How Student Loans Impact Mortgage Loan Approvals

With college graduates entering the workforce and rental rates rising across the country, many people are concerned about how their student loans will affect their ability to own a home.

According to Urban Institute, 30 to 40 percent of all undergraduate students take federal student loans, and 70 percent of students who receive a bachelor’s degree take on debt by the time they graduate.

If this sounds like you or someone you know, keep reading. We detailed three important topics for anyone who wants to buy a home and has student-loan debt.

Debt-to-Income Ratio (DTI):

A primary factor that underwriters look at when assessing mortgage-loan applications is the debt-to-income ratio. This ratio compares people’s monthly debt payments to their gross monthly income. 

It’s important to note that a DTI ratio only uses the minimum required monthly debt payment, not the total balance. If someone is required to pay $200 a month but gives $1,000 instead, only $200 is used in the DTI calculation. The same goes for someone who owes $250,000 in debt but is only required to pay $500 monthly. Then only $500 is used in the calculation.

This can be relieving news for borrowers with student-loan debt because only the monthly payment of each loan will be considered in determining their eligibility for a mortgage loan.

Credit Reports:

Another major factor that underwriters assess is creditworthiness. Late or missed payments on student loans can negatively impact someone’s credit profile, potentially affecting one’s ability to get approval for a mortgage.

It’s important to understand your payment schedule as a new graduate. Contact your loan servicer to find out when your payments begin, the amount, and how often they occur to avoid any late or missed payments on your credit report.

Loan Forgiveness and Assistance Programs:

Certain professions, such as teachers, healthcare workers, or public servants, may qualify for federal loan forgiveness or assistance programs.

As an individual in one of these fields, it’s important to understand the criteria and qualifications required for these programs to make informed decisions for financial success. For more information, visit

While student loans can feel like a daunting obstacle in a mortgage application process, they typically don’t affect your odds of approval differently than most other kinds of consumer debt.

Your financial profile is unique to you. Understanding your DTI ratio, credit profile, and loan forgiveness or assistance eligibility is critical to determining where you stand in the journey to homeownership.

Whether you’re in the beginning stages of searching for home, sweet home, or you were ready to make an offer on a house yesterday, our team is here to help. Reach out any time, from anywhere, with our chat feature to learn more about how your student loans can play a role in getting approved for a mortgage.