Dream of buying a home but still renting? Living in a rental doesn’t mean you have to just sit around and twiddle your thumbs while you wait to buy a home. In fact, this period can be the perfect time to lay the groundwork for a successful homeownership experience! Here’s how to make the most of your time as a renter to prepare for that exciting first home purchase.
Develop Good Financial Habits
If you’re not already doing so, now is a great time to start developing good financial habits. Think of your rental period as a financial training ground. If you expect your future mortgage to be higher than your current rent, try this practical strategy: save the difference each month. For example, if you’re paying $1,500 in rent but anticipate a $2,000 mortgage payment, set aside that extra $500. This approach serves two purposes – building your down payment while adjusting to your future monthly expenses.
Shape Up Your Financial Profile
Lenders look at your entire financial picture, not just your savings. During your rental period, focus on strengthening your overall financial health by maintaining steady employment, paying down existing debt, and building up your savings. A strong financial profile can lead to better mortgage terms when you’re ready to buy.
Understanding the Costs of Homeownership
When it comes to buying a home, the down payment is just one piece of the financial puzzle. As you prepare for the home-buying process, you’ll need to save for:
- Down payment (typically 3.5-20% of the home’s price)
- Closing costs (about 2-5% of the purchase price)
- Moving expenses and initial furnishings
- Emergency fund covering 3-6 months of expenses
- Home maintenance and repair fund
- Insurance premiums and utility deposits
Get to Know Your Target Market
Use your time as a renter to become an expert in your desired neighborhoods. Attend open houses, track local home prices, and learn about different areas’ amenities and drawbacks. This knowledge will prove invaluable when you’re ready to make an offer on a home.
Focus on Your Credit Score
Your credit score significantly impacts your mortgage options and interest rates. While renting, try to make all payments on time, keep your credit card balances low, and avoid taking on new debt. Also, reviewing your credit report on a periodic basis can help you catch and correct any errors before they affect your home-buying plans.
Learn About Home Maintenance
Now is a great time to start developing your knowledge of home maintenance. Understanding basic home care will help you budget for future expenses and evaluate potential properties more effectively. Consider shadowing homeowner friends during their maintenance tasks or taking basic DIY courses.
Build Your Home Buying Team
Start networking with real estate professionals in your area. Finding a trustworthy real estate agent, mortgage lender, and home inspector before you’re ready to buy gives you time to build relationships and gather valuable insights about the home-buying process.
Journey Towards the Path to Homeownership
At Mortgage Solutions Financial, we specialize in guiding renters through their journey to homeownership. Whether you’re just starting to save or ready to begin house hunting, our team can help you navigate each step of the process. Contact us today to discuss your homeownership goals and develop a personalized strategy for achieving them.
