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Factors to Consider for First Time Home Buyers
Going from Renter to Owner the Right Way
Making the decision to go from renting a home to owning your home can be momentous. That being said, there are some very important factors that you should keep in mind before making the leap into being a home owner.
How Long will the Home You Choose Fit Your Needs?
A family of four may need more room to grow than a couple that is not planning on children. Then again, a newly married young couple may soon find themselves outgrowing the space on hand through the addition of children. Even if you are thinking of adding a home based business, you will want to plan for the extra space you may need later on. Whether you choose a home with a fully finished basement or an attic with enough space to convert into the room you will need later on, make sure that you have given this plenty of thought beforehand. That way you won’t end up wasting time looking at homes that don’t offer the space you need.
How Long will You Retain Ownership?
There is nothing worse than having to move multiple times over relatively short periods. This can be especially hard if you have purchased the home where you currently reside. Whether it is due to that extra addition to the family or to a new job out of state, having to move out and try to sell your new home can be a bit of a pain.
If it has been a short time since the purchase it is possible that your home hasn’t gained enough value to cover both the investment you have made and the cost of having to sell it again so soon. In a normal economy, it can be expected that a home will see a five percent appreciation rate each year. At this rate, it would take between three and four years to cover your selling costs. With the state of the market today however it could take a great deal longer to realize this sort of appreciation rate.
How are Your Finances and Credit Rating?
While working with a great company can really help in placing you with the lender that will best suit your needs, it is important to be honest with yourself concerning your current credit rating and finances. Say you have a decent credit score, but you are barely getting the bills paid each month because your job has cut hours due to a drop in demand. It would obviously be a poor time to invest in a home.
On the other end of the spectrum, maybe your finances are great and your job is steady, but your credit is a little less than the best. Don’t be totally discouraged because there are lenders who specialize in dealing with such issues. You may have to pay a slightly higher rate and fees, but they may be able to get you out of your rental home and into the home of your dreams.
When considering your finances, you should take into account the possibility of future raises or any other sort of potential income sources that may put you even further ahead of the game. This too can help you to select the home that will fit your needs. What may seem a bit too expensive right now could quickly become much more affordable in such cases.
One way of determining whether the home and interest rates are right for you involves utilizing the 28/36 rule. While this is somewhat of an industry standard, many lenders work hard to provide individualized home loans depending on people’s situations. They will take into account everything from your earning potential and credit history to your current assets and more. It’s not unheard of for a lender to achieve a 60% ratio; however, this high of a ratio may certainly not be the norm in the current economy.
Where will You Get the Money?
It is important to remember that as the homebuyer you may very well be responsible for the down payment as well as the closing costs. Depending on the type of home loan you are receiving, however, this may not mean that these will be a huge burden. If you do not present a substantial financial risk but are able to provide ten to twenty percent as a down payment, your lender may very well consider putting together a loan package that takes some of this burden from your shoulders.
One thing to remember about owning your home is that there are costs which you may have never considered. Need to paint the interior or exterior? How about other such home improvements? Maybe there is maintenance you need to have done. Other costs will typically include taxes, insurance, homeowners’ association fees, and more. While there are costs involved in owning your home, you can bet that the rewards typically far outweigh the potential drawbacks. Simply make sure that you choose a well respected and highly rated realty company to work with and they will help connect you with a lender that is right for you.