In most states, you must be 18 years old to enter into a contract which would include a mortgage loan contract.  The technical answer is, 18 years of age, since a mortgage borrower must be 18 years of age to enter into a loan contract and therefore it is the minimum age to qualify for a new home loan.  Now, once that hurdle is met there is going to be a definite barrier for someone who is 18 or just past that age to qualify for a new home loan.  There is no rule on how young or even how old a mortgage borrower can be but, a young adult will have a tough time meeting the qualifications standard for credit history and work stability. 

Most all home loans are approved using automated underwriting programs.  These programs work on evaluating the risk on each loan application by looking at the numbers that summarize the borrower’s qualifications.  The key numbers that are reviewed by these programs are the credit score of the borrower, the purchase price, the down payment, the amount of reserves (the amount of funds a borrower has in savings after accounting for the down payment and closing costs) and the income and debt payments of the borrower. 

As you can see, these are simple numbers.  The credit score is a three digit number with the highest number indicating the lowest risk and lowest number indicating high risk.  The down payment and purchase price provide the loan to value; a low loan to value is certainly less risky than a high loan to value since a low loan to value equates to a large amount of equity in the property.  The income and debt payments provide the debt ratios for the borrower or the amount of gross income allocated to paying for the loan and all other contractual monthly expenses with low debt ratios indicating a borrower has ample disposable income to cover housing costs and a high debt ratio showing a riskier budget scenario.

An 18 year old could quite possibly save $15,000.00 to cover a $80,000 purchase with a 3.5 percent down payment on an FHA loan.  The loan to value would look good as would the reserves.  If the young adult has a good job and limited to no debt, the debt ratios would look good.  All is well so far.  But, two factors present a problem.  One, the odds of having a very good credit score at 18 is not terribly good since there is generally very little data for the credit score company to build a score upon.  A short credit history is a negative for credit scores, as is low high credit amounts on credit accounts, low numbers of accounts and limited types of accounts.  So, a limited credit history will be a barrier.  Income and employment will also be a barrier since the underwriting programs look at the length of employment and the stability.  An 18 year old is unlikely to have any measurable employment history. 

Unfortunately or fortunately, depending on which side of the loan evaluation scenario you are sitting on, loan approvals are predominantly numbers that can be crunched or evaluated by a computer.  Qualitative factors have become a thing of the past.  If you are a genius at age 18 with no credit score and a two month old job, the fact that you are the next Bill Gates and graduated at the top of your class with a Ph.D. from Harvard will not get you a mortgage loan.  Mortgage approvals are based on numbers and though it may seem as though the age of 18 is the number that disqualifies a borrower, it is not the age but the data that is usually available for a person of that age that presents the problem.

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