Student loan graduation cap and cash representing mortgage eligibility in Colorado

One of the most common questions I hear from buyers in Colorado is:
Can I qualify for a mortgage if I have student loans?

The answer is yes, you can.

Having student loan debt doesn’t automatically keep you from buying a home. The key is how it affects your monthly debt payments and how we structure your mortgage.

What lenders really look at: debt-to-income ratio

When you apply for a loan, we look at your debt-to-income ratio (DTI). That’s a percentage that compares your monthly debt payments to your gross monthly income.

For example:

  • Income: $6,000 per month
  • Student loans: $250
  • Car loan: $300
  • Proposed mortgage: $2,000
  • Total monthly debt: $2,550
  • DTI: about 42.5%

Most loan programs allow a DTI up to 50%, and some go as high as 57% depending on your credit and the type of loan.

So even if you have student loans, you may still qualify. We just need to look at the full picture.

You can learn more about how DTI works from the Consumer Financial Protection Bureau (CFPB).

Some loan programs are more flexible

  • FHA loans are popular for buyers with student loans because they allow for higher DTI and more flexible guidelines around how student loan payments are calculated.
  • VA loans are great if you’re eligible as a veteran or service member. They offer some of the most flexible guidelines available.
  • Conventional loans can also work well if your student loan payment is low or reported as income-based.

Even if your loans are deferred or in forbearance, there are still options available. The Federal Student Aid site also offers helpful information on student loan repayment plans and deferment.

What to do next

If you’re thinking about buying a home in Centennial, Denver, Parker, Castle Rock, Highlands Ranch, or anywhere in Colorado, and you’re wondering how your student loans fit in, let’s talk.

We can take a look at your numbers, see where you stand, and give you real guidance. No guessing. No pressure. Just clear answers.

Call or text me at 303-670-0137, email rbaxter@choicemortgage.com, or reach out here.

Posted in Blog, Home Purchase