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I am just starting grad school and I will make about $20,000 in the form of a Graduate Assistantship stipend (this also covers my tuition costs). I'm looking to rent in my town, which is pretty affordable -- the rental prices are about $600-$800 for a decent apartment. However I see several small homes for purchase in which the monthly cost would be even lower -- in the neighborhood of $500 per month. I'm in my late 20s and I've rented for about a decade. The idea of owning a home and building equity is really appealing. I also have a large dog, so owning my own place with a yard would be much easier. However I realize I make really low income. Is this a bad idea? My grad program will last three years. After that, working in my field, I should be making about $70,000 per year starting out.
When I was in my senior year of college (90s) I listened to a speaker who bought an old house just off campus and then rented rooms to classmates. They paid the property off for him before he graduated. With the continued rents and the equity on that house, he bought another. After completing his degree, he became a real estate broker and started buying up properties. He now sits in his multi-million dollar waterfront property in an exclusive Seattle neighborhood and can pursue any interests.
Assuming a 3.4% interest rate on a 3-year loan, after three years, you'll have about 6% equity in the house. If you sell it at that point, you'll pay a about a 6% commission to a real estate agent. Figure on spending 1% per year of the value of the house in maintenance and repairs (assuming you don't need a big repair like a new furnace or foundation work). In addition, you'll have paid property taxes, homeowners insurance, and probably PMI.
When I graduated from college, I was supposed to have been making good money. In reality, hardly anyone was hiring in my field. After I was laid off from a job it took me a year to get, I managed to scrape together mortgage payments and keep the utilities on through more layoffs and crappy jobs. I was making more than your stipend--and that was 20 years ago.
It is my understanding that lenders want to see three main things: two years of verifiable income in the same field, solid credit and a low DTI (like around 36% would be good). Some cash reserves are a must for closing costs and unexpected repairs. Full-time schooling can count as "employment", but you will probably need a job offer before qualifying.
My sister got approved for a home right after grad school, but she had a solid job offer.
IMO, if you have those things mentioned (especially strong credit and a low DTI), I hope you can buy something. It is always better than renting. You don't have to stay there forever, but at least when you sell, you will have something to show for it (barring another recession, God forbid I hope not)....
Oh, and look into first time low-income homebuyer programs. They can sometimes provide you with a little grant money, and some funds that are interest free for up to 10 years. In my area, you can get around 10K if you qualify. There is usually a class you have to attend, and your DTI must be in an acceptable range. If you have a DTI of say, 55%, forget about it.
When I was in my senior year of college (90s) I listened to a speaker who bought an old house just off campus and then rented rooms to classmates. They paid the property off for him before he graduated. With the continued rents and the equity on that house, he bought another. After completing his degree, he became a real estate broker and started buying up properties. He now sits in his multi-million dollar waterfront property in an exclusive Seattle neighborhood and can pursue any interests.
If he'd tried that in Cleveland, his rents might pay for a waterfront cottage.
Oh, and look into first time low-income homebuyer programs. They can sometimes provide you with a little grant money, and some funds that are interest free for up to 10 years. In my area, you can get around 10K if you qualify. There is usually a class you have to attend, and your DTI must be in an acceptable range. If you have a DTI of say, 55%, forget about it.
Some of that down payment and closing assistance are not zero percent loans they are grants that do not have to be paid back as long as you own the home for 10 years as your primary residence.
It can be done. Like mentioned, the first step is to talk to a lender. I have 2 family members on SSI and they make around $12K a year. They qualified for a $60K mortgage. Definitely check out the programs in your area for assistance too.
You don’t have time for a house right now. Find a roommate and a rental that allows dogs.
This.
Probably the best advice here. Wait until after you graduate.
Unless you have lots of money in reserve, you should rent. If you could qualify for a house, it would be older and things would need to be replaced.
Are you in a position to pay out 1K or more to get things fixed? If not, I would wait.
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