Should I try to buy a house when I'm in college?

[TripleAAA]

Ok, heres the deal:

I'm a 23 year old college student that still has at least 2 more solid years of school to go before I get into my career. I have $60,000 that I inherited about 4 years ago and hasn't been doing so well in the stock market. I've got it in mutual funds if you need to know...but that's not my real concern at this point. Even though I appreciate it, I'm not looking for stock market advice right now.

I'm considering maybe purchasing a house or condo near my college in about a year. The range for houses and condo's in my area start at about $130,000 and go up from there. If I were to buy a house here, I would live there myself and rent out the other rooms to help pay my mortgage payment. If I got a 3 bedroom place, I could probably get about $800 a month in my area for the two extra bedrooms. Ideally, I don't want to have to work too much while I finish up school so I don't have a lot of income to pay monthly payments with.

Here's my questions:

Would I be better off putting ALL the money down?

Would I be better off putting like 2/3 of the money down and using the rest to make monthly payments with? (along with the help from my parents who are paying my rent at at apartment right now)

Creating a scenario, lets say I put down 45k on a house that costed 200k. What kind of monthly payment would I be looking at? (ballpark)

Lastly, I know this isn't the "greatest" place on earth to ask for advice like this, but I'm just starting to sketch out some plans and would appreciate any input. Thanks

 

[Ness]

Well, we need more information on this.

What is your current living situation? If you can live comfortably, or if you are living with your parents still, there you'd be better off banking the money or investing in bonds or Cash Deposits, because those rates are solid, unlike the stock market.

What kind of job do you have? If you are working a job that's 10+ dollars an hour, then you could easily to stay at your current situation, and rather than having a house payment in the roughest years of college, you'd only have rent to pay which will probably be a lot less.


You have to look at a number of things...
One, unless you are paying for school out of pocket, you are going to have TONS of bills once you are done. So it'd be better to start saving your money now and living like a college student than taking on responsibilites, then having more once you are done with school.

Also, what if a company 100 miles away offers you a job you can't pass up when you are done with school? Suddenly, you have a house that you need to sell, you need to FIND another house, and you are going to have a hell of a time with that.

If you keep an apartment now, make your payments on time, maybe get a credit card just to build your credit rating, you will be likely to get a better interest rate two years from now when you are done with school, which will cost you A LOT LESS in the long run.

The only REAL advantage to having a house now is that you can settle down, have a place of your own with (hopefully) no annoying neighbors and landlords and begin a good life. Sure, that sounds good, but you should think less about now and more about two years from now.

 

[Jgtdragon]

Real estate is the best investment. Put it in the house. If you sell it later, you can make lots of money.

 

[mithrandir2001]

But what about after college? Planning on moving out of town? Houses are like anchors. Buy them only if you plan to hang around a while or you'll often lose money. It is very expensive to transfer property thanks to high transfer taxes and the realtor cartel.

 

[Vic]

Actually, it's not a bad place to ask as this is what I do for a living.
Your biggest hurdles are going to be that you're a 23-year-old college student with little to no income (your post implies that you are not working at this time). Thankfully, you have money to put down. If you didn't, I'd tell you to forget it. Hopefully, you have good credit. Otherwise, it'll be tough or maybe even impossible.
Assuming you have excellent credit, but are unable to verify income, I can quote your scenario:
You can put $40k down on the house. Closing costs (including origination, appraisal, title, escrow, and prepaids) will run in the $2-$3k range. Loan amount would be $160k or 80% of $200k (80% is a magic number). For a 30 year fixed rate purchase at 80% LTV with no income documentation add-ons, you'd be looking at about 7.5% today. (ahem, for those who would flame the rate, take it or leave it, that assumes perfect credit from THE best investor in the country for this program and at par rate). Principal and interest payment would be $1,118.74/mo. Depending on where you live, property taxes and homeowners insurance would be an extra $150-$300/mo. for the total payment.
Answering your other questions, I can tell you that for this program (or any similar), putting more money down would get you a slightly better rate (the no-doc add-ons are LTV sensitive). Ideally, you would put up to $70k down and your rate could be as low as 6.5% (once again, people this is a no-income-doc program NOT a Fannie/Freddie/FHA/VA).
You cannot use rent from boarders to qualify for any mortgage loan or loan program in the country.

Hope this helps, PM me with where you live and/or you want more info.

 

[her209]

you'll benefit alot more from a house purchase when you have a real salary

 

[thedarkwolf]

I did but I work full time and have cut back to only 1 or 2 classes a semester so I am going to be here awhile . My house payments are way less then rent around here. I just found out my payments are going down to $338 yeah thats right from $380 last year. You can bearly rent a 1 room efficiency for that and you would just be flushing your money down the crapper. I figure when I finally do move out I can either rent it out for around $600 month or sell it and atleast break even. Houses are cheap around here though.

 

[TripleAAA]

Thanks all for the advice and input, I really appreciate it.

To answer some of your concerns:

I don't live with my parents and live several hours away so saving money that way isn't an option at this point. My job pays just above minimum wage and is on-campus. I only work about 10 hours a week. I don't expect to be paid much for what I'm doing and it's mainly just a way to get a little bit of spending money. The nice thing about the job is that I can study and do homework while I'm sitting at a desk checking out billiard and ping pong equipment.

I am fortunate enough to be in no debt whatsoever when it comes to college expenses. In other words, I have no loans or debt I anticipate having to pay off when I'm done with college in a couple years. Between my mom and my dad (who are divorced) we are able to make ends meet in a very comfortable fashion.

As one of you pointed out...the way I see it is that right now I'm basically wasting money in a sense by renting an apartment. I'm never going to see any of that money come back to me in the future, whereas with a house, there is a fairly decent chance that I would at least break even, maybe make some money a few years from now assuming the value on the property increases.

For those that are interested, I live in the California's Central Valley in a town near the Modesto/Stockton area. I was talking to a guy the other day and he said that property values increased 22% just this year alone.

Ok, so lets say my monthly mortagage payment including all the extra stuff is about $1500 give or take. If I had a 3 bedroom house, renting two of those rooms out would probably bring in at least $400 each for a total of $800. That leaves me with approx. $700 I would have to come up with out of pocket.

Since my parents are already paying about $500 a month currently for my rent and other expenses, that basically means I'd have to come up with the extra few hundred each month.

So that gives you some more info, I'll read through the posts again to make sure I didn't miss anything too crucial. Thanks again.

 

[CrazyDe1]

Originally posted by: TripleAAA
Ok, heres the deal:

I'm a 23 year old college student that still has at least 2 more solid years of school to go before I get into my career. I have $60,000 that I inherited about 4 years ago and hasn't been doing so well in the stock market. I've got it in mutual funds if you need to know...but that's not my real concern at this point. Even though I appreciate it, I'm not looking for stock market advice right now.

I'm considering maybe purchasing a house or condo near my college in about a year. The range for houses and condo's in my area start at about $130,000 and go up from there. If I were to buy a house here, I would live there myself and rent out the other rooms to help pay my mortgage payment. If I got a 3 bedroom place, I could probably get about $800 a month in my area for the two extra bedrooms. Ideally, I don't want to have to work too much while I finish up school so I don't have a lot of income to pay monthly payments with.

Here's my questions:

Would I be better off putting ALL the money down?

Would I be better off putting like 2/3 of the money down and using the rest to make monthly payments with? (along with the help from my parents who are paying my rent at at apartment right now)

Creating a scenario, lets say I put down 45k on a house that costed 200k. What kind of monthly payment would I be looking at? (ballpark)

Lastly, I know this isn't the "greatest" place on earth to ask for advice like this, but I'm just starting to sketch out some plans and would appreciate any input. Thanks

Have your parents cosign for you and you can get like a a 5 year arm with interest payments of like 4.8%. By the way...this is a very smart idea...if I would have known better i would have bought a place in college and rented it to my friends as they're paying your mortgage. Instead I went and bought a car with what could have been my downpayment heh...

 

[StageLeft]

DO NOT do this. You're still in college. How do you know you'll even be staying where you are now when you're finished? Give it time; no reason to rush a house purchase, and two years is not enough to benefit from it anyway if you're looking at it from an equity point of view.

 

[CrazyDe1]

Originally posted by: Skoorb
DO NOT do this. You're still in college. How do you know you'll even be staying where you are now when you're finished? Give it time; no reason to rush a house purchase, and two years is not enough to benefit from it anyway if you're looking at it from an equity point of view.

Even if he doesn't he's going to have no trouble renting it out in a college town assuming it's in a good location and kept in good shape...that and the money he collects from renting it out is worth it provided that he knows he can rent it out.

If not, you're basically stuck with no income and a 1300 dollar mortgage payment a month... I mean, I bought a house with the intention of not staying in it for more than 5-7 years.

 

[StageLeft]

He could end up renting it full time after, if he moves, but then he's got the whole landlord issue and pain of renting it. Chances are high that he'd want to simply be done with it, and although throwing money away into an apartment is not fun closing costs and everything involved in a house are not fun either. In terms of equity I'm paying $750/month now _in interest_ (when you include escrow for taxes and insurance it's over $800), whereas my old apartment rent was $715, so a person has to do the math first instead of assuming that what they're doing now is a bad idea

 

[TripleAAA]

Originally posted by: Skoorb
He could end up renting it full time after, if he moves, but then he's got the whole landlord issue and pain of renting it. Chances are high that he'd want to simply be done with it, and although throwing money away into an apartment is not fun closing costs and everything involved in a house are not fun either. In terms of equity I'm paying $750/month now _in interest_ (when you include escrow for taxes and insurance it's over $800), whereas my old apartment rent was $715, so a person has to do the math first instead of assuming that what they're doing now is a bad idea

You're definitely right here Skoorb. Ideally I'd like to get out the area I'm in, but chances are I would probably get a job here first because there is much more availability. (btw, I'm going to be a teacher and coach). But in a perfect world, I would probably rather not rent it out and instead sell it.

 

[CrazyDe1]

Originally posted by: Skoorb
He could end up renting it full time after, if he moves, but then he's got the whole landlord issue and pain of renting it. Chances are high that he'd want to simply be done with it, and although throwing money away into an apartment is not fun closing costs and everything involved in a house are not fun either. In terms of equity I'm paying $750/month now _in interest_ (when you include escrow for taxes and insurance it's over $800), whereas my old apartment rent was $715, so a person has to do the math first instead of assuming that what they're doing now is a bad idea

Yeah...the way I saw it though the tax deduction and the rent from my friends and the way housing costs were going up around here I'd be dumb not to do it. I saw it as throwing away 500 bucks in rent, losing another 300 in tax deductions, and then not getting 500 bucks worth of rent from my friend. At the same time, housing was getting way more expensive. The more I looked at it the more I thought I didnt' wanna throw money away to a landlord.

I don't know, if you're willing to deal with the hassle of being a landlord if you move out later, it seems like a worthwhile thing to do. Make sure if you can't rent it you can cover the payments though.

 

[Bulk Beef]

Originally posted by: Skoorb
DO NOT do this. You're still in college. How do you know you'll even be staying where you are now when you're finished? Give it time; no reason to rush a house purchase, and two years is not enough to benefit from it anyway if you're looking at it from an equity point of view.

Skoorb speaks the truth here. I bought when I was 21, and while, in the long run, it was a good financial decision, I still regret nailing myself to the ground so early. There are a lot of things that I would have liked to have done, but the burden of a mortgage can really dampen your flexibility when it comes to things llike moving around, different jobs and career choices, etc.

Screw around now - you'll have plenty of time to be grounded later.

 

[royaldank]

No offense, but why are your parents paying your rent now? I don't think you need to buy a house when you aren't even paying your own rent now.

Another thing to consider is the market right now. You mentioned how house prices have soared in the last year or two. What goes up, must come down. Thus, when rates start going up, house buyers will become more scarce. At that point, it's a buyers market and they are in control (now, the sellers are in control). They aren't going to continue to over pay for houses because rates are low. They will be more selective and you'll be inclined to sell at a lower price just to get rid of it.

I think if you are looking at a 4-10 year plan with this place, it might be a good idea. However, if you are only going to be there 2 years, it might not be worth the hassle. Renting it out can be a pain and not something you probably want to do at your age trying to start a new career.

 

[alkemyst]

I WOULD not buy a house while in college. Enjoy your freedom now...unless you have the partying out of the way then go for it...if you move and have something you can rent out for college priced rent and it's close to campus you should always have a tenant.

The best would have been to hit the dorms 4 years ago and be 'daddy' to the women there...sure 4 years later perhaps no money, but imagine the stories you could tell.

The guys in college with the bmws porsche, aston martins, etc always had a new chick or two each week and plus access to every freaking party and special event.

To me that's 1/2 the education you get in college.

 

[huesmann]

Actually, with the stock market the way it is right now, it might be a wise choice. If you still have the $60k, I would put in a down payment of 20% on the house then save the rest to cover the mortgage while you're in school. Your renters will cover the majority of your mortgage, you can use the rest of your kitty to pay the rest of the mortgage. Your ballpark monthly payment would be about $1300, so you would need to come up with $500/mo from your kitty. Plus taxes and insurance, of course.

Edit: selling the house should not be a big deal if you have to move elsewhere for your work. Houses in college towns are good properties; you could even keep it and rent it out if you could afford to buy a new house in your new location.

 

[AUMM]

im a college student, and i recently purchased a house. put 60 K down monthly payments are around 2000. i have 4 other roomates which covers the mortgage for me. it's somewhat of a pain having to take care of everything, but its definetely worth it for me. It's awesome having a house and of course the chicks love it my house cost 570 BTW

 

[MrColin]

The factors you need to consider about how much money to put down are what is your income tax rate vs your interest rate, and how much would be your tax credit be from your mortage payments. Under some circumstances its advantageous to have the least amount paid into the mortage.

 

[shenaniganz]

Also consider this, being a college student I am assuming your income is minimal and your student loans are a lot. You should easily qualify for first time home owner and income restriction housing. Which means that you could get a 0% down mortgage and some communities offer discounts to people with lower incomes. I wish I would have bought my house when I was in college. Waiting a few months cost me a lot of money, especially considering I got married right after college and our dual incomes didn't qualify us for first time home owner benefits.

 

[alkemyst]

Originally posted by: AUMM
im a college student, and i recently purchased a house. put 60 K down monthly payments are around 2000. i have 4 other roomates which covers the mortgage for me. it's somewhat of a pain having to take care of everything, but its definetely worth it for me. It's awesome having a house and of course the chicks love it my house cost 570 BTW

Who cosigned? 60k on a 570k house is like 10%...most banks aren't going to do that kind of loan for a student, yet alone someone even making 100k a year.

Not to mention at 5% you are talking a 3k payment for a 30year loan, not counting the taxes at purchase, nor the insurance and property taxes yearly....

A 500k loan on an average house should come out to at LEAST $4000 per month roughly for most once insurance and taxes are figured in.....

 

[TripleAAA]

To answer some more questions:

Why are my parents paying my rent now when I have all this money? Good question. I've offered to pay the rest of my way through college with my inheritance, however my mother insists that my inheritance (which was from her mother-my grandma) should be used as a nestegg of sorts and I shouldn't tap into it unless absolutely necessary. She is a proponent of me buying a house now, but obviously there are a lot of different things to factor in. My dad thinks I should work more and pay a bit more of my own which I can understand, but my main concern right now is getting through college as fast as possible and the only way I can really do that is by not working too much and focusing soley on my classes and studying. I'm 23 yrs old and have been in college for 5 years now and I still have at least a year before I get my bachelors and then another year, probably longer to get my teaching credential.

I most likely wouldn't qualify for some of the special rates and such because as mentioned before, I don't have any student loans nor anticipate having any debt whatsoever when I finally graduate. Obviously this is a VERY nice thing and I know I'm quite fortunate to be in this situation.

Seems like there's definitly some different opinions on this board which is good though. It's a tough decision and right now I'm leaning towards making a purchase, but who knows what will happen over the course of the next year which is when I would actually do it.

 

[AUMM]

Originally posted by: alkemyst

Originally posted by: AUMM
im a college student, and i recently purchased a house. put 60 K down monthly payments are around 2000. i have 4 other roomates which covers the mortgage for me. it's somewhat of a pain having to take care of everything, but its definetely worth it for me. It's awesome having a house and of course the chicks love it my house cost 570 BTW

Who cosigned? 60k on a 570k house is like 10%...most banks aren't going to do that kind of loan for a student, yet alone someone even making 100k a year.

Not to mention at 5% you are talking a 3k payment for a 30year loan, not counting the taxes at purchase, nor the insurance and property taxes yearly....

A 500k loan on an average house should come out to at LEAST $4000 per month roughly for most once insurance and taxes are figured in.....

cosigned by my cousin, makes well over 100k a year, that and we've made other housing investments in the same city. the mortgage is actually 1800 per month. i plan on keeping it for a couple years (till i graduate) then remodeling it and making some profit

 

[Noirish]

WTF.
Oh well, as long as your tenants are paying I guess it's fine.
But how can it be 1800/mo if you put down 60k on a 570k house?
Doesn't that leave 510k? It doesn't compute.