Assistance Programs Give College Students Early Start as Homeowners
By Tracy Swartz
The Baltimore Sun Knight Ridder/Tribune Business News
Mar. 29 - 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.
"Homeownership could actually be a hindrance in your early 20s," Hughes said. "College graduates are usually quite mobile and usually single. At that stage of the life cycle, you're usually a renter."
Personal finance expert Suze Orman said recent graduates should progress into buying a home. First they should rent apartments while building good credit, Orman said. They also should build emergency funds and buy cars before buying homes, she said.
"You've got to really step yourself through what it takes to be a homebuyer," Orman said last week from her home in Fort Lauderdale, Fla.
Teresa Coffin, a sophomore at the University of Maryland, Baltimore County, said buying a home during the next few years isn't an option for her. Instead, she plans to save money by moving into her parents' Columbia home after graduation. Coffin, 19, said she doesn't plan to buy a house until she is married.
Marcus Roberts, in contrast, wants a home of his own. Roberts won't graduate until 2006, but the 22-year-old has started researching homeownership opportunities.
He recently attended the Congressional Black Caucus Foundation seminar at Jackson State University in Mississippi and plans to participate in similar workshops at his church.
"I'm just staying open-minded," Roberts said in an interview. "I'm not looking to buy one just yet, but I'm looking at the information."
Caucus representatives have discussed homeownership with students in the District of Columbia, Maryland, Georgia and Ohio, among other states. The foundation plans to tour all 116 historically black colleges within five years.
At the seminars, program coordinator Simone Griffin tells students that she bought her Washington home for $30,000 one year after graduation. With the money she makes from renting rooms, she can pay her mortgage and make a few hundred dollars.
"Do not be discouraged," Griffin told Morgan State seniors last month. "This will work for you."
Thomas wasn't so sure. He told a panel of real estate and banking experts at last month's seminar that he was worried that his credit report would hinder his chances of homeownership.
Thomas, who will graduate in May and get married in August, wants to buy a detached, single-family home in the Hamilton area of Northeast Baltimore. The panelists advised him to have his fiancée, who has better credit, purchase the home.
Like Thomas, Erica Steele found she needed to repair her credit history when she started her home search. Steele, a Jackson State senior, is using the next year to improve her credit, earn money for her down payment and attend homebuying classes.
At 41, Steele has never owned a home. A single mom with four children, Steele is studying for a bachelor's degree in social work. She rents her home in Jackson and works eight hours a day as a secretary at Jackson State.
She said she hopes the foundation's program can help her achieve her homeownership dream.
Eldred said a common misconception is that recent college graduates are in their early 20s. The group typically ranges from age 22 to 30.
"So many older people are going back to school," Eldred said. "There's nothing about the age itself that deems someone irresponsible for homeownership. They'll be so much further ahead if they get started early."
Vivian Garth, 37, recently began her search for a single-family home that she can buy in Cleveland after she graduates from Cuyahoga Community College in May.
She attended the caucus' workshop this month at her college, which is the first community college selected to be a host of the program.
"I don't know much about buying a home," Garth said from her home in Cleveland. "They gave us information about different programs that you could go to."
One such program is that run by AmeriDream Inc., which helps people achieve homeownership through down payment gifts disbursed by the Gaithersburg-based nonprofit group.
Buyers on average receive help with 5 percent to 6 percent of the price of their AmeriDream home, said spokeswoman Molly McAndrew.
Heather Harris, 21, has been contemplating homeownership in the next few years since she attended the caucus seminar at Morgan State.
"Being in college, you get in a renter's mode," said Harris, who plans to graduate in May. "It's extremely motivating to know that we may have an opportunity to own a home when we graduate."
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