For people who have been renting for the longest time, buying a home might never have crossed their minds. They’ve probably become comfortable with the security of having a home and having to mind only the monthly rent.
But there are also those who have finally decided that they’d like to have the long-term security of buying and having their own home.
The most common stumbling block, though, is that a lot of renters don’t have the money to pay for the down payment.
Fortunately, there are renter home loan programs for first-time homebuyers offered by state and local housing departments and agencies.
If you want to know more about how you can finally buy your own home, you might want to read on:
1. Be Ready For The Down Payment
If you don’t have enough money to pay the down payment, there are financial assistance programs that would help you pay off the down payment.
Here are some examples of down payment assistance programs:
- Grants: Grants aren’t loans but are given to the recipients for free, hence they don’t have to pay back any of it. They can use it to for their down payment.
- Forgivable Loans: These loans are given to those who have qualified for a mortgage, but don’t have enough savings for the down payment. This is usually given as a loan separate from the original mortgage. Borrowers who are given forgivable loans won’t be required to pay back the loan for the down payment as long as they stay in the home for a certain number of years.
- Deferred Payment Loans: There are also deferred payment loans given to qualified borrowers. The borrowers are given a separate loan for the down payment. They don’t have to pay this second loan until they’ve paid for the original mortgage loan. These loans usually have zero interest charged on them.
- Low-interest Loans: Another way to help the borrower pay for the down payment is thru a low-interest loan. This is also a loan separate from the original mortgage loan. Borrowers are allowed to loan a separate amount for the down payment. This loan would be charged very low-interest rates–usually way below the prevailing market lending and interest rates.
2. Find Out If You’re Ready To Buy
Before you buy your own home, you might want to go over a few things to find out if you’re ready to become a homeowner.
This doesn’t yet include the things you need before you move into your new house.
It’s important to keep in mind that owning a home will entail spending on a few other things, which you wouldn’t otherwise if you were renting.
For instance, you’re going to pay for monthly mortgage payments, mortgage insurance, set aside money for minor repairs, pay for homeowner’s association dues, and real estate taxes.
You’ll also have to consider the following so you can buy and own a home.
- Financial considerations: You have to assess your financial situation. Unless you have money to pay for everything with cash on the spot, you’ll most likely have to apply for a home mortgage loan or some other form of bank financing. Even if you get approved for a home loan, you’re most likely going to pay a down payment of up to 20% of the purchase price.
- Career prospects: Aside from your financial situation, you’ll also have to consider your job and career prospects. If your current job might possibly take you out of state and require you to live someplace else for long periods, it might not make sense to buy a home you can’t reside in for quite a number of years.
- Personal circumstances: You also have to take into account your personal plans and circumstances. If you want to live near your immediate relatives and close friends, you’ll also have to take that into consideration in your choice of home. If you’re already engaged or married, you’ll have to ask your partner or spouse about their considerations and plans, too.
3. Preparing To Buy
If you’ve already decided on a locality or general area where you want to purchase your home, you’ll have to sort out some necessary preparations.
Here are some of the things you need to do to prepare for buying a home:
- Credit score: An important factor that banks and lenders will consider before they grant your loan pre-approval is your credit score. In the U.S., you should strive to keep a credit score of 620 or higher. To have a good credit score, pay any outstanding bills or past dues from your previous personal loans, salary loans, and credit card purchases.
- Debt-to-income ratio: Another important factor that banks and lenders will look at is your debt-to-income ratio. This is the number of your debts in relation to how much you’re earning each month. They’re going to include the proposed loan mortgage in computing for this ratio.
- Loan pre-Approval: This is important so you’ll know how much banks and lenders are willing to let you borrow for your home purchase. Coupled with the money you set aside for your down payment, this would give you a more realistic idea of the home selling prices that are within the range of your capacity to pay.
4. Looking For A Home
After you’ve assessed your circumstances and made the necessary preparations for your purchase, you can now move on to the next stage, which is to search and negotiate for the purchase of your home.
Some renters prefer to buy rent-to-own homes because it makes them feel like they’re just paying monthly rents.
Here are some of the things you need to consider in choosing a home:
- Financial considerations: Your search for a house should be limited to the price range that your money can buy.
- Physical considerations: Aside from the financial considerations, you’ll have to take into account your physical considerations. This means checking the neighborhood there are nearby good schools and how you’ll get to work from there.
- Contract of sale and mortgage: If you’ve already settled on a home you want to buy, you should also start the ball rolling by negotiating with the seller for the terms and conditions of the contract of sale.
Closing The Sale
You might want to consult a real estate lawyer about the draft contract of sale. Doing so will ensure that you’ll it well and there will be no provisions that are grossly disadvantageous to you.
If everything seems to be in order, and both you and the seller are happy with the terms of the sale, you may now close the sale and finalize the purchase.
Set a date and time for the signing and exchange of all relevant contracts and documents.
After the signing, you get the title of the home as the new owner.