Buying a Home With Student Loan Debt in 2025

Do you have, or plan to have, student loan debt? Here’s a PSA for you: Yes, you can qualify for a mortgage, if you’ve determined homeownership is for you.

More than 40 million people of the United States have student loan debt. And some 17 million of them are in the age category that produces the most first-time home buyers. Some — just over half — believe they’d never be approved for the additional debt load known as a mortgage. And yet, well over a third of first-time buyers also have student loans. So…

Don’t Assume You’re Ineligible.

When examining an applicant’s outstanding debt, the lender focuses on the monthly debt-to-income ratio. That’s what you need to pay per month on your student loan, versus how much income you have. Because the lender is more concerned with monthly figures than the size of the whole debt, a large load of student debt (even in six-figure territory) won’t in itself rule out an individual’s mortgage application.

A lender puts a picture together of your ability and willingness to pay back a mortgage, judging from your saving and spending history. The lender examines your credit scores, and the history of your credit use. Are you more of a saver or a spender? The mortgage lender cares. Your money-handling history can carry you through to a mortgage approval.

Your credit profile also impacts what interest rate you’ll lock in. The higher the rate, the more you can look forward to paying over the life of your mortgage. That future paying is also a factor in the debt-to-income ratio that your lender assigns to your application.

For the hopeful home buyer, how much debt is too much debt? Delve into debt-to-income ratio in our guide to DTI.

Now, about that income. Do you have at least a two-year continuous employment history? Is your credit in good shape? Those factors also go a long way.

Line up your loan statements and your income records, then seek out mortgage brokers or loan officers at banks or credit unions. It’s good to find out how you’ll look to a lender, whether you believe you might be ready now, or are scoping out plans for the future.

Consider finding a local mortgage broker with a human touch, who understands your position, wants to work with you and help you qualify, and will look for the best loan you can get.

A Few Actions May Strengthen Your Mortgage Eligibility.

More people than ever have taken loans out for higher education. More than nine in ten student loans are federal government loans, as opposed to the ones coming from private lenders. Privately issued loans tend to have a variety of options for consolidation or loan forgiveness.

Some federal loan borrowers do get student loan debt relief, too. (More here on how.) Federal student loan repayment plans can reduce your monthly repayment obligation so that your debt-to-income ratio looks stronger to a mortgage underwriter.

Note: There’s turmoil in the U.S. education department, and it’s affecting loans. For more updates, please jump down to the next section in this article, Does a Covid-Era Student Loan Default Rule Out a Mortgage?

Sometimes, one or two student loans are divided into a larger number of obligations and servicers. In some cases consolidation can be helpful, so that the applicant’s credit profile doesn’t appear to have many loans active at once.

Combining debt streams could pare down the overall interest a borrower pays. Some borrowers work with companies like SoFi® or LoanSense. And be sure to ask mortgage reps what they can glean. They have connections. For instance, CampusDoor® by Incenter is a loan management group that connects its digital platform directly with mortgage lenders’ systems.

Now, assuming you’re going to need to keep paying off the student loan(s), the loan servicer(s) may be able to send your mortgage consultant a mortgage verification letter. At the same time you request it, you might also ask your landlord, if you rent, to send a verification of rent letter for your mortgage company. These documents show you are in good standing with your previous and current payment obligations.

Good loan officers or mortgage brokers are happy to help you get your financial ducks in a row. They sharpen their skills, and it’s to their credit when the process bears fruit for clients.

Does a Covid-Era Student Loan Default Rule Out a Mortgage?

When student loan repayment pauses ended for millions of U.S. borrowers, there was a 12-month moratorium on reporting loan defaults to credit bureaus. That ended on New Year’s Day 2025. If your loan was paused, check in on your credit profile. The Biden loan forgiveness policies were mostly undone by the courts.

If your credit score tanks in 2025, it may be on account of a newly reported student loan delinquency. There has been a great deal of chaos in student loan policy. To make matters worse for the millions of people affected, the Trump administration is moving to dismantle the federal department of education. Meanwhile, federal legislation is poised to cut benefits for student loan borrowers. In the midst of the upheaval, many people can’t tell what they do and do not owe, and how that could change in the coming months and years.

No question, this is going to have a negative effect on hopeful buyers trying to save for down payments and closing costs. Plus, defaults on credit reports can torpedo applications for government-backed mortgages.

Still, you might be able to overcome a student loan credit issue. Ask your mortgage specialist if you may write a letter of explanation for why the default happened and why it does not reflect on your ability and commitment to pay off your future mortgage.

If All Else Fails…

You might have tried everything, and still come up unable to qualify for a mortgage. Lenders have put extraordinarily strict hurdles in place after the financial crisis two decades back. If you can’t get a mortgage company to work with you, you might consider making a request for help from a possible co-borrower with a stronger credit profile than yours. You’d be paying the loan, but you’d have a co-borrower named on the paperwork who gives the lender confidence.

Speak with the mortgage consultant about this possibility — and whether the co-borrower will need to be named on the deed with you until you’re in the position to refinance.

In some cases, a parent can assume the repayments on a student loan, so ask the mortgage specialist about whether that route can help your eligibility prospects. Other borrowers might have parents or someone else close to them who can help with the down payment, as a gift.

Read more with us about Funding Your Mortgage: Gifts and Gift Letters.

We hope this article has provided readers some starting points for further exploration. This article is no substitute, though, for situation-specific financial advice. Find a professional mortgage consultant to receive personalized guidance.