GMATT73 wrote:
The big question is, do banks generally approve home loans to full time MBA students who can put down say, 25%? I'm not coming over with suitcases filled with cash, but I have stashed away enough to get through two years. Do mortgage lending companies have a special finance opportunity for students enrolled in professional programs?
Buying a home is a bit like applying to grad school -- the underwriters look at several criteria, and if one isn't overly-hot, others can make up for it.
In brief:
1. Credit score, as discussed above.
2. Credit history. I list this separately as you can have a decent score, but scanty history. (I worked with a guy who was only 6 months post-bankruptcy but had a 650.)
3. Debt ratio -- Rule of thumb: your debt ratio (the percentage of your monthly gross income that's going toward your payments each month) should be under 40%, once you add the mortgage and escrow payments in.
4. Work history -- most places are looking for at least two years in the same employment. Some lenders will consider job switchers who change companies but who stay in the same industry as meeting this requirement.
5. Down payment. If you don't put down 20%, you have to pay an additional amount toward Private Mortgage Insurance (PMI). These low-downpayment loans are riskier, so you have to pay into this default insurance pool. If you put at least 20% down, or even more, your downpayment will be considered a mitigating factor.
As a student, each lender will have a different set of underwriting guidelines. Some won't mind your exploding student debt, especially since you're not paying those debts right now. Some will count your student loans as income. Some will tell you to take a long walk off a short pier and come back when you've got a real job. And they'll all approach your student status differently, depending on how well you perform in the other areas.
GMATT73 wrote:
BTW, the freecreditreport.com website is definately a good place to start if you are clueless about your current credit standing. As aaudet mentioned, you get one score for free and another two for about $24. I highly recommend it to anybody who is considering borrowing over these next few years.
No no no! Go to
www.annualcreditreport.com and nowhere else. This site was created after the FACT Act was passed, which required the 3 bureaus to allow access to one report from each bureau per year per person. The reports at this site are completely free and with no freaky strings attached. There are many other sites out there that range from being a bad deal to a total scam. At annualcreditreport.com, you get all three reports for free. No, you don't get the score unless you pay for it (around $8 each), but you honestly don't need the score. The rules I mentioned above still apply - if you have a collection, pay it. If you were late, start paying on time. If you have no history, open a beginner account. Your score shouldn't determine the actions you take.
BTW - pull all 3 reports. You might have something nasty on one that isn't on the other two. If you're just doing an annual check to make sure everything is reporting correctly, then pull one every few months, so you can get a regular status check. If you have something big coming up, like buying a house or going to grad school, then pull all three now so you have time to address any issues.
Oh, and if you want to find out more, my favorite credit resource is "Understanding Your Credit Score" at
https://www.myfico.com/Downloads/Brochures.aspx#uycs.