House hacking on student loans

[Ben Brown]

Hey! Got a quick question and I'm curious to hear your opinions. So I'm 21, and just got back from a 2 year service mission for my church. Now I'm getting back into the swing of things financially. I'm attending college at a university but with a full ride scholarship, so I don't have to pay anything. I've been thinking about taking out student loans (even though I don't need them to pay for school) and using them to put a down payment down on a house hacking project. I looked it up and it is discouraged (obviously) but NOT illegal. I would go the FHA loan route and the idea is to start building equity at a young age, and get a little more experience in the RE realm. Let me know what you guys think, if it's plausible or just complete nonsense

[Melissa Hartvigsen]

Hello @Ben Brown,

I strongly advise against getting a student loan to use as down payment for a house. Student loans are the only type of debt that you cannot get out of, except by repaying them. Should you run into financial problems in the future you cannot claim bankruptcy on a student loan. Also, if you decide to take out the student loan for your down payment anyway, this will count in your debt ratio and will reduce your buying power.

There are other ways to buy a house with little or no money down.
1. Save for the down payment on your own.

2. Ask family for gift money.

3. Partner with someone.

4. Connect with local lenders in your area to see if you qualify for a first-time home buyer incentive.  This may come in the form of a grant (money you don't pay back), a loan that does not require a down payment (USDA if you buy in a rural area), a second mortgage with no interest and payments unless you sell or refinance.

There is no such thing as free money, and the programs have up front fees, but if that gets you the down payment you need much faster than your rate of savings it is worth considering.

Good luck, and I hope you get your first house hack going soon!
Melissa