How to invest in property when you’re a student

College is a significant investment with considerable commitments. When tuition bills, living expenses, and part-time paychecks limit your budget, buying property may seem unrealistic. But with the proper guidance and preparation, students can make the first steps toward building a real estate portfolio while in school.

Can you buy a house as a student?

If you meet the lender’s requirements and have the financial means, you can buy a house as a student.

You’ll need to reach a certain age to buy a house, known as the age of majority. This is typically 18, but some states have separate age requirements and rules about when you can legally sign binding financial documents.

From there, the most significant hurdles are usually financial. Many students have limited income, irregular work schedules, or short credit histories. This can make it more difficult to qualify for a loan, but that doesn’t mean a student property investment is off the table. With the right preparation, support, or the help of a co-signer, you may be able to get a mortgage and buy a property while still in school.

Why buy a home in college?

Buying a home while in college may sound impossible, but for some students, it can be a smart move. Here’s why it might make sense:

• It could cost less than renting: In some cases, buying could be cheaper than renting or paying for on-campus housing.
• It’s an early way to start investing in real estate: Owning a home gives you the chance to build equity or generate income by renting out part of the property.
• It creates more stability and independence: Homeownership can offer more control over your living space and reduce the uncertainty of short-term leases or dorm restrictions.

Buying property as a college student: 5 factors to consider

Before moving forward with a student investment property, it’s important to look at the whole picture. Your income, debt, savings, stability, and financial goals all matter when buying a property while in school.

1. Income

Lenders prefer loan applicants who have a reliable source of income. A steady job is a great start, but entry-level jobs and limited hours are common for college students. This can make it more difficult to demonstrate to a lender that you can afford a mortgage payment. Lenders want to see consistency and proof that your earnings are stable and likely to continue.

2. Debt

Lenders will compare your income with your debt obligations by calculating your debt-to-income ratio. A higher DTI ratio, typically over 43%, can make it more difficult to qualify for a mortgage, even if you have a steady income.

Getting a mortgage while you have student loans is an obvious challenge for anyone looking to buy a home before graduating from college. If your loans are deferred while in school, lenders may still count a portion of that debt toward your DTI ratio when evaluating your application.

In many cases, if no monthly payment is reported on your credit file, lenders will use an estimate, typically 0.5% to 1% of your student loan balance, to calculate your DTI. This also applies to deferred student loans or those on an income-driven repayment plan. Lenders may use an estimate, the payment listed on your credit report, or the payment on your student loan statement.

3. Savings

Most mortgages require a down payment. Saving enough to afford one is a challenging obstacle for students working with a limited budget, but starting early makes a difference.

You also need to pay closing costs, which usually run 3% – 6% of your loan amount.

Cutting out nonessential expenses, like dining out or subscriptions, can free up money each month. You also can look for ways to boost your income, such as getting a second job or freelancing. Every little bit adds up when you’re working toward a savings goal.

Another option is a down payment assistance program. These programs are offered through state or local housing agencies. They may include grants, low-interest loans, or forgivable loans to help cover your up-front costs. As a student, you may qualify as a first-time homebuyer.

4. Stability

Although it may not always be within your control, frequent job changes can hurt your chances of qualifying for a mortgage. Lenders prefer consistency, typically at least two years of employment income in the same field or industry. This shows lenders that you’re stable and less likely to default on your loan.

5. Responsibility

Beyond your current income and employment, lenders also assess your potential to repay the loan. That’s why it helps to show continuity in your field and a reliable plan for earning income after graduation.

If you’re pursuing a specific career path or already have a job offer lined up, include that information when applying for a mortgage. Demonstrating that you have a plan for how you’ll manage your finances will give lenders more confidence in your ability to take on this responsibility.

Tips for acing your mortgage application

Getting approved for a mortgage as a student may take some extra planning, but it’s not out of reach. By being proactive about your finances and understanding what lenders look for, you can improve your chances of a successful mortgage application.

Don't disqualify yourself if you have student loans

While lenders do factor your student loan payments into your DTI ratio, that doesn’t mean you’re out of options. If your loans are in deferment or you’re enrolled in an income-driven repayment plan, lenders may consider your actual monthly payment or use a lower estimated amount.

Make a down payment strategy

One of the best ways to prepare for homeownership is by creating a clear savings plan. Start by setting a realistic down payment goal and then building a monthly budget that helps you work toward that amount.

You also can look into local and state down payment assistance programs. These programs can help you reach your goal more quickly by helping you cover your down payments and closing costs.

Improve your credit score

Lenders pay attention to your credit score. If you’re just starting to build credit, focus on keeping your credit utilization ratio below 30% and paying all your bills on time.

You also can build credit by opening a secured credit card or applying for a small installment loan to help establish a positive payment history. Over time, these steps can show lenders that you’re a responsible borrower and are ready for a larger commitment like a mortgage.

Home buying programs for students

Fortunately, students have different loan options to help them invest in property.

Conventional loans

A conventional loan is offered by private lenders like banks, credit unions, or nonbank mortgage lenders, and is not backed or guaranteed by the government.

Conventional mortgages offer more flexibility in terms of loan amounts and terms compared to government-backed loans. The minimum down payment is 3%, though you have to pay for private mortgage insurance (PMI) with a down payment of less than 20%. Conventional loans offer competitive interest rates for those with a strong credit profile.

There are disadvantages as well. Conventional loans have stricter credit and income requirements and can be less forgiving, especially for first-time buyers with limited financial history.

FHA loans

Federal Housing Administration loans are designed to help first-time buyers and borrowers with lower credit scores or limited savings qualify for a home loan.

You may qualify for an FHA loan with a minimum credit score of 580 with a 3.5% down payment or even a minimum of 500 with a 10% down payment.

While this helps open the door to homeownership, there are some tradeoffs. FHA loans have mandatory mortgage insurance premiums, limits on how much you can borrow, and properties must meet specific condition standards.

VA loans

VA loans are a powerful benefit available to eligible active-duty military personnel, reservists, members of the National Guard, veterans, and their surviving spouses. They’re backed by the Department of Veterans Affairs and designed to make homeownership accessible to those who served.

A notable advantage is that there is no down payment requirement. VA loans also require no mortgage insurance and offer competitive interest rates, even for borrowers with lower credit scores.

There are a few things to keep in mind: borrowers will need to pay a one-time funding fee at closing, and the property must meet specific condition standards.

Can college students use a co-signer on their mortgage?

The short answer is yes, college students can use a co-signer on their mortgage. A co-signer adds their income and credit history to the application, which can lower your DTI and increase the amount you can be approved for.

While this can help, keep in mind that the co-signer is equally responsible for the mortgage. This is why co-signers are typically family members.

The bottom line: Weigh the risks and rewards

Buying a property while in college or university isn’t for everyone, but it is possible with the right plan. Focus on improving your credit score and lowering your DTI ratio, and don’t forget to save the necessary funds for a down payment and closing costs. You’ll also need to maintain a consistent income to show lenders that you can make your monthly mortgage payments.

If you’re ready to take the next step in your home buying journey, start your mortgage application with Rocket Mortgage^® today.