Home Loans for New Grads
With June college graduations comes the influx of new hirees into the DC Metro region and, along with them, angst over rising rents. With low interest rates and prices that are still affordable, many would do well to purchase rather than rent. But without work history, how do new grads secure a mortgage loan?
BB&T’s Community Homeownership Incentive Program offers terms to college grads starting their jobs within thirty days of graduation.
The CHIP loan has been a great alternative for my FHA clients since FHA fees went up earlier this year. The CHIP program is very versitile, offering loans on almost every type of property, including co-ops. CHIP offers qualifying buyers up to 100% financing without private mortgage insurance. See details on the program on my Lending page.
I only recently learned that CHIP offers home loans to new grads, so I asked BB&T Assistant VP and Loan Officer Kari Sansom to explain how the program works:
CoolDCre: What are the specific criteria for this June's graduates in qualifying for a CHIP grad loan?
Sansom: We will want to see that the new grads went from being in school to starting their new job with less than a 30 day gap between graduation and their new job. We will also want to see an established credit history with a minimum of 12 months clean credit history. In the DC metro area, we offer up to 100% financing if their income is less than $87,000 and 97% financing if their income is less than $107,000.
CoolDCre: Any restrictions on gifts toward downpayment?
Sansom: Borrowers can get unlimited gift funds from family members. The gifts will have to be documented to show who gave the gift funds and it must come from family members.
CoolDCre: Why is the rate a little higher than a standard conventional loan?
Sansom: Because the buyers are putting down less than 20% of the sales price and we are not putting a mortgage insurance policy on the loan, which will save them several hundred dollars per month versus the other programs with low down payment options.
CoolDCre: Who can use a CHIP grad loan?
Sansom: Anyone can use the CHIP program as long as they do not currently own another property. They do not have to be first time buyers, so it is open to anyone that meets the income and credit restrictions.
CoolDCre: How do new grads figure out if it's better to rent or purchase a home with a CHIP grad loan?
Sansom: They should compare the cost of renting with the cost buy buying. Many find that they can buy a comparable property for a lower monthly payment than they would have if they were renting. They should consider how fast home prices and rents are rising in the area as well as the length of time they plan to stay in the region. Factor in the tax breaks that homeowners receive, as well as the equity that they will gain over the years of ownership. Once all items are considered, many find that owning a home is a more practical financial move for them.
CoolDCre: Any advice to new grads with jobs waiting for them?
Sansom: Enjoy the new adventures of your new life. Talk with an established Realtor and loan officer about your ability to purchase to help make sure you are are on the right track. Create a budget and figure out how much you are comfortable spending per month on housing as well as other expenses. A good loan officer will also be able to help you figure out a good starting point for your purchase so that you can feel better prepared.
CoolDCre: Thanks Kari! For pre-approvals and mortgage lending advice, buyers can reach Kari here:
Branch Banking & Trust Co.
Kari Sansom Elwood
Mortgage Loan Officer
Assistant Vice President