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Going from Renting your Home to Purchasing One

Oftentimes, renters feel like they are throwing money out the window by renting their home instead of purchasing one. And if they don't feel that way now, someone in their life is going to say something to make them feel this way. And though I understand the logic in this argument, I also know, that isn't always the case. I rented for a very long time before making my home purchase because the time just wasn't right for me.

If you are a renter, there are many reasons why purchasing a home might not be the right move for you at this time in your life. Perhaps it's a decision you prefer to make with a spouse and want to wait until you're married. Maybe you wish to build your first home. Or, it's possible you just don't know where you will be a year from now. Purchasing a home does require some commitment, not only to the maintenance of the house itself but also to the mortgage. If you don't think you'll be living in your home for more than 5 years, you could actually lose money on the purchase and sale of your home.

All that being said, if you are renting a home now but know that when you feel more settled and financially secure you would like to purchase your first home, then there are some things you can begin working on now to make that next step an easier transition.

First, begin working on getting your credit score as high as you possibly can. Your credit score is an indication of the type of risk you pose to anyone from whom you wish to borrow money. The higher your credit score, the lower the risk to lend you money. You get rewarded for having a strong credit score by the interest rate you're offered. A really low interest rate is worth more than a good price on a home. To research your score you can log onto the website of any one of the credit agencies, or go to

In addition to this, keep a very close eye on your credit. Not only the score but the activity as well. You want to be able to explain everything on your report. And if something is there that shouldn't be, you want to get it cleared up before you apply for your mortgage.

Make sure you have at least 3 lines of credit. That can be a car loan, a student loan and a gas card. You need something that demonstrates a pattern of payment. Gas cards are great because they don't allow large balances for revolving credit. You pretty much need to pay them off as fast as you use them.

The more money you have to put down on your home the better. Depending on where you are in life, the type of mortgage loan for which you apply and the price of the home you think you might like to buy, your down payment requirement can be anywhere from 3.5% to 20% of the purchase price of the home. You will need to have money saved for other incidentals, also known as closing costs. Those include but are not limited to the following: Option Fee , Survey, Home inspections , Application Fee, Appraisal, Property Insurance, Property Taxes and HOA Fees (if applicable). When you get closer to the point that you are ready to purchase your home, your lender and Realtor can help you narrow down those closing costs and assign numbers to them.

Start conversations with both a Realtor and a Mortgage Lender early on. A Realtor can get an assessment of your life situation and future goals and help you determine the right path. Based on your needs, likes and dislikes, it might be that a condo in town would be a better fit for you than a home in the suburbs. A Realtor can help you plan your home purchase and refer you to really good people from whom you might need help to get you where you want to go, especially a good mortgage lender.

When it comes to a mortgage lender, you have several options to pick from: you can use one from your bank or credit union, you can contact an online lender, or you can reach out to someone locally who specializes in mortgage lending.

My recommendation, if you are a first time home buyer is to establish a relationship with a local mortgage lender. A Realtor can refer you to one that is reputable. This is the most important purchase of your life and you want the people involved to get that and work with you. A local lender will pretty much be available to you every day, including weekends. That matters when you are looking at properties and need your lender to provide you with something to go with an offer you're making on a Saturday. You will also be able to meet them face to face to get important issues addressed. They can work with you to help you develop a plan to improve your credit score and build your savings. Having a strong relationship with a mortgage lender can be very valuable to you.

And finally, get to know the areas in town where you think you might like to live. As a renter you have a lot of time to do your research on geography. A Realtor can help you understand the financial commitment required to live in any given community along with useful information about amenities and schools.

Remember, home ownership isn't for everyone and if you like having the convenience and flexibility of renting your home, then that's what you should do. But if you think you might like to make home ownership something in your life, then preparing for that moment now is the best thing you can do.

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