When most people think about getting their first home after college, they’re thinking about renting a place. But you don’t want to be like most people. You want to buy a home and start building up home equity right away.
While it might seem like a pipe dream, it IS possible. You’ve got a few months until graduation, so it’s time to start preparing to purchase your first home now.
Focus on Your Credit Score and Debt Load
Your credit score and the amount of debt you have are going to play a large role in whether or not you’ll be able to buy a home out of college. Order a copy of your credit report ASAP. If you don’t have a credit card or any other type of loan, you probably have a low credit score simply because the credit bureaus don’t know yet whether you’d be responsible with your credit. Get a credit card, start using it, and pay your bill off each month before the due date.
If you already have debt, focus on paying it off. It’s lowering your credit score, and it will decrease the amount the bank says you can afford when you get a mortgage pre-approval. It’s better to be (virtually) debt-free when you buy your home.
If you start doing these two things now, your credit score should be in good shape by the time you’re ready to buy.
Pay Attention to Your Student Loans
We said it’s better to be debt-free, but if you’re like most students in Canada, you’re going to be graduating with some student loans. That’s OK. The good thing about student loans is they’re “good debt.” They usually come with low-interest rates and reasonable monthly payments even if you have a high amount of student loan debt.
However, you need to pay attention to the loans. If you have a deferral period, make sure you know how long that period is, and start paying the loans back when you’re supposed to. Talk to the lender about how to make your payments. Make your first payment well before the due date. Your credit score will take a hit if you’re late with your student loan payments, and you don’t want that to happen when you’re trying to buy a home.
Use Those Graduation Gifts for Your Down Payment
You need a down payment to buy a home. The Canadian government requires you to have at least five per cent for the down payment, and it’s better to have more. If you’re looking at something like a brand-new condo with a $300,000 price tag, that means you’ll need $15,000 saved up to purchase the home.
That amount is hard to save up through the part-time job you’ve been working while in college, but if you combine any savings you have with the money you get as graduation gifts, you’ll probably be in good shape. Don’t be afraid to let friends and relatives know of your goal. They’ll be more likely to give you the cash you need rather than something else.
Sign Up for Our Down Payment Savings Plan
At StreetSide Developments, we offer a down payment savings plan for those who aren’t quite where they need to be with the down payment. In using this plan, you can start making the design decisions for your new home while you save up the remaining amount. Once you have the amount you need, your home will be ready. Talk to an Area Manager if you want to take advantage of this plan.
Stay at Home for a Year
This may not be the coolest option, but moving back home with your parents for a year while you work can save you a lot of money. If you’d normally spend $1,000 a month on rent but save that money instead, you’ll have $12,000 at the end of the year. It’s easy to see how dramatically reducing your expenses can help you get ahead. This is a good option if you’ve got a job but are nowhere close to your savings goal.
Make Your Home More Affordable by Sharing the Space
Your roommate days may not be behind you. We’re seeing many young professionals purchase homes with the intention of sharing the costs with a roommate. In most cases, you’ll have to qualify for the mortgage using your own income, but when you get a roommate, that person’s payment can go toward the mortgage and make it easier for you to pay. There are plenty of great roommate-friendly floor plan options at StreetSide to choose from.
You don’t have to spend years throwing money away on rent. With some careful planning, you could be ready to buy your first home just after graduation.
Photo credit: just moved, credit score, graduation
