Collective wisdom generally holds that people graduate from college, rent an apartment for at least a few years, and then buy a home when they reach their thirties and begin to raise a family. That may not be the best course for everyone, though. More and more, experts say it’s far better to buy as soon as you can afford it. In fact, it’s never too soon to go to a mortgage lender and get pre-approved for a first time home, as long as you carefully consider the costs and know how to manage your finances.
Buying a home is an investment. Not only do you gain equity, but you also have the potential for tax savings and long-term profits as your home increases in value. Those who invest wisely are therefore putting themselves in a far better position in the long run than those who rent. The key is figuring out how you can leverage enough money to cover the costs.
First, there’s the payment to the mortgage providers, but since you would be paying rent anyway (without gaining equity), that’s only a marginal concern. For most, the biggest obstacle is the down payment. Gathering enough money straight out of college can be daunting, but where there is a will, there is usually a way.
One strategy is to find someone who can help with the costs. Friends and family are great resources. The people closest to you are often the most interested in helping you get your feet on the ground. It’s not unusual for a parent or uncle to pitch in for something like a down payment, particularly if they’re confident in your ability to turn the investment around in the long run.
Considering the Costs of Home Ownership
Of course, you’ll want to stay in the house for at least three to five years in order to recoup that down payment. Unlike renting, you can’t just move out after six months. Not only do you have the initial costs to consider, but you’ll end up having to sell the home yourself, which takes time. That means you should pass on purchasing a home if you plan to continue your studies in the next few years.
Over and above the monthly mortgage payment, there are other costs associated with home ownership, including:
- Property taxes
- Maintenance and repair costs
Deciding to purchase a home means calculating these costs over the long run and ensuring you have a steady and high enough income to cover the extra payments.
For those who are ready to take on the added responsibility of home ownership, there are some simple strategies that can help ease the burden.
Tip #1: Buy a Less Expensive Home
The first tip is rather obvious. If you can’t afford a large, sprawling mansion, buy a cozy little place instead. No matter how old you are, your starter home will probably be a more modest deal in a lower-income neighborhood. It’s even more important to think small when you’ve just earned your degree and you know you have significant school debts to pay off. The good news is that, without kids to worry about, you don’t really need to the extra space or the world-class schools.
Tip #2: Partner Up with Someone
You might want to bring someone else in on the deal, particularly since you probably won’t have to worry about accommodating a large family. See if a friend, partner, spouse, or sibling wants to invest with you. There’s one important caveat: Make sure it’s someone you actually want to live with for a few years. It’s far easier to get out of a rental situation with a simple roommate than to separate from a co-investor. Of course, you can split the costs any way you choose—50/50, 60/40 or any other variation—but when you do decide to sell the house, you’ll have to split the profits along the same lines.
Tip #3: Rent Out a Room
Instead of co-investing with a partner, which is a long-term deal, you can rent out a room on a more temporary basis. If you don’t have a large family, it’s easier to allocate at least one room to a tenant. That way you’ll be able to pull in some money every month to help you cover the mortgage payments. While most of your friends will be in thrall to their landlords, you’ll become one yourself.
In the end, purchasing a home may be the best decision for the right people. If you do think home ownership is for you, A and N Mortgage can give you expert advice and help you fill out an online mortgage application.