Renting vs. Owning: Tips for First Time Home Buyers

Most people do not imagine themselves renting for the rest of their lives. For many, homeownership creates a real sense of freedom and financial security.  

Being a homeowner vs. renter can feel like a gulf that’s just too wide to cross.  There are lots of papers to gather together, money to save, and terms you may not recognize.  Sometimes there are great reasons to keep renting.  After all, renting is not a dirty word!  But if you are ready to think about making that leap to homeownership, here are some tips for first-time homebuyers.

Know the Pros of Being a Homeowner.  

It is easy to focus on everything that can go wrong with owning a home. However, if you look at the things that can go right, you will easily come to the conclusion that taking that leap from renter to owner is a great step to make. 

Here are just a few of the pros.

Stability.  The number one issue for a lessee is that the landlord can choose not to renew the lease. What then? Housing insecurity is very real and a landlord buying and selling your property can create its own sort of instability.
Cost Control.  The landlord can decide he needs more rent. In that case, you have two choices – pay or find another place. Your mortgage stays the same over time and allows you to free up more of your income. When the mortgage is gone, that money is all yours!
Individual Expression.  If you want to put certain things on your walls, paint your house in funky colors, or own pets, that’s totally your choice as a homeowner! Your house, your rules. This is one of the great perks of being a homeowner vs. renter.
Easier to integrate into a community.  When you put down roots somewhere, you get to know the flow of the neighborhood and participate in the local festivals. This can be a place where your children go to school and have lifelong connections.

Getting Ready While Renting. 

If you know that you are going to buy but still have some time on your lease, here are the things you can do to help prepare yourself for purchasing a home.

Start gathering your financial documents.  You will need to qualify for a mortgage, and you have time to do that now.  Gather together all your relevant documentation to prove your income, including your taxes, W-2s, and other paperwork.  
Start saving money.  You will need some sort of down payment.  The range can be as little as 5% to 20% or more depending on the type of loan, but you will need some money down to secure a mortgage.  You are also going to need money for other things related to the homebuying process, such as earnest money, closing costs, inspection fees, and other fees.  It’s better to start socking it away now.
Start working on your “must have” list.  Now is the time to talk carefully about what you really must have in a home before you buy it.  If you can determine this list beforehand, you will have a clear head going through the process of house hunting.  Your “must have” list will keep you from making a financial mistake just because the house is staged attractively.  Look around the neighborhoods you want to buy into.  What is the traffic like?  Can you picture yourself living there?

Once you have worked through these questions, it is time to get pre-qualified for a mortgage and find a good real estate agent. Getting pre-qualified ensures that you will not lose out on a good deal because of trying to make the paperwork go through as quickly as possible.  

You will also know immediately how much house you can actually afford, so you will not waste time looking at homes outside your budget. A real estate agent is the next important relationship to establish. You will rely on this agent to help you winnow available properties that meet your “must have” list requirements and fall within your approved budget.  

Your agent will also be a great source of education and can help you negotiate the sale price, arrange inspections and other tests, and walk you through the closing process.

As Millennials enter the rental market in greater numbers, expect to see more market-driven features catering to first-time home buyers, such as lower mortgage rates (which is driving the market now), more focus on digital presentation and virtual tours, and other features.  

Renting allows for no long-term commitment, a smaller financial commitment in general, and no worries about maintenance or repairs. But in the long term, finding true financial freedom comes from homeownership. There are so many pros. Take these tips for first-time homebuyers into consideration and … take the leap!