Getting an FHA loan as a student.

[AndrewG]

I am a first time home buyer and would like to get the FHA loan with a down payment assistance program. First I need to get the FHA loan. My problem is that I don't have a two year work history as I have been a college student for 3 years. This text is straight from the FHA website:

FAQ: Can I use education or military service in lieu of employment?

FHA does not impose a minimum length of time a borrower must have held a position of employment to be eligible for a mortgage. However, the lender must verify the borrower's employment for the most recent two full years. If a borrower indicates he or she was in school or in the military during any of this time, the borrower must provide evidence supporting this claim, such as college transcripts or discharge papers.

Handbook 4155.1: 4.D.1.b

I've talked to several banks and loan specialists and most of them say I cannot qualify for the FHA loan because I don't have the minimum two year work history. I do have an excellent credit score of 758 and just started a job with a great salary. I called the FHA and I spoke with one of their representatives who told me that since I am a college student studying in the field of Business Administration, and I currently work as a restaurant manager that I can qualify for this loan. However, most banks and loan officers insist that I need the two year work history. I have found a few mortgage companies who said it might be possible but I wanted to get more opinions before I went through with this.
Also, if I don't qualify with my current situation, is it possible to add a co-signer who does have a 2-year work history but not so great credit?

[Erik Sandstrom]

Andrew - I'm going to shoot an e-mail into underwriting questions to get an answer for you. I should be responding in about 24+ Hours with an answer.

[AndrewG]

Okay thank you for that.

[Erik Sandstrom]

Hi Andrew,
Here's what underwriting came back and told me:
Keep in mind that there are several variables that we currently don’t know of that can affect the borrowers final approval however it appears with the borrowers current situation it may be possible that he could qualify for an FHA loan. That said, FHA does require that the borrower document at least a two year employment history and being in school can fill that gap as long as it is properly documented with school transcripts.

If by chance the borrower does not qualify based on his current employment history FHA would allow a non-occupying co-borrower to be added to help the borrower qualify. See below.


Per the FHA 4155.1

4155.1 4.D.1.b
Verifying
Employment
History
To be eligible for a mortgage, FHA does not require a minimum length of
time that a borrower must have held a position of employment. However, the
lender must verify the borrower’s employment for the most recent two full
years, and the borrower must
· explain any gaps in employment that span one or more months, and
· indicate if he/she was in school or the military during the most recent two
full years, providing evidence supporting this claim, such as
- college transcripts, or
- discharge papers.
Allowances can be made for seasonal employment, typical for the building
trades and agriculture, if documented by the lender.
TOTAL Scorecard Accept/Approved Recommendation
If the Technology Open To Approved Lenders (TOTAL) Scorecard returns an
Accept/Approve recommendation, the borrower is not required to provide an
explanation for gaps in employment of six months or less, during the most
recent two years.

4155.1 4.D.1.c
Analyzing a
Borrower’s
Employment
Record
When analyzing the probability of continued employment, the lender must
examine
· the borrower’s past employment record
· qualifications for the position
· previous training and education, and
· the employer’s confirmation of continued employment.
The underwriter should favorably consider a borrower for a mortgage if
he/she changes jobs frequently within the same line of work, but continues to
advance in income or benefits. In this analysis, income stability takes
precedence over job stability.

Hopefully this helps!