Should You Pay Off Student Loans or Buy a House?

Sheryl Nance-Nash Updated on May 13, 2019

You know most good things don’t last forever.  Right now, interest rates on mortgages still average below 4% on a 30-year fixed mortgage. Who knows how long will those historic lows last?

Maybe you’re debating whether to buy that dream home while the getting is good. But ... there is the matter of your student loans. Is it smarter to pay them off before taking on homeownership?


For sure, it’s not an easy call. Let’s talk about when student loans should be priority number one, and when it’s OK to go forth and shop for houses.

Red light: when you should wait

If any of the following sound like you, it might be a good idea to hold off on the house hunt.

Your debt-to-income ratio is too high

A debt-to-income ratio provides a good overall picture of where you stand financially.

Here’s how to come up with your debt-to-income ratio: add all your monthly debt payments (car payment, student loans, credit cards, etc.). Divide that by your gross monthly income – what you earn before taxes.

If your debt-to-income ratio is 36% or higher, that’s too high. Focus on paying down your student loans first.

Your credit score is not worth bragging about

Much as everyone likes to say a number is just a number, these three digits matter.  If your credit score is below 660, you will need to pay down your student loans (and other debt) in order to make yourself attractive to a mortgage lender.

You’ll look good if you routinely make your payments in full, each month, on time. Such steps boost your credit score.  No doubt, a higher score increases the odds you’ll get an interest rate that will put a smile on your face when you do eventually buy a house.

You can’t bankroll a 20% down payment

Can you jump the down payment hurdle?

If you can’t see where in the world you might come up with 20% of the house’s purchase price as a down payment, slow down.

It’s ideal to put up 20%, otherwise, you’ll have a higher interest mortgage. To add a bit more pain to the equation, if you can’t put down 20% you’ll also have to purchase

In a nutshell, PMI makes it possible for you to put down less than 20% of the purchase price. It’s a safety net of sorts for lenders, in case you default. You must pay PMI until you have enough equity in the house that the lender no longer considers you a high risk.

While PMI may be able to get you in a house faster, know that you’ll have to pay higher monthly mortgage payments for a while—likely the first several years you’re in the house.

You're not quite ready to settle down

What’s the likelihood that you may change jobs and move to a new area?  Do you want flexibility in your living situation over the next five years?  If you plan on moving any time soon, renting is definitely a better choice than buying.

New call-to-action

Green light: when you should buy

If you are in the fortunate position of being able to afford your student loan repayments and a mortgage at the same time, it might be time to start stalking those real estate listings. But before you do that, make sure you've done the following.

You’ve paid down debt and saved

If you have been consistently paying down your student loans and credit debt and have saved a 20% down payment for a house, making that purchase could be a good move.

This is especially true if you are a good budgeter and are aware that things like insurance, home repairs and maintenance will add to your monthly costs on top of that mortgage payment.

You have an emergency fund

Experts agree that an emergency fund of three to six months of fixed expenses is a solid foundation to help you afford unforeseen emergencies like a layoff, an illness that could keep you from working and earning, or an economic downturn.

If you have calculated your critical expenses (including your mortgage payment) and have these funds already set aside, buying a house could be a good plan.

You can get more for your money than renting

Depending on the housing market and rent prices in your area, you may be able to buy more house for the same amount of rent you are paying. If so, buying may be a smart option.

Your retirement savings are satisfactory

It’s critical to take advantage of compounding interest in tax advantaged accounts as early as possible in order to save for retirement.

Buying a house is a good idea if you are already contributing the maximum amount to a traditional or Roth IRA or to an employer-sponsored 401(k) or 403(b) plan.

Sooooo close, but not quite

If you’re close to real-estate ready, but you still need to get your student loans under control before you seek out a mortgage, refinancing might be a good move.

Use this Student Loan Refinancing Calculator to see how much you could save.

Published in: Paying Off

About the Author
Sheryl Nance-Nash

Sheryl Nance-Nash is a freelance writer based in New York City. She specializes in personal finance, business, small business, and travel topics. Her articles have appeared in Money, Newsday, The New York Times,,,,, among others. When she's not writing about retirement, taxes, student loans, credit, debt, and everything under the personal finance umbrella, she writes about businesses—big and small—their victories and the challenges they face. Sheryl is married with a grown daughter. Her favorite pasttime is traveling. She loves chronicling her adventures and exploring new places and cultures. Read more by Sheryl Nance-Nash

Refinance and Save Today With These Lenders

#1 - Nitro Recommended View More Details

Special offers for medical resident and fellow refinance products

  • Fixed rates: 2.49% - 6.31% APR
  • Variable rates: 1.88% - 6.15% APR
  • Minimum credit: 650
View More Details
Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 2.49% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

#2 View More Details

For every loan they fund, they contribute to the education of a child in need

  • Fixed rates: 2.83% - 6.74% APR
  • Variable rates: 1.99% - 6.84% APR
  • Minimum credit: 660
View More Details
Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

CommonBond Student Loan Refinance review

  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

#3 View More Details

SoFi is the leading student loan refinancing provider. 

  • Fixed rates: 2.49% - 6.94% APR
  • Variable rates: 2.25% - 6.59% APR
  • Minimum credit: 650
View More Details
Visit SoFi View Loan Disclosure

$30 billion+ in refinanced student loans. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, there's no maximum on the amount you can finance. Some state restrictions may apply.

  • Serious savings: Save thousands of dollars thanks to flexible terms and low fixed or variable rates.
  • No hidden fees, no catch: No application or origination fees. No pre-payment penalties.
  • Fast, easy, and all online: Simple online application and access to live customer support 7 days a week.
  • Access to member benefits: SoFi members get career coaching, financial advice, and more—all at no cost.
  • 98% of surveyed members would recommend SoFi to a friend

Save thousands on your student loans and pay off your loans sooner. Find your rate.

#4 View More Details

Ability to apply for cosigner release after 24 consecutive payments. 

View More Details
Visit NelNetBank View Loan Disclosure

Give Your Life’s Journey a Jump-Start.

If you’re ready to put student loans in your rearview mirror, Nelnet Bank student loan refinancing offers low rates and flexible terms to help you start getting ahead.

  • VARIABLE RATES: 1.95% - 5.62% APR See Disclaimer
  • FIXED RATES: 2.48% - 6.62% APR See Disclaimer
  • AUTO DEBIT SAVINGS: We’ll knock .25% off of your interest rate when you enroll in auto debit. See Disclaimer
  • NO ORIGINATION FEES: No application, origination, or prepayment fees on Nelnet Bank loans.
  • HARDSHIP PROTECTION: Hardship forbearance helps protect against unexpected loss of income. See Disclaimer

See How Much You Can Save: Estimate your savings with a student loan refinance from Nelnet Bank.

#5 View More Details

Works with 300+ community lenders for higher approval chances

  • Fixed rates: 2.95% - 7.63% APR
  • Variable rates: 1.90% - 5.25% APR
  • Minimum credit: 660
View More Details
Visit LendKey View Loan Disclosure

Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 300+ community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

#6 View More Details

Best for borrowers who want to customize their repayment schedule to pay off debt fast.

View More Details
Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#7 View More Details

16 different loan term options – more flexibility to pay down your loan faster

  • Fixed rates: 3.24% - 5.54% APR
  • Variable rates: 3.34% - 5.69% APR
  • Minimum credit: 680
View More Details
Visit CollegeAve View Loan Disclosure

College Ave Student Loans offers major help and minor stress. We’ll help guide you through the process to find the right loan term and interest rate for you and the family budget.

  • Fast rate check: Get your new rate in 60 seconds 
  • Instant credit decision
  • Super flexible terms: 16 loan terms available from 5 to 20 years
  • No fees to apply

Click here to see more College Ave offerings and to start saving today! 


I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

Save Money Now