Mortgages for Grads

Realtor.com quoted me in College Grads Can Get Home Grants—but There’s a Catch. It opens,

Recent college graduates hoping to buy a home have one more reason to toss their caps in the air these days: Programs offering home grants to new grads are popping up across the country, offering thousands of dollars in assistance that could put homeownership within reach. Talk about a nice graduation gift!

In New York, for instance, Gov. Andrew Cuomo recently announced a $5 million pilot program, “Graduate to Homeownership,” providing assistance to first-time buyers who’ve graduated from an accredited college or university with an associate’s, bachelor’s, master’s, or doctorate degree within the past two years. That aid can take the form of low-interest-rate mortgages, or up to $15,000 in down payment assistance.

The catch? You’ll have to live upstate—in Jamestown, Geneva, Elmira, Oswego, Oneonta, Plattsburgh, Glens Falls, or Middletown—eight areas that many just-sprung college students tend to flee as soon as they have their diploma in hand.

“Upstate colleges and universities have world-class programs that produce highly skilled graduates—who then leave for opportunities elsewhere,” Cuomo admitted in a statement. “This program will incentivize recent graduates to put down roots.”

The trade-off for college grads

New York is not the only state offering this type of assistance to college grads, many of whom are saddled with significant student loan debt. According to analysis by Credible.com, nearly half of states offer some form of housing assistance to student loan borrowers, with a handful focusing on recent grads.

For instance, Rhode Island’s Ocean State Grad Grant program offers up to $7,000 in down payment assistance to those who’ve earned a degree in the past three years. Ohio’s Grants for Grads program offers down payment assistance or reduced-rate mortgages to those who have graduated in the past four years.

Still, what’s noteworthy about programs like New York’s is that you can’t just buy a home anywhere. Rather, you have to plunk yourself down in semi-ghost towns. That’s hardly ideal for someone who’s trying to kick-start a career.

So as tempting as this home-buying “help” might appear at first glance, you have to wonder: Is it enough to offset what these students give up? Some experts say it’s a risky bet.

“The New York program aims to retain highly educated people in economically depressed regions and revitalizing struggling downtowns in those regions,” says David Reiss, research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School. “It can certainly help people who are dealing with high student debt burdens. But programs like this have to deal with a fundamental issue: Do these communities have enough jobs for recent college graduates? Time will tell.”

Find a job first, then a home

Experts say students should think carefully before they pounce on this “gift” and make sure they can be happy in one of the designated locations—and gainfully employed.

“No question, they should have a job lined up first [before buying a house],” says Reiss. After all, “a good deal on a house or a mortgage is not a good deal if we don’t have a job to go along with it.”

When Should Millennials Buy?

photo by Richard Foster

SelfLender’s personal finance blog quoted me in When Should You Start Worrying About Buying A House? It opens,

If you’re a young person, then you’re probably already familiar with the fact that younger generations are more hesitant to purchase a home than previous generations.

Times are much different than when your parents were worrying about buying a house for the first time. In the “olden days,” the traditional life plan was set in stone: get married, buy a house, raise a family.

Fortunately (or unfortunately), young people aren’t jumping into homeownership within the same timeline as the generations before did, which is causing a stir amongst the real estate and financial industries.

What’s more bothersome is that many young people are having trouble gauging when they should actually start worrying about becoming a homeowner.

The answer is: it depends.

Figuring out when to buy a house is different for everyone. There is no set age that signals the right time. There are, however, financial and lifestyle signals that will help you make an educated decision on when you should, if at all, purchase a home.

The following is our rough guide to figuring out if homeownership is right for you or if you should continue renting.

Homeownership is Long Term

Purchasing a home is not for everyone. Especially for people who like to move and travel. Unless you’re able to pay for your house outright in cash, then purchasing a home might not be a good idea for someone who has been known to move around frequently.

Lauryn Williams, four-time Olympian and owner of Worth-winning.com, a financial planning company for young professionals and professional athletes, says that millennials love traveling and moving around. Just take a browse through Instagram and count the amount of selfies in exotic locations.

“My tip would be not to buy a home, because it seems to be ‘the next logical’ step in life,” says Williams. “Think about your lifestyle and whether homeownership is truly for you.”

You need to think long term about whether or not you’ll be in the same place that you’re buying your house.

Maybe you don’t travel much, but is your current job security good enough to keep you in one location for more than a few years? What if you get a better job offer that would require you to move?

The traditional career path in America is to graduate school, find a company and stay with that company for your entire life, which is not the case today. Millennials are more likely to switch jobs than previous generations.

“When people are thinking about settling down for five or more years in one location, they should start to seriously think about owning over renting,” says David Reiss, a Professor of Law at Brooklyn Law School.