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Signs You Are Ready to Become a Homeowner

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 reasons why you might be prepared to 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 both emotionally and financially rewarding when you have a long-term horizon. By following some sound first-time buyer tips, you’ll ensure that your journey from renting to owner goes smoothly.

The following are some of the most common reasons why renters decide now is the time to own a home:

1. Your Rent Keeps Increasing.

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 and up each year, so why should you be expected to pay more and more rent?

When rent is going up and mortgage rates are low, it can be a good sign that you should start shopping for a home. If you think about it – when you are renting, you’re probably helping to pay someone’s mortgage. Unfortunately, that person isn’t you!

Some folks aren’t quite ready to go right from renting into becoming a homeowner. Often the reasons are financial ones. 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 interest rates on mortgages are desirable, it’s like a flashing sign that says “buy buy buy.” Interests rates won’t stay at record lows forever. History shows us that they can turn instead quickly.

3. You Have a History of Managing Your Debt Well.

Lenders look closely at the amount of debt you have and how you have managed that debt. 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 calculate your debt to income easily by adding up all of 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 paying a lot of costs at the beginning 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 as well, a job you are probably going to stay at for years after you purchase the home. They prefer you to have a steady, stable income so that you are less of a risk. Your regular income ensures you won’t miss mortgage payments.

5. You Are Sick of Pouring Money Into Someone Else’s Mortgage.

As a renter, your rent payments are paying the mortgage of the landlord or property owner. If you are ready to put all that money towards your future, buying a home makes sense. 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.

There are also tax advantages of owning a home as well. When it comes time to sell, 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.

6. You Need Room For a Growing Family.

Having more room is another substantial reason for purchasing a home. If you are expecting 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 serve as 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 towards becoming an adult.

7. 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 be able to pay the closing costs so you can finalize your purchase. And 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 can be very confusing to a first-timer because of how many mortgage choices are out there. 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 really 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.

8. 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 go to try and buy 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 a mortgage that you want.

The mortgage will have an undesirable rate and will 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 be hurting your credit score.

Final thoughts

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 owning a home could be better than renting.

Monday, Feb. 21, is the third Monday in February. And in these United States of America, that makes it Presidents Day. Right?

That’s true, but not entirely true. According to the federal government, the day we’re officially observing is called Washington’s Birthday. Many Americans know this day, though, as Presidents Day, to honor our first president (born Feb. 22, 1732) and, ostensibly, our sixteenth, Abraham Lincoln (born Feb. 12, 1809). Over the years the day has also come to mean a recognition of all presidents, or the office of the president, or … something. It’s complicated.

In fact, what you call the holiday and what you think it means may depend on exactly where in our nation you live or grew up. The day that many of us call Presidents Day actually goes by many names and has any number of interpretations, making it one of our national calendar’s most confusing events.

Luckily, we are here to help.

The history of what we call Presidents Day goes back to the first years of our nation. As Washington’s Birthday, it was celebrated in public for the first time in the 1790s, while President Washington was actually still President Washington. It grew in prominence after his 1799 death and his ascension to godlike status in the United States. 

In 1885, Washington’s Birthday became an official federal holiday, with President Chester A. Arthur getting the honor of signing the official federal observance into U.S. law. In fact, this may be Arthur’s most enduring legacy, other than being regarded as the president to possess the best-ever sideburns to grace the Oval Office. And in the 19th century, that was really saying something.
So yes, the official federal holiday celebrates George Washington’s birthday, and only George Washington’s birthday. Washington’s birthday was commemorated every Feb. 22 until 1968, when Congress – apparently needing a three-day weekend to cope with the February Blahs – passed the Uniform Monday Holiday Act, and President Lyndon B. Johnson signed it into law. This created “observed” federal holidays on Mondays, and ever since 1971 – Richard M. Nixon’s time – the federal government festively marks the third Monday in February by not delivering the mail.

We should note that while this act remains one of Congress’ more popular decisions, it also guaranteed we would never again celebrate Washington’s birthday on his actual birthday: The latest that the third Monday in February can land is Feb. 21. As Doris Day once said with cheerful fatalism in her song from the Eisenhower era, though: Que sera sera. Somehow, we have carried on as a nation. 

By the time Washington’s Birthday became an official federal holiday in 1885, most U.S. states (well, most states on the winning side of the Civil War, anyway) had also begun observing the birthday of another great American statesman – Abraham Lincoln – as a separate, legal holiday each Feb. 12. The proximity of the two men’s birthdays on the calendar didn’t go unnoticed. Through the decades, there have been occasional attempts – it nearly happened in 1951 – to reboot Washington’s Birthday as Presidents Day to give Lincoln a much-deserved nod at the federal level. Yet, neither Congress nor the president, whoever he might have been at the time, has ever stipulated that Washington’s Birthday be renamed.

So how did the Great Emancipator nudge his way into the discussion? President Lincoln is clearly now widely celebrated on the third Monday of February, along with President Washington. The answer is deeply and profoundly American: marketing. In the 1980s, that roaring era of excess led by Ronald Reagan and later, George H.W. Bush, advertising campaigns for holiday furniture sales and deals for other durable-goods began adding Lincoln to the mix and popularizing the term Presidents Day. And, because nothing says “democracy” like a sweet discount on a new recliner, Americans have largely accepted it as the day’s informal name ever since.

The pandemic ignited a home-buying frenzy as the decade-long housing shortage converged with historically-low mortgage rates, shifting workplace dynamics and new opportunities for young buyers to pursue their first homes. As we near the end of 2021, here’s a look at the expectations of real estate experts for 2022.

We expect a whirlwind 2022 for the housing market. Home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs. A gradual uptick in mortgage rates will make affordability a top consideration for home buyers, especially the 45 million Millennials aged 26 to 35 who are at prime first-time home buyer age. Demand from these young households will keep the market competitive and fast-paced despite a small uptick in housing inventory as builders continue to ramp up production, increasing single-family starts by 5% in 2022.

Although affordability challenges will come from rising prices and mortgage rates, rising rents, which are projected to increase 7.1% will be a strong motivator for many hopeful first-time buyers. On top of this, all home shoppers will have some advantages that stem from a competitive jobs market. Incomes are projected to increase by 3.3% and with many employers looking to attract and retain talent without impacting costs, we expect workplace flexibility will continue. This should free-up potential home buyers to broaden their search parameters to include the suburbs and in some cases even completely new, less pricey metro areas.  This means we expect the suburbs and markets that offer good real estate value to continue to attract an outsized share of attention. While this has reduced the relative affordability of many such areas, they still offer a lower price per square foot and thus opportunity for buyers. On the whole, the housing market will remain competitive, but buyers will have new ways to confront these challenges.

Home sales in 2022 should be solid overall, but high home prices will likely be joined by higher mortgage rates, tempering sales compared to this year. The outsized annual increases in home prices seen in 2021 should slow in 2022, but even so will leave home prices at or near record highs. At the same time, mortgage rates will tend to be firmer as the Fed ends its bond-buying programs and begins to lift interest rates by the middle of the year. Pricier homes financed with higher mortgage rates will exacerbate affordability issues, and this can be expected to dampen demand from homebuyers on the margins of the housing market.

Home buyers should find the coming months to be more advantageous than any time in 2021. While sellers remain in a very strong position, price stabilization and the continuation of competitive interest rates may bring some welcome relief to buyers in the new year. Inventory is and likely will remain a challenge for some time as shortages in labor and materials, as well as general supply chain challenges, delay new construction. Last year was a strong year for sales and 2022 should continue to be. As the market begins to rebalance and buyers who were sitting on the fence decide to get in the game, the value of a skilled, full-time real estate professional will be even more evident. 

Much of the real estate industry could be digitized even before social distancing spurred a radical uptake in digitization. The push toward modernization will continue at lightning speed, yet while more homes are found online and virtual home tours take the place of open houses, the emotional investment and industry-understanding that agents can provide for a complex transaction will remain crucial to the home-buying and selling process.