Time to buy?
Buying your first house is one of the biggest decisions you will ever make, so determining whether to take the mortgage plunge or continue renting requires a lot of deliberation. In the U.S., the number of homeowners in the nation is the lowest it has been in 30 years. Cities across the country are expressing these trends. Cincinnati is experiencing a boom in new apartment complex construction. And the city has only a nine percent rental vacancy, suggesting that a good majority of renters are remaining renters.
Though high home prices, economic instability and stricter lending standards play a part in buyer hesitation, many potential buyers are simply choosing not to go forward with the big move. How do you know when it’s time? Here are several determinants to consider to help you decide if you are ready to make the exciting transition from renter to buyer.
If you are currently struggling to pay your monthly bills, it is not the right time for you to buy. Though a potential mortgage payment may seem lower than your current rental payment, there are many more costs involved in the initial purchase of a home and owning a home comes with a long list of additional bills and fees.
There’s the down payment (you’ve saved up at least 10 percent to put down, right?), mortgage-related fees, home maintenance, home repair expenses to consider, as well as property taxes, HOA fees, insurance, city assessments, water, sewage and garbage, which may have formerly been covered in your rent. Also bear in mind, if your down payment is less than 20 percent, you’ll have to pay private mortgage insurance. Check out Front Door’s monthly tally for home expenses. And these costs should be considered in addition to your retirement savings and emergency finds.
There are rules to home buying and cautions that need to be considered before jumping into the market. Do your research. You will need to see a mortgage professional. Many real estate agent will not even consider taking you on if you have not been pre-approved.
The most crucial bit of information during your approval process is your credit score. If you have a score over 800, then no bank would bat an eye when processing your loan request, but if you have been struggling to maintain a score of 630, you may run into some problems. You need to make sure any derogatory dings on your credit are cleaned up before you decide to go ahead with purchasing a home.HomeSearch
Also, be aware that mortgage companies use information sharing practices and home buyer information is vulnerable to hackers. Consider a service like that offers credit monitoring and identity theft protection. The last thing you need during the home buying process is to have your identity stolen and your credit score damaged.
Essentially, the stars need to align in all aspects of your life for a home purchase to go smoothly. Money, job, family — they all have to line up before you decide on the right time frame to buy.
Giving yourself a time frame to buy that is too long can create indecision, but a time frame that is too short can create panic. If you home shop with six months left on your current lease and find the perfect house, you would have to buy and move within 30 days and still be responsible for your apartment rent. Ideally, you should be ready and able to buy, but not desperate to move.
Buying a home should be an exciting and positive experience, but too many first-time buyers rush in or wait too long. Consider all the factors before making up your mind about whether it is time to say goodbye to your rental and hello to a home.