Buying a house should be an exciting and rewarding endeavor that can help you achieve financial security and peace of mind. With today’s turbulent economy, many potential individuals may feel uncertain as to whether they should take the plunge, switching from paying monthly rental fees to making monthly mortgage payments. The Home Loan Expert is here to tell you not only why it is time to stop renting and buy a home already, but also here to show you why homeownership is an accessible investment.
Buying Versus Renting
You may be asking yourself: Am I ready to commit to buying a house? Ultimately, only you can answer this question based on your unique circumstances, including
- The desire to put roots down
- An evaluation of the housing market in your area
- Your income and savings
- Other financial obligations
Homeownership is an invaluable, rewarding investment. As an asset, owning a house continues to appreciate in value, while renting a house provides a short-term benefit with ultimately little return. Plus, as property prices increase, rent prices also increase. Additionally, as a tenant, you have less housing security, as the homeowner could decide to sell the house or run into a financial fiasco leading to a foreclosure. Homeowners also benefit from incentivized tax breaks. Clearly, there are many long-term reasons why buying and owning a home outweigh renting your home as a present and future investment.
Prepping to Buy a Home When You Have Monthly Rental Payments
Prioritizing and budgeting monthly expenses is imperative to preparing to buy a home, especially as someone who pays monthly rent. Allocate a portion of your income as savings each month that will go towards housing costs that loans won’t cover.
List and calculate costs associated with buying a house. Analyze your own personal financial history to understand what you qualify for and need to be working toward. Research a home mortgage loan that fits within your financial plan. USA News recommends using a mortgage calculator to figure out your budget and see how things like interest rates and repayment terms impact your monthly payments. When it comes to buying a house, the best offense is a good defense. Be prepared.
Taking Steps Now to Position Yourself to Become a Homeowner
Potential homebuyers should analyze a few key elements necessary for homeownership when preparing to apply for a loan to buy a house. Here are some of the factors to consider:
- Assess your credit. A credit score has considerable influence on your ability to be approved by a lender. It helps lenders calculate risk and affects the interest rate you qualify for. Most credit scores have fall in the 300–850 score range. To qualify for a home loan, shoot for a credit score of 760 or higher. You can use this free estimator to get an idea of your own credit score to help you determine how to proceed on your home ownership journey.
- Determine your budget. Determining a monthly budget is imperative to the homeownership process. This allows for you to find a home that will be affordable for you. A general rule of thumb is that housing expenses should consume no more than 28 percent of your monthly income. You can calculate this expense by multiplying your income by 0.28. For your convenience, our mortgage calculator is an invaluable tool that can assist you in determining an appropriate monthly mortgage payment.
- Research down payment percentage costs. This can seem like the most daunting cost when it comes to homeownership. Different loan options are available to you depending on what suits your budget, lifestyle and financial location. Whether you are ready to put down 3 percent or 20 percent as a down payment on a home, check out what kind of home loan works best for you.
- Factor in additional costs and fees. Apart from your monthly mortgage and the downpayment, other associated home ownership costs, like homeowners association fees (HOA), property taxes and homeowners insurance, should all be taken into consideration when purchasing a home.
- Look at your debt-to-income ratio. This ratio is used to determine if the borrower can make their payments each month. Your debt-to-income ratio is important because it reflects all your monthly debt payments divided by your gross monthly income. The Federal Housing Administration typically uses a 43 percent debt-to-income (DTI) ratio as a guideline for approving mortgages. Among private lenders, there tends to be a bit more variance in terms of what DTI is acceptable.
Getting the Help You Need From Our Expert Team
The Home Loan Expert’s vision of hard work and a customer-first approach based on a bottom-up business model is ingrained in our mission to help everyday people realize their dream of homeownership. We have an ambitious team of experts trained with one goal in mind: getting our clients the best deal possible on home loan rates so they can purchase their dream homes. Reach out to us today to get a five-minute loan approval or access our live chat team, or contact us by phone at (866) 221-1458.