First Time Home Buyer for College Students
First Time Home Buyer for College Students
How Can A College Graduate Become A First Time Buyer?
Across the nation, each year college students will graduate and receive new job offers and while this might be overwhelming at first, then comes time to figure out what city you will be moving to and now will have to obtain a new residence. No pressure right? Well good news, MortgageQuote.com might be able to help with obtaining a mortgage loan, even though you have not obtained a first paycheck. However, some lenders might require that first paycheck with your new company depending on the situation as guidelines change from time-to-time. Keep in mind, time is of the essence, the sooner you inquire about a mortgage loan before your graduation, the more educated, informed and prepared you can be for your new property.
An individual might graduate in 2 months from the University of Central Florida with a degree in accounting and is ready to explore purchasing a property to begin their new career.
The student could have already received a job offer from an accounting firm in Miami, Florida before they have even officially graduated. Firms are often keen to ensure that they do secure the best candidates as quickly as possible. It can be a competitive landscape and the power is often firmly in the hands of the college leaver. However, now you have a job offer, a destination city but without a place to stay, now what? Your options are limited to mostly, either to rent or purchase a new home. You should be aware of the cons of renting, if you decide to inquire about purchasing a home, then what are the requirements to proceed?
There are two main requirements to qualify for an FHA loan. An applicant must have two years of residential history as well as two years of employment history.
However, according to FHA guidelines, college graduates who have no work experience may have the two year employment history requirement waived, if they can provide evidence that they have remained in full time higher education.
Typically, this evidence will be provided in the form of transcripts which must be sent to the appropriate lender.
Whether a student can qualify for a loan will often be contingent on if they have received job offers that have a start date, pay rate and a few other exceptions. These job offer letters can be provided as evidence before a student graduates.
As such, this means that college graduates may obtain a mortgage quote and a pre-approval for a mortgage even if they have not yet achieved job longevity, certain conditions and guidelines are required and is subject to change at any time, however this might be an ideal option for some. The college graduate’s major is considered part of the employment history despite the fact that they were not earning during this period. Make sure to gather your transcripts, to prove this to the lender as this will be required, your GPA does not have any bearing on obtaining a loan.
This is something that you must consider once the job offer letters start arriving near the end of your college degree.
Students can use a job offer letter that includes a start date which is generally within 60 days out of your closing date of your new property. However, this option might be limited if you wait too long as if the start date is within 30 days you might not qualify. If you have more FHA faqs then connect with MortgageQuote.com
What Mortgages Are Available For Students In Florida?
There are several mortgage options available for a home buyer in Florida who has just completed their degree. For instance, students can explore Home Ready mortgages. These are designed specifically for individuals with a household income that is considered 80% below the median income of the zip code, limited cash for down payment and average credit scores due to low levels of borrowing. This type of mortgage provides various benefits including pricing that is either better or equal to standard loan pricing for buyers.
Graduates may also want to explore Home Possible loans. Home Possible mortgages from Freddie Mac are designed to help home buyers that might need support with home affordability. It is similar to Fannie Mae’s Home Ready program in terms of median income requirements as well as other guidelines and qualifications. While it is not necessary to be a first time buyer to access this type of loan, it is considered a great choice for first time buyers. These loans are available with a low down payment and offer flexible down payment sources.
A Freddie Mac or Fannie Mae product might be beneficial for students that are concerned about entering the world of home ownership. The programs generally allow for a lower down payment, there is also typically a better level of mortgage insurance, particularly if graduates have already built up a strong credit rating. If you make more than the median income and want to check out a conventional loan, then there might be a lot of benefits that you might just not realize, however you can compare conventional loans vs FHA.
What Is An FHA Loan?
The US Federal Housing Administration, or FHA, is a government agency that offers mortgage insurance to banks and other lending institutions for loans that meet their criteria. This means that if a person who has taken out an FHA loan defaults on the loan, the bank will be reimbursed by the FHA for part of the loss while the borrower remains responsible for what they owe.
FHA loans are mortgages with lower down payments than most conventional mortgages which makes it easier for first-time homebuyers to buy a house without saving a large deposit. In addition to this, an FHA loan offers more flexible credit guidelines compared to conventional mortgages which make it easier for recent college graduates with no employment history or non-prime credit history to qualify.
The fact that the lender is backed by the FHA means that they are willing to take risks that they would not normally make. So, borrowers don't need to provide as much evidence of good credit history or high earning potential.
What Are The Usual Requirements When Applying?
When applying for an FHA loan, there are a number of factors that are taken into consideration. These are much the same as a standard mortgage and include things like employment status, credit history, and income. While the requirements are much more relaxed than with a conventional mortgage, there are still some criteria that have to be met in order for an application to be successful.
For example, all borrowers will need to meet citizenship, DACA or resident alien status and they must also pass FHA eligibility requirements based on their financial situation. These include things like debt-to-income (DTI) ratios and how long you've been employed at your current job. As well as this, the house you want to buy must meet certain FHA property eligibility guidelines and it's important to inform your mortgage broker if you already own another home at the time of applying for your loan.
When completing your application, you may be asked to provide items including but not limited to:
- Paycheck stubs
- Two years of employment history
- 2-months of bank statements
- Two years of residential history
- Proof of the ability to repay the loan
- Credit check
For college graduates that have not yet started a job, this can be a challenge because they may be unable to demonstrate two years of employment history and without a regular wage, they cannot show that they have the ability to repay the loan.
However, there are different rules in place for a full-time college student and recent college graduates. Students might be able to substitute two years in education for the two years of employment history. Recent graduates can also show an offer letter for a job that they have not started yet as proof of their future income and ability to repay the loan. But there are still specific rules in place for college students and recent graduates and it is important that you meet certain criteria.
Applying For An FHA Loan Without Employment History
If you are a college graduate and you do not have two years of employment experience, you can still apply for an FHA loan. However, there are certain requirements that you must meet in order to qualify. For example, you will need to have graduated from an educational program less than two years ago and you will need to show your college transcripts as proof of graduation.
There are a number of different types of education that can be used in lieu of employment history. You may have graduated high school, a four-year college program, a trade school, junior college, a graduate school, or a professional school. Service in the military can also be counted as your two years in employment.
The type of job that you have been offered may make a difference too. In order to qualify, you usually need to have a job offer in the same field that you studied in. If you trained as an engineer, for example, and you are offered a job in that industry, your education counts towards employment history when applying for a mortgage. But if you are offered a position in a completely different field, you may not be able to substitute your years in college for years in employment.
If the job is not in the same field that you studied in, that doesn't necessarily mean you will be rejected. This issue will be handled on a case-by-case basis and the underwriter will decide whether you should be approved or not. They will consider whether the job offers long-term stability and earning potential or not. So, as long as the salary is good and it's a reliable position, there is still a strong chance your mortgage application will be accepted.
When applying, you need to show an offer letter from your new employer. This letter needs to show the salary that you will be paid and it must also include details of the job itself. You should also provide a statement from your college or university certifying that you graduated less than two years ago and specifying the date on which you finished studying, if you are no longer in college.
The start date of the job must be 60 days away, but not within 30 days of the application. In some cases, this means that students can apply for an FHA loan and be accepted before they officially graduate as long as they have a job secured.
Applying For An FHA Loan With No Credit
A lack of credit is another common hurdle that college graduates face when applying for a loan. On a case-by-case basis and depending on the lender, you might be able to build credit by using credit cards and taking out loans, then making payments on time. Your overall credit score is calculated by the number of credit accounts open that you have used responsibly, how much debt you are carrying, the length of your credit history, and other factors.
College graduates may not have any credit because they haven't borrowed any money. However, when applying for an FHA loan, a first time home buyer can ask that non-traditional credit tradelines be taken into account.
A non-traditional credit tradeline is a creditor that does not report to the credit bureaus that calculate your credit score. So, there are instances where you are making monthly payments for certain things but it is not being counted towards your credit score. Common examples of this include:
- Cell phone bills
- Car insurance bills
- Utility bills
- Car leases
- Internet bills
By making these payments on time every month, you have already demonstrated your financial responsibility, but this won't show up on your credit score. Recent college graduates can use these non-traditional credit tradelines in place of a standard credit score. Having said that, there are guidelines about what can be considered.
A non-traditional credit tradeline might not be counted towards your application until you have made at least 12 monthly payments. This is generally to stop people from opening an account with a company and making a few payments just so they can boost their application. You must be able to demonstrate that you can make payments over an extended period of at least a year to two years.
The credit requirements can be stricter when using non-traditional credit sources. Any late payments could reflect poorly on you and could impact your chances of being accepted for a loan. This means that first time home buyers need to be very careful with all payments, even small ones like cell phone bills.
If you are a first time home buyer in Florida and you have recently graduated college, there are some potential hurdles you will have to overcome. Applying for a traditional mortgage is not usually a viable option because you might not be able to provide the necessary employment history. However, an FHA loan is a lot more flexible and they have systems in place to help people that otherwise would not be able to get a mortgage, including recent college graduates.
When applying for an FHA loan, you are able to substitute two years of education for your employment history, as long as you have a job offer lined up. You are more likely to be accepted if this job is in the same field that you studied in but as long as the salary is adequate and you have job security, you will be considered. You might be able to also use non-traditional credit sources in place of your standard credit score.
So, if you are a recent college graduate and you are looking to purchase your first home, start looking into FHA mortgages.