Can you buy a house in Washington with student loan debt? Yes — student loan debt does not automatically disqualify you from getting a mortgage. In most cases, the key factors are your debt-to-income ratio, how your monthly student loan payment is counted, whether you have enough saved for a down payment, and which loan program best fits your situation.
Many Americans today have student loan debt.
According to a report from the National Association of REALTORS, 39% of younger millennials reported having student loan debt, with a median balance of $30,000.
The existence of student loan debt by itself is not a deal-breaker, when it comes to getting a mortgage loan to buy a house. It’s the amount that matters most. Specifically, banks and lenders are concerned with the amount of debt a person has in relation to his or her monthly income.
If you’re going to use a mortgage loan to buy a house in Washington State, your debt-to-income ratio will come into the picture. As you might have guessed, this is a comparison between the amount of money you earn and the amount you spend each month on your recurring debts.
These days, most mortgage programs set a limit somewhere between 45% and 50% for the total debt-to-income ratio. But there are exceptions to this. Based on this standard, a would-be home buyer whose combined monthly debts accounted for more than 50% of monthly income might have a harder time qualifying for a mortgage.
There is some good news on this front. Recent developments might make it easier for Washington State home buyers with student loan debt to qualify for mortgage financing.
As we wrote in a previous blog post, Fannie Mae uses debt-to-income ratio guidelines for conventional mortgage loans. Under current guidance, the standard maximum total debt-to-income ratio is 36%, though it can be exceeded up to 45% in allowable cases. (Fannie Mae is one of the two government-controlled enterprises that purchase home loans from lenders. Freddie Mac is the other.)
The Fannie Mae rule change applies to conventional mortgage loans that are not insured or guaranteed by the government. The rules for government-backed FHA home loans are also based on debt-to-income guidelines, and borrowers may need to meet additional program requirements. So debt-to-income standards can vary by loan program and borrower profile.
If student loan debt is making it harder to qualify, a few practical steps can help you prepare before applying:
To recap: Yes, it’s possible to buy a house in Washington State while carrying student loan debt. It’s the amount that matters most. Home buyers who have a healthy balance between their income and debts have a better chance of qualifying for a mortgage loan.
Sammamish Mortgage can help Washington home buyers who are trying to qualify with student loan debt. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
No. Student loan debt does not automatically disqualify a borrower from getting a mortgage. Lenders usually focus on debt-to-income ratio, the monthly student loan payment they must count, available funds for a down payment, and the loan program being used.
Yes, in many cases. Washington home buyers can often qualify for a mortgage while carrying student loan debt, as long as their overall financial profile meets the lender’s requirements.
Yes. Lenders consider student loan debt as part of your recurring monthly obligations. What matters most is how that debt affects your total debt-to-income ratio and monthly affordability.
Student loans increase your recurring monthly debt load, which can raise your debt-to-income ratio. If that ratio gets too high, it can make mortgage qualification more difficult.
Many mortgage programs commonly set a maximum total debt-to-income ratio somewhere around 45% to 50%, though exceptions can exist. The exact limit can vary by loan program and borrower profile.
Possibly. Deferred student loans can still affect mortgage qualification because lenders may need to count a payment for debt-to-income purposes. Borrowers should document their current repayment status when applying.
It can, but it does not automatically prevent approval. Conventional and FHA loans both use debt-to-income guidelines, and the standards can vary by loan program and by the borrower’s full financial picture.
Possibly. The main concern is whether you meet the loan program’s down payment and qualification requirements. Student loan debt can make it harder to save money, but having debt does not by itself rule out a low-down-payment mortgage.
A good first step is to review all monthly debt obligations, estimate your debt-to-income ratio, document your actual student loan payment status, compare loan programs, and seek pre-approval before shopping for a home.
Yes, it can happen if the student loan payment causes the borrower’s total debt-to-income ratio to exceed program limits or if the overall financial profile does not meet underwriting standards. The issue is usually the amount of debt relative to income, not the mere existence of student loans.
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