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Due to the COVID-19 pandemic, many tenants around the country have been holed up at home for quite some time. After working from your rental for so long, you might be contemplating buying a place of your own. If you're unsure if the time is right, here's some guidance that will help you make your decision:
Why People Buy a Home
While there are advantages to renting an apartment or a house, sooner or later people pursue the American dream of homeownership. Owning a home comes with the following advantages:
1. A Savings Plan
When you buy a house, you stop paying your landlord's mortgage and start paying your own mortgage. Once you pay off your loan, you will own your home free and clear. You will have a valuable asset, while all you've done over the years is make your monthly housing payment.
2. Building Equity for Future Expenses
As you pay down your mortgage and your house increases in value, you build up equity that you can borrow against. If sometime down the road you need money to pay for large expenses, such as school tuitions or medical bills, you can go back to your lender to obtain the funds through a home equity loan.
3. Be Your Own Landlord
When you're a tenant, there are limits to what you can do with your place. If you're a pet lover, your landlord might not allow you to own a dog. If you want to break a wall down to make a room larger, that might violate your rental agreement, as well.
As a homeowner, you can decide what's good for your home and act accordingly. Additionally, any repairs, landscaping, or other improvements you make will increase the value of your home - not your landlord's.
4. A Stable and Affordable Housing Payment
Unless you live in an area that has rent control, your rent is likely to increase significantly over time. When you buy a home with a fixed-rate mortgage, your monthly housing payment will remain fairly stable for the life of the loan. After several years, the payments on your mortgage might be less than what you would have been paying in rent.
So, What's the First Step?
If you've decided to buy a home, you've already taken the first step toward becoming a homeowner. The next step is to get pre-qualified by a lender. During the pre-qualification process, a loan officer will ask you questions about your:
- Income - to figure out how much of a mortgage payment you can afford to pay every month
- Assets - to ensure that you have enough money to make a down payment
- Credit - to determine if you're creditworthy and the banks will lend you money
After discussing your situation with you, the lender will give you the price range that you should be looking for in a home. They will also provide you a pre-qualification letter that you can show to real estate agents and sellers to assure them that you've spoken to a loan officer.
Although it doesn't prove that you will qualify for a loan, the pre-qualification letter does show that you aren't shooting in the dark and that - based on the information you provided to the lender - you should be able to qualify. When you do find a home that you like, your loan officer will already know your situation and will be able to help you proceed with the mortgage process.
Contact a Local Expert
If you have questions about homeownership or the mortgage process, you should reach out to a local expert. First Savings Mortgage has been serving clients in the Washington Metro area for nearly 30 years. Contact one of their professional loan officers, who will be happy to help you with your mortgage needs.