I have been in the same field for 8 years, but the last 5 have been spent in grad school. When I get out (hopefully in short order), we plan on moving and we NEED to buy a house. My current income is, well, frankly pretty sad, but I will be making much more in my post-graduate position. I will have an employment contract set-up well before I start looking for homes and the contract will stipulate an annual increase in salary of several thousand dollars (pretty typical in my field)... so my question is this: what income will they use to qualify my mortgage, my current income or the income expected from my post-graduate position? Will or can they take into account that my post-graduate income will increase substantially year to year? In short-- how will this work?
It really depends on what type of loan program you go with, but the rule with FNMA underwriting is two years back and three years forward. That means you can use the income from the new job is you have a signed contract for at least three years. They still will only qualify you on the base salary of the contract, not the increases you expect. If the contract does stipulate regular increases in income, that's what they call a "mitigating factor", and could help you qualify for some of the ARM programs where underwriting is a little more stiff. Also keep in mind that the rules on student loans have changed. They now have to be counted against your debt to income ratio even if they're deferred. I know you didn't ask about them, but comming out of grad school, I assume it might be an issue. Also keep in mind that most first time homebuyers don't keep the same financing on that forst home for more than two years. If FNMA won't approve you right off, there are plenty of alternative A programs available that can get you into the home, and you can switch to FNMA later on once you've had the chance to establish yourself. Hey, good luck in you career, whatever it is.
In my field, post-graduate work is considered an extension of training as long as it is in academia so that student loans continue to be deferred during this period of time. Can these still be counted against me?
kit I will answer each post seperately for you. If you are going into a post-graduate fellowship program and can show that your student loans will be deferred for at least 1 year after you close on your mortgage, then they will not count towards your debt ratio. If they will be in deferment for less than a year, then yes they will count towards your debt ratio. fla-tan
kit Your work history will be fine. Conventional lenders normally are pretty understanding about dramatic income changes that occur upon graduation from either school or post-graduate fellowships. While you will most likely be required to show past income, they will go mostly on future income based upon your employment contract. The past income will be mostly used to prove time in field. I hope this and the other response I made answers your questions. If not and you wish to, you are welcome to email me off-board. fla-tan
thank you fla-tan! your answers have eased my mind I was very worried that I would have to qualify based on my graduate stipend pay (which is peanuts), so this is good news for me!
kit, You might want to look into something called a 'graduated payment mortgage'. I've never done one before so I dont really know too much about them. However, from what I do know, they sound like something you may want to check into. Do you know anything about these fla-tan? od
