You’ve packed up your dorm room, thrown your Frisbee into storage, and have bid adieu to those cumbersome textbooks. College has culminated, so what now? This exciting time in a young person’s life is ruled by one question: what’s next? For many, that answer takes quite a while to define.
Many millennials are open to moving back to their parents’ houses after college. But for some, moving home may not be a viable option or, at the very least, seems an undesirable path post-college. This is leading recent college grads to a fork in the road: should I rent or should I buy? With renting costs continuing to rise, many recent graduates are deciding on the latter.
So, as a recent college graduate, what do you need to know when buying your first home?
What does the future hold?
It can be very daunting to map out the next ten years of your life just as your tassel has been moved to the left. Impulsive decisions should be left in the dorm room and recent grads need to plan where and what they will be doing before considering buying property. Thinking like a real estate investor rather than making emotional or rash decisions can help guide the thought process.
"Before college grads think about buying a home, they should have both a stable job and firm plans to live in the neighborhood for at least the next five years,” says Brian Davis, VP of ezLandlordForms. “If a recent grad is cemented and secure in their current location then they should talk to several mortgage lenders (starting with their bank) about their loan qualifications.”
What should recent college grads see as red flags in their future? For example, do you plan to go back to school? If so, then buying a home right after undergraduate studies isn’t smart. Another factor is where you want to live. Many recent college graduates will gravitate to hip, chic areas where property values are through the roof. You have to ask yourself if you can afford an area like that and if not, whether you would be happy in a less desirable part of town.
Buying your first home is a huge decision, so all the factors together can become overwhelming. However, if you are mentally prepared to take the journey then you need to be certain that your wallet can handle the weight as well.
Plan, Plan, Plan
Before you even think of picking up a pen and inking a deal for a mortgage, it’s important to be aware of your financial standing. With technology essentially being ingrained in a young person’s DNA, budgeting has never been easier. There are a slew of apps for smart phones that are tailor-made for budgeting and planning your finances. These can enable you to see what you may be able to afford and when.
In addition to knowing the precise state of your finances, it is important to know your credit score. Just hearing these words alone can send people into a panic, but for an easy way to check it visit AnnualCreditReport.com. This is the only site that’s federally mandated and an authorized source for a free credit report. Be wary of any other sites that promise to run your credit for free.
Once you know your score you can decide what next steps to take. If it’s too low to even apply for a home loan (anything below 580), it’s time to get your credit in order. You should open up a credit card and pay it on time, stay on top of your student loans, and make sure you don’t have any lingering past due debt.
Many new buyers also don’t factor in the hidden costs of buying their first home. As well as the down payment on the property (which has proven tricky for recent grads to raise due to student loans), there are also appraisal charges, closing costs, taxes, insurance and property inspection fees.
Much like school itself, the best thing a recent college graduate can do is their homework. Thankfully, you can get a hand by partnering up with a team of professionals. As long as you think with a clear head and have a healthy financial standing, you could soon be hanging that fancy diploma in your very own home.
Reprinted with permission from RISMedia. ©2015. All rights reserved.