Purchasing A Home After Graduating: Here’s How To Do it

Owning a home is the dream for many people, but it certainly doesn’t come cheap. In fact, 21% of recent American college graduates sadly don’t see home ownership in their future, USA Today reports. Soaring house prices and student debt have understandably made it harder for grads to get on the property ladder. Fortunately, however, with careful planning and budgeting, homeownership can still be within your reach.

Although moving back in with your parents after college may seem like a step back, it can be a smart financial move. As long as you don’t have to pay rent or utilities — which can take a huge chunk out of your budget — you can save a larger amount of your income. Saving up for a down payment is therefore a much quicker process. It also helps to set a budget and live within your means. So, create a list of all your monthly outgoings and contrast this with your total monthly paycheck. The difference equals the amount you can put aside each month into savings.

Unless you can afford to purchase a home outright, securing a mortgage is essential. It’s important to consider all loan options and shop around to find the best rates, Ryan Kelley, founder of the Home Loan Expert, explains. If you’re unable to afford a 20% down payment or have a weaker credit score, you may want to consider unconventional loans. FHA loans, for example, help buyers with credit scores below 600. They allow a down payment of as little as 3.5%. However, if you default on the loan, you’ll be required to pay mortgage insurance to cover the loss.

The better your credit score, the easier time you’ll have getting a loan with better rates. A higher score assures lenders you’re financially able to pay them back. Fortunately, you can work on strengthening your credit score before approaching lenders. For example, make sure to always pay your bills in full and on time. Setting up online autopay is an easy way to do this. Also keep your credit utilization — how much available credit you’re using —  low. Ideally, it should be under 30%.

Purchasing a home after graduating is an ambitious, yet do-able goal. By being smart and proactive about your finances, you’ll soon be a homeowner in no time.