43.3 million people/households in the United States are renters!
Can you believe that?
According to data from Apartment List, this number has risen from 34.6 million just before the Great Recession, and therefore, this means that the total market share of the US renting market is about 36.6%.
And it makes sense why renting is a popular option for many people.
But, what most people don’t realize is that renting only makes them poor and more exposed to the risk of being evicted for no reason at all.
After all, they do not own the property, and their ‘survival’ is at the mercy of their landlord!
Therefore it is time to take ownership of your life?
But how do you do that? I will show you a few tips to prepare yourself for homeownership while still renting.
Let’s get started.
Why Most People Prefer Renting
I’ve decided to start this article at a more familiar place why YOU preferred renting over buying your own home.
Renting is easy. I get this a lot every time I sit down with my clients, asking them why it took them so long to become homeowners, and every time, I get the same answer, renting is more manageable.
Buying a home is a big decision that clogs both your financial and emotional status. And more often than not, many people are afraid of going through that roller-coaster.
What I have realized, too, is that many people do not understand homeownership. What it actually is and why they need it. Naturally, people fear what they don’t understand, hence the general preference of renting.
The truth is, homeownership is easier and more beneficial. When you start paying your mortgage payments at the end of every month, you are actually building equity that money is growing, whereas with renting, the money you give your landlord only makes him richer.
So, get out of that comfort zone, and let’s put you on a journey towards homeownership.
Preparing to become a homeowner
The truth is, the home buying process begins before even talking to your realtor or even applying for the pre-approval for a mortgage. I’ve realized that for most renters, home buying begins in like a year before they actually buy a home. It is a desire, and this is where you begin. You have to want to become a homeowner before you can actually own a home. The more you can do to prepare beforehand, the easier it will be for you.
If you are reading this, that means you are ready to become a homeowner, but then you have to deal with the renter’s dilemma;
Can you save enough money to achieve that goal and still live a better quality of life by owning a home?
The best way to answer that is by first looking at all the factors that affect/influence the home buying process. Additionally, you must gather and learn as much as you can about home buying. This will help you make an informed decision about homeownership and financial responsibility.
One of the factors you have to consider carefully is how much of a home you can afford.
To find out what you can afford, start by first figuring out how much money you can pay per month. Many financial advisors will tell you that this amount will range anywhere between 2 and 4 times your annual salary.
The reason for this is that we are trying to avoid circumstances that might lead you to overinvest in your first home. Of course, you can always buy more later. What you can’t undo is a mortgage loan once taken.
By figuring out your monthly expenditure regarding how much money will be going towards homeownership, the goal is to avoid instances where you are overextending yourself, subjecting yourself to poor living, you’d be better off renting.
Consider the Amount of Down payment
The amount of down payment affects and dictates the interest rates you will pay.
In most cases, though I feel this is an outdated concept, you are supposed to save up to 20% down payment. This is good, but lenders nowadays are willing to pay a lower amount if you cannot afford the 20% down. But if you can afford it, this will keep your interest rate down and help you save more money in the long run. In addition, it will also keep the monthly payments smaller.
Thus, while preparing yourself to become a homeowner, you must consider this fact and plan how to save for the down payment effectively.
Can you qualify for a mortgage?
You may have everything right, and I am assuming that you will not be buying cash. Even so, can you qualify for a mortgage? Lenders require borrowers to have a 28/36 debt to income ratio, which means you have to have 28% or less of your total monthly income going towards the housing costs and 36% or even less going towards monthly debt that you may have and this includes the mortgage payments.
For this reason, I would suggest you try to pay off as much debt as possible before applying for the mortgage. The debt to income ratio is a ratio that most lenders use to determine what you can afford, but it doesn’t account for the expenses and other costs.
It’s Not That Hard! Start Your Journey Today
First, you have to have that desire to become a homeowner. After that, start by calculating how much you can afford based on your budget, income, savings, and monthly expenses. After that, determine the amount of down payment you want to save. Many lenders will ask for anything between 3.5%-20% of the home’s price, but when you work with Eric Lawrence Frazier, MBA, the Founder, and CEO of The Power Is Now Media, you can even get a 0% down payment. Lastly, make sure that you have a solid DTI ratio before applying for the home loan. You can reach Eric at 800-261-1634 ext. 703
About the Power Is Now Media
The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, headquartered in Riverside, California. We are advocates for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com
