Renting with the goal of buying
If you are a renter hoping to make the leap into homeownership, make sure you are fully prepared for the financial commitments that come with owning a home.
If one day you aspire to be a homeowner, keep your long-term goals in mind. The transition from renting to buying is a big step that requires patience and lots of planning.
Here are three ways you can prepare to become a homeowner while renting.
Budget for your total expenses
A monthly mortgage payment isn’t the only cost you’ll be responsible for when you purchase a home. Homeownership comes with both upfront and recurring costs. You’ll need to factor these costs in as you determine how much you’ll need to save.
- Down payments typically range from 3-20% of the purchase price.
- Closing costs typically range from 2-5% of the purchase price.
- Moving expenses range from hundreds to thousands of dollars.
- Homeowners Insurance & Property Taxes are recurring costs that vary widely from state-to-state and property-to-property.
Establish and maintain good credit
Your credit is one of the most important factors lenders use when deciding if you qualify for a mortgage loan.
- Start to build a credit history:
- Open a free or low-cost checking or savings account.
- Apply for a credit card and use it responsibly.
- Make sure your on-time rent payments are being reported to credit bureaus.
- Make all your payments on time and in full.
- Monitor your credit by checking your credit report annually.
Make a spending and savings plan
Once you determine how much you’ll need to save, create a spending and savings plan and stick to it.
- Determine how much you need to save monthly to reach your goal.
- Carefully track your income and all expenses.
- Trim non-essentials.
- Check in with your progress and stay on track.
Trimming non-essentials such as travel, dining out, and a daily latte can save you hundreds, or even thousands, a year.
Owning a home can provide you with the independence you've always wanted, but it's important to remember that homeownership comes with new responsibilities. When you think you are ready, talk to a housing counselor or industry professional to discuss your options.
Related Topics
How to get your rent reported to credit bureaus
Learn how to report your on-time rental payments to credit bureaus.
Understanding your credit
Learn how your credit score and history may affect your eligibility to rent a home.
Tools and Resources
Rent vs. Buy Calculator
Understand the financial differences between renting and owning a home.