Buying Property After Graduation

Added June 11, 2007 by Ilyce R. Glink

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Summary: A soon-to-be college graduate is planning on buying a condo with some of his student loan money for the down payment. Interest rates on student loans aren't that low, and the money will need to start being paid back six months after graduation. This grad needs to calculate his debt, income and expenses to determine if it's really the right time to buy a home.

Q: I'm currently in graduate school and have one more year to graduate. My tuition is paid for, but I have to take out loans for my living expenses.

I'm considering buying a condo once I graduate. Do you think it would be a good idea to take out the smallest school loan out for my remaining year and apply for 100 percent financing once I'm ready to buy the condo or should I take out the maximum loan amount and use the money as a down payment? I have great credit.

A: It's almost impossible to get 100 percent financing right now. In the wake of the collapse of the subprime market, most of the 100 percent financing money has dried up, except for loans backed by the Veteran's Administration.

So, if you can borrow more money from your student loans, you may want to do it. But remember, you'll need to start paying that loan back 6 months after graduation, and student loan interest rates aren't that low.

What you should do is your homework: Take out a piece of paper and jot down how much income you'll have once you graduate, as well as the cost of paying down your debts plus living expenses. You'll want to make sure you're earning enough to pay your bills. Then, you can calculate if you can really afford to buy a condo, and decide whether the amount you have to spend will allow you to live where you want for the next 5 to 7 years.

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