Being a tenant can become tiresome due to many rules, regulations, and standards to which a landlord might constrain you. And in addition to enjoying certain freedoms, owning your own home has also proven to be a cost-effective option when done right.
The National Association of Realtors found that with homeownership and the tax savings accompanying it, the homeowner pays less than a rent payer within three years of purchasing. It is, therefore, a big transition to move from renting a home to owning yours.
With that said, here is a complete guide to help you move from a tenant to a homeowner in good time.
Check & Build Credit Score
Before securing a mortgage, it is essential to obtain your credit report. Your credit report will detail your borrowing history and should contain a score. The higher your score, the better your chances of securing low-deposit mortgage plans.
Having no credit history can work in your favor or against it. On the one hand, it shows that you handled previous credit well or obtained no credit at all, while on the other hand, it may be concerning to the lenders.
If you are in this situation, obtaining a little credit may be a good idea to show you are good with repayment plans and will go a long way in ensuring you get approved for a home loan.
Mortgage lenders will be reluctant to approve buyers with a low credit score, so tidying up your finances and building your credit score by paying off debts and credit cards is vital.
Understand Your Options
Before contacting a realtor or property seller, the first step is to develop a strategy. There are multiple ways to own a home, so consider factors such as your income, planned moving date, and location.
Your earnings and savings will undoubtedly play a huge role in purchasing a home. If you have moderately good earnings, saving and sacrificing might be your best cause of action, but if you are an average to low earner, securing a loan might be a better recourse to saving.
As a first-time home buyer, you will have to make a downpayment of between 15% and 18%. However, more significant sum deposits entitle you to lower monthly mortgage payments.
These payment structures exemplify how financial planning can help you save costs when buying a home.
It is also essential to choose a moving date that will be suitable for your current rental agreement and ideal for your line of work if you have to move some distance. You will not want your current rent to expire before your new home is ready.
Likewise, your desired living location plays a vital role and earns your consideration as different areas attract different values and costs of living.
Consider Other Options
Mortgages and home loans are not the only methods of becoming a homeowner. There are other ways. The government constantly launches and relaunches home ownership schemes that you may be eligible for.
For instance, the government released a shared ownership scheme that enables buyers to purchase a certain percentage of a property while paying rent on the rest to a home association.
The government also has other programs like the US Department of Housing and Urban Development-led Federal Housing Allocation (FHA) loans which reduce down payments.
It would be best if you also considered whether it is better and more cost-saving to continue renting.
Homeownership demands additional costs such as surveying costs, stamp duty charges, and legal fees for solicitors and conveyancers. You must also factor in the general expenses of moving your belongings and self from one place to another.