updated 7/11/2005 12:11:45 PM ET 2005-07-11T16:11:45

So much for recent college grads thinking their studies are behind them.

Now come real world lessons they rarely faced in school: do they rent an apartment, buy a home, or start saving for homeownership?

Given recent press coverage about overheated real estate markets in certain cities, no wonder grads and their parents are skittish when it comes to "Do I or don't I?" decisions.

The very idea of young people owning a home sooner-than-later based on first incomes isn't as far-fetched as it might sound. Banks have rolled out loan programs to bring ownership within reach, although not without some angst and sacrifices.

Even though the purchase of a home may not be in the immediate future, financial experts say it's never too early to educate oneself about mortgage options. Gwen Thomas of the Bank of America says given the number of loan options and the savings that buying a home requires, "it's worth the time to sit down with someone to go over where you are real estate-wise and where you want to be in five or 10 years."

On the plus side of ownership, it's worth noting that 20-somethings new to the job scene really won't be in the housing market for the grandiose homes frequently featured in articles. Instead, a small starter house, condo or fixer-upper is likely to be their first toehold in real estate.

As banks jockey to expand positions in the mortgage marketplace, consumers have seen a new wave of highly attractive loan programs. In addition to old standby 15- or 30-year fixed rate loans, banks float zero or low down payments or interest-only loans in front of consumers. Young borrowers at the lower end of the wage totem pole might also qualify for other types of assistance programs.

Relatively few homes are owned by the younger generation. According to year 2000 U.S. Census data, only 12 percent of homes are owned by those under the age of 34. That pales by comparison to 41 percent in the same age group who rent.

As real estate prices continue to spiral up in many markets, there's something to be said for entering the real estate fray as early as possible. Even single or low double digit increases in value might be a good alternative to a so-so stock market where it often does take money to make money.

Ex-students don't need to look too far for examples of how real estate can pay off. Home ownership is probably a huge chunk of their parent's asset base. As it was for earlier generations, ownership lends a sense of empowerment, too. Then there are the tax breaks that go along with home loans. That's to say nothing of establishing good credit ratings.

Money spent on rent is money shelled out on rent and nothing more. It accrues nothing toward the American dream of home ownership.

Graduation gifts of cash (if not already spent) can help defray down payments. Some couples even opt to downsize weddings and instead apply the matrimonial savings toward a first home.

Yet there is a flip side to the rent-or-buy equation.

Recent grads fortunate enough to land full-time salaried work can be perplexed by uncertainties of "will I stay in this job" or "is this an area where I want to live?" Those fears can be doubly disconcerting for anyone on hourly payrolls.

Rental offers a convenient buffer between first-job jitters and nagging concerns about the young earner's economic future or style of living. There's comfort in coming home to a roomie as well as a second -- or third -- person to share housing and grocery bills.

Young would-be home owners should crack the books again on loan options. There is some appeal to low down payments or interest-only loans in terms of lower out-of-pocket costs but accumulating equity -- the amount of gain in value that belongs to the owner -- may be slower to build.

Thomas advises young clients to sit through homebuyer seminars. The classes, usually in the evenings, "are a good way to see what's available in the local market, and they can meet a Realtor they're comfortable with and who understands their situation," she says.

And at a time when transportation costs are no small matter, renters might be able to live closer to work. Many homes in the affordable scope of possibility for young buyers may be too far away from city centers for a comfortable and affordable commute.

In any event, it is prudent to start stockpiling cash for the inevitable march toward home ownership. Do the math. Add up fixed costs -- rent, insurance, etc. -- as well as account for fluctuating budget amounts for entertainment and incidentals. Save some portion of the overage. That amount won't be missed.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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