Should a Recent College Grad Buy or Rent a Home?
Graduating college is a stressful enough time without also worrying about what comes next. Some students are actively chasing the American Dream in hopes of buying a home immediately after college. Others are comfortable renting while they start their careers.
Which option is better? As more and more student graduate college each year, this question is becoming more common. Should a recent college grad buy or rent a house?
In the renting vs. buying debate, there’s rarely a clear answer. Much of it will come down to the individual’s long-term goals, financial situation, and the housing market. In this article, we’ll take a closer look at the pros and cons of buying vs. renting as a recent college grad.
The Reality of Post-Grad Life
First, we need to look at just what it’s like to be a post-grad today. Most students graduate with some kind of student loan debt. That places them in a precarious situation where they need to find financial support fast to begin paying those loans off.
In addition, the odds of finding a high-paying entry-level job as a recent grad aren’t very high. Many students struggle for months or even years before they land a job in their field that pays the bills. In the meantime, they might choose to work in the service industry or freelance to make ends meet.
Finally, college grads don’t always lead stable lives. They might be moving from place to place in search of a job. They might have to move back to their hometown. There’s a lot of movement and not much stability for recent college grads. This only complicates the question of whether a recent college grad should buy or rent a house.
The Benefits of Buying a Home
There are a lot of benefits of buying a home for recent college grads. First, it gives a level of security that renting can’t provide. The recent grad owns the home, and they can even use it as an investment property to make additional income.
In many states, it’s actually cheaper to buy a home than to continue renting. Many recent grads are happy to discover their mortgage payment is lower than their past rent payments. Of course, there are unexpected fees like insurance, repairs, and maintenance that will drive up this cost.
Finally, while buying a home might be a good idea, it can also be harder for a recent grad to secure a mortgage. If the grad has limited work experience, a high debt to income ratio, or a low credit score, these could all make it challenging.
The Benefits of Renting
On the other hand, renting is a much simpler choice for recent grads. First, it gives them the flexibility to move as they need to depend on jobs or life. It’s also much less expensive up front, and it’s easier to qualify to rent than to qualify for a mortgage.
More importantly, renting saves a lot of money on maintenance and repairs. If anything happens to the apartment, the grad can easily leave without much fuss.
While renting might not be the best long-term option for recent grads, it’s a great solution for the often confusing time between college and career. Students don’t yet have their lives figured out. They might be switching jobs, exploring new cities, and trying different things. Renting fits well with this lifestyle.
Which is Best for You?
So which option is best for you? If you’re a recent college grad wondering if you should buy or rent a home, you’ll need to consider what’s more important to you. As a homeowner, you’ll build equity and more stability. However, you’ll also be responsible for unexpected costs and repairs.
If you rent, you’ll have more freedom and flexibility, but you won’t have the security of owning your home. There’s no right answer, so consider what matters the most to you.
Ultimately, take inventory of your current debt. It is worth getting further in debt for your property? How is your financial situation? Once you understand this, you’ll be in a better situation to decide whether you as a recent college grad should buy or rent a home.