Electric Loan Officer

Category - First Homes

The Biggest Mistakes Renters Make Before Buying a House (And How To Avoid Them)

The Biggest Mistakes Renters Make Before Buying a House (And How To Avoid Them)

Renting to homeownership is a monumental step for those who are looking for a bigger opportunity than they currently have. There is a lot a renter needs to know before taking a dive into the homeownership market.

Understanding where mistakes are made is the best way to get the best house for your budget while taking advantage of perks associated with smart buying.

Below are 6 of the biggest mistakes renters make before buying a house. Read, understand and apply this knowledge to your next homeownership adventure as buying a home will most likely be one of the biggest investments you will be making for yourself or your family.

Mistake #1: Buying over budget

The word budget can make many people squirm in their seats. No one likes to dive into their finances and bite off more than they can chew, but often renters make this crucial mistake. There is a huge difference between renting and buying, the budget being one of them. Before you decide to buy a home, as a renter you must sort through your finances and make a budget available to yourself and real estate agent that makes sense. Buying a home over your budget might cost you more money in the long run.

Mistake #2: Not factoring in outside costs

What exactly are outside costs? Think of it this way, they are costs that accrue from maintenance to item replacement that your landlord probably covered for you while you were renting. If you need a new roof, replaced siding or a new air conditioning unit the cost is on you, not the real estate agent who sold you the home (darn!). Be aware of outside costs like landscaping, HOA fees, replacing old appliances and other costs that are not covered in the cost of your home.

Mistake #3: Failing to get a great inspector

Before the final paperwork is signed an inspector will walk through the home and look at a checklist of items associated with the upkeep of the home. This can include the age of a water heater, gas, air conditioning units, functioning appliances, siding, the presence of mold/mildew, etc. Having a great inspector will ensure that every little imperfection in your new home is taken into consideration.

Mistakes are made when the inspection process isn’t taken seriously and homeowners are stuck with the growing cost of fixing what was already broken.

Mistake #4: Not checking up on your credit

New borrowers are often faced with denied applications because of bad credit, no credit or an inexperienced borrowing record. Renters who want to buy a home make the mistake of not factoring this into their new buying experience, take time to see houses only to have application after application rejected. Before you decide to move start building/fixing your credit and talk to a professional about your borrowing record. Steps can be taken to avoid this common mistake. List your assets, income and make sure you have a reviewed prequalification from a certified Mortgage Loan Originator.

Mistake #5: Being dishonest about debt

This is called fraud, and not something you want to deal with when making the transition from renting to buying. Fraud will follow a renter and disable them from being able to buy freely and without consequence. Honesty regarding debt includes personal debt, credit card debt and poor credit ratings.

The best thing to do is be upfront and work with companies who can guide you to a debt free life.

Mistake #6: Assuming assets include income

This mistake can cost new homeowners an approved application for homeownership. Assets do not factor into income and the mistake is made all too often. Your potential borrowing loan is only based on your income and renters often make the mistake of either claiming their income is higher or simply including assets. Neither will benefit the homeowner in the long run!

4 Important Things Tenants Buying a Home Should Know

4 Important Things Tenants Should Know Before Buying a Home

Transitioning from renting to owning is a major milestone in an individual, couple or family’s life.

Tenants buying a home get a sense of stability, freedom and the ability to change or remodel your home without being tied to someone else’s requirements.

None the less, if you have been renting for a long period of time you might find yourself relatively apprehensive to take such a large step in your financial and personal life. Without a doubt you’ve had friends and family all sharing stories and giving you advice on what to do when transitioning; it can be so overwhelming! This is all completely normal, but the idea of moving from renting to owning doesn’t have to be scary and can be incredibly rewarding!

We have included four key points every tenant should know before buying a home to help ease your mind and start you on your journey to homeownership.

1. Tenants Buying a Home Can Build Equity

Every month you paid your rent you were building equity…for your landlord.

When you decide to buy your own home you are flipping the script and in turn building your own equity. If you are new to the real estate market you might ask yourself why this is important for you. The answer is simple, equity is your own personal asset and when you are talking about a home with the value of $100,000 or more it is quite a substantial asset.

As you pay off your mortgage you are in turn building your equity. If the real estate market is in a very favorable condition as it has been in recent years, the stake you have with the home’s equity can increase as the value of your home increases. As you become more comfortable in your home and decide to make renovations, add on or perform routine maintenance you are also improving the quality of your home and increasing your equity or investment.

If you have built up a ton of equity you can cash in your home asset for another asset. Say you’ve paid off your mortgage, renovated your kitchen and decide to sell while the market is hot. You can use the equity in your home and apply it to another home to shave off money owed on a new loan or simply get cash for your equity.

2. Mortgage Interest Can Be Tax Deductible

If you have resisted buying a home because you think the initial and reoccurring costs are too much for your budget think about tax season and the possible deductions you will receive because you are a homeowner.

The beauty of the interest you have on your mortgage is that it ca be tax deductible! If you have a mortgage with a value that is smaller than the price or value of your new home you are eligible for a mortgage interest deduction. Along with charitable donations, deductions for dependents and even a new marriage deduction you will find yourself with a quite a bit of money back that can be applied to your loan or to home improvement projects to boost your equity.

As a new homeowner you could also receive property tax deductions in the amount paid in the relevant tax year. This can be another wonderful addition to tax breaks and deductions you will experience as a first-time homeowner.

3. Planting Your Roots is Incredibly Rewarding

Perhaps one of the most important aspects of owning a home is simply starting your life in a more permanent location! Once you have chosen the home of your dreams you can start exploring the city you’ve chosen and plant your roots. Owning a home provides a sense of stability. You are living in your own personal asset and have probably chosen the area because of favorable school districts for your children, a shorter commute to work or simple LOVE the area where your new home lies.

Whatever the reason, you are now a part of a greater community where you can meet new people, share in new community experiences and have a greater sense of ownership.

4. No More Landlord!

This might sound silly, but living under the thumb of a landlord can be exhausting.

When you own your own home you can do whatever you please with the interior! Paint the bathroom blue, break down the wall between the kitchen and living room to add more open space, build bunker in the backyard or simply landscape how you choose! The freedom is huge, and having a sense of personal pride can really translate into your home.

The beauty of owning your own home is making it your own space. You can make adjustments as often as you want without having to worry about losing a security deposit or having a landlord visit with steam coming out of his ears after you’ve hung a family portrait with nails instead of sticky tape.

Every tenant should know and understand that they are not only making an investment in their lives by owning a home but are also providing a sense of freedom and stability for themselves and their families.

Owning a home doesn’t have to be scary, complicated and stressful! It is a rewarding experience that will pay you back over and over again with time, commitment and educated decisions.