Home>> How To Prepare For Homeownership
As rent prices continue to soar, many renters want to know what they can do to get ready to buy their first home. According to recent data from ApartmentList.com:
“The first half of 2021 has seen the fastest growth in rent prices since the start of our estimates in 2017. Our national rent index has increased by 11.4 percent since January . . . .”
Those rising rental costs may make it seem impossible to prepare for homeownership if you’re a renter. But the truth is, there are ways you can – and should – prepare to purchase your first home. Here’s some expert advice on what to do if you’re ready to learn more about how to escape rising rents.
If you didn’t already know, starting September 18th, Fannie Mae will be taking consistent rent payments into consideration during the underwriting process which could improve your chances of homeownership. Learn more about this by clicking here.
Start Saving – Even Small Amounts – Now
Experts agree, setting aside what you can – even smaller amounts of money – into a dedicated savings account is a great starting point when it comes to saving for a down payment. As Cindy Zuniga-Sanchez, Founder of Zero-Based Budget Coaching LLC, says:
“I recommend saving for a home in a ‘sinking fund’ . . . . This is a savings account separate from your emergency fund that you use to save for a short or mid-term expense.” Zuniga-Sanchez adds saving in smaller increments can help make a large goal – such as saving for a down payment –achievable: “Breaking up your goals into smaller bite-sized pieces by saving incrementally can make a large daunting number more manageable.”
You may not need as much as you think for a downpayment on a home, in this article we break down the actual amount you may need for a downpayment on a home. Various loan options such as FHA, VA, and Conventional loans have varying down payment options that start as low as 3%.
Assess Your Finances and Work on Your Credit
Another tip experts recommend: take a look at your overall finances and credit score and find ways to reduce your debt. According to the HUD, the average credit score of first-time homebuyers is 716. If you’re not sure what your credit score is, there are numerous online tools that can help you check. If your score is below that average, don’t fret. Remember that an average means there are homeowners with credit scores both above and below that threshold.
If you find out your score is below the average, there are several ways to improve your credit before you apply for a loan. HUD recommends reducing your debt as much as you can, paying your bills on time, and using your credit card responsibly.
Concerned about your credit? Check out this article explaining all of our programs with some programs accepting a credit score as low as 600, read more here.
Also, other options such as a rapid rescore may be beneficial depending on your situation, read more about a rapid rescore here.
Start the Conversation with Your Loan Advisor Today
Finally, it’s important to talk to someone who understands the market and what it takes to become a first-time homebuyer. That’s where we come in. A trusted advisor can help you navigate your specific market and talk you through all the available options. Having the right network of real estate and lending professionals in your corner can help you plan for the homebuying process as well as determine what you can afford and how to get pre-approved when you’re ready. To learn more about why you need a pre-approval and the benefits of getting one, read this article.
Most importantly, we can help you understand how homeownership is achievable. As Lauren Bringle, Accredited Financial Advisor with Self Financial, says:
“Don’t write home ownership off just because you have a low income . . . . With the right tools, resources and assistance, you could still achieve your dream.”
Bottom Line
If you’re planning to be a homeowner one day, the best thing you can do is start preparing now. Want more information on the benefits of being a homeowner, click here. Even if you don’t think you’ll purchase for a few years, let’s connect today to discuss the process and to set you up for success on your journey to homeownership.
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