April 26th, 2022 2:31 PM by Holly Ecimovic
Are you considering buying your first home?
Many of us have been told: "If you're renting, you're throwing your money away." But, how do you know when you're really ready to purchase a home?
The truth is, purchasing your first home is different for everyone.
There's not a one-size-fits-all approach.
While there is a lot to take into consideration when purchasing a home, it's more doable than people might realize with the right mindset and partners to help, like our team here at Contemporary Mortgage, and your real estate agent.
Another thing to remember is that the price of rent can spike, year over year. Many people today are currently experiencing that.
However, mortgages tend to be more stable over the course of the term of the mortgage (usually 30 years.)
Have you considered what your current lifestyle entails, and have you taken a look at what your long-term goals are?
Are you thinking about purchasing your first home this year?
Let's take a look at some signs you might be ready to explore homeownership.
Signs You're Ready to Purchase a Home
Here are a few signs that you're ready to purchase your new home:
1. You Feel Financially Stable
Is your job stable? How does your savings account look? Homeownership comes with additional costs you may not be used to. Be sure to have funds set aside for things such as repairs, renovations, trash pick-up, water, maintenance service, and homeowner's insurance so you're prepared for life as a homeowner.
Also, take a look at your FICO score. Is it 640 or higher? Having a good score is essential when purchasing a home and can help you get better interest rates on your loan to save you money. Many lenders will also go as low as a credit score of 620 for a conventional loan, and a 580 for an FHA loan. An FHA loan is a Federal Housing Administration loan. It's a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores than are usually required.
Check out some of our free online tools for when you are in the process of buying a home for the first time. CLICK HERE for the complete list!
With each payment you make, and with the current demand for homes, your equity will grow. It is important to note that you can also do things to reduce your mortgage cost, such as refinance or recast.
2. You Want More Freedom on Home Renovations
Does your landlord have strict restrictions around home renovations? Oftentimes, renting means you won't be able to make any major changes to the home or apartment. That can be a pain when you really need to customize something to suit your lifestyle and needs.
One of the best perks about having your own home is having the ability to do whatever you want to it and make it your own. Want to paint? Do you want to try your hand at remodeling? The world is your oyster when you're a homeowner! While you're responsible for all the costs, you are building long-term equity so you can reap the benefits in the future.
3. You're Looking For More Space
Tired of hearing your neighbors stomping around or talking loudly through the wall? Are your closets bursting at the seams because you don't have enough storage space? Maybe you're thinking about starting, growing your family, or even getting a pet. No matter what the reason may be, purchasing a home can give you the space, privacy, and quiet you're craving. Sounds amazing, right?
4. You're Looking for Additional Ways to Receive Tax Deductions
Who doesn't love a good tax break?
For many, mortgage interest deductions are some of the biggest tax breaks you can get. The IRS has also provided several other tax breaks for buying a home, including pay points, real estate taxes, mortgage insurance premiums, and some home improvements.
Signs You're Not Ready to Purchase a Home
Here are some signs that renting might be the better option for you right now:
1. You Don't Plan on Settling in a Specific Location
Still trying to figure out your career path? Or maybe you're interested in living in a big city, but unsure if it's right for you long-term.
2. You're Building Your Credit
Your credit score is extremely important when purchasing a home. If it isn't exactly where you'd like it to be, don't panic. Take some time to build it up. Do your homework, meet with financial advisors, and stick to your budget. For perspective, most lenders require at least a 640 FICO score to qualify for a loan.
3. You Don't Want to be Responsible for Maintenance Repairs
If something breaks while you're renting, your landlord or maintenance office is just a phone call away. Typically, they handle fixing the problem themselves and are held accountable for the expenses as well. If home repairs aren't your thing, or you don't have the money to cover a major unexpected repair, it might be a good idea to continue renting until maintenance projects are more realistic.
4. You're Looking for Stable Monthly Costs
When you rent, expenses are typically reliable. For example, you can probably estimate how much your electric and energy bill will cost without much variance from month to month. However, when you purchase a home, you may come across unexpected costs that increase your monthly budget.
5. You're Still Figuring Out Your Plan
There's absolutely nothing wrong with not knowing what your long-term plan is yet. It just may mean purchasing a home isn't the right move for you at this time. Everyone is on their own timeline, so you must make a decision that's best for you.
If you're still unsure whether or not you're ready to purchase a home, or you're looking for a second opinion, reach out to us today and we will talk you through your options. Determine your goals, budget, and timeline so you can get one step closer to purchasing your dream home.
Ready for a simple, painless home-buying experience? Give us a call! 407-834-3377
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