It’s an exciting time when you decide to go from long-time renter to a first-time homeowner. The home search itself is thrilling and the anticipation of finding your dream home is almost overwhelming.
Along with the excitement, however, comes responsibility. There’s a lot to do before you even begin searching for your dream home. To help you remember it all, we’ve put the following list together.
1. Compare Rent Costs and Homeownership Costs
Renting math is easy. You pay a security deposit and your monthly rent. If you’re savvy, you also pay renter’s insurance. Owning a home involves a plethora of costs and fees including closing costs, home inspection fees, property taxes and more. Do the math and figure out how these costs fit into your budget.
2. Prepare Your Credit Score
As soon as you decide you’re ready to buy a house, start preparing your credit score. This number will have the biggest impact on whether you’re approved for a loan and what kind of interest rate you’ll get. If you don’t have any credit cards, get one or two now and be diligent in paying them off each month. If your credit score is lower than you’d like, work on fixing the issues before you begin searching for your new home.
3. Shop Around for Mortgages
Every lender is unique. It’s important you shop around for the best mortgage terms based on factors like location, loan type, purchase price, your down payment, and your credit history. It’s also a good idea to get pre-approved for a loan before you begin looking for a home.
4. Be Realistic about Your Rent-to-Own Timeline
You may think your work is done when you find your dream home and put an offer on it, but the reality is your work is just beginning. It could take a month or more to close on the home, during which time, you’ll be jumping through hoops to keep the process moving forward.
To avoid becoming homeless between the end of your lease and the move-in date to your new home, you’ll need to time the process just right. It’s a good idea to have a backup plan in place just in case the process is delayed for some reason and you can’t move into your new home when your lease ends.
5. Prepare for More Responsibility and Think Long Term
Owning a home is a lot more work and expense than renting, so you have to be prepared and think ahead. From paying things like property taxes and homeowner’s insurance to maintenance costs and repairs, you’ll want to err on the side of caution and set up a savings account and emergency fund to stay ahead of the game. Furthermore, you’ll want to think about things like location and neighborhood when looking for a home you’ll likely spend many years in.
Making the transition from renter to homeowner is an exciting and scary time. There are many things to consider, so keep the list above handy if you’ve decided it’s time to make the switch.