Should You Stop Renting and Own in 2019?
WHEN YOU’RE READY TO STOP RENTING?
Sooner or later we come to the realization that renting is no longer an option. But the question is how do we know when it’s a good time to become a homeowner. So is it time for you? Here are a few indicators that you might want to consider.
YOU’VE HUNG ONTO YOUR JOB FOR OVER TWO YEARS
Lenders often require a mortgage borrower to have steady employment for at least two years in the same industry. Mortgage companies are giving borrowers a large sum of money. They want to be reassured that you have the ability to pay your loan each month before granting approval.
If you freelance or are otherwise self-employed, don’t feel left out in the cold. Lenders will look over your tax returns in lieu of providing W-2s. Be careful not to take too many deductions. You want to provide the highest possible net income to increase your chances of obtaining a loan.
YOUR DEBT IS UNDER CONTROL
No one said you need to be debt-free. Lenders don’t expect borrowers to be totally debt free. They just want to be reassured that you don’t have so much debt that it would be a hardship to make your mortgage payment every month.
Lenders gauge your debt using a Debt to Income Ratio. Don’t let this term scare you. It’s quite simple. Your debt-to-income ratio takes into account for how much of your income goes to pay of your existing and proposed mortgage debt. As a rule of thumb your DTI should be less than 36 percent. However many lenders are softening their requirements and allowing borrowers to have a DTI of up to 45 percent with solid credit scores.
There are only two ways to reduce your debt-to-income. You can either generate higher income or pay down your debt. Speak with a local Phoenix Area lender for how to effectively accomplish this.
YOU’RE ABLE TO START SAVING
Having some sort of savings account is the next part of the equation. A lender not only takes your income and debt load into consideration, they require that you’re able to come up with some of the upfront costs in buying a home. Unless your purchasing an investment property, putting down 20% on your home is unrealistic. The minimum down for a FHA loans remains at 3.5%. And for that you still need to have a fair amount of cash on hand. Gone are the days of no-money down home purchases. Sorry.
Aside from the largest expense (down payment) you’ll also need to have reserves for closing costs, inspections, transaction fees and more handily available before the Close of Escrow.
IT’S TIME TO SETTLE DOWN
When you own your home, your making a huge lifestyle change. Many newly converted home buyers are ready to stay in one place for awhile. How long is a while? You can plan on at least the next five years to get the most from your investment. So if you see yourself staying in place for a while, home ownership could be for you.
BUY SOME TOOLS
Always wanted to learn how to paint a room, fix leaky pipe, install a dishwasher. Now’s the time. Don’t worry if getting on top of a 25-foot roof turns you off, your Realtor has plenty of great contractors who will do it at their peril.
ADDITIONAL STOP RENTING RESOURCES
- Your Landlord Probably Hates You… Here’s Why via Brandon Turner
- 12 Overlooked Costs of Renting an Apartment via Allison Martin
- Average Rent Prices in 70 Phoenix Metro Neighborhoods Right Now via Steven Hsieh
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About the Author: The above article, Should You Stop Renting and Own in 2019? was written by Troy J. Elston, a licensed Realtor at West USA Realty, the premiere real estate brokerage based in Peoria Arizona. With over 16 years of experience in the real estate industry, Troy produces stunning results for home buyers and sellers. If you're thinking of BUYING or SELLING a home in the Phoenix Area, Troy would love to share his knowledge and expertise with you.
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