FHA loan for college students?

Question

I am a college student who is interested in purchasing a property to house hack with a friend. As of now, I have a job lined up for after graduation, I will start working in June and my friend is in the same situation and we would like to apply for loans together.

I have two questions:

1. How feasible is it to apply for a FHA loan when we haven't officially started work, and haven't graduated yet?

2. Would getting preapproved for a loan before graduation/starting work vs. after starting work somehow affect the rate we would get on the loan once we start making offers?

Many thanks! and any advice for someone in my situation is greatly appreciated

Grant Greene · Answer

@Alex Olson makes a very good point about finding a co-signer.  The sticking point with an FHA loan is that they want a two-year work history for every borrower.  If you and your friend, along with your co-singer, have good credit, you'll want to go with a conventional loan - you can still get in with a small down payment (the usual reason people gravitate toward an FHA loan).  I have an alternative idea for you and your friend - it doesn't require income verification or job history.

I'll disclose up front that is for non-owner occupied properties only; I realize this throws a bit of a wrench into the house-hacking idea, but hear me out.  There's a loan product that allows you to finance BOTH the acquisition cost and the renovation costs, and qualification is based on liquidity and DSCR rather than income and job history.  Usually, you have to come up with 30% down to acquire the property, and then you have to foot the bill entirely for the renovation costs. This loan product will allow you to finance the acquisition for as little as 10% and possibly finance 100% of the renovation costs - those numbers are based on experience.

I realize that house-hacking is ideal because it gives you a place to live (and get your mortgage paid by the other renters), so if you can get a co-signer and go conventional, that's perfect.  Just as an aside, on an FHA loan, schooling counts as job history IF it's job specific: you're going to nursing school, and you're graduating in two months and have a job offer. We could use your time in school as work history.  Conversely, if you're going to school and majoring in business, even if you got a job in a field that fit your studies exactly, they wouldn't count your school time.

Mull it over and let me know if I can provide you with more information regarding purchasing an income property.

Kyle Bambu · Answer

Hey Ethan! Congrats on searching for a property at this stage. I am also a college student with a job lined up after graduation. I'll be moving to Phoenix, AZ at the end of May. I'm currently in the stages of closing on a property in AZ, and I won't even be out there for two more months. I had no issues getting a loan. Guidelines state that you can get a loan up to 3 months out of your job as long as you have an official offer letter. Obviously credit is going to still play an important role. If you have no credit history, I'd suspect that you'll run into issues. You also do not need an FHA loan. If you have the credit, a conventional 3% down loan will likely be the better option for you. If you'd like, I can discuss with you more since I'm currently going through the whole process.

Ethan McRae · Answer

@Alex Olson ah I see, thanks. Any ideas on good ways to find lenders that would want to work with first-time investors?

Alex Olson · Answer

@Ethan McRae Best choice is to talk to a lender that likes to help first time investors. Tell them, though, that you will only do an FHA loan. You may have to have some kind of job or a cosigner to get started. Very smart thing to do though - house hack before you are 21! Hope this helps!.