Can I get a mortgage right out of college?

By Gina Pogol
Mortgage Credit Problems Columnist

Dear Gina, I just graduated from college and have already accepted a job! I'll be moving out of state and would like to buy a house before mortgage rates and home prices go up. Can I get approved for a mortgage just out of college? - Edwin, Portland

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Dear Edwin,

There is nothing to prohibit a new grad from buying a home. Bad credit problems or insufficient income are greater obstacles than a new college degree. That said, there are a few things to consider.

Considerations for new grads buying a home

  1. Your income must be sufficient and also stable. If you have never held a paying job or unpaid internship in your new field, you can't really claim that your income is stable. If you have several years in the workforce, in similar positions or industries, you've got a better chance of convincing an underwriter that this new job will stick.
  2. Newly minted grads may have very little credit history. Do you need credit to get credit? Not really, if you apply for an FHA home loan. As long as you haven't racked up late payments, collections and other bad credit, mortgage lenders are willing to consider your application. Utility payments, rental history and even regular deposits to savings can be used to demonstrate responsible money management.
  3. FHA allows you to have a co-borrower if you need to show a more solid source of income, and if your family member or friend is willing and qualified to do this for you. However, co-borrowers cannot be used to offset bad credit.
  4. Other programs for first-time home buyers may be available to you, including down payment assistance or mortgage credit certificates. Check HUD's website for more information about local programs in your new town.
  5. Taking in roommates can make home ownership less expensive. Understand, however, that rental income from roomies won't be considered by underwriters when they evaluate your mortgage application.

Make sure you're ready to settle down

The biggest issue I see is that you are apparently very eager to tie yourself to a town, home and job when you don't yet know if the new work and location is a good fit. Buying and selling a home every time you move can be very expensive, and according to the New York Times, one-third of people in their twenties move every year.

People become ready for home ownership at different rates, and you may in fact be ready for the responsibility. Understand, however, that younger buyers do have higher mortgage default rates, perhaps because they lack home management experience. Before buying a home, do yourself a favor and complete a home ownership class before buying. The home you save may be your own.

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