Expert Q&A Archive
What are some mortgage options for full time students?
Hi. I just wondered what kind of programs might be available to help the older full-time graduate student--single, not working, just full-time student--buy a home? I rent, and I would like to own, and wondered what was out there for those in my situation?
Rosemary Ervin, CPA:
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Nothing special for students purchasing homes. Are you going to pay cash or are you going to purchase the American way--mortgage? If you go the mortgage route, you will need to verify income to qualify for monthly payments. Your income can come from wages, business income, but you say you are not working. Do you have a portfolio that will support monthly mortgage payments? Consider pre-qualifying for a mortgage. See what lenders are looking for as far as down payment and monthly income. It will help you determine how much home you can afford to purchase. Always determine how much you can spend before you start shopping. Stay within your budget so you will not be disappointed if you find the dream home and the contract fails because you do not qualify for the mortgage. Good luck.
Gail V. Marquet:
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The best course would be to finish your education, get a job, and then save up at least 20% to put down on a home. Right now mortgage money is extremely tight, and programs you might have qualified for in the past are about non-existent. Patience and savings is your best bet.
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Many communities have down payment assistance programs for first time homebuyers, often associated with taking an approved first time homebuyer education course. I would recommend that you start by researching first time homebuyer education programs in your area and signing up for one of those. They will usually be free, or a very low cost, to cover materials. I would also recommend that you make an appointment with a certified financial counselor to review your complete financial situation. You can find a certified financial counselor in your area by logging onto NFCC.org under the "Find a Counselor" link. The counselor can help you look at what would be an affordable price range to consider and can help you come up with a plan to address your debt if you have any.
Personally, as a certified financial counselor, and housing counselor, I would be hesitant to recommend that you actively pursue home ownership until you graduate school and secure a job in your new field. Usually home loans are a 30-year commitment, and especially if you don't have a significant (20% or more) down payment, you should be extra sure that your financial
situation can support a long-term commitment of home ownership. This is especially important when you don't have a sizeable down payment, as people often find that they need to sell or relocate quickly; and if you don't have equity in your home, it can be difficult to sell a property, especially given that in many areas of the country, home prices are going down right now, rather than up. My strongest recommendation is that you take your time, and make sure that you are really ready. Home ownership is a big commitment, and though it can seem like it takes forever to get there, it's worth it if you are buying when you are really ready financially.
Bettye J. Banks:
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It is not impossible, but with the credit markets so tight right now (lenders have learned a tough lesson about credit qualifications), you may find it a bit difficult. Without employment, how do you expect to pay a mortgage payment?
Realistically, to get started you need at least the following:
1. Documentable, sustainable income (all sources)
2. Adequate credit history or alternate credit. Check your credit [history] now before you begin the home buying process.
3. Excellent record of on-time rent/shelter payments
4. Enough cash on hand for down payment and closing costs (varies with program and lender) Some down payment and closing cost assistance may be available.
You can expect your new [monthly] house payment to equal just over 1% of the loan amount. For example, an $80,000.00 house will have an $800.00 per month payment. Can you afford that?
You may wish to wait a little while before you take this step. I agree that homeownership is a desirable and worthy goal, but you must be prepared to handle the responsibilities connected to that ownership.
Fiscal responsibility is only one of the considerations. Do you have the time (and inclination) to maintain the property?
• Lawn care (beautification and upkeep) Remember you have to buy a lawn mower now.
• Maintenance, upkeep and/or repairs on the physical structure
• Increased (and increasing) utility costs
• Taxes and insurance, if they are not included in the mortgage payments.
Now that I have scared you half to death, let me offer you some hope. Many mortgage lenders still offer first-time homebuyer programs. Check with lenders in your area, or go to the U.S. Department of Housing and Urban Development's web site (HUD.gov) and navigate the site for information.
You may be required to attend a homebuyer education workshop at a HUD-approved housing counseling agency. The HUD website has a list of approved agencies in your area. You can also contact the National Foundation for Credit Counseling (NFCC), the oldest and most respected national credit counseling agency for information about an affiliate agency near you. 800-388-CCCS (2227)