Home Purchase After College

Gustan Cho Associates

Home Purchase For College Graduates

One of the mandatory requirements to qualify for a residential mortgage loan is that the mortgage loan applicant have a two year work history. The 2 year work history requirement applies to all mortgage loan programs.  Whether you want to qualify for a FHA loan, VA loan, USDA loan, Conventional loan, or Jumbo loan, all mortgage lenders want to see a 2 year work history. Gaps in employment is fine but a 2 year work history is required.  The 2 year mandatory work history requirement has become an issue for immigrants who came from another country where they have great paying jobs but do not have the 2 year employment history that is required.

Home Purchase After College Graduation

Many college graduates and graduates of graduate and professional schools such as business schools, law school, dentistry schools, and medical schools do not have the mandatory 2 year employment history but when they graduate, many have six figure salaries and can easily afford a home as well as the expenses that go along with home ownership.  Do college graduates have to wait two years for a home purchase after college?  The answer is no.  Graduates of technical schools, junior colleges, 4 year colleges, graduate schools, and professional schools are exempt from the two year mandatory employment history requirement as long as they can provide their college transcripts.  For example, if a student just graduated from high school, went to a 4 year college to study pre-law, and after graduation from college with a Bachelor’s of Arts degree went straight to business school for the next two years and got his Master of Business Adminstration degree and after the MBA went to law school for the next three years and graduated with a J.D. degree, law degree but has not worked a day in his life, this student can qualify for a mortgage loan even though he does not have a two year employment history as long as he lands a full time job.  This person can close on his mortgage loan after providing 30 days paycheck stubs to the mortgage lender.

Employment Offer Requirements For Home Purchase After College

To qualify for a mortgage loan, a college graduate needs to secure a full time employment from an employer as an hourly employee or salaried employee.  Commission employment does not count for recent college graduate seeking home purchase after college.  If you land a commission job such as a real estate agent or car salesman, you need a history of 2 years full time employment history.  Part time employment does not count either and jobs where the employer pays cash does not count either.  However, those who get hourly or salaried income and their status is full time, they will be able to qualify.  They can apply for a loan and get approved, however, they cannot close until they have received 30 days of paycheck stubs from their employer and submitted to the mortgage loan underwriter.

Down Payment Requirements

With the exception of VA Loans and USDA Loans, every home buyer needs to put a down payment on a home purchase.  Minimum down payment requirements for a conventional loan is 3% down payment of the purchase price and minimum down payment for a FHA insured mortgage loan is 3.5% down payment.  Many college graduates do not have down payments of their own but the great news is that the down payment can be gifted from parents or other family members.  Prior to a clear to close the family member giving the home buyer the down payment needs to sign a gift letter stating that the gift is not a loan and does not need to be paid back.

Credit Requirements

Many college graduates do not have credit or limited credit since they were students for the past several years.  You can still qualify for a mortgage loan with no credit.  Mortgage lenders can use non-traditional credit in lieu of traditional credit.  Non traditional credit are creditors that do not report to the credit bureaus.   Examples of non traditional credit include utitlity bills, cell phone bills, insurance bills, cable television bills, and other creditors that are paid timely for the past 12 months who do not report it on the three credit reporting agencies.

How Does Student Loans Affect Home Purchase After College?

Depending on the mortgage loan program, student loans  may affect the calculations of your debt to income ratios.  FHA Guidelines on Student Loans state as long as the borrower’s student loans have been deferred for at least 12 months, the student loan monthly payments can be exempted from calculating debt to income ratios.  Conventional Guidelines on deferred student loans state that student loan payments need to be counted in qualifying a mortgage loan borrower’s debt to income ratios even though the student loans have been deferred for more than 12 months.  You need to get what your payment will be after the deferment period in writing form your student loan provider and that payment will be used.  If the student loan provider does not give you the proposed payment, 2% of your student loan balance with be used to calculated your monthly future student loan payment.

If you are planning on graduating from a technical school, junior college, college, graduate school, or professional school and have an offer of employment and are intending in purchasing a home after graduation, contact me at 262-716-8151 or email me at gcho@gustancho.com so I can get you a solid pre-approval.

Related> Deferred student loans

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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