Buying a Home After College
Are you a recent college graduate interested in buying a home? Even if the ink isn’t dry on your diploma yet, taking on homeownership could be a good move. You can build equity and set yourself up for a bright financial future.
You’ll also gain a comfortable place to decompress at the end of the workday. But the benefits – and responsibilities – don’t end there. Read on to find the complete guide to buying a home as a recent college graduate!
The Unique Challenges of Being a College Grad
When you’re young, you could face some disadvantages as a homebuyer. You won’t have the same work history or experience. So you’ll need to take stock of your financial picture first. First-time home buyers have many advantages available to them when it comes to first-time home buyer mortgage programs. These programs are designed to help people buy their first home. There are a lot of reasons you should buy real estate when you’re young!
Minimal or No Credit History
You build a credit history by making big purchases and regular on-time payments. But when you’re barely into your twenties, you won’t have many big purchases to your name. This can impact your credit score – and your ability to secure a loan. Credit Karma is one tool that can really help you keep an accurate understanding of your credit score.
Making monthly payments on a car could help your credit status, for example. Having an active credit card in your name can help, too. And if you lived in an off-campus apartment and made rent and utility payments, that should help your score.
Minimal or No Savings
If you’ve payday loans in Ottawa only held internships or low-paying jobs, you won’t have a lot of savings. Some housing lenders may require a 20% down payment. For a $150,000 house, that means you’d need to have $30,000 saved up.
You can start to build your savings once you start working. Stash your money in a high-yield savings account. And consider living with family or friends to save money. Once you have enough you are ready to start your home search!
Moving, Marriage, or Grad School on the Horizon
As a recent college grad, you may be more transient than someone twenty years older than you. Are you dreaming of grad school in a few years? Or are you hoping to live in a variety of places?
These are all factors to keep in mind when you start exploring homeownership. Maybe you’re looking to move up within your current organization or stay close to family in the area. In those instances, buying a home could be the right choice. Oftentimes you may even find that new construction homes are the way to go as the barrier to entry can oftentimes be easier than purchasing a resale.
The Financial Benefits of Homeownership
As a young homeowner, you stand to gain a lot from owning a home. You’ll build equity and credit. And you’ll learn how to budget for home repairs and updates. The challenges of buying a home as a recent college graduate are similar to that of buying a home as a government employee. These challenges can be overcome if you find a great real estate agent.
Build Equity
Your home will have a value assigned to it, and you’ll be making mortgage payments. The difference between the home’s value and what is left in your mortgage is the equity. In other words, if your home is worth $100,000 and you have $60,000 remaining in your mortgage, you have $40,000 worth of equity.
