Your Student Loan Balance Is Not What Keeps You From Buying. Your Monthly Payment Is.

"I have $68,000 in student loans. I am not going to be able to buy a house for years, am I?"

Probably sooner than you think, and for a reason most people never hear. Your lender is not looking at the $68,000. They are looking at what you pay on it every month.

That one distinction changes the whole plan. Paying a few thousand dollars toward a balance often does almost nothing for your approval. Changing which repayment plan you are on can change it immediately.

I'm Lesley The Realtor, and at Dream Homes Minnesota this comes up in nearly every first-time buyer conversation. Here is how the number actually gets used.

1. The ratio that decides your approval

Lenders compare your monthly debt payments to your monthly income before taxes. Student loans, car payments, credit card minimums, and the new mortgage payment all go in the top. That ratio is the gate. The balance of a loan never appears in it. Only the payment does.

So two people with the same $68,000 can get very different answers, depending entirely on what their monthly payment is and which loan program they use.

2. FHA counts a payment on every student loan, even the ones at zero

FHA's rule is strict and it is also knowable. Every student loan you owe gets a monthly payment counted. Two numbers are allowed: your actual payment when it is above zero, or 0.5 percent of the outstanding balance when your credit report shows a zero payment. That second one catches deferment and forbearance, so "my loans are deferred" does not mean they count as nothing.

Read the percentage carefully. It is half of one percent, not five percent, and it runs on the current balance, not the original loan amount. On a $68,000 balance showing a zero payment, that is $340 a month going into the ratio.

This has been the rule since a HUD letter dated June 17, 2021, and it is the rule that applies now.

3. Conventional has a path that FHA does not

Fannie Mae allows a lender to qualify you using a $0 payment when you are on an income-driven repayment plan and your actual documented payment really is $0. Documented is the operative word. A statement from your servicer showing the plan and the payment, not a screenshot and a hope.

That is the single biggest fork in the road for buyers with large balances and modest incomes. Same borrower, same loans, two different answers depending on the program. Ask your lender to run you both ways.

4. Why paying down the balance is usually the wrong move

Say you have $5,000 saved and $68,000 in loans. Putting the $5,000 against the balance drops your payment by a small amount and takes $5,000 out of your down payment and reserves. On most files that trade makes the approval worse, not better.

Being on the right repayment plan, with documentation, usually does more than the $5,000 ever could. And the $5,000 is still sitting there where the lender can see it.

5. What to actually do, in order

Pull your credit report and read what it says your student loan payment is, because that is the number the lender starts from. If it says zero and you are on an income-driven plan, get a current statement from your servicer in writing. Then take both to a lender and ask for a conventional scenario and an FHA scenario side by side. Do not guess which is better. Make them show you.

6. What this looks like against Twin Cities prices

The Twin Cities median sale price was $395,000 in September 2026 and the 30-year fixed average was 7.18 percent as of Nov. 5, 2026. Those are real numbers that make the ratio tight, which is exactly why the student loan line is worth getting right rather than assuming it disqualifies you. We regularly see buyers who were told no by one lender get a workable number from another, because the first one used the 0.5 percent rule and the second documented an income-driven payment on a conventional loan.

7. One honest caution

Program rules change, and individual lenders add their own stricter requirements on top of the agency rules. Nothing here is a promise about your file. It is the list of questions that gets you a real answer instead of a vague one.

Short FAQ

Will my loans show on my credit report even if I am not paying yet? Yes, and the reported payment is what the lender starts with. That is why the report is the first thing to pull.

Does refinancing my student loans to a lower payment help me qualify? Often yes, because it lowers the payment in the ratio. Be careful about giving up federal protections to do it, and talk to someone about that tradeoff before you move.

Can I buy if I am in default on a federal student loan? That is a different and harder problem. Federal loan default can block government-backed financing outright. Get the loan out of default first, and there are established paths to do it.

How much do I need to make? There is no single answer, because it depends on your payment, your other debts, your down payment and your credit. A lender can give you the number in about twenty minutes with your actual documents.

Next steps

If student loans are the reason you have not asked a lender yet, send us a message. We will connect you with a lender who will run your file both as conventional and as FHA so you see two real numbers, and we will tell you what those numbers buy right now in the suburbs you are looking at.

Lesley The Realtor | REALTOR® | Bridge Realty
651-661-4770
[email protected]
www.dreamhomesminnesota.com