Can I get a mortgage? Is it possible to be approved for a mortgage after college? Can I own my own place before I’ve saved up a lot of money?

When I wrote about investment options that are better than investing in the stock market, I knew that I would get feedback from the more ambitious readers. I received two emails on the topic. Then earlier on today I ended up meeting up with my friend from school who’s working as an Advisor at a Credit Union now. On top of him spilling his coffee and me making a scene out of it, we got into talking about what he looks at when someone comes in to apply for their first home mortgage.

Before we get started I wanted to mention that I’m not here to tell you if it’s better to buy or rent because I’m here to cover the process of applying for a mortgage.

Can I get a mortgage? Let’s look at what you need to take off before you even apply for a mortgage.

Your credit score.

Before anyone even considers loaning you any money at all, they’re going to look at your credit score. This is simply a tangible number that gives a snapshot of your history of handling credit. You can argue all that you want with it, but as a young person applying for a mortgage you’re going to have to get your credit score up there before you ask for a penny.

If you don’t know what’s a good credit score, I suggest that you check out my previous piece on the topic. You can check out your credit score from all three credit bureaus with Equifax right now. You can also get your free Transunion credit score from Credit Karma as well.

Your income and job security.

How stable is your job? The loaner won’t want to loan money to someone with an unstable job because then you won’t be able to pay your mortgage payments and you might consider walking away from your mortgage (as seen with the recent economic issues). This makes perfect sense because why would you loan money to someone that might not even have a job in six months?

Another factor with applying for your first mortgage is your income. There’s a ratio known as TDS (which I’ll explain in detail in another post) where the loaner will look at your income and compare it to your total expenses. I’m not going to bore you with the details. Long story short is that you won’t be approved for a mortgage if your income isn’t substantially higher than your expenses.

Just so you know, if you’re a young entrepreneur you’re going to have a pretty challenging time trying to prove that your income is stable.

Your savings.

How much money do you have saved up? How much of your savings will go towards your home down payment? The company where you apply for your home mortgage will want to know that you have money saved in the bank in case you lose your job or your business tanks. They simply want to know that you’re going to be able to cover your mortgage payments in the worst case scenario.

Your residence stability.

My friend mentioned to me that they take into account your residence stability in the sense of how often you’ve moved around in the last few years. This isn’t a huge factor in applying for a mortgage if your credit score and savings are up there. When there are issues with your credit and how much money you’re putting down, then the loaner will want to see how stable you’ve been with where you live. They want to be sure that you’re going to actually want to live in the home that you spend so much money on.

It’s time for you to answer the question. Is it possible to get a mortgage after college? In certain situations you can get a mortgage a few years after college. If your finances are not where you want them to be just yet, then there’s no shame in waiting a little longer before you buy your own place.

If you want more information on this topic you can check out my eBook on deciding to buy or rent a place in your 20s.

Edward is about to become a first time home-buyer and is trying to be as prepared as possible to make all the right decisions. When Edward isn’t busy learning his craft and working toward his financial goals, he writes about cooking for beginners at If You Can Read, You Can Cook.

My wife and I are planning on buying our first home next year, so home buying and mortgages are topics on which I have been soaking up information. I’ve been talking to everyone from bankers to bloggers, reading advice from debt gurus like Dave Ramsey, and soaking up every word that M.D. has written on the topic. Then when while I was partaking in one of my favorite pastimes (mental arithmetic, don’t laugh) at work, I came to a startling conclusion.

Buying a home with a mortgage COULD save you thousands of dollars.

Dave Ramsey believes that you should never take on additional debt and should rent until you can save the entire home price. He calls this the 100 down plan. On his website, he uses the example of saving $30,000 per year and buying a $100,000 starter house. The problem is that the US median household income is less than $50,000. The average family won’t be able to save anywhere near that much money.

I’ll start with the regular disclaimers. This plan only works if you plan on living in the same place for a while. Don’t buy if you aren’t psychologically ready for the commitment of undertaking such a large financial commitment or being your own landlord. This idea may not be the best one for you and your situation; sit down and do the math yourself for your own situation.

And one final disclaimer. I’ve only done the math for my situation: living in an area with a relatively high rent to home price ratio. In the college town that I live in, students increase the population by almost 20% during the school year. That puts a high demand on rental units in a part of the country with relatively low house prices.

So right now, we are paying $750/month rent and are looking at $200,000 houses. We are saving $1000/month towards a down payment after starting out from no savings a few months ago. I am assuming a 5% mortgage interest rate and 1% savings interest rate. I calculated three scenarios:

The Dave Ramsey 100% down payment plan

To save $200,000 at the rate of $1000 per month, it will take 15 years. During this time, you will pay $135,000 in rent. Of course, this is assuming that home prices, rent, and income don’t increase in 15 years. And chances are that income isn’t going to increase as quickly as home prices or rents.

So the house price is really $335,000.

The standard 20% down payment

The standard advice is to save a 20% down payment and get a mortgage for the remaining 80%.

To save 20%, it will take just over 3 years to reach $40,000. During this time, you paid $27,000 in rent. Once you buy, you can use your old $750 rent payment and your $1000 savings to pay a mortgage payment of $1750. It will take just under 10 years to pay off the mortgage and you will pay $42,000 in interest.

Grand total: $269,000.

At the end of the day, simply having a mortgage saves tens of thousands of dollars over paying cash. You can also apply this theory for buying a run down home as a young investor.

[Note from MD: If you want to save tens of thousands of dollars by making the right decision between renting or owning a home in your 20s you need to check out my writing on the topic(you can pick the guide up here).

You don’t have to rush. Just because you found your dream job, paid off your debt, or started saving some serious money for the first time ever it doesn’t mean that you have to buy a home. Buying property is not the next logical step in your 20s. Just because some “expert” on the news tells you that it’s the best time to buy a home it doesn’t mean that it applies to your unique situation.

We all have unique lives. You may want to start a business, travel more, or splurge money on yourself. How you spend your money is your decision. You don’t have to buy if you’re not ready yet.

I put together a guide a few months back on making the decision between renting or owning a home in your 20s (you can pick the guide up here).

[Note: The idea for this post was blatantly stolen from Len Penzo. Thanks man!]

An end of an era is here and it’s time for a new chapter to begin.

I’m now renting out my condo so that I can have more money and flexibility to travel more often. No I’m not becoming a lifestyle design blogger. I’m starting to travel more and experience what this world has to offer. I really want to get this out of my system while I’m still in my early-20s.

The crappy part about renting out my condo is that my base will be my parent’s place. The good news is that I had been pretty much bi-locational (is that ever a word?) the whole time because everything I do is close to my parent’s place (gym, friends, work).

I really enjoyed my experience with living in a condo for over a year. I’m just not convinced that it’s for me. Why do I feel that condo living isn’t for me?

Too many rules.

There’s just way too many rules considering that you own your unit. You pay so much money for this unit when you buy and then you pay your maintenance fees, only to be bombarded with a bunch of rules. I know that this isn’t the Wild West and we all need to be considerate, but I’m just not a fan of too many restrictions.

Too many fees.

The fees just add up. Every year the fees are bound to increase, not decrease. On top of your mortgage and and property taxes you have to deal with maintenance fees. The maintenance fees can be very pricey depending on what your building has to offer. Fortunately my building had fairly standard amenities. The more you have in your building the more you’re going to be paying per month. I actually know someone that pays $600 a month for maintenance fees because the building offers everything from its own library to a state of the art gym with a swimming pool. I’m pretty sure that you can find a gym membership at a much lower cost.

Not enough space.

Everyone is so close to each other. I grew up in a home with a backyard and lots of space to do whatever we wanted. It feels weird to be so close to your neighbors. The space issue is something that I’m going to have to deal with because real estate is very expensive in Toronto. So unless I want to move out to a farm somewhere out north I’m going to have to learn how to live with limited space.

At the end of the day I really don’t know what the future holds for me. I’m really excited at times and then super nervous at other moments. I’ll keep you guys posted.

What about you guys? Where do you currently live? Do you want to live in a condo one day? What are your experiences with condo living?

(photo credit: rjackb)

“The major fortunes in America have been made in land.” — John D. Rockefeller.

We all know the deal. Go to college, study hard, get good grades, graduate, get a well-paying job, get married, and buy a home. We often feel like buying a piece of property is the next logical step in growing up.

Lately I’ve been receiving many emails about real estate. Maybe it’s due to the economy and how things have been going.

I put together a guide a few months back on making the decision between renting or owning a home in your 20s (you can pick the guide up here).

Let’s answer the important question here…

What’s the best time to buy a home? I didn’t want to pull an answer out my ass. So I decided to check one of my favorite books on personal finance, I Will Teach You To Be Rich.

Ramit Sethi on when you should buy a home:

Buy only if you’re planning to live in the same place for ten years or more.

What if you want to start looking into a home purchase right now? What if you’re a young professional looking to get into ownership? What if right now is that time?

Here’s the simple process for buying a home…

Improve your credit score.

Before you even start looking at places you need to be 100% sure that you have a decent credit score. You really don’t want to get screwed over with a killer interest rate. I’m actually working on a guide right now that deals with your credit and how you can get the most out of credit cards. Stay tuned for more. All I will say for now is that you need a solid credit score before you even consider buying a home. If not, then good luck with those insane interest payments!

You can check out these calculators to see what a difference a lower interest rate will make on how much money you spend during any loan (mortgage or credit card).

Make sure you can afford being a home owner.

The simple rule for home ownership and your mortgage is: a final monthly cost that is no more than 30% of your gross pay. Do all of us follow this rule? I doubt it.

The euphoria of telling your friends that you’re a home owner is pretty intoxicating. The obvious dilemma is that many of us get into ownership before we can afford it. We just think that we need to buy a place once we start working since that’s what adults do, right?

If you’re not sure how much money you can borrow to buy your first home, check out this calculator. Play around with the numbers and be honest with yourself.

Save a freakin’ lot of money for your down payment!

You need to save a lot of money for a down payment alone before you can consider even looking for a home. You can’t just save set amount of cash in general. You need to specifically put money aside for the actual down payment. The reason for this is that you’re going to need a lot of other money for the millions of other expenses that come your way as a new home owner (flat screen TV, house parties, and much much more).

Get a long term loan.

Your night life can be wild and filled with adventure (would you want it any other way?). Your mortgage on the other hand, well that can be long and boring. The best option is usually a 30-year fixed rate loan. You might spend more money this way, but you can also put more money towards your home loan.

Take advantage of government incentives.

Depending on where you live and your circumstances, there are certain government incentives that you can take advantage of as a home owner. Since this really depends on where you live, you know better than me of what’s available to you. Speak to your friends that are new home owners and they should be able to help you with this one.

Wait and save.

It’s okay to chill and save up a bit longer. You don’t have to rush. Nobody wants to rush into marriage, yet most want to rush into buying a home. I just don’t get it. You can get out of a marriage much quicker than you can get out of a mortgage (pretty scary, huh?).

I really hope that I presented all of the information on buying your first home in an easy to read format. Buying a home is an important decision that deserves to be treated seriously. I also hope that you take some time to play around with the calculators I linked to in this article. They can really send you in the right direction.

Are you a new home owner? Do you have any tips for real estate rookies?

(photo credit: drs2biz)

I just launched a super informative manual on PIN, helping you decide if you should buy or rent a home in your 20s. If you want help with making this decision easier, then look no further then this brand new guide.

According to the Federal Housing Finance Agency, housing appreciation has been largely negative since the fall of 2007. I know that this a general stat and it doesn’t factor in location. The stat does however indicate that home ownership doesn’t always trump renting a place. This shows that buying a home isn’t always the logical choice once you start making real money in your 20s.

Today I wanted to present the case for renting a home. I wanted to shift away from common advice that suggests that renting is simply “throwing money away.” I’m here to show the positive side of renting out a place when you’re making good money.

When and why can it be better to rent a place instead of owning one?

Uncertain future plans.

If you don’t know where you’re going to end up work and life wise in 6-12 months, it’s not really worth going through the extensive process of trying to buy a home. You should buy a new place when you’re ready to settle down and stay in a certain community for an extended period of time. When your future is uncertain you don’t want to commit to a set location. It could really mess up your plans.

Looking to save some money.

If you still need to save up more money before you’re ready to own your own place, renting is the ideal solution. You can rent out a cheap little pad with a few friends where you pay a few hundred bucks per month for rent and save the rest towards your home down-payment. The benefit of renting is this situation is that you give yourself some more time to save money. It’s not worth trying to buy a home where you’re financially unprepared.

Plans to travel.

If you want to do some long term traveling in the near future you’re going to want to hold off on buying a place for now. Real estate should be about your unique priorities in life. Some of us will want to settle down and get married right after college. This is when buying a home can be a good idea. On the other hand, if you’re like me and you want to travel the world, you might want to stay at home or rent for now. There’s no one-size-fits-all when it comes to real estate, regardless of what experts try to tell us. If you want to travel, then do it. You don’t HAVE to buy a home if you don’t want to.

You just need a place to stay.

Not everyone is fortunate enough to have a supportive family that will let them stay at home until they’re 35 years old. If you just need a place to stay then renting will provide you with the shelter that you need. Buying a home shouldn’t be done out of necessity. You should be in the market for a home when you’re financially prepared, not when you simply need somewhere to stay.

You simply want flexibility.

If you’re looking for flexibility, then renting is the right option for you. Once you tie up a significant portion of your savings in a home, you’ll eliminate a lot of flexibility from your life. Flexibility is highly valuable as a 20-something. You never know when you can land a job offer in a different part of the country. You also never know when you can fall in love with someone in a different. You really never know what can happen from the years that you graduate college until you turn 30.

I hope you guys now understand when it’s a better idea to rent instead of owning. If you want further help on making this important decision then please check out my very new manual. Home ownership is the most important decision (aside from getting married) that we can make in our 20s. Please take it seriously.

Are you looking to purchase a new home in the near future? Are you confused about the whole mortgage and financing process?

Don’t worry guys. Applying for a mortgage can be a very nerve-wrecking process. All of the industry jargon, paperwork, countless signatures, and hours spent waiting, can really bring one down on the whole process. Fortunately, you’re not alone!

Today let’s address the colossal question: what do I need to get approved for a mortgage?

Exceptional credit score.

I’ve discussed the importance of a credit score many times here. Now it really comes into play. The higher over 720 that you’re credit score is, the better the interest rates will be. Why does this matter so much?

Let’s put it into perspective and run a little calculation:

Think about the difference that an interest rate of 6.5% compared to 5.5% will make on $300,000? Let’s just say you save up $50,000 for your down payment, bringing the total amount you need to mortgage to $250,000. At a interest rate of 5.5% you will spend $63,273.46 on interest in he first 5 years of the mortgage.

Now let’s say your credit score is average and you get a higher interest rate of 6.5%. In the first 5 years you will spend $74,961.02 on interest. Ouch.

If you have an exceptional credit score (over 720) and you’re able to secure an interest rate that is 1% lower, you can save $11,687.56 on interest in the first 5 years of your mortgagee alone.

(Thanks to the mortgage calculator at CanEquity for this calculator. This is assuming a 5-year fixed mortgage, paid bi-weekly, amortized over 25 years. The interest rate numbers are simply just arbitrary numbers from the top of my head.)

Steady work.

The lenders need to be very certain that you’ll be able to make your mortgage payments. The lender will want to see proof that you have steady employment. They will usually want to see how much income you earned in the previous tax year and some of your most recent paychecks.

Part-time work doesn’t usually cut it for most lenders. The fluctuation in income usually makes you too risky of a borrower.

For the entrepreneurs of the bunch– you might require a little bit more paperwork. Lenders will often ask you to prove your income a bit further. You may be asked to bring in tax returns from the past few years. I’ve had various self-employed readers and friends tell me that the mortgage approval process dragged on for them. Just a heads up.

Solid mortgage down payment.

After the credit crunch of late-2008, it’s highly unlikely that your mortgage application will get approved with anything less than 10%. The general rule of thumb is that you should strive to save up for a down payment of 20-25% for your first home purchase.

Your credit score will determine how credit worthy you are, your employment will determine how likely you are to make your mortgage payments– but your mortgage down payment will determine if now is the right time for you to be purchasing a home.

Savings.

The lender wants to see that the home purchase won’t obliterate your savings/available assets. The lender will be more comfortable with loaning you money if you have some savings in the bank and some assets to your name. This just means that you’ll temporarily be able to pay your mortgage payments if you happen to lose your job or be in between jobs.

Has anyone recently gone through this process? Any experiences that you want to share with us?

This is a guest post from Ryan: a recent college graduate who writes about personal finance, real estate, entrepreneurship, mobile living, and personal development at Planting Dollars. In his free time he scuba dives with sharks, builds travel websites, and enjoys frugal living in Hawaii.

Have you ever thought it would be sweet to start your own business in college? If you’re not sure of the best business to start consider real estate sales as an option. If you’ve got confidence, believe in helping people with home ownership, and a great work ethic, this may just be your perfect college business, and great resume builder.

The summer before my senior year I took a position as a Realtor with a local brokerage company. Over the course of the following year I closed over $2 million in real estate transactions; You can do the same. I simply had a desire to learn about real estate and wanted to be paid for how hard I worked, not how many hours I put in. Real estate sales was the perfect solution. Realize that real estate sales costs money to get into and that it’s 100% commission; You will not make money until you close a sale.

In between classes I would follow up with clients, do a little prospecting, then get back in and learn about the history of the middle east, accounting, or whatever other liberal arts course I was taking at the time. Time management and the ability to juggle multiple tasks is essential. You’re helping someone with one of the biggest investments of their life, so you have to take it seriously.

If you’d like to beef up that business resume, learn how to start your own business, gain valuable lifelong selling skills, and have the potential to make decent money, here are the steps you should take if you’d also like to sell $2 million in real estate before you graduate college.

Step 1: Find a brokerage company that allows part time Realtors

Simply start acting like a Realtor and cold calling local brokerage firms asking how you can become a Realtor with their company. Brokerage firms like words like, ambitious, go-getter, and self-motivated. Most will have some kind of training program, but often you’re on an island and have to motivate yourself everyday. Get as many interviews as you can and learn about the differences between brokerage companies. Stress that you’re incredibly hard working and aren’t afraid of prospecting. If possible find a way to team up with a more experienced agent.

Step 2: Get your real estate license

Each state has their own licensing laws so you’ll need to get licensed in the state you plan on selling. You can easily just Google your “state + real estate license,” and you’ll find a plethora of information regarding getting licensed. In my experience licensing cost me about $300 in total and took a few weeks to complete.

Step 3: Read as many sales books as possible

Start reading books by success coaches like Zig Ziglar and Brian Tracy. These books will not only help you in your real estate sales, but in your outlook in life in general. Believe you can achieve and you will. If you’re reading this and thinking it’s impossible to do what I did, it will be.

Step 4: Get out there and make it happen

Work hard developing new clients through prospecting. I would go door to door on the weekends, call expired listings, talk to for sale by owners, and do mailings to particular neighborhoods. Through reading about how top producing real estate agents gained their success you can duplicate their models and create your own success. The best book you can read in this regard is the Millionaire Real Estate Agent, by Gary Keller. Also realize that unfortunately Sunday afternoons will be for open houses and not for an all day keggers, sorry!

It’s honestly that simple. People tend to over complicate things, but if you follow these four steps you’ll be able to sell $2 million in real estate between classes as well.

If you have any specific questions feel free to stop over at Planting Dollars and shoot me an email.

Is it better to buy or rent a home? This article is going to dig deep into this question.

Buying a home right after college or in your twenties has become indoctrinated in the minds of many of us.

There is a high value placed in society on ownership (at least there has been for years). Home ownership has become an axiom that is rarely challenged. There is a negative stigma that follows renting. This thinking is engraved into all of us and young professionals often want to purchase a home right after college.

I wanted to open up the discussion: to rent or to buy a home, which option is better? A question that will plague all college graduates and twenty-somethings as time goes on, salaries increase, and your parents start getting in the way of your love life.

Why has renting become overlooked? Why does everyone feel the need to buy a home?

All I can tell you is that I have done my research and put together the ultimate home buying guide and I take a detailed look at buying vs renting.

Questions to answer before deciding if you should buy or rent a home.

Is your income stable?

Are you an entrepreneur? If you are then your income has the potential of fluctuating greatly. There can be very prosperous months and then there could be months where you barely earn enough revenue to cover the costs.

Are you new to the work force? If you’re the “new guy” at the company then you have the opportunity to grow your career and move up within the company. On the flip side of the coin, you are at risk of being let go first when budget cuts hit the company.

How much will your salary increase?

Do NOT ever guess too high when it comes to future expected earnings. You don’t want to downplay your skills but there is no need to overestimate your future earnings.

Things to consider when buying a home:

Are you really buying this home?

When you buy something it means you’re purchasing it and it is yours. This not exactly what happens when you buy a home. Buying a home usually means that you are simply acquiring it through financing. You live in this home but you sure as hell don’t own it. You probably own the items inside the home but you don’t own the actual home. The bank owns the home and you are paying them to finance it for you.

Do not make quick decisions.

Do not sign any papers until you are 100% sure this home is for you. J of Budgets are Sexy wrote that he signed the papers to buy his home within 48 hours of seeing it. I don’t mean to point out J because we can all be guilty of this. Home buying is the single biggest investment we will ever make and it deserves to be treated as such.

How far is your work from the home?

You may like the community the home is located or it could be an amazingly low price, but how far will you have to commute to work? I have an older friend that purchased a large home at a low price just outside of the city. He calculated his commute and concluded that he would be driving 25 minutes to work each way. He was willing to accept this and determined it wasn’t that bad. Well he forgot to note one important piece of information- he calculated his driving time late at night. During rush hour and crazy traffic it can easily take him an hour each way when traveling to and from work.

A good time to buy a home in general may not be a good time for YOU.

Sure it may be a buyer’s market. Interest rates are very low at the moment. But don’t ever let the market dictate when the right time to buy a home for you is. For one, the perfect home for you may not be available at the time. You also may not have enough money saved up for a down payment. Low interest rates are excellent when home buying but they don’t mean much if you simply are not financially ready- YET.

Watch our for your pre-approval amount.

I want to buy a new house how much can I afford? – This is what many new home buyers will ask their banker. Just because a bank tells you that you have been pre-approved for a mortgage of $xxx,xxx it is by no means a final number. Don’t let that number be your sole home buying deciding factor. You should strive to find a home well below that price so that you can have some breathing room with your monthly payments.

Opportunity cost of buying a home.

If you buy one home you can not purchase another home unless you sell yours. This money is taken away from other areas of your life. Unless your income significantly increases this will mean- less traveling, less toys, less flashier wardrobe, less nights out on the town, and less money in general to spend. Are you willing to accept this smaller monthly cash flow? Is there any where else you would to spend or invest your money?

Pay off all of your consumer debt first.

Find a debt elimination plan that is right for you and make sure your consumer debt is paid off before you even consider buying a home. For one it will be a lot more difficult to get approved for a mortgage when you have outstanding credit card debt. Secondly, an unfathomable amount of your monthly income will go towards debt (mortgage & consumer debt combined).

Have an emergency fund in place.

It’s pretty much a given from a personal finance blogger’s perspective that an emergency fund is always needed. This especially holds true when you are pursuing a new endeavor (trying out a side business, moving out, traveling, etc.). An emergency fund is critical when buying a home because you never know when something within the home will break, leaving you very little tight financially for the time being. If you have a real emergency and your emergency fund isn’t sufficient you have something like payday loans you can turn to. These provide good access to finance without having to turn to a bank. Still you will want to have the emergency fund in place without having to solely rely on them.

Owning a home is not the only way to build equity.

Holding your money in securities or in a high yield savings account makes it fairly easy to access and liquidate. When you have your money tied up in real estate it is very difficult to liquidate it. You will have to find a real estate agent, put the home on the market, and hope that you find a buyer at the price you are looking for.

How long do you plan on living in the community?

Is the home you plan on buying in a community you would absolutely love to live in? If so, then buying a home could be the perfect decision for you because you will likely hold on to this asset until it has greatly appreciated in value (don’t forget about inflation) and your mortgage is all paid off.

Are you buying a home for the right reasons?

Many mid-late-twenty-somethings will buy a house for the intoxicating sense of approval that comes from peers when they find out you own a home. Have you made the proper calculations before investing this colossal amount of money into real estate? Could you have put more money towards your down payment if you waited? Could you have made a better investment with your money?

Are you ready for home maintenance?

You could invest in real estate through purchasing a condo. With a condo you will avoid having to do any maintenance outside of your own unit. When you invest in real estate by purchasing a home you are taking on a whole array of future costs. Your furnace could break down in the winter. Your lawn mower may die on you in the summer. You could break a window when playing baseball. Home maintenance costs need to be factored into your final decision.

Buying a home is not a forced savings tool.

If you want to save money then just setup a savings account and save money. Do not buy a home so that you have a reason to save/invest money. Buy a home if you need to move out and you require a shelter. Buying a new home should not be a convenient reason to save money every month. You will be pleasantly disappointed with the other costs involved with home ownership.

Home appreciation is not all profit

Housing prices have gone up over the years but so has inflation. You must also consider all of the money that you will have to spend on maintenance and the various other costs that come along with owning real estate. You home can appreciate greatly in value over time but do not consider this to be “all profit” as there is more to it.

Take advantage of  the $8,000 Tax Credit

If you have already purchased your home (took me way too long to slip this into an article, sorry) take advantage of the $8,000 first time homebuyer tax credit. The purchase has to be made before December 1st, 2009, it has to be our primary residence, and you have to stay in your home for three years. If you see buying a home as a long term commitment then you should meet these tax credit requirements.

Wait.

Erica wrote a post in June of 2008 on real estate prices. The lowest priced home in the area was $489,900. Now the lowest price in the same zip code is $319,000. Ouch that’s got to be a stinger. I will stress this once again- wait before you invest into buying a home, no matter how tempting the real estate property listings will seem.

Benefits of renting, as opposed to owning your home:

Is renting such a bad idea?

Someone else does the repairs.

When you rent a home you don’t have to stress about fixing every little thing that breaks. You can’t break things and expect to have them fixed, but every item that breaks on its own and is essential to running the home is in the hands of the landlord. This is a fairly arbitrary reason to choose renting over owning but some people simply don’t want to deal with home repairs.

Renting keeps you more flexible.

When you rent you have a higher degree of flexibility that you simply just don’t have when you own a home.

A common scenario- As long as you are near the end of your contract, you can easily get up and switch locations. You can move across town, across the country, or even back home with your parents if you want to save money.

An extreme scenario- You can try something completely out-of-the-box (see: Adam Baker) and travel the world when your lease expires.

Consumption goes up when you buy a house

Once you have paid all of the relevant costs for your house you are nowhere close to done. Now you will have to design every room in this home. When you rent an apartment you simply purchase enough furniture for the living room and bedroom and you are all set. With a home you will likely want to extensively design every room. From a “guys room” in the basement to an “entertainment hub” in your living room, to a “home office” upstairs.

Save more money with renting.

The common adage that claims renting is “throwing money away” does not exactly hold true these days. Depending on the location and the size of the unit, you can potentially save a couple of hundred dollars a month when you rent. By renting you avoid:  mortgage payments, property tax, insurance fees, maintenance, and upgrades. In a perfect world you can save some decent coin.

BUT… This is only in a perfect world. If you are a very financially conscious person and you have plans in place to save and invest the money you save, renting is an ideal option. Unfortunately, what ends up happening is that most people use this money towards life in general.

(Aside: Property tax is considered a financial benefit of renting, but it is calculated in your monthly rent by the landlord in most cases.)

Renting is not “throwing money away”

I could not put together a reputable article on home ownership compared to renting without addressing this form of so called, “conventional wisdom.” You are paying for shelter. Sure you will never see the $1,000 or so a month on rent you pay, but, you are paying to have a roof over your head. When you own a home you will never see many of the costs again. It’s just apart of life. If you want to live in a safe and clean area,with a roof over your head at all costs then you’re going to have to pay for it. If you are completely convinced that paying for rent is such a waste then don’t move out.

How large should your monthly mortgage payment or cost of rent be?

@RJ Weiss: Depends on how much maintenance your home requires but as a rule of thumb I would say no higher than 33% of Gross Income.

@Ericabiz: Your mortgage payment should be far less than your rent. Rent includes maintenance + structure insurance.

@MoneyMatters: Dave Ramsey suggests no more than 25% of your income.

Should you rent or buy?

@MoneyMatters: Here’s my take on the issue.. “don’t buy a house just because people say it’s a good time to buy”

@Budget Pulse: You should rent.

@MattJabs: If you have money saved, buy. If you don’t, rent. Don’t go into debt.

My take on renting compared to buying a home:

I’m not here to give you an answer. I simply want to help make your decision easier by presenting both sides to the home ownership compared to renting argument in one clear and concise article. At the end of the day, what you choose to do depends on your financial goals, more importantly, your life goals.

Do you want to travel the world? If you want to travel in your twenties or thirties it’s going to be fairly difficult when you have to deal with a mortgage.

(An older friend of mine would only rent when he was younger. He would rent an apartment and then rent out a storage unit for all of his possessions when he found a temporary opportunity somewhere else or just wanted to travel.)

Do you want to take entrepreneurial risks?

Do you want to start a family and live in a safe area?

Do you want to be bachelor for the foreseeable future?

All of the above information needs to be consumed and the questions need to be addressed before deciding on whether you will invest your hard earned money into real estate or if you will opt to rent an apartment. I can’t answer these questions for you but I do hope that you answer them yourself.

I also hope I didn’t scare any future home buyers. I just wanted to put together an article that included every possible detail about the largest investment that many of us will ever make.

What’s your take?

Additional reading on renting vs buying:

My “Worst” Buyer’s Remorse Story @ Budgets Are Sexy
Is It Really A Good Time To Buy a Home @ Good Financial Cents
Not Everyone Should Own a Home @ WSJ
Don’t Buy A House Just Because People Say It’s A Good Time To Buy @ Bible Money Matters
The Realities of Home Ownership @ Get Rich Slowly
Renting Makes More Financial Sense Than Owning @ Smart Money
Renting a House Smart Move For Newly Weds @ Frugal Dad
Renting vs. Buying Calculator & Graphs @ NY Times
Should You Buy a House If You are In Debt? @ Moolanomy
Rent vs Buy A House: How To Evaluate Your Options @ The Digerati Life
10 Mistakes I Made As A First Time Home Buyer @ The Wisdom Journal
11 Things To Think About When Buying A House @ Four Pillars
Buy Your Home The Right Way For Personal Finance Success @ PT Money
5 Myths About Home Ownership @ Washington Post

If you’re moving away for this fall, are you going to stay in a college dorm room or rent an apartment off campus? For those of you that are going to be moving into an apartment rental unit, then I have some quick tips for you.

Student housing is a topic that gets more popular as the summer goes on. Especially in my home because my brother has chosen to attend a college in a different city.

Since the back to school rush is going full force here at Studenomics, I just wanted to share some really important information with you guys in regards to the popular college student housing option of renting an apartment with a few friends.

Watch Out For Furnished apartments

It may seem convenient and like the perfect option but don’t pay the extra money just because you’re too lazy to do a little searching around. When looking around for apartment rentals off campus it’s funny to see how many are trying to lure college students by offering furnished apartments for a much higher price.

At the beginning of last semester I noticed that an old high school friend of mine posted up a note on Facebook asking for any spare furniture because he was moving into a new apartment. Instead of throwing out some old stuff in the garage I gave him a call to come look through the stuff and pick out anything he wanted.

Be Cautious When Signing a Full Year Lease

Please keep in mind that when you sign the lease for your rental apartment or rental home that most land lord’s require you sign a full year lease. This usually means that either you have to find someone to sub-lease the rental property to, you have to live at the rental unit all year long, or worse case scenario is you guys take the financial loss.

You must also keep in mind that the lease puts certain liability on you in case of any damage done to the apartment unit. Nothing wrong with having a few friends over for drinks but the onus is on you if anything happens to the place.

For the sake of not providing you guys with very general advice on college housing options I decided to conduct some additional research and I found two great websites that help students out with apartment rentals/housing options for the school year.

In Canada there is Homes 4 Students

In the United States Off Campus Housing 101

Please note that I have no connection at all to these companies and to be honest I have not even used the sites myself. My goal is to share valuable resources with the readers of Studenomics and I believe that those two websites should help you with your student housing situation.

Please share any other resources you may have for affordable college student housing options!