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!