Making the move from renting to buying a home is a big lifestyle change. If you are preparing to make that transition, here are some things you need to consider before you start shopping for your new house.
The Financial Implications of Owning are Different from Renting
When you rent a home or apartment, your financial obligations are much simpler. For starters, most renters pay rent on a monthly basis that is inclusive of the costs for utilities and any other fees. One payment a month and your living expenses are covered.
That’s not how it works when you own your home. As a homeowner, you are responsible for the monthly mortgage payment, separate utilities bills, property taxes, mortgage insurance if you need it, and any homeowners association fees for your neighborhood. All of these are individual bills you will have to manage and pay each month.
On top of that, you are responsible for the cost of repairs and maintenance. As a renter, you simply call your landlord to fix things that break. As a homeowner, those expenses are coming out of your pocket. All of this means, more likely than not, it will cost you more on a monthly basis to own than rent, which means you need to have a solid financial plan before you start shopping.
When You Make the Transition from Renter to Buyer Matters The timing of buying a house is crucial for financial stability as a new homeowner.
Before you even speak to a real estate agent, you need to have your finances in order. That means you need to have at least 20 percent of the estimated down payment in savings to close on the mortgage; you need to make sure you have a credit score of at least 620 to qualify for a conventional loan; and you need to create a mock budget based on the estimated monthly expenses you will incur as a homeowner.
If possible, plan your new home purchase and move around the end of your rental lease term. Most landlords require an advanced notice before you move out or there may be financial penalties. There may also be costs associated with breaking the terms of the lease too early. Planning ahead can help you avoid these unnecessary expenses. Keep in mind that it can take as much as 30 – 45 days to close on a loan.
The Process Can be Overwhelming
The home-buying process is much more complicated than signing a lease. The volume of paperwork, the intense negotiations, and the abundance of rules and regulations can be intimidating, especially for first-time buyers. That’s why it’s so important to do your research before you start on your journey.
And it helps to have a good team on your side. Choosing the right real estate agent and bank can make a big difference in making the home-buying process as easy for you as possible. Be prepared to ask them a lot of questions to make sure you understand every step of the process and are confident in the decisions you make.
Making the move from renter to buyer is exciting if you are fully prepared. Spend extra time on the front end of the process educating yourself as much as possible so you are as prepared as possible to make the transition.