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Renew Your Lease or Buy a Home-How Do You Know It’s Time?

It’s almost time to renew your lease and you have been watching a lot of House Hunters on HGTV. It looks easy enough on TV to buy a house and you think you are ready to take the big step, but how do you know if now is the right time?
The very first thing you need to consider is your financial situation. Make an appointment with a local lender to get pre-qualified for a home loan. Resist the urge to jump on a website and get a quick pre-approval on line. This is usually not a complete pre- qualification with a credit check, but rather you plug in a few numbers and they spit a number back at you of how much house you can afford. This is seldom reliable and you certainly won’t be able to ask the questions that you need answered. Local lenders will pre- approve you free of charge and take the time to explain the different loan products that are available and how the process works. This is critical if you are serious about trying to buy a home. It will let you know how much house you can afford so you know you are looking in the correct price range. There is nothing more discouraging than finding your dream house only to discover you can’t afford it. A pre-approval letter also tells Sellers you are qualified to buy their home and puts you in a much better negotiating position.
When you speak with a lender, they will look at your income, your current debt load and your credit score. Make sure you bring your bank records, pay stubs, tax returns and a list of your current debt with you to your appointment. There are loan products available that require little or no money down so if you think you need a 20% down payment before you can buy a house, you might be pleasantly surprised. While there may be some loan products available to those with a lower credit score, somewhere in the mid 600’s is usually the cut off for most types of loans. Your lender can also tell you approximately how much money you will need to pay closing costs, which are the fees you will incur for your loan and closing.
After you have been pre-approved for your loan, you will need to choose a Realtor to work with. Working with one Realtor is much better than calling whoever’s name is on the yard sign. Your Realtor will work for you to find you the properties that match your criteria and will help you make and negotiate offers on the properties you choose. It usually does not cost a buyer anything to work with a Realtor because the seller usually pays the Realtors fee, or commission. Your Realtor will be your advocate during your home search and is an invaluable resource in helping you navigate the home purchase.
If you own a home you need to be prepared to make a long term commitment to owning that home. When you are renting, you can give your landlord 30 days’ notice and move out. When you are a homeowner, you need to sell your home before you can move and that may take much longer than 30 days. Make sure the home you choose will fit your needs not only now, but in the future. If you are just married and looking for your first house, what may seem perfect for a young couple may not work so well if you have a few children. Keep your future needs in mind when you are looking at homes. You should also be prepared to compromise. Most people seldom get everything on their wish list when buying their first home. Your Realtor can help you prioritize your wants so you can get the most important items in your first home. That home you saw with the beautiful new kitchen may not be worth the 45 minute commute to work every day, or you may wish you had bought the home with the attached garage instead of the one with no garage and a hot tub.
One of the other things you will want to consider is the extra cost of homeownership. When the water heater goes out or the roof starts leaking you can’t just call the landlord to fix it. Repairs and maintenance costs are part of owning a home. Ask anyone who owns a home and they will tell you there is always something that needs fixing or replacing and you have to have a budget for those things as well. Property taxes are another expense you didn’t have when you were renting but you will when you own a home. If you have an escrow account with your mortgage, your taxes and insurance are included in your monthly payment instead of having to come up with the whole amount when it is due.
There are some good things to consider when thinking of buying your first home. There are financial issues with home ownership but also tax deductions that you don’t get being a renter. You can usually deduct your mortgage interest and your property taxes which for some people equals a very nice tax refund at tax time. Another fact that renters may not be aware of is that many times your house payment may be less than you are paying in rent. You will also be building equity for yourself instead of your landlord. The most fun aspect of home ownership for most people is that it is your home. You decide what color to paint the walls, where you want to hang pictures and if you want to rip up the carpet and put in hardwood floors. You can decorate, remodel and renovate to your heart’s content! First time home ownership is a little intimidating but if you are well prepared financially and emotionally it can be very rewarding choice. For more information on home ownership visit my website at www.choicerealtyfreeport.com.

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