By Annemarie Rogers, Mortgage Loan Officer
For most Americans, buying a home is the most expensive purchase they will make in their lifetime. It requires a steady income, responsibility, and discipline. But buying a home isn’t just about income. You will also need established credit and discretionary funds for the purchase. If you’re wondering how to manage your finances, education and homeownership goals while going to college, read on.
For traditional college students, pursuing higher education is often the first step to leaving their parents’ home. After living in a dormitory, many students will seek on-campus apartment and condo rentals. Campus housing can be expensive, so some traditional college students, non-traditional college students, and graduate students consider investing in their own housing.
One of the challenges students face when purchasing a home is having enough qualifying income. One solution to this dilemma is to have a family member as a non-occupying co-borrower on the mortgage. In this situation, a student will qualify with a family member using the income and debts of themselves and the family member to purchase a home. The co-borrower will be fully obligated on the mortgage and will assume title to the property.
Other challenges include having money for your contribution to purchasing a home. If you don’t have money saved, you can see if you have a family member who would be willing to give you a gift for the funds you will need for your transaction. If you are pursuing a Federal Housing Administration loan, also known as FHA, you can have 100% of the funds you need for closing come from a gift from a family member. This program also allows you to negotiate with your realtor up to 6% of the sales price as a seller concession, where the seller will pay all or a portion of your closing costs.
Student loans are also a consideration when purchasing a home. Unless you have a full scholarship or are paying cash for your education, it’s likely you are taking out student loans. While you are in school, these loans remain in deferment. Once you complete school, the repayment will begin or you may be able to apply for continued deferments. Most mortgage programs require that you qualify with 0.5% to 1% of the balance of your loans. The longer you remain enrolled, the higher these student loan balances will be, so be aware of what your monthly obligations will be once you graduate.
Even though you qualify for a mortgage, buying a home may not be the right decision for you. There are many factors to consider. Where do you plan to live following graduation? Will you live in the home long enough to recoup the expense to sell a home should you need to relocate? These expenses include real estate commissions, transfer taxes and title fees, and more. As with any major life decision, you should examine the advantages and disadvantages carefully before determining if homeownership in college is the best path for you.