From Renter To Owner: Are You Ready To Make The Transition?

Kimberly Bean
Published on October 30, 2015

From Renter To Owner: Are You Ready To Make The Transition?

If you’re a renter in Southern Maryland, you already know the steep cost of renting. According to recent studies, Americans spend 30 percent of their monthly income on rent, while those who own a home spend only 15 percent on mortgages.

Obviously, most of us would prefer to own our own homes, but the down payment on a home can be a roadblock for many, and it is tricky to know when you’re in the right situation to take on the expense of a down payment.

Timing is everything. What do the experts think? Let’s look at that mortgage experts think about switching from renting to owning.

How do you know if you’re ready?

Let’s look at liquidity first. This is the amount of money you have at your disposal. People who have fewer debts than others are generally considered liquid enough to afford a down payment. For example, let’s say you’ve paid off (or nearly paid off) your car, and your student loan expenses are taken care of. A significant portion of your finances are not being budgeted to pay off your debts. Your financial position will tell you whether you’re ready to move from being a renter to being an owner – or not.

The difference between being ready – and thinking you’re ready

If you’ve wanted to buy a Southern Maryland home for a while, it’s natural that the decision to buy is nagging at you. Most buyers make instinctive decisions, only to find that they weren’t ready to make the move when they did. Many financial commitments come with owning a house, and it’s important to remember these when you’re making your purchase decisions. Home inspections will be required, and there are hidden costs you may not be aware of. And, it costs money to take care of a home. Be very sure about what you want before diving in.

How do your finances affect your moving plans?

If you move around a lot, it doesn’t make financial sense to buy a home in one area only to move to another city or another area of the country within the year. Some places, like New York City, are too expensive for most homeowners, and moving out of the area might not be an option because of work and family demands. Take into consideration where you want to buy and how this will impact your work and your need to remain flexible.

How much of your monthly income should you pledge towards mortgage repayment?

Most experts will tell you that if your mortgage costs 30 percent or less of your monthly incomes, that is a feasible rate. You want to be able to live comfortably without having to sacrifice too much of your income to your mortgage payment. Think about the percentage you’d be comfortable paying for your mortgage, and while the industry has no set percentages, some lenders are flexible enough to let you pay within your comfort zone. It’s helpful here to have a good understanding of your general monthly expenses.

Homes with down payments of less than 20%

You might think that when the percentages are too low that there must be a catch in there somewhere. Have a keen eye when you review the final paperwork; it’s possible for numbers to vary based on several variables, so be analytical and thoughtful when reviewing. Remember that this 20 percent is going to rise steadily if the value of the home is too high. At the same time, avoid going to low on the percentages because that would translate into high installments. Balance is key.

To rent or to buy: where is the financial edge?

The answer to this question depends on where your finances are right now. Renting makes sense if you think that the down payment is going to make you financially strapped. On the other hand, it makes sense to shop for a home when you’re sure you can make the sacrifice without moving too far away from your financial comfort zone.

Leveraging on your savings

The beauty of your savings is that they give you a lot of flexibility. If you save more, you are in the position to buy more. At the same time, putting up more money upfront means lower payments and preferable rates in the long term.

Moving from renting to owning is a big decision. Find a mortgage professional and ask questions about your ability to make the transition. Check your credit score, and be aware of the additional costs associated with home ownership. And, most important, don’t forget to learn on the expertise of a great Southern Maryland real estate agent to point you in the right direction!

Brandywine MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309

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