To Buy a Home Soon, Start Learning (and Saving) Now

rp_stock-photos-for-entrepreneurs-2-large-300x200-1-300x200.jpgIn college, you are supposed to learn. Primarily, you should be studying in your chosen field, gaining the knowledge and skills that will serve you in a future career ― but few college grads leave university without acquiring a few lessons about adulthood, too. You learn how much detergent to put in your laundry; you learn how to treat those around you with respect; and you learn how to afford books and rent while still having money left for food. Yet, college still fails to prepare you for the “real world” in a handful of ways ― especially when it comes to owning a home.

Unless real estate was part of your major, you probably know almost nothing about the complex process of buying and selling property. However, if you don’t know what you need now, it could take you years before you are ready to buy your first home. The sooner you quit renting and start gaining equity on your own home, the better ― which means you should really start learning about home ownership right about now.

This guide can help you figure out what financial resources you need to make your first real estate purchase, so you will be one step closer to being prepared for your real, adult life.

Creditworthiness

Few home sales are made with cash. Instead, most home buyers can only afford to purchase property with the help of a home loan, or mortgage. Mortgages come in all shapes and sizes, from the standard 30-year fixed to adjustable rate, from jumbo to conforming, from government-insured to conventional. Because you will be paying your mortgage for several decades (unless you sell the home and move) it is imperative that you understand the various mortgage types and find a trustworthy lender to work with.

Yet, even before you start hunting for a mortgage, you need to work on your credit score. How you use credit now will impact your future score, which will raise or lower your mortgage interest rate. Until you buy a home, you should improve your creditworthiness by paying down your balance, diversifying your credit, and raising your limits without overspending. Then, you should be able to secure an affordable interest rate right out of college.

Available Cash

Though your credit history is paramount, you shouldn’t skimp on saving actual cash. You will need money available to make a down payment on your future home, because neither sellers nor lenders want to do business with a buyer who lacks any liquid assets. For the best interest rate, you should have at least 20 percent of the home’s cost available, but some lenders will accept as little as 5 percent, balancing their risk with demanding higher mortgage payments from you. Additionally, you will need to pay closing costs, home inspector fees, taxes, and a number of other expenses not factored into the home’s price, which means to afford a home soon, you need to start saving yesterday.

Stability

There is no point paying a monthly mortgage if you expect to be jet setting around the world for much of your post-college years. Additionally, if you crave the freedom of a freelance job or the whimsy of a (poor-paying) creative job, home ownership might not be for you. Lenders care little for the joy and independence in your life; more than anything else, they want to know that you are stable and secure, with a reliable income and a reason to stay put. If you can’t prove your responsibility, ideally with a history of paychecks, you can’t and shouldn’t buy a home.

Foresight

Most college students love imagining what their lives will be like after graduation ― but a vast majority of them get it dead wrong. More likely than not, you won’t get your dream job, your dream spouse, or even your dream house, and the sooner you recognize that, the better. Right now, you should develop your sense of foresight, so you can more accurately predict what your property needs will be. Most recent college grads need little more in a home than a warm, dry place to sleep and eat. However, if you are certain that you need a multi-room home close to a good school for your forthcoming family, you should start saving for that, instead.

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