13 Steps of Buying a House As a College Student

The steps of buying a house are slightly different for people who are in different stages of life. If you are a college student, you have more opportunity and time in the real estate market. The following steps will help you to leverage your advantages in order to get the best possible deal on a house.

1. What kind of a house do I want?

Before you walk into a lender’s office or even start looking online, you must have an idea of the type of property that you want. This will help you to narrow down your options and drill down into fewer properties instead of bridging over the surface of too many at once.

2. How much house can I afford?

Another metric that you must consider before bringing any professional agents or lawyers into the picture is learning your own budget. Believe it or not, limiting your search by budget will actually improve your chances of getting luxury amenities, more square footage, and newer architecture.

3. How much cash do I have right now?

Cash is still king in the real estate market. You will need a certain percentage of the total home value as a down payment to reduce your costs. You will also need money to cover origination and closing costs if you are using a lender. These are fees that cannot be avoided: Save them upfront.

4. How long do I need to save to make the numbers right?

If you do not have enough money to cover the down payment, the origination fees, and the closing costs, you should work up a schedule to see how long it will take you to save. You can prepare yourself in other ways during this incubation process by pulling your own credit report and getting together credit references.

5. Have I checked my credit?

Pull your credit while you are saving the money for your upfront fees. The credit minimums that you should use as a benchmark are 620 for a government loan, 700 if you want a conventional loan, and 740 if you want the best interest rates possible in the market. You can and should challenge all negative credit items whether you believe that it is your fault or not.

6. Am I paying back all outstanding debts?

If you have any outstanding debts, credit lines, or judgments, pay them off before you walk into the lender’s office. These items tend to weigh down on the credit score quite heavily, and they also speak volumes against you to the lender who will be scrutinizing your risk profile, assuming that you are not an all cash buyer. If you cannot pay back all of your debt immediately, this will not automatically preclude you from a great loan. However, you do need to show the documents that prove that you have a plan for paying them back.

7. Do I have references?

Because you are so young, you may not have an ongoing record of credit. If you do, you may be able to skip this step; however, there is never anything wrong with gathering references to speak on your behalf. Good references may include a former or current employer or landlord. People who can speak to your consistency are like gold to your lender, who will be checking more than anything on your ability to maintain a loan over 10 to 30 years.

8. Is my income consistent enough to maintain a mortgage payment?

You will need to bring in pay stubs for at least six months to show a consistent income. You may be able to use your work study payments to fulfill this requirement. If you have a side business, then you should go through the process to make it a legitimate business so that you can present that income to the lender in an organized fashion as well.

9. Have I picked the right agent?

Unless you have studied real estate in school, you will need an agent to help you through the complex negotiations that you will be involved with. Vetting an agent will also educate you to much of the process. Never give up your right to inspect the home or create a contingency list, and discontinue all contact with agents who recommend this to you.

10. Have I checked for possible government subsidies?

If you are a first time home buyer, then you may qualify for one or more government subsidies that will help you substantially with down payments, fees, and requirements. You may also qualify based on military service or the location of your property.

11. Do I understand how to negotiate with a seller?

Negotiating with a seller is done mostly through an agent, but you should also create a personal relationship as well. Real estate is not all about money. People sell to buyers they like.

12. Do I have a guarantor?

You may need your parents as co-signer on your loan. This is known as a guarantor. If you are serious about owning a property, let them know and see if they will serve this role for you.

13. Have I considered a land contract?

You may be able to sidestep many of the lending fees and negotiations with banks if you can find a seller who is willing to sell on a land contract. You will negotiate directly with the seller.

2 Point Highlight

People who can speak to your consistency are like gold to your lender, who will be checking more than anything on your ability to maintain a loan over 10 to 30 years.

You may be able to sidestep many of the lending fees and negotiations with banks if you can find a seller who is willing to sell on a land contract.