5 Tips to Finance Your First Home Out of College
When you graduate from college, your financial situation can feel overwhelming. In addition to dealing with bills and trying to find a job, you will also likely have to begin making payments on student loans. Adding to this stress is the fact that most recent college graduates want to buy their first homes shortly after entering the workforce. Here are some tips that will help you finance your first home out of college.
Begin by Building a Good Credit Score
One of the most important parts of getting a good interest rate on your first mortgage is having good credit before applying for the loan. Be sure to stay current on your student loan payments and any other debt payments you may have. If you need to build up your credit, consider getting a credit card and paying it off each month. Never use more than 30 percent of your available credit line since your FICO score rewards low credit utilization.
Live Cheaply for a Few Years While Paying Down Debts
Some college graduates leave school and immediately secure lucrative jobs. If you are lucky enough to have this happen to you, it can be tempting to increase your standard of living to match your new income. Despite this temptation, it’s best to live cheaply for a few years after securing your first job. During this time, you can pay down any consumer debts and make significant dents in your student loans, both of which will make it easier to get a favorable mortgage when the time comes.
Save Up a 20 Percent as a Down Payment
Another advantage of keeping your expenses low during your first few years in the working world is that it will allow you to save up a 20 percent down payment to put toward your home. A larger down payment will reduce your monthly mortgage payments and help you get a better interest rate. It will also allow you to pay off your mortgage more quickly, since you’ll have a lower loan amount to repay.
Find a Reliable Lending Agent
When it comes time to finance your home, make sure to procure a loan from a reliable agent. Working with a good lending agent like Precision Capital – Your Private Money Source can help you make the most of the credit and down payment you have. Finding a business that you can trust will help you establish a good working relationship with them. This can be important especially if you have a long mortgage repayment plan, as you will be working with them for the long run.
Buy an Inexpensive Starter Home
Once you’ve saved your down payments and brought any other debts under control, you can start looking for your first house. Again, it’s a good idea to keep your expenses down. Your first home out of college likely won’t be where you live until you retire, so it’s best to buy something affordable. Your starter home doesn’t have to be extravagant and keeping it simple will put you in a much better position financially.
By following these five simple steps, you should be able to buy a basic starter home by the time you’re two or three years out of college. Although it can seem like a bit of a wait, the time will pass quickly, and you’ll be in much better financial shape when you go to purchase your first home.