Is it Time to Stop Renting and Buy a House?
Are you ready to stop renting? How do you know it is time to stop renting and start owning?
These are questions many potential homeowners have asked themselves.
There is no denying the flexibility that renting offers—you can move relatively quickly when you want, and you do not have to carry a mortgage for decades to have a place to live.
However, if you are like many renters, you are probably at least considering the idea of owning a home.
But how do you know if you are ready for homeownership?
Here are some significant signs you may be ready to stop renting and become a homeowner.
If some or all of these resonate with you, it’s probably time to talk to a real estate agent you trust to start looking for a place you can be happy owning and living in.
The opportunity to become a homeowner can be emotionally and financially rewarding when you have a long-term horizon.
Following some timely first-time buyer tips will ensure your journey from renting to owner goes smoothly.
The following are some of the most common reasons to stop renting and start owning:
1. Your Rent Keeps Increasing.
One reason people think about whether they should buy a house or keep renting is the cost.
In most areas of the country, rents are rising and rising. The increase in rental prices can be frustrating for numerous reasons. You cannot anticipate your housing costs over the long term, which makes it hard to plan your finances.
You also probably feel some frustration with landlords—after all, who likes being told that they need to fork over yet more rent money in the coming year?
There is also the uncertainty of the whole situation that can get to you. Your income is probably not shooting up each year, so why should you be expected to pay more and more rent?
When rent rises, and mortgage rates are low, it can be a good sign that you should start shopping for a home. If you think about it, you’re probably helping to pay someone’s mortgage when you rent.
Unfortunately, that person isn’t you!
Some folks aren’t ready to go from renting to becoming a homeowner. Often the reasons are financial. It could be not enough of a down payment or high amounts of debt, possibly from student loans.
At times, if you can find the opportunity, renting to own a house might make sense. Of course, there are pros and cons associated with rent-to-own arrangements, so make sure you understand them.
2. Interest Rates Are Incredibly Attractive.
One of the better reasons to go from renting to owning a home is when money is unbelievably cheap. When mortgage interest rates are desirable, it’s like a flashing sign that says, “buy, buy, buy.”
Interest rates won’t stay at record lows forever. History shows us that they can turn instead quickly.
When they do, it will be a lost opportunity if you were in a position to buy. Low-interest rates are an excellent reason to consider purchasing a home.
It just takes a little research on how to get the best mortgage rate. Something you can do on your own or employ a mortgage broker to search for the best terms.
3. You Have a History of Managing Your Debt Well.
An excellent reason to stop renting is when you know a mortgage will be easy to manage.
Lenders look closely at your debts and how you manage them.
Ideally, a lender wants you to have a 43% or less debt-to-income ratio, although some conventional loans will allow you to have a 50% DTI.
You can easily calculate your debt to income by adding up your monthly debt payments. Once you know what your monthly debts cost, you can divide that number by your gross monthly income.
If you have high balances on your credit cards, you can pay them down to look more appealing to lenders. You do not have to pay them off completely.
Instead, pay them down enough to hit the right DTI. Then, you can put that extra money into building an emergency fund for your home.
4. You Think It’s Time to Put Down Roots in a Specific Place.
Purchasing a home requires costs that cannot be recouped in the first few years of ownership.
In other words, for a home purchase to make financial sense, you need to be ready to stick around for a while.
Over time, the investment can prove quite positive, but it does take time.
Real Estate has been shown over and over again to be an excellent long-term investment. Like other investments, it is not for someone who might need to move quickly because of a job relocation.
Lenders prefer you to have had the same job for a while, which you will probably stay at for years after you purchase the home. They want a steady, stable income to make you less risky.
Your regular income ensures you won’t miss mortgage payments.
5. You Have a Specific Home or Neighborhood You’ve Pictured Yourself in.
The desire to live in a particular property or neighborhood can be powerful. Maybe your parents are getting ready to downsize, and you have always thought owning their place would be great.
For others, there may have been a house in the town you’ve always wanted to own if it became available.
Some buyers have always pictured themselves living in a desirable neighborhood in town with all of the nearby amenities you love. Different strokes exist for different folks, and emotional attachment can be highly influential in that thinking.
Some people have specific subdivisions they have in mind due to the excellent environment for their kids.
6. You Want to Be Able to Customize Your Home and Lot
Many potential homeowners have dreams about precisely what they want. You might envision having a finished basement with luxurious amenities such as a home gym or a built-in bar.
On the other hand, your spouse may envision having an ensuite bath to die for, complete with a custom tile shower and a double vanity with quartz countertops.
Maybe both of you want a lot with at least an acre of land and room for an in-ground pool. These things become a reality when you stop renting and pull the trigger.
The beauty of owning a home is you can do remodeling and improvements at your leisure.
7. You Are Sick of Pouring Money Into Someone Else’s Mortgage.
Possibly one of the top reasons for not paying rent and starting owning is to stop making someone else money.
As a renter, your rent payments are paying the mortgage of the landlord or property owner. Buying a home makes sense if you are ready to put all that money toward your future.
Each mortgage payment you make will increase the equity in your home, which is an investment for you.
A home purchase is not always a guaranteed home run—all investments carry risks. But, generally, you can expect that you will gain many financial benefits from putting money into the property over the life of your mortgage.
8. There Are Tax Benefits That You’ll Receive When You Stop Renting
Another purely financial reason to stop renting is the tax benefits that come with homeownership.
There are tax advantages to owning a home. When selling, you could have a sizable real estate capital gains exclusion. If you are single, the tax exclusions will be $250,000. If you’re married, the exclusion will jump to $500,000.
Some expenses can be deducted from the capital gains tax as well. These are financial considerations you will never receive until you stop renting.
9. You Have The Financial Stability to Save For an Emergency Fund.
One standard piece of advice for every potential homeowner is to have an emergency fund for the unexpected.
As a renter, your landlord pays for emergencies.
If a pipe bursts, a refrigerator breaks, or an air conditioner stops working, the landlord has to come in and fix it—and pay for those repairs.
But as a homeowner, you are the one responsible for those expenses. You want to be confident you have enough money to weather such emergencies.
I have written about things you need to do before buying a home, including having a down payment and money set aside for emergencies.
If you are considering buying a home, you need to start saving to create an emergency fund. That way, you can handle it without breaking a sweat when something goes wrong—which will happen eventually.
Vanguard has an excellent resource that discusses some of the problems that can rear their ugly head you need to be prepared for.
10. You Just Got Married, and Your Apartment Doesn’t Work Anymore.
A significant life event such as getting married is one of the most common reasons for going from renter to homeowner.
Buying a house before marriage used to be taboo, but that is no longer the case. It is not unconventional thinking for two people to decide to find a home that blends common goals.
Having an apartment usually does not satisfy blending two families, especially if kids are involved.
11. You Need Room For a Growing Family.
More room is another substantial reason to stop renting and purchasing a home. If you expect to have a child shortly, it makes sense to start considering homeownership.
While renting is sometimes a necessity for growing families, if you are fortunate enough to be in a position where you can buy a home, doing so can offer many benefits for you and your growing family.
Your new home can give you room to expand, such as providing your family bedrooms, bathrooms, and all the other spaces that make life easier. The house can also be a stable location for peace of mind for you and all your loved ones.
By becoming a homeowner, you’ll be able to pick and choose the kind of property that will serve the needs of your lifestyle.
Buying a home can not only be rewarding but fun as well. It is a chance to spread your wings and take another step toward becoming an adult.
12. You Are Ready to Pay a Down Payment and Closing Costs.
One of the most significant signs you are ready to move from renting to owning a home is having a down payment.
Financial stability is a powerful indicator that you are prepared to buy a home—particularly when it comes to down payments and closing costs.
You want to be able to pay the down payment to get a mortgage, and you want to pay the closing costs so you can finalize your purchase.
Don’t worry if you don’t have 20% down—many loans do not require so much for a down payment.
There are numerous loan programs available for first-time buyers.
It’s not always apparent as a first-timer because of the many mortgage choices.
An experienced mortgage broker can come in handy to answer all of the questions you should be asking a lender. Remember, you should be interviewing them as much as they are interviewing you.
For first-time homebuyers, FHA mortgages have become popular. Some FHA loans only require 3.5% down, while loans backed by Fannie Mae and Freddie Mac only need 3% down.
If you can come up with 3% down and qualify for the right loan—and have your closing costs in order—you can likely become a homeowner.
When buying a fixer-upper, you may also want to consider an FHA 203k loan which allows for rolling the costs of improvements into one mortgage.
13. You Have Improved Your Credit Score.
The credit score you bring to lenders will play a significant role in the type of financing you can get. The worse your credit score, the fewer options you have available when buying a home.
That is why it is essential to do what you can to improve your credit score before you stop renting and buying a home.
The better your credit score, the more options you will have and the more money you can save on your mortgage.
If you have improved your credit score, it may be time to talk to a lender about what you can do to get a mortgage. You can sometimes qualify for a mortgage with a credit score of 500—but that does not mean it will be the mortgage you want.
The mortgage will have an undesirable rate and require a higher down payment. But, if you have a higher credit score, the loan will have a better rate and require a lower down payment.
If you need to improve your credit score, get a free copy of your credit report, and address any issues that might hurt your credit score.
Mortgage professionals and real estate agents continuously preach the importance of the best credit scores – this is why!
While you can get a mortgage with bad credit, the terms offered by the lender won’t be ideal. You’ll end up paying thousands more for the property due to higher interest rates.
Steps to Stop Renting and Buy a House
Once you have committed to stop renting and purchase a home, you will want to follow the following steps.
- Choose a lender
- Get pre-approved for a mortgage
- Find an excellent buyer’s agent to work with
- Start looking at homes that match your criteria
- Make an offer on a home you love
- Get the home inspected by a professional home inspector
- Apply for a mortgage and wait for your commitment
- Get homeowner’s insurance
- Change your address with the post office
- Hire a moving company or rent a moving truck
- Go to closing.
Congrats, you have now broken free from renting!
Final thoughts on Stopping Renting
Going from a renter to a homeowner is not something that should be made as a snap judgment. There should be a lot of planning involved in buying a house for the first time.
Those who are unprepared typically make buying mistakes they regret later on. Don’t be one of them!
Hopefully, you have enjoyed these eleven reasons why you may want to stop renting and become a homeowner.
Other Helpful Home-Buying Resources
- Sound home buying advice – see some expert guidance when you purchase a house for the first time.
- Is buying a fixer-upper a good move – get some insights on what you should be thinking about when purchasing a home that is not in the most fabulous condition.
Use the above articles to make excellent home-buying decisions. Before you know it, you’ll stop renting and be in a home you love.
About the Author: The above Real Estate information on stop renting and start owning was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and would love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
