What You Need To Qualify For A Mortgage As A Recent Graduate

Founder and CEO of InstaMortgage, one of the fastest-growing private companies in America. Best-Selling Author and Keynote Speaker.

When you think of buying a home, you likely think of middle-aged families who have worked steadily for a couple of decades to get the income, credit rating and savings necessary to qualify for a mortgage and make a down payment. But you don’t necessarily need to wait that long. Even if you’re a recent graduate, just entering the workforce, you might be able to qualify for a mortgage and buy a home. Here’s how.

What You Need To Qualify

Before getting into tips and tricks for getting a house right out of college, let’s look at what you need to qualify for a mortgage. There are several factors.

Credit Score

Typically, you’ll need a credit score of 620 or higher to qualify for a mortgage. This isn’t too difficult. You should meet the threshold if you have a credit card on which you make regular payments and if make your student loan payments on time. The average FICO credit score for Americans aged 20-29 is 662.


Lenders need to know that you can pay back the money they loan you, so a reliable income is necessary. Most borrowers must show that they’ve had a steady income that will allow them to make the monthly mortgage payments for at least two years prior.

If you’re just out of college, you might not have had a job during that time, or if you did, it might have been only part time. Fortunately, there’s a loophole. You can provide your college transcripts for the last two years in lieu of proof of past employment.

However, you still need to be employed presently in a full-time role. You must be able to demonstrate that employment (and paycheck) can be relied on for at least another three years after you take out the loan to ensure that you can make payments.

Debt-to-Income Ratio

How much you make isn’t the only factor lenders consider when determining if you can repay your loan. They also look at your debt-to-income (DTI) ratio—i.e., what percentage of your income goes toward debt obligations. To qualify for a mortgage, your debt (including the future housing payment) must be less than 45% of your income in most cases. However, some loan programs allow the DTI ratio to be as high as 60%.


In addition to showing lenders that you can make your monthly mortgage payments faithfully, you must also make a down payment. However, it’s not as much as you might think.

Repeat home buyers who have built up their credit and income over time pay an average of 15% of the home’s value as their down payment. First-time home buyers can get a home loan with as little as a 3% down payment. The average price for a home in 2022 was a little under $428,700. Three percent of that is $12,840.

Note that a lower down payment typically means higher monthly mortgage payments and mortgage insurance premiums.

Tips For Qualifying

Many of these requirements may seem daunting for first-time home buyers, particularly if they’re just out of college. So how do you qualify? There are a few steps you can take.

Get A Co-Signer

Financial magazines and websites love to feature the success stories of young people who are only a few years out of college but already have their student loans paid off and a house with its mortgage paid. They’re presented under the guise of hard work and shrewd financial planning, but in everyone, you’ll see a common factor: They got help. Usually, it’s from their parents, though sometimes it’s their grandparents or a rich uncle.

Even if your relatives aren’t wealthy, they may still be able to help you. If someone in your life has good credit, a steady income, and not a lot of debt, they can co-sign your loan as a non-occupant co-borrower. Their financial stability can help you qualify for a loan you wouldn’t have been able to get on your own.

FHA Loans

There are several programs to help first-time home buyers qualify for a mortgage they might not otherwise be able to obtain. Probably the best option is a Federal Housing Administration (FHA) loan. The Federal Housing Administration insures the loan, so lenders are more willing to give you the money, even if you don’t meet all the qualifications.

As long as your credit score is 580 or higher, you can get a loan with a down payment as low as 3.5% of the home’s value. They offer flexible guidelines for credit scores, down payment, and debt-to-income ratio making it a preferred loan program for first-time home buyers.

In the current economic climate, it’s easy to think of owning your own home as a pipe dream, years away from achieving, if you ever get there at all. But with some planning, and help from real estate and lending experts, you can qualify for a mortgage and purchase your dream home right out of college.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

Leave a Comment