How can I buy a house when my college debt is so high?

 Our guest author today:  Thomas Buckley 

A house with a garage.

Since you're reading these words, there's a good chance you owe a good deal in student loans. You also assume that such a scenario can make things difficult for you when applying for a mortgage. However, buying a place instead of renting one when your college debt's a bit high is doable, as long as you're sure not to take on more debt than you can afford. We'll show you just how it's done. You'll learn how to buy a house even if your college debt is high. Stay tuned to see what your options are!

#1 Enhance your credit score

Did you know that you can maintain a good credit score even if you're indebted? Your student loan most probably won't do any harm to your credit score unless, of course, you've been missing payments. Here we'll show you some ways to boost your credit score before applying for a mortgage.

A laptop next to some credit cards.

You'll need a good credit score to get approved for a mortgage.

Don't forget to pay your bills on time

As we've already said, as long as you pay your bills on time - you're good. These so-called on-time payments matter significantly to your credit score. So, pay in full or before your due date, and you'll be on your way to building a sturdy financial reputation.

Don't close your old accounts

Some of you might think that shutting off an old credit card account is an obvious method to increase your credit score. However, that's not the truth. Here's our take: an old credit card account can help your credit, especially if we're talking about an account in good standing. The longer your credit history, the greater your credit score. Also another plus is the average age of your accounts: the older, the better.

Utilize different types of credit

You'll want to use different types of credit. If you're "sporting" a so-called thin file with little credit in your past, that will not help your future lenders make a good judgment. A good combo of revolving credit (credit cards, etc.) & installment loans (such as your car payments) will show that you can manage various types of debt.

#2 Reduce your DTI (debt-to-income) ratio

Of course, you're probably well aware that a mortgage lender will want to calculate your so-called DTI (debt-to-income) ratio to see whether you're eligible to make monthly payments on a new mortgage. Once you're trying to buy yourself a home with a student loan, you'll need to consider the impact your loans have. You'll want to know that most (or, at least, many) lenders follow the so-called "28/36 qualifying ratio." That means you're not supposed to spend more than 28% of your gross monthly income on your total housing costs and more than 36% on your total monthly expenses, including your new mortgage payments. Even if you've got a higher DTI, you'll still be able to purchase a property. However, there's a good chance you won't feel so comfy taking a loan with a high DTI.
Here's how you can reduce your DTI:

Boost your income with a second job
Consolidate your student loans to get a lower monthly payment
Reduce the monthly payments on your student loans by enrolling in an income-based repayment program

A man carrying a suitcase.

Boost your income with a second 

#3 Apply for preapproval (figure out your homebuying power)

The thing about getting a preapproval from a lender is that it will help you figure out what the costs and down payment requirements are. Most lenders will have to take a peek into your employment history for the last two years, credit history, income, and assets to see what you can qualify for. Anyway, here we'll introduce you to a list of things you should keep in mind when applying for preapproval (some say that preapproval is a so-called gamechanger for homebuyers).

A thorough financial exam

Keep in mind that a lender will want to look at most aspects of your recent financial history. All your funds will have to be sourced and explained. So, if you've got any large deposits outside of your regular payroll - lenders will take a good look at them. Also, they'll consider any significant loans, too.

Is that everything?

The other thing you'll need to do is to check with your lenders to make sure you've given them all the necessary documentation for a decision on your preapproval.


If your answer's a YES, there's a good chance that you'll need some extra paperwork to verify your income. Also, remember that there's a chance you'll have to go through an income audit, where an accountant will consider your records and verify your income.

Lenders don't accept loans as down payments

The thing is lenders aren't supposed to accept loans as down payments. For instance, if a relative wants to lend you the money for a down payment - it will not work. If it's not coming from your own wallet, the down payment will need to be a gift from someone you're sharing a close relationship with.

Once you obtain your preapproval, you'll be able to figure out which home you can afford. Also, keep in mind that sellers will probably take you more seriously once your preapproval is in place.

#4 Save some money when moving

Another way to handle the home buying process as a person with plenty of student loans is to cut some costs here and there. Therefore, you'll need to organize the move to the new place so that it can fit into your budget. You can try packing yourself, asking your friends to act as a moving crew, and renting a truck.

A little dog inside a cardboard box.


Save some money when moving by packing DIY-style.

#5 Think about down-payment-assistance programs

Here's another thing that can help you buy a house if your college debt is high: there are many down-payment-assistance programs you can enroll in even if you've got plenty of student debt. For instance, you might qualify for an FHA loan, which can cut your down payment to as little as 3.5%. Also, if you're opting for a home in a more rural part of the country, you might be able to qualify for a USDA loan. The best thing about it is that it requires no down payment. Lastly, have you served in the military? If so, check out VA loans.

These have been the ways you can buy a house when your college debt is sky-high. By following the info we've shared with you above, we've got no doubts that you'll make the best out of it!

Bio: Thomas Buckley is a freelance writer primarily concerned with real estate topics. You'll mostly see his work at Also, he's an avid sports fan and father of two.