Achieving Homeownership Despite Student Loan Debt

Although student loan debt can be difficult to manage, it does not have to prevent someone from buying a home. Here are five steps that could unlock the door to homeownership, even with student loan debt

Step 1: Reduce smaller debts

Lower your debt-to-income ratio (DTI), the percentage of your income used to pay debts. Lenders prefer a lower DTI, generally 45% or less, as it shows you have the financial ability to repay the loan. To decrease your DTI, cut expenses and use the savings to pay off small debts, like credit cards and personal loans. You can also lower your DTI by increasing your income with a side job or getting a raise from your employer.

Step 2: Request credit history reports

Lenders use credit scores to help determine loan eligibility, interest rates, and repayment terms. Credit scores are calculated using the data found in credit history reports. It’s crucial that your reports contain accurate information. Incorrect data can unnecessarily lower credit scores.

Obtain free copies of your reports

Contact the three major credit bureaus, Equifax, Experian, and TransUnion at Review each report and dispute any errors.


Step 3: Improve your credit score

Credit scores typically range from 300 to 850, with higher credit scores helping you qualify for more loan options. A conventional loan, which is backed by a financial institution, usually requires a minimum score of 620.

Credit history reports do not contain credit scores

However, major credit card issuers offer free access to your score. Check your monthly account statement or credit card app.


Step 4: Explore financing options

Learning about the various types of mortgages is a crucial step in becoming a savvy homebuyer. In addition to government-backed programs, qualified homebuyers can access Freddie Mac Home Possible® mortgage and Freddie Mac HomeOne® mortgage loans which offer special benefits.

Freddie Mac Home Possible® mortgage:

  • Unlock your dream home sooner with flexible down payment options, including family assistance, employer programs, secondary financing, and sweat equity contributions.

  • Qualify with a moderate income up to 80% of your area's median, without geographic limits on loan amounts – making homeownership more accessible.

  • Secure your new home with a minimal down payment as low as 3%, thanks to our maximum 97% Loan-to-Value (LTV) option.

  • Say goodbye to mortgage insurance sooner when your loan balance drops below 80% of the appraised value, with reduced coverage requirements for higher LTV ratios.

  • Enjoy capped credit fees that are lower than standard rates for loans over 80% LTV, keeping your costs down.

  • Ideal for 1-4 unit homes, condos, co-ops, planned-unit developments, and even manufactured homes.

Freddie Mac HomeOne® mortgage:

  • Designed for both home purchases and no-cash-out refinances.

  • No geographic or income limits for borrowers, making homeownership accessible to all.

  • Custom mortgage insurance coverage, conveniently bundled with a credit fee for a streamlined experience.

  • Low down payment option, requiring as little as 3% down with a maximum 97% Loan-to-Value (LTV) ratio, or up to 105% Total Loan-to-Value (TLTV) when combined with our Affordable Seconds® and other secondary financing options.

  • Perfect for 1-unit properties.

An Oregon State Credit Union mortgage professional can help you explore these and other home loan options to find the best fit for your financial situation.

Step 5: Open a First-time Homebuyer Savings account

Oregonians have access to special state tax benefits when they open a First-time Homebuyer Savings account1. Save for loan-related costs using this designated account and you could subtract up to $5,000 from your Oregon taxable income each year for a maximum of 10 years. Couples filing jointly could subtract up to $10,000.

Loan-related costs may include:

  • Down payment

  • Closing costs

  • Realtor fees

  • Appraisal costs

  • Loan origination fees

Eligible applicants include those who have not owned or purchased a single-family home in the last three years.

Homeownership is possible even with student loan debt

Take proactive steps to improve your finances and explore all mortgage options to make your dream a reality. Speak with one of our mortgage loan officers who can help you secure the keys to a new home. Get pre-qualified today!

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Insured by NCUA. Maximum deduction allowed is $5000 for individual tax filers and $10,000 for joint filers. Must meet eligibility and other requirements as set forth by the State of Oregon for this program. Deduction does not apply for federal taxes. Consult your tax advisor for personal tax advice. You must purchase a home in Oregon. If you do not purchase a home in Oregon, you will not qualify for the subtraction and will be required to add back any amounts you subtracted on previous tax returns. Account must be opened by December 31, 2026. If money is not used to purchase a home within 10 years of opening the account, you may be subject to tax and other penalties as determined by the State of Oregon.

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