How to Stop Renting At Any Age
Renting a home often feels a lot like throwing your money out the window. Every month, you pay a good chunk of your check to live in a home that belongs to someone else. When your lease is up, and you move out, the home you have been paying for stays put while you have to move onto something else.
And even though you pay to use the place, you still have to follow the rules about what color paint you can use, whether you can hang things on the walls, and so on. Is it any wonder that buying a home is such a common goal?
If you feel like it’s time to stop renting and start owning, there’s some good news: It’s completely possible. Take a look at the tips below to help you meet this goal.
But First... Make Sure You Are Ready
This really is important. For some reason, people feel pressured to buy a house as quickly as possible. Unfortunately, it’s not always the best decision or the best time. The truth is that there is no perfect time to stop renting and buy your own place, so you have to decide if it’s the right choice for you at this time.
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Renting vs. Owning
To be truthful, though, renting comes with its own pain. For instance, one of my closest friends told me that her brother is being kicked out of the house he’s renting. Is it because he didn’t pay his rent or follow the tenant rules? Nope, not at all. In fact, it has nothing to do with him.
His landlord, however, decided for some reason not to pay the property taxes on this rental. I do not know if he didn’t have the money, just forgot, or did it intentionally.
What I do know is that because he did not meet his obligation, the state is taking the property. This leaves my friend’s brother without a place to live before his lease is up and after he has been faithfully paying his rent for a couple of years now.
My point of all of this is to give you a real view of the potential risks with both options. I could give you a list of pros and cons, but I feel it’s easier to imagine when you have real-world examples to picture.
When you are comparing these two options, really think them through. Both have advantages and disadvantages. Ask yourself if the worst were to occur, which could you manage better.
For example, if you were to be kicked out of a rental for any reason, do you have somewhere else to stay? Could you stay with a family member or friend until you found another place?
Likewise, if your roof were to start leaking or your pipes burst in the home you buy, do you have the resources to fix it? Which would have the smallest impact on you?
Once you answer this question, you can more easily decide which route to go. Even if you feel renting is the best option for now, it doesn’t have to be forever. You can start working on building up your financial health to buy a house while you are renting. That way, when you are ready, a burst pipe or leaky roof will not throw you off so much.
Steps to Stop Renting When You’re Ready
Whether you are ready to stop renting now or are just trying to get to that point, the following steps can help.
1. Get Your Credit Report
There are two main obstacles most people face when getting ready to buy a home: their credit and the down payment. Now, if you’re like me, your mind is probably going to go into hyperdrive planning how to take care of both of these things at once.
Don’t even let yourself go crazy with that just yet. It’s best to focus on one thing at a time. In my opinion, the best way to buy a house is to start by focusing on debt. Why? Two things: 1. The longer debt goes unpaid, the more interest you face; and 2. It doesn’t matter how much money you have saved — if your credit and debt to income ratio are not good, you will not get a loan.
So aim to pay off your debt first. Doing so will get you better loan terms, anyway. Start by getting your credit report, and then follow the next step to determine what debts to focus on first.
Talk to a Specialist About Your Credit
Let me tell you a secret. Okay, maybe not necessarily a secret, but it seems not to be common knowledge. And, it is a very important piece of information to have, so here you go: Every industry looks at your credit differently.
When you get your free credit report or check in with your favorite credit monitoring app, you can see what is on your credit. You see what you owe, how long debts will be on your credit, your score, and other important information. Everything on there plays an important role in your credit- this is common knowledge.
What is not is that each of those pieces of your credit report is measured differently depending on what type of credit you are applying for. This is one reason that speaking to a pro in that industry is so important.
Let me try to explain a little better. I can tell you everything on my credit. I look at it frequently and know the information like the back of my hand. As such, I thought I knew what steps I needed to take to get my credit in shape for a mortgage loan.
However, I am nothing if not thorough, so I decided to talk to a mortgage specialist. He pulled my credit — a report that looks much different than any I had ever seen — and gave me notes on what I would need to do to be approved.
Turns out, there were several things that I had as a lower priority that his company’s equation considered very important. There were also things I thought were important that he said had little to no impact.
Though his advice turned my plan on its head, it worked out to my benefit. It allowed me to make a progressive and effective plan to get approved to buy a house. It’s always in your best interest to speak with someone who can give you this type of information.
If all of that is not enough motivation to speak to someone, let me give you some more: The credit score you see is not always what they see or go by. A different mortgage specialist told me at one point that it’s not odd for the score you see on Credit Karma or Experian to be 10 or 20 points off from what their reports show. And the most recent specialist I talked to said that his company takes all three scores, adds them together, and then goes by the average of the three. In other words, it’s hard to know what credit score you actually have according to different lenders.
2. Take Some Time to Learn About Loans
There are several loan options available that can suit most financial situations, as long as you meet the requirements.
No Down Payment Loans
Some loans, such as VA loans and USDA loans, do not require that you have a down payment.
However, VA loans are only for active-duty military members, veterans, surviving spouses, and other relevant groups.
USDA loans are only for homes in rural areas and for low-income families.
Low Down Payment Loans
There are also FHA loans that require low down payments. Those with credit scores as low as 580 qualify for as low as 3.5 percent down, while those with at least a 620 can get as low as 3 percent down.
The even better news, though, is that this money does not have to come out of your pocket, like with other loans. You can use grants, additional loans, or gifts for the down payment.
Other Types of Loans
There are several other loans to consider, from private loans to conventional loans and jumbo loans. Typically, you can expect to either need a 20 percent down payment on most of these or to have to pay for private mortgage insurance (PMI) until you reach 20 percent equity in your home.
Take some time to learn about different mortgage options. When you speak to a mortgage specialist, they can usually help you determine which loan is the best option for you.
3. Check Out First Time Home Buyer Options
If you have never owned a home before, you might be eligible for a first-time homebuyers program. These are grants and loans that help cover closing costs and down payments if you meet certain requirements.
4. Save for a Down Payment
Some loans do not require a down payment, which can be incredibly helpful. Borrowers usually have to meet pretty strict requirements for those types of loans, though. Even if you do not have to have a down payment, putting something down on your home can only help.
I know, though, how difficult saving for a down payment can be. Start by squeezing every bit you can out of your budget. Be sure you add any extra, like tax checks and bonuses, to your stash.
The following are a few additional ideas that can help you grow your down payment even faster:
Try Sharing Space
If you are currently renting, you are already paying out a decent amount each month. Putting up just a portion of your rent money could help. Consider either renting out a room to someone to share the rent or look for rooms for rent from someone else.
Sell Your Stuff
Go through your closets, your shed, your kitchen drawers — everywhere in your home. Find anything and everything you no longer need or want and sell it. You don’t even have to sit outside to have a yard sale. Just post it all online. This is a great way to make some cash and get rid of stuff before moving into a new home.
Pick a Side Job
Whether it’s delivering pizza, babysitting, blogging, or selling crafts on Etsy, pick a side hustle. Even if you only make an extra $100 per month, it’s moving you closer to homeownership.
Talk to Family
Sometimes, family members will help out. If your parents or aunts and uncles normally give you cash for your birthday or Christmas, ask them — nicely — if they would be willing to do so early. See if a family member will let you do some yard work or house cleaning in exchange for a contribution to your down payment.
Just talk to your loved ones. I’m aware that this suggestion will not work for everyone, but for some, it’s worth a shot. You never know what might happen.
Choose the Right Tools
After you have spoken to a specialist and know what steps you need to take on your credit, it’s time to get organized. How? I’m glad you asked.
One of the best ways to get organized is by using some of the incredible tools available for these tasks, such as a budgeting tool and a debt tracker. Better yet, use a tool that helps you manage all of your finances.
The Goalry Mall has everything you need to organize and track your entire financial situation, including:
A budgeting tool to help you analyze and control spending, set savings goals (Hello, down payment), and more
A debt tool that helps you organize and track all of your debts, create a repayment plan, and education resources that teach you how to repay them quicker.
A loan tool to help track current loans, apply for new loans, and more
Goalry provides the opportunity to do all of this and much more. With such a tool, you can develop a clear plan between your current status and homeownership. You can also use it once you buy your home to track your new bills and mortgage loan.
Conclusion
No matter your age, you can stop renting and buy a home — as long as it’s what you really want. By talking to a specialist, organizing your finances, and improving your credit, a home of your own is within reach.