Renting to Homeownership: Making the Switch
Jul 20, 2017 | First Time Homebuyers | Share:
When paying monthly rent, it’s hard not to miss the security and comfort of a home; nonetheless, while buying a home may seem feasible, it’s important to draw out the next steps in your long-term life plan before making new moves. Just because you can buy a home doesn’t mean you should right now. However, with the right timing and planning, putting down the dollars on one of your biggest life investments can be incredibly rewarding.
Whether you’re preparing to buy your first home, reviewing prerequisites for the future, or searching for next steps about becoming a homeowner, remember that buying a home comes with more costs and responsibilities than renting from a landlord.
Length of Stay: Make Sure To Stick Around
Real estate professionals suggest staying in a newly bought home for at least 5 to 7 years. You are more likely to lose money with a short turnover time. If you decide to buy and sell your house within a year, it is very likely that its appreciation will not match closing costs in addition to the other expenses you would have put into the house as a new homeowner.
To get a better sense of your situation, look into determining factors such as your employment stability, family needs, or other reasons to relocate or travel over a long-term time period.
Additionally, the length of your current lease can affect your readiness to buy a home. If your lease ends in several months or you need to move out in the next 30 days, having too much or too little time may be unreasonable to make a smooth transition. Plan ahead to ensure a good length of time between leaving your old pad behind and moving into your new one.
Meet with a Mortgage Professional To Establish Credibility and Responsibility
When making your first payment, you will most likely be asked whether you have talked to a mortgage professional. It’s smart to do this as your first step to gauge how feasible your home purchase will be. Know that the loan approval process is the same for both first-timers and more experienced homebuyers. Either way, your credit scores shouldn’t take more than 6 months to fix if they aren’t in top shape, and mortgage professionals recommend that your total debt load is less than 36% of your gross income for a measure.
If you’re in good credit standing, great! Mortgage lenders want to evaluate several things before condoning a house purchase. It is recommended to have a credit history of longer than 12 months to demonstrate a stable credit history with routine, responsible purchases based on subscription (car insurance or cell phone bills) or other living expenses. In addition, mortgage lenders like to see that homebuyers have been working the same job for at least two years to demonstrate stability without frequent changes or income gaps.
For all potential homebuyers, it is important to know your proposed criteria for your purchase and search the local MLS before meeting with a mortgage professional. By figuring this out, it is easier to calculate which purchases fall in your range.
Readiness to Cover Homeowner Expenses
If buying a home is in your long-term plans, make sure to save up and avoid jumping the gun. Every potential homeowner should have mortgage interest and principal down payment, HOA (Homeowner’s Association) fees, homeowners insurance, property taxes, and closing costs in mind before pulling all other sources together.
These accumulated costs will likely make a large dent in your bank account, not to mention moving costs, furnishing costs, and maintenance costs during and after moving in. Buyers will often have an image of their perfect home, forgetting the time and money it takes to bring an unfurnished and empty home up to their own standards.
It’s also easy to forget all of the costs that property providers usually cover when renting a home. This may include maintenance costs for lawn mowing, hedge or tree trimming, snow shoveling, and pest or rodent extermination. Other considerations are common household utilities that landlords may or may not have covered such as water and trash. Emergency repairs such as air conditioner breaks or sewage pipe bursts need a “rainy day” fund, which means that it is necessary to save more money than needed to cover these extra costs.
Beginning your journey to homeownership is an exciting time, and can be best executed with accurate knowledge. Making sure your length of time in a new home is advantageous, getting your budget and finances reviewed by a mortgage professional and being ready to cover additional expenses that come with homeownership are three ways to begin your journey on the right track.