgage to purchase a home, it is important to have a handle on your student loan debt. Make sure you know the size of your debt, the repayment terms and the interest rates. Although it can be overwhelming to sit down and look at your debt, knowing how much you owe and how much you need to pay is key to taking the next steps. If you plan on applying for a home loan while you have student debt, your budget will need to cover your new housing payments as well as your existing student loan and other debt payments.

Build your credit

Having strong credit scores and credit history makes it more likely for you to be approved for a loan and to obtain a great interest rate. If you are making your monthly payments for your student debt on time, having student loans should actually help your credit scores by contributing to a positive credit history for you. Ensure you are paying all your bills on time so you can build and maintain strong credit. Generally, you need FICO credit scores of at least 580 to qualify for a mortgage, so be sure to check your scores and work to build and maintain them.

Strengthen your finances

Additionally, it is important to manage your debt-to-income (DTI) ratio, which is an important factor that lenders use to determine your ability to repay a loan. DTI is the percentage of your gross monthly income (income before taxes and deductions) that goes toward your expected debt payments. Generally, to qualify for a mortgage, your DTI should be no higher than 43%. For example, if you earn $5,000/month and pay $500/month on your debts (student loans, auto loan, credit cards, etc.), the maximum mortgage payment you might expect to qualify for is $1,650/month ($5,000 x 43% = $500 + $1,650).

If your DTI is too high, you may be able to lower it by paying down your debts, switching to a repayment plan with lower payments, applying with a co-borrower or increasing your income. You may also be able to lower your DTI, reduce your student debt payments and save money by refinancing your student loans at a lower interest rate, such as through the CampusDoor student loan refinance program, if you qualify.

Talk to a mortgage professional

To get a true sense of your home financing options, you should speak with a mortgage professional. This will allow the lender to evaluate your specific situation and options and tell you if you are in a good position to apply for a loan now or if you need to do some more work on strengthening your financial profile. If you are ready to apply, the lender can help you take the next step and get preapproved for your home loan.


Student debt can be daunting, but it doesn’t have to hold you back from your homeownership goals. If you or anyone you know wants to find out if they are ready to finance a home purchase, reach out today for a free mortgage consultation.

Draper and Kramer Mortgage Corp. and its employees do not provide credit or financial planning advice. This material has been prepared for general informational purposes only and is not intended to provide and should not be relied on for such advice. Do not act or refrain from acting on the basis of this material without first consulting a qualified professional for advice.