Buying a home as a grad student

[stillthisappeal]

I'm headed back for my PhD this fall after taking three years off to work full-time and pay off student loan debt. Much to my surprise, I've inherited and saved a fair amount of money over the past few years, and would be able to afford a down payment on a moderately priced home (50-80K) in a decent neighborhood near my school. By my calculations, the mortgage payment would be lower than most rents (for example, my TA stipend is high enough that I've been looking at apartments that cost TWICE as much per month in rent).

Both of my parents seem to support my move. In my dad's opinion, purchasing home is not about paying it off but keeping up with the monthly bills (which, I've established, should be easy to do). And this spring I've met a few grad students who have purchased their own homes and seem happy. Still, the idea still strikes me as kind of funny. After all, aren't grad students supposed to be poor?

Does anyone on the board have experience with home ownership and grad school? Can it be done?

[ZeChocMoose]

I'm headed back for my PhD this fall after taking three years off to work full-time and pay off student loan debt. Much to my surprise, I've inherited and saved a fair amount of money over the past few years, and would be able to afford a down payment on a moderately priced home (50-80K) in a decent neighborhood near my school. By my calculations, the mortgage payment would be lower than most rents (for example, my TA stipend is high enough that I've been looking at apartments that cost TWICE as much per month in rent).

Both of my parents seem to support my move. In my dad's opinion, purchasing home is not about paying it off but keeping up with the monthly bills (which, I've established, should be easy to do). And this spring I've met a few grad students who have purchased their own homes and seem happy. Still, the idea still strikes me as kind of funny. After all, aren't grad students supposed to be poor?

Does anyone on the board have experience with home ownership and grad school? Can it be done?

I am curious about this as well i.e. people who buy houses as full-time graduate students.

That items that I would be concerned about on top of your mortgage payments would be closing costs, utilities, maintenance, and property taxes. Do you have money to cover all of these? Also the other sticky point for me would be once you finish your degree and your job is in a different area, what happens if you have real difficulty selling the house?

[timuralp]

Well, I did end up buying a condo. It's not a house, but it's been working out pretty well. There is the additional association fee on top of the mortgage payment, but I manage to get it all at around $900 -- with the extra principal payment each month. A one bedroom in this town would run around $800, so, it's not too bad. The property taxes are included in my mortgage payment (the mortgage company pays the tax). The only big maintenance item so far has been a new furnace, as the original one was from 1972. That ended up running about $3,000 -- ouch. Other than that, it's been great. Luckily, University towns also don't experience significant drops in housing prices, so I'm hoping to sell it for around what I paid for it or even a little more.

Good luck!

[rising_star]

This topic has been discussed multiple times:

There are links to two other past posts on this if you follow the link above.

I would also add the following:

If you're looking at a condo, you need to check the history thoroughly so you'll know whether to expect an increase in the monthly HOA or an assessment to pay for a large project (repaving everything, new roofing, etc.). If you get a bill in the mail for a $10,000 assessment and it comes just after closing, what will you do?

If buying a house, you absolutely need a reserve fund in case anything breaks. timuralp's point above about having to buy a new furnace is a good one. But other things can also go wrong and need replacement (air conditioning, water heater, plumbing, etc.) and not all of those things will be covered by a home warranty or a homeowner's insurance policy. If you can't afford the "Oh s$%*" aspect of home ownership, then maybe renting is better, especially if you will be cash-poor after making the down payment and whatnot.

FWIW, I thought about buying a house/condo in PhD city and would have if I'd stayed in MA town for my PhD. At the moment, I'm probably paying more in rent than I would be for a condo. BUT, I'm also about to spend a year away from here doing fieldwork. If I were a homeowner, I'd have to find a renter or management company, and possibly pay my mortgage plus rent in another location. That would definitely be a headache. That said, given that I've moved 3 times in less than a year, I kinda wish I'd bought for the stability.

Also, I'd look into the housing market more broadly. Are prices going up or down? (In my area, they are definitely going down.) How much work are you willing to put into a place? Will you be able to resell or rent it easily after you finish?

[IRdreams]

The other question is: is it more common for people who are married or in long term stable relationships? There is one girl in my program who owns her own home and makes substantial rental income off of it, but for the most part it is couples who do this sort of thing. Many of these couples also have one partner not in Academia.

[stillthisappeal]

Thanks for the feedback. After giving it some thought, I've decided to put off buying a home for the first year. I want to make sure that I can coast through my coursework without any distractions. Moreover, I think that I need another year to realign my finances and assess exactly what kind of home I'm looking for.

[Nurse Wretched]

Well, I did end up buying a condo. It's not a house, but it's been working out pretty well. There is the additional association fee on top of the mortgage payment, but I manage to get it all at around $900 -- with the extra principal payment each month. A one bedroom in this town would run around $800, so, it's not too bad. The property taxes are included in my mortgage payment (the mortgage company pays the tax). The only big maintenance item so far has been a new furnace, as the original one was from 1972. That ended up running about $3,000 -- ouch. Other than that, it's been great. Luckily, University towns also don't experience significant drops in housing prices, so I'm hoping to sell it for around what I paid for it or even a little more.

Good luck!

Um, yes. Yes, they do.

When Pfizer pulled out of Ann Arbor, housing prices dropped double-digit percentages. Ann Arbor still hasn't recovered from the housing bubble, and it's a most collegiate town.

[MoJingly]

I am currently in the process of closing, and I will be starting my program mid-summer. I found a little 700 sq/ft cottage that is perfect for me. I'm looking forward to living alone and having my own space.

This being said, there are a lot of headaches that come with buying a home, and it's quite stressful. So far, though, I think it is going to be a good move. Once I close and get adjusted, I'll be in a better position to give advice!

I thought about holding off until my second year, but the timing worked out well. In the housing market, you have to keep your eyes open and pounce once you find the right opportunity. It just so happened that the right opportunity came RIGHT AFTER I decided to go to grad school here. I already know the neighborhood and am really happy about the place I found. It needs some work, but so does every other place built in 1945. Since I'm buying now instead of after a few years of grad school, I have more time to fix it up and pay into my mortgage before I go to sell.

There's a LOT to think about before buying a house! I'm a single 23 year old female, and this has been a lot to handle. BUT it's going to be a good move in the end, or else I wouldn't have even thought about it.

Edited April 19, 2011 by MoJingly

[mudlark]

The other question is: is it more common for people who are married or in long term stable relationships? There is one girl in my program who owns her own home and makes substantial rental income off of it, but for the most part it is couples who do this sort of thing. Many of these couples also have one partner not in Academia.

Yes, I think it is. I know at least three students in my program who own their own place (including myself) and we're all in long-term relationships. Both of the other students have husbands in law school, though, and my husband makes less than my scholarship at his job, so it's not necessarily about having a second person to bankroll the project.

[timuralp]

Um, yes. Yes, they do.

When Pfizer pulled out of Ann Arbor, housing prices dropped double-digit percentages. Ann Arbor still hasn't recovered from the housing bubble, and it's a most collegiate town.

Ok, let me qualify this: since the summer 2008, aside from foreclosures, the condos in my complex have not dropped significantly (about $5,000 at the worst and since then climbed a little bit upward). As far as I could tell, condos in the similar price range (<75k) did not experience a tremendous decline.