A recent college graduate who is trying to secure a California home loan, or a loan in any state for that matter, needs a loan program that has flexible guidelines. An FHA loan offers that flexibility when it comes time for qualifying for the home loan.
Being that the graduate recently attended school, they are not required
to meet the entire two year work history requirement that a Fannie Mae
or Freddie Mac conventional loan requires. An FHA loan will allow school
attendance credit towards the two year work history.
Being in the workforce full time for one year coupled with the prior
year being in school satisfies the two year work history guideline,
which again many conventional lenders of today aren't allowing. If the
home buyer is working in the field in which they received their degree,
that would help the overall chance of getting approved for a home loan,
however it's not necessarily required. Lenders and underwriters may have
differing views and rules when it comes to this scenario so it's wise
to check first with your Loan Originator before you enter into a loan
application to how this situation is viewed before they pull your credit
In addition, an FHA loan may allow for longer employment gaps. For
example, if the graduate decided to take three months off after
graduation prior to gaining employment, FHA is more lenient than Fannie
Mae conventional lending.
Also FHA may allow non-occupant co-borrowers, conventional loans don't.
If the bank of Dad and Mom runs dry after paying years of college
tuition, and they aren't able to donate a cash gift toward buying a home
for their child, they can go on the loan to aid in qualifying for the
home loan even if they aren't going to be living in the property. Again
conventional Fannie Mae and Freddie Mac loans do not allow this.
These FHA guidelines are nothing new but with today's ever changing
Fannie Mae and Freddie Mac lending environment it's easy for real estate
professionals to forget them and most consumers don't know these
differing rules even exist. FHA is here to stay and consumers and real
estate professionals need to remember that even with these looser
guidelines, including accommodating lower credit scores, the interest
rates are very close to what Fannie Mae and Freddie Mac conventional
loans offer. So whether you're a college graduate or not, this is
valuable information for all prospective home buyers to know prior to
searching for a home to purchase.
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