When people start thinking about buying a home, one of the first concerns that comes up is student loans. I hear questions all the time like, “Do I need to pay off my student loans before I can buy a house?” or “Will my student loans stop me from getting approved for a mortgage?”

The truth is, student loans don’t automatically prevent you from becoming a homeowner. Many homeowners carry student loan debt. What really matters is how those loans affect your overall financial picture.

I learned this personally when I purchased my first home.

At the time, I didn’t fully understand how much my monthly student loan payment factored into the mortgage process. I knew I had student loans, of course, but I hadn’t realized how closely lenders look at that monthly payment when determining how much house you can afford.

Once I understood how it worked, everything made more sense.

Why Monthly Payments Matter

The biggest factor lenders look at is something called your debt-to-income ratio, often referred to as DTI.

Your debt-to-income ratio compares your monthly debt obligations to your gross monthly income. This helps lenders determine whether taking on a mortgage payment is financially manageable.

Your student loan payment is included in that calculation.

For example:

Monthly income: $6,000
Student loan payment: $250
Car payment: $450
Credit cards: $150

Total monthly debt: $850

In this scenario, the debt-to-income ratio is about 14 percent, which is considered healthy by most lenders.

Most lenders prefer your total debt-to-income ratio to stay below about 36 percent, although some loan programs allow higher ratios depending on credit and income.

The key takeaway is this: it’s not just the student loan balance that matters—it’s the monthly payment.

What Happens If Your Loans Are Deferred?

Many people assume that if their student loans are in deferment or forbearance, lenders won’t count them.

Unfortunately, that’s not always the case.

If a credit report doesn’t show a monthly payment, lenders are required to estimate one. They often calculate a payment based on a percentage of the total balance.

For example:

Student loan balance: $40,000

A lender might estimate the payment at 0.5 percent of the balance, which would be $200 per month.

Even if you’re not currently making payments, that estimated amount may still be used in the mortgage calculation.

Choosing the Right Repayment Plan

This is where strategy becomes important.

If you choose the right student loan repayment plan—one that aligns with your income—it can make a big difference when preparing for a mortgage.

Income-driven repayment plans, such as:

• Income-Based Repayment (IBR)
• Pay As You Earn (PAYE)
• SAVE plans

adjust your monthly student loan payment based on what you earn.

When the payment on your loan statement reflects that lower amount, lenders will usually use that actual payment when calculating your debt-to-income ratio.

This can make the difference between qualifying comfortably for a mortgage and feeling financially stretched.

What If Your Loans Are in Default?

If student loans are in default, that situation will need to be addressed before moving forward with a mortgage.

In many cases, borrowers can resolve this by entering a repayment plan, bringing the loan current, or completing a rehabilitation program.

Once the loan is back in good standing and payments are being made consistently, the path toward homeownership becomes much clearer.

The Bigger Picture

Student loans are just one part of the financial equation.

When lenders evaluate a mortgage application, they look at several factors together, including:

• Your monthly student loan payment
• Your overall debt-to-income ratio
• Your credit history
• Your employment and income stability

Many people successfully purchase homes while still managing student loan debt. The key is understanding how those loans fit into the bigger financial picture.

A Lesson I Learned

Looking back, the biggest lesson for me was realizing that alignment matters more than elimination.

I didn’t have to completely get rid of my student loans to become a homeowner. What mattered was making sure my repayment plan worked within my overall financial structure.

When your debt, income, and repayment strategy are aligned, homeownership becomes much more attainable.

Final Thought

If you’re carrying student loan debt and dreaming of owning a home, don’t assume the door is closed.

With the right strategy and a clear understanding of how lenders evaluate debt, it’s possible to move forward with confidence.

As I often say:

Financial freedom begins when intention replaces survival.

— Tish Griffin
TishTalks™