There is a lot of advice out there that says people in college (or recently graduated) need to wait until they’ve been out in the work force for a few years to buy their first homes. Some of the reasoning behind this is practical: until you have a steady job, you don’t know whether or not you’ll be able to afford a house payment along with student loan payments, etc. You also haven’t had time to build up a credit history sufficient enough to satisfy a mortgage lender’s requirements. Finally, most mortgage lenders refuse to lend to people who are still in school (with the exception of those who have chosen to go back to school later in life).
That’s a great deal of evidence stacked against you, but it doesn’t mean that you shouldn’t start exploring the idea of home ownership and real estate investments now. Taking a few online courses through sites like Simpler Trading about the basics of real estate investment will help prepare you for the realities of home ownership when you’re ready to take that leap.
It’s also worth noting that home ownership isn’t the only type of real estate investment you can make. You can also invest in commercially zoned real estate, vacant lots (in both residentially zoned and commercially zoned areas), etc.
Before you invest in anything though, there are a few things that you’re going to need to have in place to get the financing you’ll need for that initial investment. And, like your real estate education, those are things you can start working on right now. Here are a few of them.
A Down Payment
Do not trust any lender who does not require you to put down a down payment on a piece of property. At best, these lenders will charge you outrageous interest rates and fees. At worst, they will not be legitimate lenders and you could find yourself out of a home and out some hefty loan payments in the process. It is always better to save up a good sized down payment for your first investment. Aim for 20% of what you think you’ll want to borrow when it comes time to apply for your loans. There are a lot of ways to start building up this nest egg while you are still in school and even while you are still paying down your student loans. Even if you can only afford to save a few bucks a week now, do it! It adds up!
Your credit score is going to matter just as much as the amount of money you’ve saved for your down payment. Take care to build a positive credit history and, with it, a high credit score. Your credit score and history will determine your mortgage eligibility and, often, your interest rates. The easiest way to do this is simply to pay your bills on time and to not carry too much debt. While debt to income ratio is a minor factor in whether or not you are approved for a credit card, it is a major factor in whether or not you’ll qualify for a mortgage.
Steady and Respected Employment
Yes, it is a curse of today’s society that working full time at a fast food restaurant or as a retail clerk isn’t viewed with the same esteem as someone who works in an office. Hard work is hard work, right? Not in the eyes of a mortgage lender. People who work for corporate employers and in corporate-styled jobs are viewed as more stable than those who freelance or work in a service industry. This is because income is variable for a freelancer and the rate of turnover in retail and service industries is high. So, if you want to invest in real estate before you’re 30, take the boring office job now, get your house and then jump into the freelance pool.
Investing in real estate is one of the best investments you can make as an adult. The sooner you start learning the ropes and building a solid financial background, the better off you’ll be.