Plenty of people still choose to own a home with many interested in becoming first-time homeowners. Before looking at available homes in a desired area, some may be want to know more about a few of the obligations and financial considerations that come with homeownership. Explore some changes and challenges that occur to those taking the plunge from renting to owning a home.
Home Maintenance and Expense
Renters often fail to realize that their rent covers many expenses that a homeowner will need to pay out-of-pocket. Many routine maintenance tasks like AC repair, other repairs and home renovations are paid for by the landlord when renting. This changes when a renter chooses to buy a home. As a homeowner, one may decide to spend time performing maintenance tasks, such as cleaning out gutters or landscaping, or hire someone to do the work. Homeowners will either be paying money or delegating part of their free time to the maintenance of their home.
Newly constructed homes and older homes will need special attention from time to time. It benefits homeowners to set aside a budget to cover annual repairs in order to avoid paying for an unexpected expense at an inconvenient time. Backed up septic systems, electrical issues, and HVAC problems may all require a homeowner to reach out to a licensed professional. Those in the financial position to cover the costs of the mortgage loan, homeowner's insurance and annual maintenance/repairs may want to look into buying a home.
Mortgage Loan Approval
Most renters will be looking to apply for a mortgage loan. However, they may not know much about factors important to lenders. Many choose to apply for a conventional mortgage loan and these lenders often give the best terms to those with a good or excellent credit score. An applicant's credit score reflects their ability to make regular payments and is determined based on an applicant's credit history. Lenders give the best mortgage terms and lowest mortgage interest rates to those deemed low risk. Borrowers with a high credit score can save thousands over the life of a mortgage loan. A renter looking to buy can review their credit score and see if improvements should be made to it before applying for a mortgage loan.
Those going for a conventional mortgage loan should be aware that they are expected to make a down payment. Doing so serves to establish initial equity in a home with lenders preferring those applicants who can make a down payment of 20 percent. This does not mean that those making a smaller down payment cannot buy a home. Such borrowers can be approved but will be paying back a larger loan amount and more interest to their lender. Other restrictions and mortgage insurance may apply to this group of borrowers.
Renters who can make a significant down payment may want to proceed with a conventional home loan. However, other types of loans are available for those who want to buy a home but cannot come up with a sizable down payment. Some may qualify for an FHA home loan or loans requiring zero down.
Ready to Close on a Home?
There are many responsibilities and expenses that can quickly add up. After mortgage approval, previous renters will have to cover closing costs like lawyer fees, inspection fees and moving expenses. Planning ahead can make the transition from renting to buying a home in Independence smoother.