Aid gives college students early start as homeowners

Grants: Young graduates are taught the advantages of establishing credit and building wealth through home equity.

March 28, 2004|By Tracy Swartz | Tracy Swartz,SUN STAFF

Months from graduation, John Ryan was uncertain of his future living arrangements until he saw an item in the York College senior bulletin. York was offering recent alumni $6,000 to help buy a home near the Pennsylvania college.

Ryan signed up for the program, graduated in December and moved into his two-bedroom house last month. With the grant and $4,000 from a city program, Ryan was able to afford his $45,000 home.

"I'm making out like a bandit right now," said Ryan, 22, a security guard at York Hospital. "With the assistance, my mortgage isn't really that high."

Richard Thomas, 25, is looking for similar help. A senior at Morgan State University, Thomas is shopping for a home in Baltimore that he can buy after graduation.

Thomas is one of hundreds of seniors whom the Congressional Black Caucus Foundation is targeting for its Student Homeownership Opportunity Program. The foundation - which raised money for the program through private donations - is offering $1,000 toward closing costs on a home bought during the next two years by this year's graduates of historically black colleges.

Census numbers show homeownership by the young is growing rapidly nationwide as the lowest interest rates in more than 40 years cause more buyers to consider building home equity earlier in life.

Increasingly, homebuying programs are targeting college students and soon-to-be graduates, a population largely ignored by the housing industry because of its mobility, scant job history and debt burdens.

Some experts doubt whether these programs can work, contending that college students can do better by renting first and paying off credit-card debt and student loans. But advocates say they are trying to educate college students early about managing money, establishing credit, building wealth through homeownership and contributing to neighborhood development.

"People should get started in homeownership as early as possible," said Gary Eldred, author of The Beginner's Guide to Real Estate Investing and other homebuying books. "As soon as they get their first job and know where they're living, it's a great time to get started."

According to Census data, 22.8 percent of Americans younger than 25 owned homes last year. Ten years ago, about 15 percent of that group were homeowners.

Eldred said recent graduates increasingly are sought after by mortgage lenders for homeownership because their parents can offer financial support and they usually have several job prospects.

Lenders typically look for two to three years of job experience when deciding whether to approve a loan. Now, employment contracts often are accepted instead, Eldred said.

"We need to see at least two years of some sort of history, whether it be schooling or an actual professional job," said Dee Ziccardi, a mortgage banker with AccuBanc in Lutherville. "They have to show that they're mature enough that they'll be able to handle a mortgage."

According to the U.S. Department of Labor, the average college graduate earns 71 percent more than the average high school graduate.

Because of their higher incomes, college graduates are able to buy homes at a younger age than are those without college degrees, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University in Pullman.

About 69 percent of college graduates owned homes in 1997, according to a national study by the Federal Reserve Bank of Chicago. About 65 percent of high school graduates owned homes then, and 55 percent of people with less than a high school education were homeowners.

"Historically, homes have become the fastest track to establishing wealth for American households," Crellin said. "If they have the assets to achieve down payment, owning a home of their own is a very solid first step."

Homeownership seemed to be the right step for Ryan. He didn't have any debt from York College of Pennsylvania and had a job in the city of York.

Retaining graduates to boost the local job market is one of the goals of York's 1 1/2 -year-old program. Another goal is to increase the number of owner-occupied homes in the city, said Matt Jackson, York's economic development director.

"These homeowners are more attentive to city properties," Jackson said. "They have a vested long-term interest in the health and viability of the neighborhoods, blocks and city as a whole."

Living next to each other near campus, Ryan and an alumna are the only participants in York's program. If they stay in their homes for at least three years, they don't have to repay the $6,000.

Recent graduates shouldn't be tied to a house, said James W. Hughes, dean of the School of Planning and Public Policy at Rutgers University in New Jersey. He said graduates should wait until they have better credit and have accumulated wealth before they settle into homeownership.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.