More millennials, and even members of generation Z, are making the move from renting to homeowning. This exciting transition is a life milestone that can positively impact financial stability. The Bedros Team wants to make sure that if you are considering this move, you have the right tips and tools to transition into homeownership with ease.
One of the first steps to take as a renter is to understand the terms of your lease. If you are not 100% certain of the terms you signed, contact your current leasing office or landlord for a copy of your contract. Some apartment complexes require a 30-60 day written notice for nonrenewal, and a fee may be associated with not complying with this requirement.
Since the time it can take to find your new home and finalize a closing can vary, also ask your leasing office about short-term leases or month-to-month payments. Be prepared by knowing if your monthly rent payment will increase if you need to continue on a short-term basis after your current lease ends.
Once you have a full understanding of when and how to properly terminate your lease, it’s time to set a realistic, obtainable budget for your new home. Mortgage calculators are pretty quick to find online, and they can be a great place to start. However, most mortgage calculators simply look at the money you make and give you a maximum affordable mortgage based on your income. A widely accepted standard is that your monthly home-related costs should not be more than 28% of your gross income. This is a fairly simply calculation, but to better determine an affordable mortgage, you should consider all of your fixed monthly debts. This includes monthly payments on student loans, cars, credit cards, and any other set financial obligations.
After totaling all of your fixed debts, you can use a more advanced mortgage calculator to find a more realistically affordable mortgage payment for your current financial situation. If possible, you do not want your total debts, including your potential mortgage, to exceed 36% of your income.
Once you have an estimate of the mortgage you can afford, it’s time to compare lenders and get preapproved for a home loan. Collect quotes from more than one lender to ensure you are getting the best mortgage rate possible and selecting a great financial partner. There are multiple types of institutions that offer mortgage loans including online-only banks, credit unions and mutual savings banks. Choose at least three lenders to compare rates, incentives and fees, and then select one or two institutions to apply for preapproval. Preapproval shows a seller that you are ready to make a serious commitment.
With a preapproval letter in hand, you can focus on determining the top priorities in your home search. Make a list of everything you are looking for in your ideal home. Whether you want a big backyard for your dog, a short commute to work, a neighborhood in a good school zone or a spacious two car garage, write it down. If you are buying a home with a partner, ask them to make their own list so you can compare the two for similarities and differences. When your list is complete, rank each item 1-10 from highest to lowest priority.
Your priority list will help you start a conversation with your Accredited Buyer’s Representative (ABR). A buyer’s representative will work on your behalf to find a home that addresses your top priorities while keeping your budget in mind. An ABR is trained on buyer representation and contract negotiation strategies. ABRs also understand the best practices for closing procedures. Since you will be spending a lot of time with your buyer’s representative at meetings and showings, interview 2-3 individuals to ensure you hire someone with experience who will prioritize you as their client.
If you are looking for an Accredited Buyer’s Representative in Knoxville or surrounding counties, contact our team! We have two ABR team members, Bedros and Lindsay, who would enjoy the opportunity to help you find your ideal home!