Posted on January 25th, 2013 by Mike Freeman. | Back to blog posts.
As a kid, I always pictured how growing up would work. I'd go to college, graduate with a degree, marry my sweetheart, and buy a house. What many graudates are finding is that it's just not that simple.
Looking back over the past 40 years, home prices have climbed by a factor of 10. If you read our post about how Entry Level Job Salaries are similar to what they were in the 80's, you'll see the problem here. While salaries have stayed pretty much the same, home prices have continued to climb.
Recent graduates are often times caught up in a predicament that's tough to get out of. A conversation with Real Estate agent Josh Anderson gives us some insight on what a recent college graduate can do to help better their chances of qualifying for a mortgage and buying a home.
Anderson's first tip is to establish credit. No credit history is just as bad as having a low credit score. Anderson's advice to recent graduates is to get a credit card, use it, and pay it off at the end of each month. By establishing a positive track record with your lendors is the first step in increasing your score. Don't go out and buy a new TV or a car, put gas on the card, go grocery shopping. Then, at the end of each month, pay it off.
The next thing to consider would be what type of loans you can qualify for. An FHA Loan is a loan backed by the government to help lower income home buyers qualify for a home. Anderson suggest consulting with a broker on what the best loan type for your situation is at the time. The benefit to an FHA loan is that you get to keep a little more money in your pocket to use on buying the house. Getting a new couch or buying appliances. This is a big expense which many first time home buyers are not properly prepared. Paying only 3.5% down on the home as opposed to a conventional 20% down let's you keep more of your money.
Anderson also warns against listening to Mom and Dad. Too many first time home buyers take advice from their parents. If mom and dad bough a home in the 70's or 80's they were probably looking at a home 1/10th the price. As well, many of the rules and regulations have changed. Making home buying a completely different ball game today.
Another craze that can lead people into getting in over their head is the HGTV buzz. As a recent graduate looking for your first home, chances are you don't have a wad of money in the bank or a ton of time to spend fixing up a home. The shows on HGTV that depict homeowners spending their time and money with a fixer upper don't always tell the entire story. Be careful not to take on more than you can handle on a fixer-upper.
The final advice that Anderson shared with us was to always consult with an agent. Working with a licensed realtor who knows the market, knows the rules, and can consult and advise as opposed to just selling to you can make your home buying experience painless and profitable. Not hiring a realtor might save you $3,000 in the short term but could wind up costing you much more when you try to sell your home.
While owning a home might not help you get a job, it will surely help in getting buy. With rent prices climbing and interest rates lowering, the price of owning a home can be much less than paying rent. Along with the fact that you're building equity in something that you'll be able to sell down the road.
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