26 Feb Moves to Make: Preparing to go from Renter to Homeowner
Deciding whether to rent a home or purchase one, isn’t always an easy choice to make. Personal circumstances as well as housing market trends can greatly impact the time when someone will be ready to make their home purchase. If your plan is to buy a home, either now or in the future, you should be taking steps to prepare for that purchase. It’s never too early to get started!
Things to Consider when Planning to Buy in 3-5+ Years
Whether you’re a new renter or simply not ready to buy, but you plan to be a homeowner in the future, you should still be making important steps to get ready.
Take a look at your credit score. As a renter, you know that your credit history can impact your rental application. The same is true with purchasing a home. Late payments reflect on your credit history for 7 years. It’s important to budget your bills and make your payments on-time. It’s also important that you keep an eye on your debt-to-income ratio. Try not to max out your credit cards. Make yourself a monthly budget and do your best to follow it.
Establish a savings plan. While the idea of saving for a down payment may be daunting, you can make it much easier by starting early. Included in your monthly budget, you should be putting money into your savings account out of each paycheck. To really maximize your saving efforts, do some research on current home prices in the location you’d like to buy. The average downpayment on a house is 20%. Let’s say you’re looking to purchase a home in 3 years and you’d like the purchase price to be at $120,000. You’ll want to try to set aside $500 per month. Once you do your research, use these figures to adjust your monthly savings amount to fit your needs.
Go check out those open houses. You’ve seen the signs around town advertising the open houses, right? Well, start taking time each month to visit a few open houses. Seeing the different homes that come on the market gives you a great idea of what’s important in your future purchase. Keep a list of things that you really like, things that are a must, and things that you dislike. The more homes you view, the more this list will grow or change. Then, when you’re ready to buy, you’ll know exactly what you’re looking for.
Buying a Home Within the Next 2 Years
As you get closer to finally making that home purchase, there are some additional steps you should consider.
Focus on your finances. To begin, now’s the time to focus on paying off those larger debts. Reducing your debt-to-income ratio will have a big impact on your overall approval and interest rates. In addition to boosting your credit score, you should be saving for your down payment. Lenders will use your credit score information as well as your down payment to determine the loans you may qualify for, and how much can borrow. Lastly, do your research on the lenders in your area. Once you find someone you’d like to work with, get pre-approved. Pre-approval is crucial, especially in a busy housing market. Without being pre-approved, you may miss out on making an offer when you find the right home!
Find the right real estate agent. Having someone you can truly trust is so important during the home buying process. Schedule meetings with several real estate agents in your market and interview them. This is the person that will be with you from start to finish, so make sure you feel like you have good rapport with them. You’ll view houses together, prepare an offer when you find the right home, and work through any contract details to get you to the closing!
Research the current market trends in your area. This is just as important as working with the right realtor. Knowing things like the price that current homes are going for and the average days that a home is on the market, is going to help you when it comes time to make an offer. And while your real estate agent should be knowledgeable in this, it certainly doesn’t hurt to do your own research.
Get ready for home maintenance. Generally being a renter means that your landlord takes care of most property maintenance, especially bigger issues. Once you become a homeowner, you’ll need to know even more handyman knowledge. Check for any classes or workshops in your area that you can take to prepare.
Don’t Let the Process Become Too Stressful
In the end, buying a home is an exciting journey, different for each and every person. No matter when you’re planning to buy, don’t let the process overwhelm you. Make a plan, focus on your finances, and really do your research. The more prepared you are, the less stressful it’ll feel. Get started today, so you can accomplish your dreams!