Student loan debt a barrier to home ownership in Texas

Adults with student loan debt face increased barriers to owning a home, according to the Texas Real Estate Research Center assistant research economist Clare Losey. Student loan debt makes potential homeowners more at credit risk for mortgage lenders by increasing their final debt-to-income ratio, limiting their ability to save and lowering their credit score if they have a missed payment, according to a Losey study.

More than half of students (52%) from four-year Texas colleges graduate with student loan debt, leaving their universities with an average debt of $26,273, according to the study. This leads to a monthly payment of $273 for those with average debt and an interest rate of 4.529%.

For those without student loan debt, their house price to income ratio is 4.11, which means they can afford a house that is 4.11 times their household income. For those with a debt-to-income ratio of 5%, roughly the ratio of someone aged 25 to 44 with an average amount of school debt making up the median income, their house price-to-income ratio is 3 .63, according to the research.

With a median income of $67,635, those with no student debt can afford a home worth nearly $278,000, while those with average debt can afford a home worth $245,515. In other words, for someone to be able to afford a home of the median value in Texas, which is $325,000 in the first quarter of 2022, someone without student debt needs an income of $79,075, while a person with average debt would need to earn over $10,000 more to afford the same house ($89,531).

It’s also harder for those with student debt to save money for a down payment on a home, research shows. To afford a first-quartile house in Texas or the most expensive house among the lowest 25% of houses ($217,000), a person without a student loan who earns the median income can save up to 5% d installment in approximately 1.6 years. For those with the average amount of debt, that savings time almost doubles to 3.1 years for the same home.


The disparity is more pronounced among those who earn less money, according to the study. It would take nearly three times as long for someone earning $50,000 a year with the average student debt payment to afford a first-quartile home compared to someone earning the same salary without debt. (6.3 years to 2.2 years).

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