Smart Moves: Strategies for College Students Buying Their First Home

Buying a property as a college student is a big step into the future. Real estate is the most reliable asset, as it can be used as a source of income in the future as well as housing. Young homeowners who use their income to pay off their mortgage instead of renting a room are guaranteed future financial security. Although the option of buying a home instead of renting a room in college may seem favorable, not a lot of students can afford this luxury. The housing market is a volatile industry with many ups and downs and unpredictable changes. Therefore, purchasing a home as a college student can be very difficult, but not impossible.

Real estate experts expect mortgage rates to drop in 2024, giving way to those with lower income to apply for a loan. Anyone who has the qualifications to apply for a mortgage can potentially purchase real estate. The most important aspect of buying a home for the first time is understanding the housing market and planning the budget.

Understanding The Housing Market

Understanding the housing market trends is the key to coming up with the best strategy to buy a house as a college student. Thoroughly researching current real estate industry trends allows students to know what to expect.

These days, buying a property is difficult for millennials with degrees, let alone college students. Therefore, combating the housing market takes willpower, critical thinking, and a great deal of knowledge of the field.

College students thinking of purchasing a home should consider several aspects of the housing market to create a budget; let us discuss the most influential factors:

Demand-supply ratio
Median home prices
Mortgage rates
Additional costs

Demand-Supply Ratio

The price shifts in the housing market heavily depend on the demand-to-supply ratio. A high demand-to-supply ratio means there is a higher demand than the supply. Whenever the demand for housing exceeds the housing inventory, prices result in increasing.

2024 is the perfect year for college students to consider purchasing a home, as in the current housing market inventory seems to be running low compared to the demand for housing. More and more people are choosing to rent homes instead of buying, resulting in property investors relying on property managers for business growth.

This leaves first-time homebuyers at an advantage as the demand has started to decrease dramatically in recent years. This climate in the industry is what real estate professionals consider the “buyer’s market”.

Median Home Prices

College students looking to purchase properties should look into median home prices in their desired states before setting a strategy to make a move. Considering median home prices is the most important step in setting a budget for a house. College students getting ready to buy real estate for the first time need an analysis of median home prices to determine the size of a loan they will need before applying for a mortgage.

The median home sales price was reported to be $417,700 at the end of 2023 in the United States. The most expensive state to buy a house would be Hawaii, as the median home value hit $832,688 according to Zillow. As for the least expensive state to buy a house, the median property value in West Virginia was $154,152 at the end of last year.

Although home prices are not expected to lower by much, housing market experts predict mortgage rates to drop, giving college students an excellent opportunity to apply for loans.

Mortgage Rates

Mortgage rates are expected to drop in 2024, giving first-time buyers the motivation to take the first step and achieve their goals of home ownership. “The National Association of Realtors expects mortgage rates will average 6.8% in the first quarter of 2024, dropping to 6.6% in the second quarter.”

However, mortgage rates are affected by several factors: housing market trends, location, specific lender standards, the demand-supply ratio, and the borrower’s credit score. Therefore, college students are encouraged to look into the mortgage market in their area before making a decision.

Additional Costs

While college students buying their first home may have already considered the factors above, it’s important to note that many additional aspects of home ownership will affect the budget for purchasing a property and keeping it:

Property taxes
Maintenance costs
Repairments
HOA fees
Insurance
Down payment
Moving
Furnishing

This is a list of only some of the most important additional costs that come with owning a home. Therefore, college students buying a property for the first time are advised to thoroughly consider the expenses associated with home ownership.

Strategies for College Students Buying Their First Home

After thorough research regarding the housing market and associated costs with purchasing a property, students are ready to start creating a foolproof plan to buy a home. Strategies include setting a budget and comparing it to savings, generating additional income if necessary, applying for a loan, and researching the area to find the proper location suitable for one’s budget.

Setting a Budget

When strategizing to set the correct budget for an ideal home, it’s important to make a list of priorities. Some expenses are more important than others. College students buying a house for the first time need to have a clear understanding of the type of home they are looking for and the location.

Determining downpayment, renovation, and furnishing costs is a hustle. Some students may prefer purchasing a cheaper home but going overboard when it comes to repair and furnishing, while others would rather purchase a more expensive home and avoid remodeling.

Therefore, it’s essential to get a clear idea of what you want before setting a budget. Take the list of priorities and separately calculate costs for each item. Afterward, cut the cost by making changes in the least important parts of your list to cut the costs.

Generating Additional Income

Students may often find themselves in a situation where a budget for buying a home and paying off a mortgage exceeds their savings and current income, even after carefully arranging a list of priorities. In this instance, the most obvious solution is to try generating additional income.

For college students studying and working at the same time can be overwhelming and stressful. However, buying a home at such a young age requires sacrifices. Students often start working part-time jobs waiting, tutoring, babysitting, etc. These are honorable pursuits to make a living independently as a young student, but these jobs also require physical presence, straining active college undergraduates.

Scholars who wish to buy homes may often need more than one part-time job. The best-case scenario for these students is to find remote working jobs, to avoid the stress of rushing. Moreover, remote working jobs help students save money for their goals, as there is no need to spend any of their income on transportation and eating outside.

Applying for a Loan

One of the most important factors that brokers consider before giving out a loan is the current debt-to-income ratio. This is where students are at a disadvantage, as many of the undergraduates in the United States have student loans weighing them down.

FHA loans are the most popular ones among first-time buyers as the Federal Housing Administration (FHA) provides mortgage insurance on loans made by special FHA-approved lenders. Borrowers can apply for loans with lower mortgage rates with these lenders due to the government insurance.

Students buying their first home could consider a co-signer on their mortgage to qualify, as part-time jobs usually can’t cover the loan. Guardians, parents, and significant others are usually able to help out college students in these instances.

Researching the Area

Location, location, location – real estate professionals repeat this phrase frequently, as the location is, in fact, the most important aspect when purchasing a home. Whether you prioritize safety, visual appeal, expenses, or proximity to your work and school, location plays a key part.

The area a student chooses will play a major role in the value of property. One of the best strategies for a college student buying a home for the first time is researching different areas in their state. Finding the cheapest safest location in proximity to your college will give you a huge push forward to purchase a property as a student.

Conclusion

Purchasing a home as a college student is a risky move. Being a young homeowner is one of the most satisfying achievements for undergraduates, but it’s also incredibly difficult. College students must be willing to hustle to buy their first home. Therefore, they must be sure to consider the housing market in their area, research mortgage rates, calculate every cost, set a budget, and research locations in their state before taking this huge step. As a college student, owning a property is a huge accomplishment and it demands respect as it is also a huge responsibility.