It can be tempting to get away from your parent’s house and live on your own when you turn 18. If you’re a college student or recent grad, this new feeling of independence can change your life, enticing you to purchase a home so that you can begin living alone. Unfortunately, an estimated one million people enter into foreclosure every year. This staggering number is an all-too common occurrence for homeowners struggling to pay their mortgage. As a college student or recent graduate, you need a certain level of security and responsibility before entering into any type of home contract.
Can You Afford a Down Payment?
Experts recommend that a 20 percent down payment be put onto a new home during the closing process. Down payments are specifically designed to help lower the cost of the home, thus reducing the amount you’d pay each month to stay there. If you’re looking to buy a home that costs $200,000, that means you’ll have to put down about $40,000 to make a reasonable down payment. If you put down less than 20 percent for your down payment, mortgage payments will increase substantially. This is when the financial difficulties to own your home might start and mortgage payments go unpaid.
Are You Good with Budgeting?
Being a homeowner is a huge responsibility that requires a knack for budgeting and timely bill pay. College students often find it difficult to keep to their studies, let alone keep themselves on a specified budget. Remember that if you’re currently in college, your student loans will be an added cost to you once you graduate. Understand that these loan payments need to be paid along with your new mortgage, if you should buy a home.
Do You Have Good Credit?
A poor credit score will increase the interest rate attached to your mortgage. A bad score is anything below 619. Even average or decent credit scores, anything within the 620 and 679 range, can increase the amount you’d pay in interest, hiking up your mortgage payments each month. You need to become savvy with interest rates, credit scores and mortgage companies to get the best deal on a home loan. A reasonable interest rate is anything that falls in the 4.000 percent range. Anything higher than this and most of your bill payments will be going to pay interest. It’ll feel like you will never have your home paid off because the amount rarely goes down.
Can You Care for a Home?
Apart from the mortgage process and bills, being a homeowner requires a bit of knowledge and skill. Sure, you can call in a plumber whenever you experience a minor problem, but this can become costly over time. It’s important to have a reasonable understanding of how to care for a home so that you can avoid hefty contractor fees. Have a home inspector examine and assess the house before you choose to purchase it. They can tell you if there are any structural or infestation problems with the property, giving you headway on how much work will need to be put into repairing it.
Will Someone Be Co-Signing?
Having an extra person on the mortgage could mean the difference between being approved by the bank and not getting the home that you want. Parents will often co-sign homes with their children for a myriad of reasons, and these might include: allowing their child to be approved for a mortgage, having someone else on the deed in case the home enters into foreclosure or preventing the home from being taken if property taxes are not paid.
The Hard Truth
The vast majority of experts will agree that it is just not financially sound or responsible for a college student or recent graduate to buy a home until they are well-established. Unless you have a stable career that pays well, you are going to find paying for a home to be difficult or even impossible at times. Student loans, mounting debt and car payments are often enough to keep students’ wallets empty. Unless you are well-off, have a lot of money in the bank and have a great career that offers a good salary, you are better off staying with your parents until the time is right to purchase the home of your dreams.