First Time Home Buyers: College Graduates

Gustan Cho Associates

Can College Graduates Qualify For Home Purchase Mortgage?

College seniors throughout the country are interviewing for jobs.  Many college seniors have either May or June graduations and many will have job offers long before graduation.  Many college senior have a good dilemma which is multiple job offers and deciding on which job offers to to take.  Depending on the major of the college graduate, many college seniors are getting job offers of upwards of $100,000 per year, especially those college students with technology majors such as computer science, web development, IT, or other high tech fields.

The great news is that college graduates can qualify for a mortgage and can be homeowners without providing two year employment history and not having to need mom or dad to co-sign for a mortgage loan.

Requirements For Home Purchase Loan For College Graduates

To qualify for a residential mortgage loan, you need two year employment history and proof of income.  Mortgage lenders will also require two years tax returns, two years W-2s, verification of employment, recent paycheck stubs and likelihood for three years continous employment.  However, many college graduates have no full time employment history, and some never worked a day in their lives.  Great news is that mortgage lending guidelines do not require full time employment history from full time students.  A college transcript or vocational school transcript can be substituted in lieu of work experience and no work history is required.

Job Offer Letter From Employers

If a student gets a job offer letter from a prospective employer, a mortgage lender will most likely issue a pre-approval after reviewing the mortgage application and credit report and go off the job offer letter or employment contract.  The student can then look and shop for a home and enter into a real estate purchase contract.  However, most mortgage lenders want to see 30 days pay check stubs before they will issue a clear to close.  There are some mortgage lenders who will just go off an employment contract and request that the borrower provide pay check stubs after closing on their home loan.

Down Payment And Closing Costs On Home Purchase For College Graduates

Most college graduates will be limited with reserves.  All home purchase mortgage lenders will require down payments and closing costs.  The only loan program that do not require down payment on a home purchase are VA loans and USDA loans.  Most home buyers do not have to worry about closing costs because closing costs can be covered through a sellers concession and/or lenders credit towards closing costs.  However, down payment needs to be documented funds.  The good news is that the down payment can be 100% gifted by a family member and/or relative.  FHA requires a minimum 3.5% down payment and Conventional loans require a minimum of 3% down payment.

Student Loans When Qualifying For Mortgage

Most college graduates have tens of thousands of student loans and these student loan payments can really affect a mortgage loan applicant’s debt to income calculations.  The great news is that student loans can be deferred by the student loan provider for at least a year if not more.  FHA allows deferred student loans to be exempted from debt to income calculations so it will not affect the DTI.  However, with conventional loans, mortgage loan underwriters will count student loan payments even though student loans are deferred.  Conventional lenders will count 2% of the student loan balance as the monthly payment even though the student loan is deferred in calculating the debt to income ratio of the mortgage loan applicant.

Get Pre-Approved Now

If you are about to graduate and want to see if you are pre-approved for a mortgage loan and see what the maximum amount you qualify for, click this link GET PRE-APPROVED APPLY NOW or call me at 262-716-8151.  You can also visit me at www.gustancho.com and subscribe to my newsletter.

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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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