8 Signs It’s Time to Become a Homeowner
If you’ve been renting homes for close to a decade now, you’re most likely tired of the monthly expenses that are essentially being thrown out the window. Imagine having a home to call your own: a yard to host Summer barbeques, renovating your kitchen without someone else’s approval, and most importantly no more rent checks. Becoming a homeowner is a big decision, so you want to make sure it’s right for you. If you’re on the fence, we have 8 signs that it may just be time to take the plunge into homeownership.
This is one of the most important factors when it comes to becoming a homeowner. In order to even take the first step towards homeownership, you’ll need to have a strong credit score. A good FICO credit score is typically about 670. With a score in this range, lenders will view you as low risk for defaulting on loans, which makes you a great candidate for a mortgage. Not to mention the mortgage pricing you’ll receive will directly impact the monthly payments you’ll be making for the life of the loan. As CEO of Growella (now known as HomeBuyer), Dan Green, straightforwardly explains, “If your credit score is not optimal, you’ll pay more for a mortgage…your credit score today will have a huge impact on the homes you’re looking at and can afford. It may be sensible to wait to buy and work on your credit.”
If your credit score still needs some help—don’t fret! One in three Americans have a credit score below 670, so you’re not alone. Start by checking on your credit with a free credit report. Take some time to work on improving your score by making your credit card payments on time, avoid opening new credit lines (unless you’re working towards establishing a credit history), and don’t let your balances exceed 30% of your maximum credit limits.
The majority of home sales require a down payment. Your loan type will play a huge factor in the requirements when it comes to your down payment, but that payment can range from 5% to 30% of the cost of your new home. There are many programs and FHA loans that assist new qualifying buyers when it comes to these costs, although having the ability to put down more on your home can increase your odds of being approved for a loan and further help you to lock down better interest rates. The Sr. VP of Mortgage Lending at Navy Federal Credit Union shares, “It is, therefore, critically important to factor into your budget the source of your down payment.” With the slew of lenders, nonprofits, and agencies that provide financing options and assistance programs to help out new homeowners put together a down payment, there are options for everyone.
Aside from the large expense of actually buying a home, a lot of other, often unexpected expenses creep up when you’re moving into your new house. Closing costs for one tend to amount to an additional 2-5 percent of your homes sale price, which is then split between the buyer and the seller at closing. Well after the down payment and the closing costs are finalized, you’ll quickly realize the various maintenance and upkeep payments here and there. Having a savings dedicated to home issues can give you ease if something pricey breaks unexpectedly, like your furnace for instance which can cost upwards of $6,000.
There is no need to sign a lifelong contract that you’ll stay in one place forever, but it’s smart to at least be committed to staying put for the next five years or so if you’re planning on purchasing a home. Buying a home is most likely the greatest significant financial commitment you’ll ever make, so you’ll want to make sure you’re ready to settle down and get comfortable in your town. If you’ve kicked the travel bug and you’re confident you want to stick around one place for a while, then taking the stride towards homeownership is a great option for you.
Anytime something goes awry in your rental property, you’ll give your landlord or super a call to fix it. Just remember when you own your own property—you’re the person that will need to handle those problems, or you’ll need to hire someone who will. Aside from the time and labor this will involve, it’s also pricey. Having savings will help to relieve financial stress, but don’t forget the labor element as well. Taking care of day-to-day upkeep and issues yourself will save you money, but consider finding experts for the larger issues so you aren’t dedicating too much of your time and energy to your home.
There are endless rules when it comes to modifying your rental home. Some landlords even give you a hard time about hammering a nail into the wall for a family photo. If you’re ready to say goodbye to the stress that comes along with your security deposit, owning a home will do just that. Having control over your home is freeing and offers endless options making it nearly impossible to get sick of your home. Just keep in mind that with renovations often comes repairs, so you not only have to be prepared to have control over your property, but also responsibility. Feel like painting your room bright red? Go for it!
Contrary to popular belief, it is okay to have debt. About 300 million Americans are in debt. That doesn’t mean you can’t build equity and buy a home. What it does mean, is that you have to have to have a handle on your debt. If you have a clear payment plan with an end date in view, then homeownership may be right up your alley. Loan companies don’t expect borrowers to be debt-free, they mostly just want to ensure you don’t have too much debt in relation to your income. In other words; they want to know if you can afford to take on an additional mortgage payment. Companies determine this by using a debt-to-income ratio, which shows how much of your monthly income contributes to paying off debts. To buy a home, ideally your ratio should be less than or equal to 36 percent. If you’re not sure how in control you are of your debt, find your debt-to-income ratio by adding together your monthly income and then dividing that by the sum total of your recurring monthly debts, minus rent.
There is no rush when it comes to buying a home. You want to be sure that it’s exactly what you want, where you want, and the price you want. The housing market is ever changing, so keep a close eye on the market, chat with your realtor and determine when the best time is to start the homebuying process. It’s best to be in a comfortable living situation when you begin exploring your options because it could take upwards of 6 months until you’re settled into your new home.
You’ll always give yourself reasons not to buy a home, whether it’s due to fear of change, insecurities about your finances, or perhaps you’re just not ready. But if the majority of the signs listed above have popped up as of late, it very well may be time to start looking at the reasons why you should buy a home.