29 Jan Transitioning from Renter to Buyer in 5 Short Steps
Long-time renters may want to reconsider their housing options. With mortgages currently at low rates, today’s market provides the perfect opportunity for renters to convert into first-time buyers. And it isn’t as difficult as one may think.
“With calculated preparation, an affordable transition that packs long-term benefits is well within reach,” says Steve Ostad, founder of a New York City independent real estate brokerage.
Although first-time buyer tax credits have expired, there are still many other enticing reasons to buy. To opt for equity and freedom from landlords, Ostad suggests renters use these five simple and economical steps to help transition themselves towards homeownership:
1. Retrieve your credit score via FICO. Whenever you’re applying for any type of loan or mortgage, lenders always want to know your credit risk level. FICO is the principal credit scoring program used by lenders in determining this risk. Your FICO score is a huge factor in determining the amount that lenders will agree to loan you and also the details of the terms. “It’s the go-to credit score program. Any other scoring program is a waste of time,” says Ostad.
2. Reduce credit usage. Your FICO score is extremely sensitive to credit usage. The most important way to help your score is to reduce your overall usage. In addition, be sure to pay your bills on time. Pay debt off rather than shuffle it around. Remember, the better your score, the better terms you may receive on loans.
3. Plan for a 30-year fixed rate mortgage. In an unstable economy, the 30-year fixed rate is really the safest way to go, says Ostad. Don’t simply accept any mortgage, however. Shop different lenders and make sure the 30-year fixed rate is your best option.
4. Research and enroll in first-time home buyer programs. Many of these programs alleviate large down-payments and forgive loans. Tax credits for first-timers may have expired, but there are other options. Do your research to find out what is currently available in Idaho at the time of your search.
5. Utilize the MLS. The Multiple Listing service is the most comprehensive and up-to-date database for all available listings. Use an MLS to explore any and all options that fit your desired location and price range.
Ostad also recommends that buyers be realistic. “One thing I stress is to not over-extend yourself. If you share a budget with a broker, they may try to show you something a little out of reach. If you fall in love at first sight, you’ll want a place that’s out of your range,” he says.
“Renting is almost throwing your money into a black hole. Although it may seem nerve-wracking at first to put that initial payment down, you’re going to end up spending that money on rent regardless. At least now you will have a tangible asset that’s proven to eventually head up in value. It’s a great time to take advantage of the good financing available.”
Reprinted with permission from RISMedia. ©2015. All rights reserved.