FREEEEEDOM!!! Your hard work has finally paid-off. After years of studying, homework, tests, part-time jobs (or maybe full-time if you’re a warrior) and countless late nights you finally earned your college degree. Now what?
If you’re like many recent graduates, you’re thinking about buying a home. Home ownership is certainly a logical next-step, but are you ready? Here’s a checklist of items you should tackle before you go shopping:
According to a 2013 study published by the National Association of Home Builders, Americans were staying in their homes for an average of 13 years. Just 3 years later, the real estate blog HousingWire.com reported a shorter average tenure for home ownership in a 2016 article. According to HousingWire’s assessment, home owners are staying put for about 8 years before selling, but that number is trending upward. Conventional industry wisdom says that you should stay put for at least five years to build solid equity before selling your home, and a stay of less than two years could result in an upside-down mortgage. “Upside-down” means you owe more than you can net in a sale.
Why should the length of time you own the home matter to you? The longer you stay in your home, the more equity you build before selling or refinancing. Many first-time home buyers make the minimum down payment requirement when obtaining their mortgage, and could find themselves in a state of negative equity if they try to sell their home shortly after purchasing. This situation is also known as being “underwater” on one’s loan.
Consider how long you plan to stay in your first home. If it’s less than two years, you may want to rent until you’re ready to commit to a longer stay.
Before you buy a house, you should secure steady employment. This one may seem overly-obvious, but many first-time home buyers put the cart before the horse. If you’re like most home buyers, you plan to obtain a mortgage to purchase your home. The National Association of Realtors reported in 2015 that 97% of Generation-Y buyers financed their home purchase, and 88% of all home buyers used some form of financing. To do so, you need to show a steady source of income before the lender will approve you.
Part-time, temporary, and conditional sources of income aren’t all that attractive to lenders. A steady job with long-term potential tells lenders that you likely have the ability to repay a loan.
Pay your bills on time. Pay your bills on time. Pay your bills on time.
Paying one or two bills late may not seem like a big deal at the time, but it will have an adverse effect on your credit score. A late payment, also called a slow payment, can show up on your credit report for up to 10 years. The amount by which your credit score decreases for each slow payment depends on the amount of credit you’ve built. If you’re just starting to establish your own credit every little detail counts, so take those due dates seriously! Ruoff’s blog on building credit offers more information on this important topic.
Finances can be stressful, especially when you don’t know all the rules. Does your job qualify as “long-term?” Will your student loans affect your ability to obtain a mortgage? How much house can you afford? At Ruoff Home Mortgage, it’s our job to answer those questions for you.
Most buyers who obtain a mortgage finance 90% of their home. Getting the right loan on the right terms for you can make a big financial difference! Contact one of our Home Loan Professionals and take the guesswork out of the home-buying equation.
You need the help of a professional when buying a home. Sure, shopping online in your PJ’s is fun, but what about the nitty gritty of the real estate process? Buying a home involves contracts, negotiations, taxes, appraisal, scheduling, the inspection, the inspection response, closing conditions, AAAAHHH!
Check out Ruoff’s blog on Buyer Representation for more on why we’re pro-representation for home buyers. Then find an experienced Realtor in your area.
Buying a home is a wonderful way to begin your post-college years. Your home could be a profitable investment, and one that you can start enjoying right away. Complete the five steps above before you start shopping. A calculated approach to home buying ensures that you’ll stay on-track financially as you enter the next phase of life.
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