Decide: Determine whether you’re ready to buy a home right now or if you need a little more time before committing.
Consider: Understand how student loans play a role in your homebuying and financial journey.
Prepare: Assemble a financial plan that will set you up for success in becoming a homeowner.
Student loan debt is real…but so is the dream of owning a home. Being a homeowner is still one of the biggest milestones many young adults dream about. But for Millennials and Gen Z, it can feel out of reach. If you’re feeling like the road to homeownership is more like climbing a mountain than walking a straight path forward, you’re not alone.
Your goals and lifestyle play a big role in determining whether you’re ready to buy a home. Reflecting on these questions can help you figure out where you stand.
Student loans don’t have to prevent you from becoming a homeowner. With a little bit of patience and thoughtful planning, buying a home could be much closer than you realize. Here are five practical tips that’ll help you move closer to owning a home without letting student loans hold you back.
Like other debts – car payments, credit cards, etc. – student loans affect your debt-to-income ratio (DTI). Lenders look closely at your DTI as a metric to determine whether you can comfortably manage your monthly bills. If student loans push your DTI too high, it may limit the amount you can borrow. You can work around this by:
Helpful Tip: Use a debt-to-income calculator to understand the factors that impact this metric of your financial health.
Determining if you can comfortably afford the expenses of homeownership along with student loan payments is essential. Homeownership comes with other expenses besides the monthly mortgage payment. Costs like insurance, property taxes, maintenance, and more should be factored into your house buying budget.
Helpful Tip: Start by taking a realistic look at your budget – does the idea of those extra costs feel overwhelming? If so, try this exercise to test your financial readiness. Let’s say your rent is $1,700 a month, but buying a house would increase your payment to $2,100.
This proactive step gives you a clearer picture of how homeownership might impact your budget and helps you prepare for the financial responsibility. It's also a great way to start saving for your down payment (more details below).
Your credit score has a direct impact on mortgage eligibility and the interest rates you’re offered. Your student loans – and how you manage them – can affect your credit score. Here’s how:
If your credit score isn’t where you’d like it to be, there are ways to improve it:
If you have less than perfect credit, you can also explore options for adding a co-signer or co-borrower to your loan. However, it’s extremely important to discuss and follow a plan for repayment to ensure financial obligations are met.
Many states and credit unions offer special programs designed for first-time buyers. Taking advantage of these programs can help you get into a home sooner and with less upfront cash.
These may include:
Helpful Tip: Plug in numbers with our online mortgage calculator to see how much house you can realistically afford in your budget. Follow the 28/36 guideline which states housing costs should not exceed 28% of your gross monthly income, and total debt, including housing should not exceed 36% of your gross monthly income.
Balancing saving with paying off student loans isn’t easy, but even small, consistent efforts add up over time. Remember that automatic transfer suggestion we mentioned above? The good news is that exercise is two-fold – it helps you test your financial readiness AND can also be used as a savings for your future down payment.
Helpful Tip: Research down payment assistance programs and grants offered through your state and local housing agencies. Georgia residents, visit Georgia.gov or usa.gov. South Carolina residents, visit schousing.sc.gov. Check with your local lender for additional information and resources.
Owning a home while paying off student loans may feel like a juggling act, but it’s not impossible. At Peach State, we offer a complete suite of home loan programs, tools like our ‘How Much House Can I Afford' eBook, financial calculators, and other educational resources to help you achieve your homebuying goals.
As a member, you also have FREE access to HUD-Certified housing counselors through Balance. They can even help with setting a budget, reviewing credit reports, explaining the homeownership process and more.
With intentional budgeting, credit building, and exploring programs built for first-time buyers, you can take meaningful steps toward homeownership without student loans holding you back. Remember, it’s not about being debt-free before you buy a home – it’s about being financially prepared by making smart money moves.
For more helpful reads about becoming a first-time homeowner, check out 5 Mistakes to Avoid as a First-time Home Buyer and Buying Your First Home: Terms, Tips, and Traps.