For many, owning a home is the American dream, but it can be challenging for adults with student loan debt. In 2022, one in seven Americans had student loans equaling $1.74 trillion in total.

The majority of borrowers range in age from twenty-five to thirty-four and owe, on average, over $35,000 in federal student loans. As a result, 29 percent of student loan borrowers are delaying purchasing a home, with the average age of new homebuyers jumping to thirty-six years old.

Although it may seem complicated, it’s not impossible to qualify for a mortgage if you have student loans. By following these tips, you can increase your chances of getting approved for a mortgage and buying the home of your dreams.

Refinance your student loans

If you have a large amount of student loan debt, consider consolidating your loans into a single one with a lower interest rate. This can make it easier to manage your payments, improve your debt-to-income ratio (DTI), and free up more money to put toward a monthly mortgage payment.

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Make additional loan payments 

Even if you can’t afford to pay off your student loans in full, making extra payments can help you reduce your debt faster. This can improve your credit score and make it easier to qualify for a mortgage.

Save for a down payment 

The more money you put down, the less you’ll have to borrow, and the lower your monthly payments will be, which can increase your chances of securing a mortgage. If you can’t afford a large down payment, you may still be able to qualify for a mortgage with a down payment of as little as 3 percent.

Stay within or below your budget

It can be hard to juggle multiple payments, making it important to create a budget so you can live at or below your means. By building that budget now, you can get a gauge of how much you can afford in monthly mortgage payments. And sticking to it in the meantime would give you extra funds to put towards savings, an emergency fund, your loans, or a down payment.

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Improve your credit score

When applying for a mortgage, your credit score can greatly influence the lender’s decision. However, many lenders will take into account your other credit history, such as on-time payments for a car loan and credit cards. If you’re able to keep your DTI below 43 percent of your gross income, it can increase your chances of getting a mortgage.

Research government-backed loans

Government-backed loans, such as Federal Housing Authority (FHA) loans and United States Department of Agriculture (USDA) loans, often have lower interest rates and less stringent requirements than conventional mortgages. For example, FHA loans only require a 3.5 percent down payment and allow for a higher DTI. USDA loans are also available to borrowers who live in rural areas and don’t require a down payment.

However, be aware that you cannot obtain a federally backed loan if you’ve defaulted on your student loans. There are options to get them out of default on your student loans. To qualify for a home loan, you’ll first need to get them out of default, such as by rehabilitating or consolidating.

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Shop around for a lender

If you are ready to apply for a home loan, shop around for a lender to obtain preapproval so you can better determine how much you can afford for a monthly payment. Be sure to compare rates and fees since not all lenders offer the same terms and conditions. Ask your mortgage professional any questions you have about mortgages and student loans.

Be prepared to answer questions 

When you apply for a mortgage, the lender will ask you about your student loans. Come ready with all the necessary information about your loan amount, interest rate, and repayment plan to provide the lender with a clearer picture of your situation.

Seek the advice of a financial advisor

If you’re struggling to figure out how to get a mortgage with student loans, consider getting help from a financial advisor who can help you assess your financial situation and create a plan to achieve your homeownership goals. This includes figuring out how to save enough money for closing costs, unexpected expenses, and even an emergency fund.

Most importantly, be patient. The process of getting a mortgage can be time-consuming, but keep going even if you don’t get approved for a loan right away. Continue working on paying down your student debt, saving money, and building up your credit history—eventually, you’ll be able to make your homeownership dreams come true.

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