Owning your own home is an integral part of the American dream. But before you go all-in, there are many financial aspects to consider. After all, taking on a monthly mortgage payment and the costs associated with owning a home can be a major financial adjustment.
To help you figure out whether it’s best to continue renting or consider buying, the mortgage officers at Chesapeake Bank have put together a list of important factors to consider.
When it’s best to buy a home
In order to be ready to settle down and buy a home, you have to be able to do just that…settle down. When questioning whether or not you are ready to buy, ask yourself if you are ready to stay in one place for the next couple of years. You also need to make sure your finances are in order, your credit history looks good and you have extra funds to cover things like closing costs, a down payment, moving expenses, home maintenance, and an emergency fund.
When it’s best to continue renting
If you’re still exploring your options or considering a career move, that’s OK, but buying probably isn’t for you. Take some time while you rent to figure out your next move, pay off some of your personal loans and raise your credit score to better prepare for when you are ready to buy.
What to consider when buying a home
Owning a home comes with a certain set of perks aside from being able to remodel and redecorate. Long-term benefits such as equity, appreciation in value, tax deductions and an increase in your credit score are great selling points when considering buying. But, there’s no turning back if you change your mind. If you decide to move, you are responsible for finding a tenant to pay the mortgage (if your loan allows it) or selling your home altogether, which could take a while.
What to consider when continuing to rent
Renting allows the flexibility to change your location based on personal preference or a career change. While you don’t have long-term home security or freedom to renovate, renting does provide minimal responsibilities. You are only responsible for paying for renter’s insurance to cover your personal belongings while the home or building owner is responsible for paying taxes, insurance, and cost of maintaining the home.
Five simple questions to help you decide
- How long do I plan to live in the home?
- How much can I afford in a monthly mortgage payment?
- Do I have proof of a steady income?
- Is my credit history in good shape?
- Do I have extra funds to cover closing costs and unexpected home emergencies?
Remember, it takes more than simply looking at your mortgage payment to determine whether you should rent or buy.
I’ve decided buying a home is right for me, what next?
Once you have weighed the options, the next step should be to meet with your local mortgage lender. This meeting will help determine the amount of money you qualify to borrow; it will also ensure you’re able to attain a pre-qualification letter before meeting with a real estate agent.
At the start of your house search, it’s not always clear how much your down payment will be. The amount depends on the type of loan and typically ranges from 3-20 percent of the cost of the home.
Home Possible® loans
If you can’t afford a down payment, Freddie Mac’s Home Possible mortgage may be an option for you. Home Possible loans offer low down payments for low-to-moderate income homebuyers. To qualify, the borrower’s annual income must be equal or less than the area median income (AMI) for the census tract where the property is located.
These loans offer more flexible sources of down payments, low down payments options and refinance options, but have stricter borrower qualifications and loan limits.
Ready to get started?
At Chesapeake Bank, our goal is to provide the highest level of service at competitive rates. We strive to structure your real estate loan and mortgage options to fit your individual needs. Happy house hunting!