Are you considering making a change from renting to buying? Maybe you’re longing for that sense of ownership, to be your own landlord, or to put a stop to all the moving, leases, and security deposits. No matter how far into the future homeownership is for you, there are some important things to keep in mind as you think about purchasing a home. It can seem like a really empowering process, (and don’t get me wrong, it is) but it’s important to do your homework so you know what to expect along the way.
To help you prepare for the transition from renter to owner, I’ve put together the following guide.
The home purchasing journey isn’t an overnight process, and you certainly wouldn’t want it to be. The transition from renting to buying is a big step and there are a lot of moving parts along the way. Be patient throughout the process, but be sure to stay in touch with your real estate agent and mortgage banker along the way.
Make informed, not impulsive, decisions by researching the mortgage process, ideal neighborhoods, and your budget before you begin your home search.
One of the biggest things to anticipate as you transition from renting to buying are the associated costs. As a renter, your typical costs and fees are monthly rent, a security deposit, and any utilities. As a homeowner, things are a bit different. Costs will typically include your monthly mortgage, property taxes, potential HOA fees, mortgage insurance, and any fees associated with the home buying process and upkeep of your home.
Your monthly rent is collected on the first of the month, to cover you living at that property for the following month. Mortgages are slightly different. In most cases, your mortgage payment at the beginning of the month is to pay for the month prior. This is why your first mortgage payment is due after you’ve already closed on your home for at least a month.
As a renter, your rent went to your landlord. Depending on whether or not they had paid off the property, that money either went toward their mortgage payment or was collected as profit. Your mortgage payments, however, go toward your principal balance on your loan (what you borrowed) plus any accrued interest. This is good news because these payments are going toward your financial growth, not to someone else’s.
Not to worry, this lifestyle shift isn’t anything to fear. Chances are, if you’re already considering buying a home you’re definitely on board with these changes. In comparison to renting, owning a home means more stability and less moving. Say goodbye to the days of renewing your lease or questioning whether your landlord will ask you to move. As a homeowner you can really nestle into your community and plant your roots.
Another lifestyle change to expect is having extra freedom and responsibility within your home. Choices on design, renovations, landscaping are all up to you. Now, it’s also important to note that all the repairs, maintenance, and replacements will be up to you, too. Aside from on-going maintenance costs, some first-time homebuyers are surprised by some unexpected upfront costs associated with buying a home, such as buying new furniture. After all if you’re buying a bigger space, you’ll likely want to fill the extra room with furniture, which can add up really quickly. Also, moving in itself can be a big cost, especially if you’re moving between states.
Make sure to account for these costs, as it may not be something you included in your monthly or annual living expenses as a renter.
Owning a home is a big step toward financial stability over time. As opposed to renting, your hard-earned dollars can possibly make their way back to you — rather than to a landlord. As a homeowner, you’ll start building equity. What is equity? In short, it’s the portion of the property that you actually “own” which grows over time as you pay off your loan.
Why does equity matter? Equity is an asset. As equity in your home grows over time, you can use it toward other things like a second home, retirement, borrow it as an equity loan or pass it along to an heir.
When you begin to think about purchasing a home, seek out the help of a real estate professional you trust and can act as your mentor. Ideally, this person should be accessible and keep your best interests in mind, no matter what. This transition may come with a lot of questions and you want to have someone in your corner who will work to make your journey toward homeownership as easy as possible.