Mortgage for the College Student
You may not usually think the words “college student” and “buying a home” would go together in a sentence, but for many non-traditional students, especially veterans, buying a home is something they often deal with while attending school. For student-veterans, there are a lot of options you can look at, but you’ve got to hit a few priorities. When you’re juggling school, work, and family, then throw negotiating finding a home and getting a mortgage in the mix, things get really complicated really quick. You need a mortgage option that is on the fairly simple side.
First, A Note on the Unique Advantages of Being a Veteran
As a veteran, you have access to the GI Bill benefits, which can pay for all of your tuition, a stipend for your books, and most importantly for this article, can pay for your housing. You can receive a monthly stipend to help cover your housing expenses if you are attending school full-time. This part of the GI Bill is a huge benefit and when combined with the VA loan program, can help you build up the rest of your life while you’re still in school. You should research how much of a housing stipend you are eligible for and decide the best way to use it – do you buy a bigger house than you would otherwise and use your benefits to help cover it while you’re in school, or do you find a house with a payment lower than the stipend so you don’t have any housing expenses while in school? What you decide will depend on your family and work situation.
Your Best Option – The VA Hybrid ARM
Why the hybrid ARM? We can’t get too detailed here, but let’s cover the points in the first paragraph: the VA hybrid ARM is no more complicated or difficult to get than a fixed-rate loan, and it comes with the added benefit of being able to use a streamlined to easily refinance it at any time, while in order to refinance a fixed-rate loan your interest rate must drop as a result. Next we need to consider cost. On a hybrid ARM, you can get a much lower interest rate than on a fixed-rate loan, without paying through the nose in closing costs. The great thing about the hybrid ARM is that the initial fixed period can be 3 or 5 years, which can give you exactly as much time as you still need to graduate before the interest rate starts to adjust. Now, adjusting does not necessarily mean rising (despite popular belief). Interest rates can go down as well. With the VA hybrid ARM, you can easily get your monthly payment below your housing stipend for your zip code, relieving a huge burden on your finances.
Your Second-Best Option – The 15-Year Fixed
If you’re not willing to take on the VA hybrid ARM, you still want to avoid the 30-year fixed like the plague. With a 15-year fixed, you get a lower interest rate and you pay interest for only half the time. What’s the catch? Your monthly payment is usually around half-again the payment on a comparable 30-year fixed. This is actually not a big problem, however, if you realize that even though the 30-year fixed payment is lower, the amount of interest you’re paying is probably higher than on the 15. Many people are coaxed into buying more house than they can really afford because of the lower payment on the 30-year fixed. If you get a 15-year fixed for a home with a payment you can afford, you’ll be much better off financially for the rest of your life. Interest rates on a 15-year fixed aren’t usually as low as the hybrid ARM, but they are still much lower than for 30-year fixed.
So, as a college student you need a loan that isn’t too complicated or time-consuming to get, and you need one that won’t stretch your paychecks too far. Your best bet is the VA hybrid ARM, and your second-best bet is the 15-year fixed. Contact us today to get started.