Going From a Renter to a Homeowner
Despite what you might hear from financial advisors saying that you should stay in your rental unit, investing the extra income elsewhere, most people would be better off owning a home than renting it.
If you’re young, such a high level of commitment could lead to much apprehension. Still, in the context of building a future for yourself, renting is only step one. Owning a home gets you to a new level of stability.
There is, however, some useful advice everyone should follow when becoming a first-time buyer. Let’s share some useful advice on making the transition from leasing to owning your home. Going from renter to owner is a big life step worth following some of the best advice.
Should You Rent?
Renting isn’t bad in itself. Housing is easy to come by, you aren’t committing for life, and apartment finders are slick and comfortable. One look at this page shows how tempting it is to stay a tenant – luxury, easy-access condos yours for the taking.
While you shouldn’t make the call out of convenience, there are circumstances where you might want to stay a renter. Notably:
- You can’t afford a home. If your monthly income doesn’t allow you to leave any money on the side, you shouldn’t risk your financial future by going into debt.
- You have a low credit score. The sufficient funds on your bank account don’t make a difference if you can’t acquire a mortgage. Rebuild your credit first to avoid overpriced, harmful loans.
- You require flexibility. If another significant change is happening in your life around this time, figure it out before tackling the new challenge.
If you’re not facing such obstacles, though, it might be time for a change.
While You’re Still Renting
Many consider homeownership one of the massive life achievements, but shifting to the new lifestyle takes some groundwork. Even if you don’t plan on moving in the next year, you can do things to help your future-self make the transition smoother.
Keep an Open Mind
You’re likely to toy with the idea of purchasing a property long before you do it. However, the steep prices you’ll encounter while scouring listings might discourage you.
So, it might be time to consider whether you’re ready to move to a more affordable area. Research other, more budget-friendly cities and try to imagine yourself living there.
Learn About Mortgages
Getting financing for your new house is a complicated process that scares many people off. The best way to avoid the stress and doubts that come with it is by researching early and thoroughly. It’ll seem much less overwhelming without the burden of having to contact the lender and get everything in order as soon as possible.
Start Saving Up
Good saving habits are the bedrock for a seamless purchase later. You might create a down payment savings fund and set up an automatic transfer each month. Determine how much you’ll need to put aside by considering the prices in your (future) location and your desired timeline.
Visit Open Houses
As you’re getting closer to achieving your end goal, you could go to open houses. It’ll make the once vague idea seem like a much more realistic concept.
Plus, it’s much easier to determine your likes and dislikes once you see what’s available on the market. Visualizing your dream home is vital to gauge which properties are viable options down the road, but setting your expectations too high can only lead to disappointment.
Preparing to Transition From Renter to Owner
Unlike finding a place to rent, home purchases don’t happen in a week. Entering the homeownership process is a big step with many moving parts.
A Lifestyle Shift
Once you purchase a property, your lifestyle will change. Most differences are positive, though, at least from the perspective of a person ready to commit and settle down.
You’ll see increased stability in your day-to-day life. No more renewing your lease, worrying about your landlord’s shifting demands, and following the contractual obligations. You also get to nestle into the new community.
Questions and Considerations
Inquiries about the build, materials, amenities, and the neighborhood become much more salient once you’re picking a place for the rest of your life.
So, don’t be afraid to ask questions, even if they sound trivial. Things you’d typically gloss over as a renter now become crucial.
Long-Term Financial Growth
The up-front home purchase costs are high, and you’ll have to cover numerous expenses as you settle in. After those first few months of spending, however, your day-to-day living expenses decrease.
Moreover, homeowners build equity as they’re paying off their mortgage. With time, equity becomes an asset that you can use towards other monetary needs.
Getting Your Finances in Order
Finally, you’ll require a firm grasp of your finances and a robust savings fund to facilitate the shift.
Check Your Credit Score
You might’ve never missed a payment in your career. Still, check your FICO score to ensure it’s ready and error-free. A good credit history helps you avoid lenders with sky-high interest rates.
Tip: If there are clear negative indications on your report, you can add explanations, discussing what led to the situation. While it won’t boost the number, the person reviewing your statement will consider it.
If the number is too low for you to expect a decent offer, try to catch up with due debts or pay off a loan you already have before applying.
Budgeting for Homeownership
While budgeting, consider your debt installments and regular monthly expenses. Then, check whether there’s enough money left to cover the up-front and other costs:
- The down payment
- The closing costs
- Emergency expenses
- Moving costs
- Utility deposits
- Property taxes
It sounds like a lot and might even seem downright impossible at first. However, cover these expenses and your other daily bills will decrease, letting you build a stable financial future.
You can’t do it on shaky legs. So, these preliminaries serve as a way to prevent you from ending up in a financial rabbit hole you won’t be able to get out of after the purchase.
Final Thoughts on Renting to Owning
Renting can feel like a comfort zone, without too many concerns or responsibilities on your end. Ultimately, though, the decision revolves around your circumstances and how you want your future to look.
So, take your time before deciding on the next step. Stay a renter for as long as it takes to set a stable financial foundation and prepare yourself mentally. That way, once you enter the real estate market in search of a home to call your own, you’ll be ready to do it right.
About the author: The above article on going from renting to homeownership was written by Wendy Dessler. Wendy is a super-connector who helps businesses find their audience online through outreach, partnerships, and networking. She frequently writes about the latest advancements in digital marketing and focuses her efforts on developing customized blogger outreach plans depending on the industry and competition.