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My fiance and I are hoping to purchase a home in the next 1-2 years. I graduated college with a B.S. 3 months ago, and got a job as a rural appraiser trainee making around $30k a year. When I am certified in 2.5 years, I will be making closer to $75k. My fiance will have a masters and starting out making around $50k a year. The only debt we have is student loans and we both own our vehicles outright. I am 23 and he is 27. Both our credit scores are in the high 600s. We are eligible for the VA loan and located in Colorado. What are some ways we can look more appealing to banks for a home loan? Do we have any hope of being approved once he graduates in May of 2018 and has a job?

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Answers (1)

Congratulations on your recent graduation and new employment!  


I applaud you for planning ahead, as your timeframe of 1-2 years allows you time to prepare and make sure you are set up for success.  There are two ways to look at the home purchase, both from "What do I need to qualify?" and "What is wise for my long term success?"  Let's tackle the first part first.


When lenders look at applicants for a home loan, there are a few things they look at:


1. Income - Lenders look at a person's ability to pay the mortgage on a monthly basis, and will request documentation on how much income you make, typically pay stubs or tax returns.  Any increases in income can help in getting approved.


2. Assets and Current Debt - Beyond what you need for down payments, closing costs, and other fees, lenders will look at how much accessible assets you have after getting into the home.  They will also analyze how much debt you carry as a percentage of your income, called debt to income ratio.  It represents a lower risk to lend to people that have extra money set aside and aren't deeply indebted.


3. Credit Score - Your credit score is one of the factors considered for approving a loan.  Do things now like pay bills on time and pay down debt balances.  It's also a good idea to pull a copy of your credit report and make sure there aren't any surprises on it like bills that you haven't paid in the past.  Check out an article a colleague wrote on credit score, as well as USAA's free credit check monitoring service that can help you track your credit.


While you asked most directly about how to get approved for a home loan, I wanted to give you a few other things to consider as you prep for a home purchase.

  • Make sure you are building up an emergency reserve of accessible funds, working towards 3-6 months of your living expenses. For more on emergency funds, click on this graphic.  After building your emergency fund, start working on the money needed for your home purchase.
  • You will need cash to purchase a home, even a VA loan.  Closing costs, VA loan fees, and other fees go along with the down payment you put down, anywhere from 3% to 20% or more of the value of the home. 
  • Make sure you are addressing other areas of your financial life like the right insurances, saving long term for retirement, and have a plan for the next car purchase that may be coming up soon.
  • Your fiancé's graduation and eventual employment will increase your income, as long as you are both jointly applying for the loan.  When you have a joint application, lenders take into account both of your income, credit scores, debts, and assets.  I'd caution you to NOT purchase a home jointly until you are married, as a jointly owned home with a non-spouse can cause financial challenges should you ever want to go your separate ways.  You are wise to prepare as a team now and both be saving up cash for an eventual home purchase.

How to save all this money?  If you build a lifestyle that you can live on for 30,000 per year, consider keeping your spending the same as you get raises and your fiancée's job starts.  You may notice friends around you spending money, increasing lifestyle, and using debt to finance it.  Be patient and delay your gratification, as many people have gotten themselves into trouble moving too quickly getting into a home.


When you do start the home buying process, call a lender that you can trust to walk you through the process.  USAA has experienced loan officers that can help walk members through the different types of loans available, and even can help connect you to a realtor that has been pre-screened by USAA, saving you money as well. - Real Estate Rewards Network


Again, congratulations on your recent graduation and good luck preparing for the home purchase!


-Matthew Angel