Can You Buy a Home in Indiana With Student Loans?

Yes. Student loans don't stop you from buying a home. Lenders count your student loan payment as part of your monthly debts, along with car loans and credit cards, and compare the total to your income. How they figure that payment depends on the type of loan, and it can make a real difference in how much you qualify for.

Lesa Miller is a REALTOR® and broker in Bloomington, Indiana, who helps first-time buyers in Bloomington, Bedford, Martinsville and the surrounding towns. Here's what I tell buyers who are carrying student debt.

How do lenders count student loans?

Your lender adds up your monthly debt payments and compares them to your gross monthly income. That's your debt-to-income ratio. Your student loan payment is one of those debts, even if it's deferred.

What if my payment is $0 or my loans are deferred?

This is where the loan type matters.

• FHA loans: If your credit report shows a payment above $0, the lender uses that payment. If it shows $0, the lender counts 0.5% of your balance. On a $30,000 balance, that's $150 a month.

• Conventional loans (Fannie Mae): If you're on an income-driven repayment plan and your documented payment is $0, the lender may count $0. If your loans are deferred or in forbearance, the lender may use 1% of your balance or the full payment from your repayment terms. On a $30,000 balance, 1% is $300 a month.

If your loans have been forgiven or paid off and you have the paperwork, FHA lets the lender leave them out.

What should you do first?

1. Get your current student loan statement showing your payment and balance.

2. Talk to a lender about which loan type counts your loans most favorably for you.

3. Get pre-approved before you look at homes. Pre-Qualified vs. Pre-Approved explains why.

You may not need as much cash as you think, either. Do You Really Need 20% Down? covers that, and Top 7 Things First-Time Homebuyers Get Wrong has more.

Frequently asked questions

Can I get a mortgage with student loans?

Yes. Lenders count your student loan payment in your debt-to-income ratio, along with your other debts.

How does FHA count a $0 student loan payment?

FHA uses 0.5% of your outstanding balance when your credit report shows a $0 payment.

How does a conventional loan count deferred student loans?

Under Fannie Mae guidelines, the lender may use 1% of the balance or the full payment from your repayment terms.

Carrying student loans and thinking about buying? Call or text (812) 360-3863, or visit LesaMillerRealEstate.com/Links. Let's start with a lender who can run your real numbers.

This post is general information, not lending advice. Lender guidelines change; talk to a lender about your situation.