Why Buy vs Rent?
Some of the fun reasons:
- Having your own back yard for cookouts, gardening or just lounging around.
- The freedom to decorate, paint and hang pictures without permission!
- Thinking about getting a pet? Not in that rental……
More importantly some of the financial benefits of owning a home
- Paying yourself not a landlord (If you are paying $1000 a month in rent and have been there for 3 years you just threw away $36,000! That’s a lot of money
- Since you have to pay a monthly living expense anyway why not pay down a mortgage on a property you own plus the mortgage interest that does go the bank is tax deductible
- Your mortgage payment will stay the same for the life of the loan, your rent can increase yearly
Making the switch from renting to owning is exhilarating, but many new homebuyers find the process overwhelming.
This is why I have created this First-Time Homebuyer Checklist. The 12-month timeline will help you sidestep common mistakes, like paying too much interest or purchasing the wrong house.
So hear is the first step moving closer to homeownership
12 Months Out
Check your credit score. Get a copy of your credit report at annualcreditreport.com. The three credit bureaus (Equifax, Experian, and TransUnion) are each required to give you a free credit report once a year. A Federal Trade Commission study found one in four Americans identified errors on their credit report, and 5% had errors that could lead to higher rates on loans. If you find errors on your report reach out to me and I will help you start the process of rectifying the errors
Determine how much you can afford. Figure out how much house you can afford and want to afford. Lenders look for a total debt load of no more than 43% of your gross monthly income (called the debt-to-income ratio). This figure includes your future mortgage and any other debts, such as a car loan, student loan, or revolving credit cards.
There are plenty of calculators on the web to help you determine what you can afford. If you’re pushing the limits, start reducing your debt-to-income ratio now.
Make a down payment plan. Most conventional mortgages require a 20% down payment. If you can swing it, do it. Your loan costs will be much less, and you’ll get a better interest rate. If, however, you’re not quite able to save the full amount, there are many programs that can help. FHA offers loans with only a 3.5% down payment. But they require mortgage insurance premiums, which will drive up your monthly payments.
As you’re planning your savings strategy, keep in mind that banks like you to “season” your money. That is, they like to see that you’ve had stable funds in your account for 60 to 90 days before applying for a loan. Don’t worry: You can still use a financial gift from a family member or bonus received near the time you buy.