Buying a Home with Student-Loan-Debt in Colorado Springs

Ah, student loan debt — for many aspiring Colorado Springs homeowners, it can feel like a storm cloud hanging over your new Colorado Springs home-buying dreams. You’re not alone if you’ve asked, “Can I really buy a home with all this student loan debt?”

There are also programs and policies specifically designed to assist first-time home buyers who are managing student loan debt, helping them transition from renters to homeowners.

At 719 Lending Inc., your trustedlocal mortgage broker in Colorado Springs, we want you to know the answer is a resounding yes — you absolutely can. Student loans may shape your financial picture, but they don’t have to stop you from owning your dream home in Southern Colorado.

Let’s explore how student loans affect home buying, what lenders really look for, and how you can qualify for a home loan with student debt right here in Colorado Springs.

🎓 The Reality: Student Loans and Homeownership in Colorado Springs

A recent Kaplan Group study found that every $1,000 of student debt reduces the likelihood of homeownership by 1.8%. Individuals with a bachelor’s degree but no student loan debt tend to have the highest homeownership rates across age groups, highlighting the positive impact of higher education without debt on the ability to buy a home. Yet, in Colorado Springs, where education and opportunity go hand in hand, that statistic doesn’t tell the full story. The average student loan debt for a four-year degree is expected to exceed $39,000 in 2025, further emphasizing the financial challenges many face.

About 37% of first-time homebuyers are student loan borrowers — and many of them succeed. Many college graduates in Colorado Springs are navigating student loan debt as they pursue homeownership, and may benefit from first-time homebuyer programs. Student loan borrowers may face unique challenges when qualifying for a mortgage, but with proper planning and understanding of loan programs, they can still achieve homeownership. Why? Because they learn to manage their debt-to-income ratio (DTI), protect their credit, and choose loan programs designed for buyers like them. However, substantial student loan debt often affects your ability to make large purchases and take on other debts, making financial planning even more critical.

Owning a home near Falcon, Colorado, Fort Carson, Fountain, or Old Colorado City is still within reach — even if you’re paying off student loans.

Assessing Your Financial Health Before You Buy

Before you start house hunting in Colorado Springs, it’s essential to take a close look at your financial health—especially if you’re juggling student loan payments alongside other monthly debt obligations. Lenders want to see that you’re in a strong position to manage a mortgage, and that means understanding exactly where you stand with your debt, income, and savings.

Start with your debt-to-income ratio (DTI). This is a key number that most lenders use to determine your mortgage eligibility. To calculate your DTI, add up all your total monthly debt payments—including student loan payments, auto loans, and credit card debt—and divide that by your gross monthly income (your income before taxes and deductions). For example, if your monthly student loan payments, auto loans, and other debts total $1,200, and your gross monthly income is $4,000, your DTI is 30%. Most lenders prefer a DTI of 36% or less, but some government-backed loans, like those from the Federal Housing Administration, may allow a higher ratio—sometimes up to 50%—especially if you have compensating factors like a larger down payment or strong savings.

Next, check your credit score and credit report. Making student loan payments on time is one of the best ways to build a positive payment history and boost your credit score. Missed or late payments, on the other hand, can drag your score down and make it harder to qualify for a mortgage or get the best interest rate. You can check your free credit score using tools like Credit Journey, which also offers personalized tips to help you improve your score. Be sure to review your credit report for accuracy—mistakes can happen, and correcting them can make a real difference in your mortgage application.

Savings are another crucial piece of your financial health. You’ll need funds for a down payment, closing costs, and an emergency fund to cover unexpected expenses after you move in. If saving feels overwhelming while making monthly student loan payments, look into down payment assistance programs available in Colorado Springs. These programs can help cover some of your upfront costs, making homeownership more accessible for student loan debt holders and recent college graduates.

Don’t forget to create a realistic budget. Factor in all your monthly debt payments, including student loans, auto loans, and credit card debt, as well as your living expenses and savings goals. Make sure your monthly income is enough to comfortably cover your total monthly debt payments, a future monthly mortgage payment, and other essentials. If you’re finding it tough to balance everything, consider exploring an income-driven repayment plan for your federal student loans, which can lower your monthly student loan payments and improve your DTI.

If you need extra guidance, don’t hesitate to reach out for help. A financial advisor or credit counselor can help you develop a personalized plan to strengthen your financial health and prepare for a successful mortgage application. Many lenders, including Fannie Mae and the Department of Veterans Affairs, offer payment assistance and flexible loan options designed to help student loan debt holders achieve their dream of homeownership.

By taking the time to assess and improve your financial health—tracking your debt to income ratio, monitoring your credit score, building your savings, and making smart choices about your student loans—you’ll be in a much stronger position to buy a home in Colorado Springs. With the right preparation and support, your student loan debt doesn’t have to stand in the way of your home buying goals.

💡 Understanding Your Student Loan Debt: Federal vs. Private

Not all student loans are created equal. When buying a home with student loans, lenders consider both loan type and repayment status:

• Federal student loans offer flexible plans like Income-Driven Repayment (IDR) or deferment, which can lower your reported monthly payment. Managing federal student loans responsibly can help maintain or improve your credit score, which is important when planning to buy a home.
• Private loans may have stricter repayment terms and fewer options, so refinancing or consolidation can help improve your DTI before applying for a mortgage.

Knowing your repayment plan and status helps your lender calculate your eligibility accurately.

📊 How Student Loans Affect Your Mortgage Eligibility

When you apply for a mortgage, lenders — including us at 719 Lending — look closely at three things impacted by student debt: lenders care about your overall financial behavior, including how you manage debt and make payments, when evaluating your mortgage application. Student loan debt can impact your eligibility for mortgages by increasing your debt-to-income ratio and affecting payment calculations, which is especially important for government-backed loan programs like VA loans and FHA loans.

1. Your Debt-to-Income (DTI) Ratio

Your DTI ratio compares your total monthly debt (including student loans, car payments, and credit cards) to your gross monthly income. Your monthly student loan payments are a key part of this calculation—higher monthly payments can increase your DTI.

Ideal target: 36% or lower, though FHA and VA loans may allow higher ratios (up to 50–55% with compensating factors). Many lenders have different DTI requirements, and some government-backed loan programs, such as FHA or VA, may allow higher DTI ratios. The maximum DTI ratio for the best odds of loan approval is generally set at 43%.

Lenders use different rules depending on loan type:

Lenders will consider your total monthly debt payments, including student loans, auto loans, and credit cards, when determining your eligibility for a mortgage loan. If you have more debt, your DTI will be higher, which can make it harder to qualify for a mortgage. A higher DTI ratio signifies that a borrower may be stretching themselves too thin financially.

Knowing these guidelines — and working with a Colorado lender who understands homeowners insurance requirements — can make all the difference.

2. Your Credit Score

Consistent, on-time student loan payments actually help build your credit. Maintaining a strong credit history, including timely payments on all credit accounts, is essential for mortgage approval. Having a mix of credit accounts, such as credit cards, auto loans, and student loans, can also positively impact your credit score. Late payments, however, can severely hurt your score. The financial burden of student loan debt can lead to delayed life milestones, altered career choices, and increased financial hardship.

Most mortgage programs require:

• 580+ for FHA loans (3.5% down)
• 620+ for conventional loans

Keep your credit utilization below 30%, avoid new debt, and consider tools like Experian Boost to add positive payment history. Using a credit journey tool or service can help you monitor your credit score and create a personalized plan to improve your credit before applying for a mortgage.

3. Your Cash Reserves

Student loans can make saving for a down payment tougher, but there are programs to help. Having extra money set aside can help with your down payment, closing costs, or serve as a financial buffer. Additionally, having student loans can affect a person’s ability to build up an emergency fund or start investing for retirement, making it even more important to explore available assistance programs.

Here in Colorado, CHFA (Colorado Housing and Finance Authority) offers down-payment assistance that can cover a portion of your closing costs or initial payment. Lenders may also consider your retirement savings as part of your overall financial health when evaluating your mortgage application.

Saving even a small emergency fund shows lenders you’re financially prepared for homeownership. Managing your DTI and building up savings can help you save money in the long run and improve your chances of mortgage approval.

💰 Down Payment and Closing Costs: What to Expect in Colorado Springs

When you’re buying a home in Colorado Springs—especially as a student loan debt holder—understanding your down payment and closing costs is essential for a smooth home buying journey. Student loan debt can impact the home purchase process by affecting your qualification criteria and borrowing capacity. These upfront expenses can feel daunting, but with the right planning and resources, you can confidently take this next step, even while making student loan payments.

For most lenders, the minimum down payment for a conventional loan or FHA loan is typically 3.5% to 5% of the purchase price. With the median home price in Colorado Springs hovering around $430,000, that means you’ll need at least $15,050 for a down payment. If you’re able to make a larger down payment—such as 20%—you can avoid private mortgage insurance (PMI) and lower your monthly mortgage payment, freeing up more of your monthly income for other financial goals or debt payments. Mortgage lenders also evaluate your financial health by considering your ability to make mortgage payments, especially in the event of income loss.

But the upfront cost to consider isn’t the only thing. Closing costs in Colorado Springs usually range from 2% to 5% of the home’s purchase price, which can add $8,600 to $21,500 to your total out-of-pocket expenses. These costs cover things like title insurance, appraisal fees, inspections, and loan origination charges. It’s important to factor these into your home buying budget, especially if you’re juggling other debts like auto loans or credit card debt alongside your student loan payments.

If you’re a first-time homebuyer or your monthly debt obligations are stretching your budget, don’t worry—there are payment assistance programs designed to help. The Colorado Housing and Finance Authority (CHFA) offers down payment assistance grants and second mortgage options, sometimes covering up to 4% of your home’s purchase price. The City of Colorado Springs also provides down payment assistance for low- to moderate-income buyers. And while the Ohio Housing Finance Agency is based out of state, it’s a good example of the kind of payment assistance programs available nationwide.

Before you apply for a mortgage, take time to review your credit report and check your free credit score. Most lenders look for a solid payment history and a manageable debt to income ratio, which includes your student loan payments, auto loans, and any other monthly debt payments. Keeping your credit score healthy and your monthly debt payments in check can help you qualify for better loan terms, lower interest rates, and even more favorable programs like VA loans.

Don’t forget to set aside an emergency fund for unexpected expenses that come with homeownership, such as repairs or appliance replacements. If your financial situation is complex, consider working with a co-borrower or seeking advice from a personal finance expert to make sure you’re making the best decisions for your mortgage application and long-term financial health.

In summary, buying a home in Colorado Springs with student loan debt is absolutely possible. By understanding your down payment and closing costs, exploring down payment assistance options, and keeping your debt to income ratio and credit score in good shape, you’ll be well on your way to homeownership. With careful planning and the right support, you can turn your dream of owning a home into a reality—even while managing student loan payments and other debts.

🏦 Smart Strategies to Buy a Home with Student Loans

✅ Refinance or Consolidate Loans

Lowering your student loan interest rate or extending repayment can reduce your monthly payment — instantly improving your DTI ratio.

⚠️ Tip: Avoid refinancing federal loans into private ones if you might need IDR or forgiveness options later.

✅ Enroll in an Income-Driven Repayment Plan

An IDR plan can cap your student loan payments at a manageable percentage of your income — freeing room in your budget for a mortgage.

✅ Pay Down Strategic Debts

Focus on paying off small or high-interest loans to improve your DTI. If you’re within 10 months of paying off a student loan, some conventional programs may exclude it from your DTI entirely.

✅ Add a Co-Borrower

A creditworthy co-borrower (spouse or partner) can strengthen your application and potentially lower your interest rate. If you want to improve your chances of getting a mortgage, consider adding a co-borrower to your application, as this can also help offset a high DTI ratio or limited credit history.

🏡 Colorado Loan Programs for Borrowers with Student Debt

VA Loans — Ideal for Veterans Near Fort Carson

No down payment, no private mortgage insurance, and flexible DTI rules make VA loans—a program backed by the U.S. Department of Veterans Affairs to support eligible veterans and active-duty members in the home buying process—a powerful option for those who qualify.

FHA Loans — Perfect for First-Time Homebuyers

FHA Loans — Perfect for First-Time Homebuyers, FHA loans are insured by the Federal Housing Administration, which allows for more flexible qualification criteria. FHA loans are government-insured, allowing for lower credit scores and smaller down payments — often just 3.5%. Updated FHA guidelines now use 0.5% of the loan balance for DTI if payments are deferred, making it easier for student-debt holders to qualify.

USDA Loans — Rural Opportunity

If you’re buying outside the metro area (think Peyton, Falcon, or Ellicott), USDA loans offer 100% financing with lenient DTI ratios. USDA loans are a type of government backed loan, making them accessible to buyers with student loan debt.

CHFA FirstStep and CHFA Preferred

These Colorado-specific programs combine competitive rates with down-payment assistance and are available to both FHA and conventional borrowers.

🧭 Should You Pay Off Student Loans Before Buying a House?

It depends. If your student loan rate is higher than your future mortgage rate, paying it down might make sense. But if your loans are manageable under an IDR plan, it’s often smarter to focus on saving for a down payment and building credit.

A 719 Lending mortgage advisor can run both scenarios side by side — showing you exactly which move builds more long-term equity and savings.

According to the National Association of Realtors, a significant number of homebuyers face challenges due to student loan debt, which can impact their ability to qualify for a mortgage or save for a down payment. This insight highlights the importance of working with a knowledgeable mortgage broker who understands these unique financial situations and can help navigate available loan options.

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