When you’re renting, the landlord and property owner are doing a lot of stuff that you may not realize. Tenants pay the rent, take out their trash, and keep the unit in decent condition. That’s about it. The landlord does everything else. Property is a big investment. If you’re thinking about switching to home ownership for the first time, educate yourself about the differences and the new responsibilities you’ll take on.
Owning a House is Different
When transitioning form renting to owning, get an honest idea of all the costs of ownership in money, time, and work. Consider all the ways owning a house is different from renting as well as the benefits of homeownership.
- More upfront money: With renting, it’s first, last, and security deposit. But buying a house involves a lot more upfront money, including earnest money, down payment, private mortgage insurance, inspection, appraisal, and other closing costs.
- More time: If your occupation or that of your spouse might require moving in the near future, buying may not be right for you. It’s recommended that you plan to invest at least 4 or 5 years in one place if you’re buying.
- More work: If anything breaks, you have to fix it or pay someone else to do it. There’s also a lot of preventive maintenance to keep a house in good condition.
- More commitment: You have a responsibility now to take care of the buildings and grounds. You’ll have an eye on resale value years in the future.
- More worry: A house includes many different systems with various components in good working order to keep it habitable and comfortable. One pipe leak or bad storm can mean a stressful, expensive nightmare.
- Less freedom and less flexibility: A house and its contents tying you to one place can be a bad thing and a good thing. It’s not so easy to pack up and move to a different city or state. But you finally have “roots” and a place to call your own.
The land and buildings are yours. You can do nearly anything you want to make it your home. Also in the long run, home ownership is more financially lucrative. As a renter, you’re paying someone else’s mortgage. As a homeowner, if values increase in the future, you’ll be paid to live in this house.
Preparing to Buy a House
There are a few practical preparation steps to get in position to buy a house:
Step 1 is getting your financial situation in order, which means paying off debts and improving your credit score. Your debt-to-income ratio and credit score are among the things lenders consider when deciding whether to loan you money and at which interest rate.
Step 2 is getting pre-approved for a loan. This process will help you get an idea of the lending process and factors. More importantly, it will give you a price range to stick to when shopping for a house.
Step 3 is budgeting for the whole process from house hunting, packing, closing, moving, and ownership. Will your mortgage require a down payment, inspection, appraisal? You’ll need to get used to all the additional expenses of home ownership that you never had to think about as a renter, including;
- Monthly mortgage payments
- Property taxes
- Homeowners insurance
- HOA fees
- Emergency repairs
Step 4 is learning as much as you can about the home buying process and all the costs, steps, factors, and instruments involved.
Step 5 is hiring an experienced, helpful real estate agent to offer advice and guide you through the transaction.
The home buying process is not as quick and easy as signing a lease. It requires months of paperwork, offers and counteroffers, negotiations, and inspections. You’ll need to muster the stamina, commitment, and organization to see it through to the end.