If you lived in a dorm or with your parents throughout college, you might be ready to live on your own once you have your degree in hand. But don't make a move too quickly. Housing takes a huge chunk of your income and if you pay too much, you can experience financial problems. Here are a few tips for finding a house after graduation.
1. How Much Can You Afford?
Affordability is important when looking for a house after graduation. You may think you can afford the dream home, but ideally your house payment should be no more than 28% to 30% of your gross income. This keeps your house payment affordable, which ensures you have disposable cash to pay utilities, other bills and save money. Even if a lender or landlord approves you for a place that's more than this percentage, you should keep your house payment low to avoid being house poor.
2. Consider the Cost of Living
If you're offered a job in a new city with a high salary, you might jump at the opportunity to move and earn big bucks. But before you hire a moving company, you need to check out the cost of living in the city. Sure, you might earn good money, but if the cost of living is considerably more than where you're currently living, earning a higher salary may not necessarily mean extra money.
3. Renting versus Buying
There's also the decision to rent or buy after graduating from college. Some young adults jump into a mortgage too soon. There's nothing wrong with buying a house if you can afford one, but consider the benefits of renting. With renting, you don't have to spend money on a down payment or closing costs, plus renting is more flexible and there's the freedom to move after one year. Decide whether you're ready to settle into a permanent residence.
4. Minimize Expenses
If you decide to move out after graduation, minimize your expenses. This way, you can save money and pay off some of your student loan debt before getting into a mortgage. You can get a one bedroom apartment, live in a basement apartment or get a roommate to keep your household expenses low.
5. Stay Home
This might be the last piece of advice you want, but staying home after graduation is financially beneficial. Chances are your parents will charge little rent, so you can save money, pay off debt and pay off your student loans. This also gives you the opportunity to save up to buy a house in the future.
6. Short-term Lease
If you rent an apartment but you're not really confident in your ability to afford the monthly rent, look for places that offer a short-term lease – perhaps two, three or four months. You can give living on your own a try, but you're not stuck in a long-term lease if you discover the apartment is too much to handle.
7. Don't Keep up with the Joneses
At the end of the day, you have to do what you can afford. Your friends might buy houses or move into luxury apartments. But if you buy a home just because your peers have one, you can dig a hole for yourself.
Looking for a house after graduation is an exciting time, but you shouldn't get a home that's too much for your present income. What are other tips to help young people find a house after graduation?