What’s the best part about renting?
You don’t have to maintain your apartment. (Unless you caused the damage.)
Having help with maintenance is nice. No argument there. But that’s still only if you have a responsive landlord.
Ok, so one decent PRO. What about CONS?
- Can’t decorate how you want
- No pets (most of the time)
- Landlord can walk into your home
- Paying someone else’s mortgage
It’s time to buy your own home and build long-term wealth.
Need proof? A census study shows that homeowners are worth, on average, $197,349 more than renters.
That’s 90 times a tenant’s median net worth.
Before house hunting
When you think of buying a house you imagine yourself driving through cool neighborhoods and touring homes for sale in North Andover.
Well, too bad. Slow your roll. Even if you’ve been dreaming of reasons you KNOW you want to buy a house to North Andover. You’re not there yet.
The initial steps you need to take are far more mundane. But they’re critical.
Step 1: Get your finances in check
Write down all your recurring monthly debt payments. Ouch, right?
Include your rent and any other payments you make to repay creditors (alimony, child support, credit card payments, auto loan payments, student loan debt, etc).
Then, take the total and divide it by your pre-tax monthly income. (Do NOT include living expenses like utility bills, food, and entertainment.)
Assume your monthly debt payments total $1,540 and your monthly income is $5,000.
1,540 ÷ 5,000 = 31%
This is your debt-to-income ratio (DTI) – a number that lenders rely heavily on to determine whether or not to lend you money.
Your goal should be a DTI of no higher than 43%, according to Investopedia.
If it’s higher, start paying down your debt. Consider bringing in extra income as well.
Step 2: Check your credit
Working on a too-high DTI is just one area of your finances to concentrate on. You may also have some credit messes to clean up.
You won’t know, however, unless you get credit reports from all three of the major credit-reporting agencies:
By law, you are entitled to a free copy from each of the agencies every 12 months.
FreeCreditReport.com has great TV commercials, but there are plenty of places to get this report.
Be careful and make sure you research your credit report source before providing your sensitive information.
Step 3: Go over the credit reports!
Pore over the reports and look for inaccuracies and mistakes. Sounds like fun, doesn’t it?
I know. But do it anyway.
These agencies aren’t perfect, and YOU could pay the price for their mistakes. If you find any mistakes, file a dispute.
Each credit report agency will have instructions on how to file disputes, but…. they’re a huge pain.
As John Oliver explained on his show in April of 2016, it’s easier said than done to report errors on your credit report.
But it’s worth it—
You’d be surprised at how much your credit score can improve just by deleting inaccurate information from your reports.
Step 4: Go get that loan
When you’ve squared away any credit problems and raised your DTI it’s time to go shopping for a loan. See several lenders and compare their offers to find the best rates and terms.
The FTC offers a handy guide on how to compare loan offers on its website, at consumer.ftc.gov.
This part can be kinda intimidating. Our best advice is always to shop local and find a mortgage lender in North Andover or surrounding area.
Stuff costs money
Keep in mind that the pre-approved loan amount that you get from the lender is the maximum amount you can borrow.
If a mortgage payment for a home at that price won’t leave much left in your monthly budget to cover unexpected expenses, consider shrinking your budget a bit.
As a homeowner, you’ll need to have a fund in place to cover not only ongoing home maintenance expenses, but those nasty surprises that happen.
Installing a new water heater will, for instance, set you back more than $1,000, according to Home Advisor.
If the AC unit dies, installing a new one will cost more than $5,000 and plan on spending in excess of $200 to replace broken glass in a window.
Then, what happens if your property taxes increase? Your mortgage payment will, too.
Many first-time homebuyers are under the impression that by signing the purchase agreement, the home is pretty much theirs.
It’s a big mistake, because it leads to emotional lock-down – the feeling that you are committed.
Remember: you signed the purchase agreement – not the closing papers.
In reality, you aren’t committed until the last contingency is removed.
You can actually change your mind, and for any number of reasons, and even be entitled to the return of your earnest money deposit in many cases.
Common contingencies include:
- Approval of the home inspection
- Final mortgage/loan approval
- Satisfactory lender appraisal
Think of these contingencies as your “get-out-of-the-deal-free” cards.
This way, regardless of how emotionally attached you become to the property, you’ll know that, should you need to, you can walk away gracefully.
It’s hard. We can help.
We wrote a detailed description of the North Andover home buying process that can help you understand how it works.
But if you really want to figure this out, call us. We’ve done this hundreds…maybe even thousands of times. We can help you learn the ropes and we’d love work with you!