College Graduate Decision Time: Should You Take Out a Mortgage Now or Later?

You’ve recently graduated from college.

Life decisions are staring you in the face.

Foremost among them: Should you save money now or take out a mortgage loan on your first house?

The decision is yours to make, but Walter Updegrave of Money Magazine wants to remind potential borrowers of all the upfront costs home ownership includes - from the down payment to title insurance to mortgage application fees - not to mention a commission when you sell.

Closing costs for buyers average about $3,000 in the United States. Selling the house is even more expensive. With brokers’ commissions alone averaging between five and seven percent, expect to shell out close to 10 percent of the price of a home when you sell; that’s about $20,000 for a median priced house.

In most markets, buyers have to hold on to their properties for at least two years just to offset the effects of those transaction costs. Of course, the faster prices rise, the sooner buying a home pays off. But most experts expect market prices to be fairly stable for the next couple of years.

Given all that, it generally only makes sense for younger buyers if you’re sure you’re going to be staying in the same place at least five years. Moreover, with the latest reports showing housing prices are stagnant or falling in many areas of the country, buyers might even want to figure staying put a couple of years on top of that.

This poses a problem for recent graduates because how many really know where you want to live for the next five or so years at this point? You might very well want to take a job in another part of the country. Or maybe you’ll just want to try living somewhere else. You can still do those things if you own a house, of course.

But it’s easier if you don’t have to worry about selling your home or renting it out while you’re gone in order to afford home loan bills.