We’ve really thought about it, and the best thing that can be said about being a tenant is that you aren’t on the hook for repairs to the home. Unless, of course, you did the damage. And, only if you have a responsible, responsive landlord.
Is there such a thing?
The downsides to renting are many: You don’t have the freedom to decorate how you want. You may not be able to have a pet. You have to let the landlord into your home. You’re paying for someone else’s mortgage with nothing to show for it when the lease ends.
It’s high time you bought your own Southern Maryland home – to pay your own mortgage and build long-term wealth.
Need proof? A census study shows that homeowners are worth, on average, $197,349 more than renters. That’s 90 times a tenant’s median net worth.
The first steps
It’s OK to admit it: When you think of buying a Southern Maryland house, you imagine driving through cool neighborhoods and touring homes for sale, right?
You’ll get there. The first steps you need to take are far more mundane, but they’re critical.
First, get your finances in check. Write down all of your recurring monthly debt payments. These payments include your rent and any other payments you make to repay creditors (alimony, child support, credit card payments, auto loan payments, student loan debt).
“Don’t include living expenses such as utility bills, food, and entertainment,” say the experts at Wells Fargo Bank.
Take that total, and divide it by your pre-tax monthly income. For instance: Assume your monthly debt payments total $1,540, and your monthly income is $5,000.
Dividing 1,540 by 5,000 gives us 31 percent. This is your debt-to-income ratio (DTI) – a number that lenders rely heavily on to determine whether or not to lend you money. (Or, plug your numbers into an online DTI calculator.)
Your goal should be a DTI of no higher than 43 percent, according to Jean Folger at Investopedia.
If it’s higher, start paying down your debt. Consider bringing in extra income as well.
Next, check your credit. Lowering your DTI is just one area of your finances that needs your attention. You might also have some credit messes to clean up. You won’t know whether you have any clean up to do, however, unless you get credit reports from all three of the major credit-reporting agencies: TransUnion®, Experian® and Equifax.
By law, you are entitled to a free copy from each of the agencies every 12 months. The best place to get your reports is at annualcreditreport.com, the only provider authorized by the federal government.
Go over the reports, looking for inaccuracies and mistakes. If you find any, file a dispute. Each credit report will offer instructions on how to do so. You may be surprised how getting rid of inaccurate information on your reports will raise your score.
Now, you can go get that loan!
After you’ve squared away any credit problems and raised your DTI, it’s time to go shopping for a loan. See several lenders and compare their offers to find the best rates and terms. The Federal Trade Commission offers a handy guide on how to compare loan offers on its website, consumer.ftc.gov.
Consider home maintenance costs
Remember that the pre-approved loan amount that you get from a lender is the maximum amount you can borrow. If a mortgage payment for a home at that price will leave little in your monthly budget to cover unexpected expenses, consider buying a less expensive home.
As a Southern Maryland homeowner, you’ll need to have a fund in place to cover ongoing home maintenance expenses as well as those nasty surprises that happen. Installing a new water heater, for example, will set you back more than $1,000, according to homeadvisor.com.
If the AC unit dies, installing a new one will cost more than $5,000, and plan on spending in excess of $200 to replace broken glass in a window.
Then, what happens if your property taxes increase? Your mortgage payment will go up, too.
It’s almost yours
Many first-time Southern Maryland homebuyers are under the impression that by signing the purchase agreement, the home is pretty much theirs. That’s a big mistake because it leads to emotional lock-down – the feeling that you are committed.
Remember: You signed the purchase agreement – not the closing papers.
In reality, you aren’t committed until the last contingency is removed. You can, in fact, change your mind — and for a number of reasons — and even be entitled to the return of your earnest money deposit in many cases.
Common contingencies include the approval of the home inspection results, final loan approval, and a satisfactory lender appraisal of the property.
Think of these contingencies as your “get-out-of-the-deal-free cards.” This way, regardless of how emotionally attached you become to the property, you’ll know that, should you need to, you can walk away gracefully.
Accokeek 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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