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Archive for the ‘Graduate Students’ Category

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I recently had the pleasure of hosting a home buying seminar at alma mater, Northwestern’s Kellogg Graduate School of Management. We had an unbelievable turnout with nearly 125 people showing up! It is always fun to interact with the students and honestly, a little weird, since instead of listening to a lecture I was now giving one. I teamed up with Colfax Realty to discuss all of the ins and outs of home buying and financing. This is something that I have been doing for a number of years now and is always the highlight of my year.

We also spoke at the University of Michigan’s Ross Graduate School of Business last week as well. This week I will be at the University of Chicago Graduate School of Business. The week after next, we will be at Harvard Business School and Harvard Law School.

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So you just finished up your MBA, law school, or med school?  You picked up a great six figure consulting gig at a major strategy consulting firm. Maybe you snagged a position with a BigLaw firm. Regardless, you worked hard and now you want your own crib.  No more renting in the same building with undergrads!

 

Buying a home after finishing school is not much different from when you are already in the work place.  Lenders will evaluate your credit, assets, and income just like they would any other borrower.  However, there are a couple of small differences that grad students need to be aware of when deciding to purchase a home after graduation.

 

Start Dates: The biggest challenge that students often face is coordinating their new home purchase with starting their new job.  Often times the graduate has to relocate to a new city and purchase a home prior to starting work. For example, you are finishing up at Kellogg in June and decide to stay in Chicago. You don’t start work with your new company until after Labor Day. Obviously, having the summer off so you can find a home and move into your new place is convenient. However, this can cause obvious problems for mortgage lenders because, technically, you are not yet employed.  All you have to prove that you will have a job is an offer letter of employment.  It is possible to close prior to starting your new job.  If your loan application is packaged properly by the loan officer, most lenders will allow you to close approximately sixty days prior to your official start date.  It is important to understand that lenders do this on an EXCEPTION basis.  The lenders will also want to see that your credit and assets are above average as well.  Finally, remember that not all loan officers are familiar with graduate and professional schools, so make sure you are working with someone who understands the unique situations and knows how to properly present the file.  Every spring and summer I have to step in a save a deal a week or two before a scheduled closing because a lender wanted the borrower to have started work and would not accept the offer letter of employment.   I have seen this happen on more than one occassion, especially with the call center oriented places like E-Loan, Quicken, and god forbid, LendingTree.

Non-permanent residents: If you are not a US citizen (non-perms), it is still possible to obtain a mortgage to buy a home. Like your US classmates, your income, credit, and assets will be evaluated by the lender.  If you have been in the US long enough to have an established credit history with a valid FICO score, for the most part you will be treated like a US citizen.   However, you will also have to show a valid Social Security number and visa establishing legally residency and authority to work.  The most common visa received by graduate students who go on to live and work in the US is an H1-B although there are other categorizations.  Because H1-B’s take can take several months to process, most lenders will allow you to use your temporary Employment Authorization Card along with documentation from your future employer showing that the H1-B has been applied for as proof of legal residency.  Where most non-perms run into problems is lack of credit history.  You should start establishing credit as soon as possible so we can get a valid FICO score.  Here is more information on mortgages for non-US citizens.

Zero Down Loans:  You don’t need to have a down payment to buy a home.  Most lenders offer competitive zero down programs for a wide range of qualifications.  In many cases, the rates are the same as mortgages with down payments.  In addition, with good credit, private mortgage insurance (PMI) is usually not required.  The bottomline is save your signing bonus.

Student Loans:  I often get a lot of questions about the impact of student loans.  Most mortgage lenders will count the payment in your debt to income ratios even if the loans are deferred for a period of time.  If you can afford the payment along with your mortgage, the amount of student loans is inconsequential.  Some lenders offer programs especially for Doctors where they will ignore student loans while the Doctor is in residency.  However, this is not the case for MBAs and attorneys.

As always, if you have any questions, don’t hesitate to give me a call.

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