Many college graduates hoping to buy a home wonder how to get a mortgage while dealing with student loan debt.

In fact, 41% of college-educated Americans with student loans report having postponed buying a home because of their debt, according to a recent survey by Student Loan Hero, a service that helps people pay off their student debt more efficiently. Making matters worse, student debt surged 56% from 2004 to 2014, to an average of $28,950 per borrower, reports the Institute for College Access & Success.

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Understand Debt-To-INcome Ratio

Your debt-to-income ratio, or DTI, correlates how much money you owe on student loans, credit cards, car loans, and home loans) to your current income. 

Most mortgage lenders require a borrower's DTI to be no more than 36%. Think of this as how much you spend monthly on expenses divided by how much you make in a month. This results in your DTI. Remember, your DTI will increase indefinitely once you add a mortgage to your monthly charges. offers a home affordability calculator so that you can make sure that your DTI does not go into, or above, the 36%. Se this to determine about how much you can borrow for a home.

refinance your student loans

Did you know it is possible to refinance your original student loans with a private lender? Well, you can! As most students do, they get their loans from the federal government, but as stated in a recent survey by, a college lender market place,

"Borrowers seeking to maximize their saving refinanced into loans that reduced their repayment terms by 59 months - nearly 5 years - and increased their monthly payments by $151, on average. They reduced their interest rate by 1.71 percentage points on average,". 

Another way to make room for a mortgage is the refinance and extend the life of your college loan. The outcome being smaller payments over a longer period of time. The only downfall to this is that you'll pay more interest over the life of the loan. You can determine the benefits and consequences of this in your personal situation. But in the long run, it may be worth it.

Take advantage of fAnnie mAE'S new Policies

Fannie Mae, the government-sponsored enterprise that buys and securitizes home loans, recently created two new policies tailored specifically for college grads with student loan debt to get a mortgage. 

  • DEBTS PAID BY OTHER PARTIES: This policy gives the applicant the ability to exclude non-mortgage debt (student loans or credit cards) that is being paid by someone else (an employer or parent) from their DTI.
  • INCOME-BASED REPAYMENTS: It allows lenders to acknowledge that you could be paying less than 1% if you participate in federal reduced-payment income-based programs. As to in the past where lenders assessing your worthiness for a home loan were required to factor in 1% of your entire college loan balance as your monthly payment. 

look for local mortgage programs for college grads

Half of the states offer housing assistance to college grads with student loan debt. Restrictions do apply; you may be required to buy in a certain area. But research what your state has to offer in terms of assistance.  

clean up other aspects of your financial profile

Just because you have student debt does not mean that you don't have a chance to buy a home; it is only one part of what lenders look at. “Student loan debt is just one factor that affects your [mortgage application],” says Donna Bradford, Assistant Vice President at Navy Federal Credit Union's Metro Mortgage Processing & Closing department. 

A good credit score, meaning you make your monthly payments and other debts on time, your income, and making a sizeable down payment can make a difference (see more below). 


A way to increase your chances of getting approved for a home loan is to make a 20% down payment on your home. Lenders are less likely to disqualify an application with 20% down. It shows you have "skin in the game", which as a result, lowers your chances of defaulting on your loan.

Thank you to for compiling all the necessary information to help you make a home purchase.

It's really important to talk to a great, local lender to make sure that you have access to all of the available programs that might help with your home purchase in Colorado. We have a great network of lenders who our clients have worked with and loved...want to meet them? We would be happy to make an introduction!



Posted by West + Main Homes on


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