Are you debating the pros and cons of renting vs owning? Going from renting to owning can make a lot of sense considering that renting is essentially paying off someone else’s mortgage while buying builds equity and allows homeowners to take advantage of many tax benefits.
One of the first things a prospective home buyer should do is evaluate their situation:
- Are your finances in order? If not, renting vs owning may be a better choice.
- Do you have the desire and time to manage the upkeep of a home?
- Do you need to be flexible about your location due to your job?
- How is the real estate market in your area?
- Do you want to be able to personalize your home?
If you think owning is right for you, there are a few things you can start doing in order to prepare for buying a home.
- Know the total cost of buying a home: The mortgage payment is only a portion of the monthly costs a homeowner will have. Additional expenses such as homeowner’s insurance, private mortgage insurance (if less than 20% is put down), and property taxes will also be applicable.
- Understand your mortgage options: It is no longer mandatory to put down 20% of the purchase price of a home in order to buy. Some loans offer 100% financing or in some cases as little as 3% can be put down. Know what your mortgage options are and if you are going to put money down, understand how much you will put down and plan/save accordingly.
- Speak with a mortgage lender: Even if you are not quite ready to buy, it’s a good idea to meet with a lender in order to learn what type of loan may be best for you as well as how to get your credit score and finances in the best shape possible before purchasing.
- Work on your credit score: Credit scores are very important in determining what kind of rates you will qualify for. Before buying get your credit score in check by doing a few things. Pay your bills on time; a late payment on your credit report can knock off as much as 60-100 points from your score. Don’t open new credit cards; opening new lines of credit can damage your score. Finally, even though it may seem like a good idea, don’t close old credit card accounts. Doing so will lower your available credit which can negatively affect your credit score.