Are you ready to own a home instead of rent? Over the years, I've heard people say that "renting is throwing money away." Of course, that isn't always the case. When is the right time to buy a house? Here's some tips to help you determine if you should buy or keep renting.
Own or Rent?
1) Save at least 10%
2) Practice making payments
3) Remember furniture and appliances!
4) Ask for your credit score
1) Have you accumulated a large down payment? Gone are the days when you could show up without any money one day and hold the keys to your new home the next. After the real estate scare over the past few years, banks want to verify that you can afford a house. Part of that verification process includes a down payment. Frequently, banks ask for a 10% or more down payment. To avoid mortgage insurance, look to accumulate a down payment of 20 percent before you buy.
2) Calculate your monthly payment before you purchase. Try to save the difference between your current rent payment, and your new house payment each month. If you can't do it, you'll need to adjust your home purchase plans.
3) Remember that some large expenses happen soon after you've purchased your new home. Landscaping, furniture, appliances and other costs can add up quickly. When you're planning your down payment, factor in these costs as well.
4) Review your credit report and credit score. You may have to pay a few dollars to find out your FICO score, but this is valuable information. If your credit score is low, banks are going to charge you more for a loan than people with high credit scores. It may make sense to clean up your credit report and raise your score before trying to buy the home of your dreams.
Following these steps might cause you to rent longer before you buy. However, when you sign the mortgage contract, you may sleep more peacefully knowing your new home is affordable.