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How Renters Can Prepare to Be Homeowners

By Bill Gassett | November 30, 2019

Preparing to Go From Renting to Buying

Are you renting your home? When you first move away from home, you are more than likely to end up renting your first property. Most renters would like to become homebuyers but don't have the financial capability just yet.

On occasion, renting to own a home is an option. With the rent to own option, part of your rent will go towards the down payment to purchase. It's possible you may know the property you're in is exactly where you want to remain.

This kind of situation makes renting to own really attractive, especially when you are not quite ready to purchase. You can see a complete explanation in the helpful article at Maximum Real Estate Exposure.

Going from renter to homeowner.

For many folks, the road to buying their first house is challenging. Day to day living is costly, and salaries don't seem to have kept up with costs due to skyrocketing real estate values.

But, despite living costs, most renters set themselves the goal of becoming home buyers. There are many expenses attached to buying a home, and it is hard to afford things like the initial down payment.

Bank rates are at an all-time low, and it may feel like saving is a waste of time. However, unless you qualify for a no down payment loan, you will still need to put some money down. Saving for a down payment is the first step on the road to becoming a home buyer.

Saving For A Down Payment

Saving for a down payment is tough, especially if there is only one of you. When you are serious about buying your own home, the first thing you should do is take a look at your budget. How much are you spending on non-essential items? You want to be able to have the earnest money necessary to purchase a house, right?

Checking your budget means being honest with yourself and writing down everything you usually do. You may not think that your two daily coffees don't have an impact on your finances, but if you can save $10 per day, you will have saved $300 by the end of the month.

If you would like to get really serious about saving for a down payment, you should also consider selling stuff you don't use. You may be pleasantly surprised how much your clutter or books you have read, are worth to someone else. Check out online sites such as eBay or Craig's list.

Also, getting a side gig can help you to save money for a down payment. Working a few extra hours from home every week could make all of the difference.

Check Your Credit Score

Knowing what your credit situation is also essential. You can order your credit report for free from one of the credit reporting companies. Most lenders set minimum scores. Many lending institutions will set a minimum credit score of around 650 to get a loan. If you already have a good credit score, make sure that you continue paying all of your bills on time.

If you are concerned about your credit score, you can do a little research online on how you can improve your score. That could include paying off some of your debts, such as credit cards and your car loan. It is best to avoid changing your credit card or card surfing when you are saving for a down payment. All searches are registered against you and will affect your credit score.

Don't Make Big Purchases

Do you really need to take a vacation to Mexico this year? Stopping to make big purchases such as TVs and the latest fridge for your beer will save you a lot of money. You may even want to consider canceling the gym membership for a while and exercise for free in the park or using Apps and Youtube videos.

Avoiding big purchases and canceling the gym membership can save you a surprising amount of money.

Find Out How Much You Can Afford

Thanks to online calculators, you can find out how much you can afford. There are many different calculators online. For instance, you can check out the costs of renting vs. home buying. Your bank may even have a calculator that can give you some idea of how much money you will need to save up.

As a matter of fact, don't forget to speak to your bank manager. Many banks like to hang on to their customers and offer specialist saving accounts for home buyers, or new savers.

How to Get Pre-Approved For a Mortgage

To make sure that you are ready to move quickly should the right opportunity present itself, you should get pre-approved for a loan. Once again, your bank manager will be able to help you. But, don't stop there, explore other lending options rather than just your regular bank. It is highly advisable to speak with a mortgage broker. More often than not, a broker will have access to far more loan options than just a single lender.

A mortgage broker will seek out the lender that has the best mortgage program for your specific needs. For example, are you looking for a conventional thirty-year fixed-rate mortgage, or do you need something a bit different like an FHA loan?

There are numerous mortgage programs for first-time buyers. It is essential for you to have an understanding of the pros and cons of each of them. An outstanding mortgage broker will be able to assist you in determining what loan product best fits your current financial situation.

Do be careful with credit checks. Some lenders will run credit checks without telling you, and this will affect your credit score. Sometimes it is better to stick with your regular bank.

Final Thoughts

Every day renters become home buyers. Most of them would have done some smart planning to make sure they have both cash available and a good credit score. With some planning, a few sacrifices, and hard work, you can find yourself opening the door to your first home that you have bought with your own money.

Before jumping into homeownership, make sure you are in an excellent place financially. Never over-extend yourself. Buying within your means is essential as a first time homeowner. So many people make the critical error of being house poor.

Other Valuable Home Buying Resources

  • Don't lose your earnest money buying a home - see how you can end up losing your hard-earned earnest money if you do not follow the real estate contract. Many buyers don't realize their money is at risk when they don't perform according to the agreement.
  • Questions to ask when buying a fixer-upper - learn what you should be asking before jumping in and purchasing a home that needs tons of work. Getting in over your head on a housing project can really screw up your life.

Use these additional real estate articles to make sound decisions when buying a home for the first time.

Bill Gassett is an authority in the real estate industry with 38 years of experience. Bill is well respected for his informative articles for buyers, sellers, and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Newsbreak, Credit Sesame, Realty Biz News, and his own authoritative resource, Maximum Real Estate Exposure. He has been on of the top RE/MAX agents in New England over the last two decades.
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