Home Purchase For College Graduates With No Work Experience

This BLOG On Home Purchase For College Graduates With No Work Experience Was UPDATED On April 18th, 2019

College seniors throughout the country are interviewing for jobs.

  • Many college seniors have either May or June graduations
  • Many will have job offers via offer employment letters long before graduation
  • Many college seniors have a good dilemma of receiving multiple job offers
  • Deciding on which job offers to take can be a good stressful thing to have
  • Depending on the major of the graduate, many college seniors are getting job offers of upwards of $100,000 per year
  • Especially those graduating 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 right out of college with no work experience. Recent graduates can be homeowners without providing a two-year employment history and not having to need mom or dad to co-sign for a mortgage loan.

Mortgage Requirements For Home Purchase For College Graduates

To qualify home loans borrowers need two-year employment history and proof of income.

  • Mortgage lenders will also require the following:
    • two years tax returns
    • two years W-2s
    • verification of employment
    • recent paycheck stubs and likelihood for three years continuous employment
  • However, many college graduates have no full-time employment history
  • Some never worked a day in their lives
  • The great news is that mortgage 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
  • No work history is required
  • High school graduates with a new full-time job and an offer employment letter can also qualify for home loans

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 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 paycheck stubs before they will issue a clear to close
  • There are some lenders who will just go off an employment contract and request that the borrower provide paycheck stubs after closing on their home loan

Down Payment And Closing Costs On Home Purchase For College Graduates

Most college graduates will be limited to reserves.

  • All home purchase lenders will require down payments and closing costs
  • The only loan program that does 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
  • Most 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 of 3.5% down payment
  • 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.

  • Lenders will use 1.0% of the outstanding student loan balance as a monthly debt on deferred student loans on FHA and USDA Loans
  • However, if a borrower can contact student loan provider and get a fully amortized monthly payment over an extended term (which is normally 25 years) that figure can be used
  • It normally turns out to be 0.50% of the outstanding loan balance
  • This amortized monthly payment needs to be in writing by the student loan provider
  • FHA no longer allows deferred student loans to be exempted from debt to income calculations
  • VA Loans exempts deferred student loans that have been deferred for 12 or more months from the closing date
  • If student loans are not deferred, VA will take 5% of the outstanding student loan balance and divide that figure by 12 months and that will be the monthly student loan payment that is used for DTI Calculations
  • However, with conventional loans will take IBR (Income Based Repayment) as the monthly debt if the IBR is reported on the credit reports
  • Conventional lenders will count 1% of the student loan balance as the monthly payment if the IBR payment is not reflected on the credit report or borrowers cannot get a fully amortized monthly payment over an extended term in writing

Get Pre-Approved Now

College Graduates with recent job offer letters needing to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans, please contact us at The Gustan Cho Team. Home Buyers who are about to graduate and need to get pre-approved for a mortgage loan and see what the maximum amount they qualify for, click this link GET PRE-APPROVED APPLY NOW or call us at 262-716-8151. Or text us for faster response. Or email us at [email protected]

This BLOG On Home Purchase For College Graduates Was UPDATED On April 18th, 2019

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