Your First Home: How Can College Students Prepare For Their First Property?
There are so many achievements that a person can be proud of, and of course different people place different emphasis on one or another. One fairly universal goal that most young people look forward to fulfilling, however, is buying their first property. Indeed, many make this a primary goal to focus on during or in the first years following college. It’s a challenge, especially in today’s market –– but it’s not impossible!
In this piece, we’re going to dig into how college students can get ready to buy their first homes after graduation.
Get Rid of Your Debt
Easier said than done, we know. In this instance, we’re not talking about student loan debt specifically (although if you do manage to pay that off, you’ll be in great shape!). The more urgent matters are typically credit card debt and personal loans. These tend to have high interest rates; credit cards charge an average of 16% in interest, which affects you in a few different ways. Most notably, as you spend more on your credit card, your monthly payments go up, and less of the payment goes towards the actual debt. Instead, most of your minimum monthly payment is actually just interest. Some personal loans work similarly, and if you happen to fall behind on monthly payments for either, it can negatively affect your credit score. This in turn makes it more difficult to purchase (or in some cases even rent) property.
Know Your Options And Understand Your Credit Score
Your down payment is important, but it’s not the be-all and end-all of buying a home. There are other aspects, such as your credit score, which determine if you’re eligible to buy a home, and what financing options are available to you. Even if you don’t have any money saved up right now, it’s a good idea to take a look at the options and talk to lenders and financial experts to have a clear idea of what can be done later on.
Invest What You Can Now
Investing what you can when you’re young gives you more wiggle room later on –– not only for buying a home but also for being able to pay for any sudden financial emergencies that may arise. And it’s important to note that there are various types of investments for college students. Some of these include index funds (which allow you to use ready-made portfolios and teach you how the stock market works), and Certificates of Deposits (CDs), which boast higher interest rates (and thus greater returns) than normal savings accounts. Other options are available as well, of course, but the types of investments just mentioned are viewed as stable and relatively low-demand methods for young people and beginner investors.
Consider Your Budget
A good first step towards financial independence, in general, is to create a budget and stick to it. While mapping out your monthly costs, aim to spend 30% or less of your take-home (net) pay on housing –– which includes rent and will eventually include your mortgage payment and other home-related costs. The other 70% can be broken up in various ways, but the main categories to keep in mind include groceries, utilities, debt payments (like student loans and credit cards), transportation or gas, and savings. You can also include luxuries such as a gym membership or streaming subscription –– but consider also that many luxuries can be traded in for other cost-saving options such as working out at home or sharing a Netflix account with a roommate. However your budget looks in the end, organizing and sticking to it will make it all the more likely that you can put together the financial security needed to buy your first home.
Once you have your budget hammered out, look at places where you can save more money. Do you have any subscriptions or automatic monthly memberships that you don’t use? Cancel them. Are you going out to eat a little too often? Cook at home (you get bonus points for learning how to cook!) Consider getting a roommate for the time being, or looking for ways to reduce your current housing costs. Every penny saved is a penny that can go towards your first home.
Buying your first home usually isn’t easy, but it is absolutely worth doing. And if you manage to do it soon after graduating college, you’ll have managed an impressive achievement that will get you off on the right foot in your young adult life in numerous ways.
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