How College Students Can Prepare to Buy Their First House
There are many accomplishments that people strive for. Graduating from college is one of them, but it takes quite some time before that happens. However, the time you spend in college is a prime opportunity to start planning out other aspects of your life. If there’s one thing you need to plan for, it’s purchasing your first house. Buying your first house is one of the most important milestones of your life, so it’s important that you go into the process well prepared. In this article, we’ll be covering how college students can prepare to buy their first house.
Eliminate a Majority of Your Debt
Being debt-free is one of the most common personal finance rules to follow and so ideally, you want to have no debt, but the truth is that it’s next to impossible. It’s abnormal not to have some form of debt. What matters is that you keep it under control. You need to have a low debt-to-income ratio before you can have a house. As a college student, you’re obviously aware that student loan debt takes priority. The thing is, you have a six-month grace period upon graduation before you must start making payments. But there’s also other forms of debt you shouldn’t have. You may have taken out a personal loan or a credit card, which are the most common ways you can accrue debt. Having lingering debt can not only decrease your credit score, but it can also significantly decrease your chances of being approved for a mortgage.
Build Up Your Financial Security
Just as you look for a quality house, mortgage lenders look for trustworthy borrowers. They don’t want people who can’t afford the cost. This is why you need to build up your financial security. Financial security is what you can comfortably fall back on without much issue. However, financial security isn’t only about having money in the bank. It’s also about the assets you have as well. These assets can be anything ranging from real estate investments to your credit cards.
Credit cards can be used as an asset; it’s not something that just accrues debt. Being a college student gives you advantage when it comes to applying for credit cards. You can take out a student credit card rather than a traditional one. Their functions are identical, but what truly separates them is a single benefit: lower interest rates. The real reason why credit cards are so difficult to pay back is because of the unpredictable nature of the interest rates. As a security measure, lenders, whether it’s for a loan or a credit card, add an extra amount on top of the initial payment as a form of security to have.
Student credit cards don’t have an interest rate when they’re active. So, whatever you use the card for, you can pay the amount back with very little problem. One thing to note, however, is that this benefit isn’t offered by every lender. Furthermore, those that do offer it only have it active during the first year. Once that time has passed, you’ll have to start paying the interest rate. Make sure to review an in-depth guide on how student credit cards work, where to apply for one and how you can utilize them.
Don’t Be Afraid to Cut Corners
When it comes to financing a house, you’re going to need every cent you can get. You may have a few expenses that you don’t need or can’t afford now. Regardless, reducing your spending is a good idea. Go over your current budget as well as your bank statements to get a better idea of what you’re paying for. Anything you don’t need, like a membership or restaurant excursions, should be cut out. When it comes to utilities, you need to be careful with how much you use. Leaving electronic and appliances in when you’re not using them can increase your power bill by a pretty large amount. Appliances that are too old use double, if not triple, the amount of power because it can’t handle it.
