Can recent graduates get pre-approved for a conventional loan?

[Stefanie Garner]

Hi guys,

I finished grad school last January '22 and am sitting on top of student loan debt.  I hope to get pre-approved for my first conventional loan in the St. Louis, MO, area as an out of state investor in the next 6 months ($50k-$200k loan,  $20k down).  With payments paused, I have not paid a dime of student loans yet. I'm gainfully employed but do have a gap in employment history due to schooling.    I can't be the only one in this boat --- Can I still get pre-approved?

If you know of any strong STL area lenders, please drop them here too..
 

[Nick Belsky]

@Stefanie Garner

Absolutely.  You will need to show your student transcripts and they will count and employment history, even though you haven't had any income from school.  Student loan debt is no different than in any other case.  Typically, if UW is Fannie, they will use 1% of the balance owed, and if Freddie, they will use 0.50% of the balance owed.  If any of your loans show as a minimum monthly due on your credit report, the lender will use that minimum versus a percentage of the balance.  If your first property, you won't likely be able to go Freddie on the first one.  Fannie for sure and you can use Freddie on subsequent investment properties.

Be sure to have at least 1 month of paystubs for your current job and from an income and employment history standpoint, you should be able to qualify.  Local banks are not likely going to get you the best rates and such for conventional.  Remember, all conventional lenders have to follow the same rules and the competition is fierce.  Many national wholesale lenders are tough to beat on pricing and frankly are much faster to get you to closer.  If they are servicing the loan too, it is tough to find better lenders/servicers than UWM or PennyMac, IMO.

Cheers!