Two Great Tastes That Go Great Together?

September 2, 2011 10:49 AM

Asking for a friend: Buying a house and going to grad school...can it be done? There are various circumstances in my life which make this a very advantageous time for me to purchase a house, however, I am also planning to quit my job and go to grad school in the spring. The mortage payments will be less than I would pay in rent, and between help from family and financial assistance I will be able to afford all my expenses, but am concerned that if I apply for financial aid before finishing the mortgage paperwork, it will cause issues with the lender. Is this the case? If I don't purchase the house now, due to other circumtances it could easily be 6-8 years before I have this opportunity again, if ever. Any advice appreciated!
posted by odayoday to Work & Money (7 answers total)

Just be careful not to simply compare mortgage payment to rent payment. A better comparison is the total cost of ownership, which typically includes mortgage, insurance, property taxes, and maintenance costs.
posted by rocket88 at 11:00 AM on September 2, 2011 [7 favorites]

I bought a house during grad school, but I had the advantage of being able to get a private mortgage. Most lenders will not lend to people in grad school because of the debt to income ratio, these days. So just make sure that the friend is pre-approved after screening of his/her finances. And agreed with rocket88 that you have to consider all the costs. I had to put a whole bunch of money into the house (silly stuff like curtain rods, appliance stuff, lawn care, etc). Even though I was renting rooms in it and making a good 25% over what my mortgage payments were for several years, I probably broke even or so on it. I considered it a good deal since I got housing out of it and good experience for my next home purchase and sale.
posted by treehorn+bunny at 11:09 AM on September 2, 2011

I bought a condo when I started grad school, and I know other people who bought property during grad school. It can be done as long as 1) you can actually afford it (as rocket88 says, the costs include more than just your mortgage), and 2) your lender believes you can actually afford it. Note this implies that you should be able to get the loan without misrepresenting your financial situation to the lender.

Caveat: it's unclear what you mean by applying for financial aid for graduate school, but if it means "applying for loans for a Ph.D. program", then you can still buy the house but you should walk away from that program. You should never, ever, ever enroll in a Ph.D. program unless you are fully supported. If you're talking about applying for some kind of grant, or funding for a professional degree, then you may disregard this advice.
posted by alopez at 11:10 AM on September 2, 2011

Response by poster: alopez, my friend is planning to apply for federal loans to assist with costs for a master's in social work.
posted by odayoday at 11:13 AM on September 2, 2011

Conventional wisdom would tell you to apply for the mortgage, qualify and close on the house while still employed. I cannot imagine why that advice would not apply here.
posted by DarlingBri at 11:34 AM on September 2, 2011 [2 favorites]

I think it's a bad idea. Grad school means that a person is in transition. Home ownership should mean a person is not in transition. I suggest waiting on home ownership until your friend is not in transition; s/he has graduated, has moved to where the stable job is, is happy in that location, and is ready to take on regular costs of home ownership.

Do not underestimate maintenance costs for owning property. When you rent, you can assume that if something breaks, someone else will fix it. When you own property, you fix it and it is expensive. Grad students are known to be very, very broke and therefore without the funds to pay for new water heaters, new furnaces, broken plumbing, etc. etc.
Mortgages, insurance, and property taxes can be estimated. Maintenance comes up randomly and dramatically.
posted by aabbbiee at 12:56 PM on September 2, 2011

I'd talk to a financial aid specialist. Applying for aid if you have significant funds will make a difference; I'm not sure about home ownership.
posted by theora55 at 7:36 AM on September 3, 2011