Most of us have been there: transitioning from high school to college puts us in the grownup league. This is the point where many things change, and we begin to think more maturely. One of the many things we begin to consider is a roof over our heads.
Sure, as a student, you won’t have years of working experience and probably won’t make as much as your parents. This is why many are discouraged from considering buying a home.
Things aren’t as simple as that; you shouldn’t dismiss the idea instantly. This guide will outline the options for students who want to buy a home while enrolled in college or university.
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Should You Buy a Home as a Student?
Buying a house or an apartment is a big commitment, so the first question you should ask yourself is whether you should consider buying a property.
The monthly payments will be higher, so a roommate can be a good idea. Having one means you can partially cover the payment and be more comfortable with your finances. Once you finish college, you can continue renting it and have an additional monthly income.
Committing to a home mortgage is recommended if you stay in the area. While that is true, moving to another state or country doesn’t mean you cannot keep the property. You can always sign a contract with an agency and let it deal with rent and maintenance. The best part is that you’ll continue getting monthly income.
How to Buy a Home as a Student
One of the main reasons students are hesitant about buying homes is generally instability. They work part-time or underpaid jobs, which often discourages them from considering a permanent roof over their heads. Even though this may make things difficult, it’s not entirely impossible.
Most of the properties in the US are purchased by taking out a mortgage, and it won’t be too different if you’re a student. Getting a loan and paying for it for several decades with interest is a good way to get your home now without thinking too much about saving enough to pay it at once.
Many mortgage companies are offering different kinds of loan programs each with various conditions. The result is some flexibility in choosing based on the interest rate or the down payment percentage.
Speaking of down payments, saving enough money can be a bit of a struggle as a student. Careful budgeting may help, but in a worst-case scenario, you can always check some of the assistance programs or go for a loan with no down payment.
Get a Co-signer
As a student, your credit score may not be ideal for getting a loan, but that doesn’t mean you won’t be able to get your new home. If you feel like you can afford the monthly payment but were denied the mortgage, your other option is a co-signer.
The idea behind this is simple: the person in question would be one with a better credit score than yours who can vouch for you. It’s a way of telling the lender you can make full payments on time. A co-signer is often someone very close to you, like a parent, sibling, or partner. The main reason is that they’ll take on the payment responsibility if you fail to do so.
Since the co-signer vouches for you, lenders will approve your mortgage, and you’ll be ready to purchase your new home. As long as you pay on time, everything will be fine. If you fail to do so, that responsibility falls on the so-signer, and they’ll need to continue making the payments instead of you. Keep in mind that this can hurt their credit score as well.
Consider All the Angles Before You Buy
Many students dismiss the idea of a home mortgage due to existing student loans. While having an existing loan may complicate things a bit, it won’t make it impossible to buy a home.
When applying for a mortgage, the first thing that lenders evaluate is your debt-to-income ratio or DTI. This gives them an idea of how much you make and the debt you’re currently in. Some have a fixed number and don’t approve applications below that, while others are more flexible. If your DTI isn’t as ideal as you want it to be, you can try to aim for flexible lenders.
On the other hand, if you’re not in a rush, you can start working on improving your score and apply for the loan again once the numbers are up.