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Renters: Are You Ready to Buy a Home?

Preparing for home ownership is more than just saving up for a down payment. Here are five steps that renters can take to put themselves in a position for home ownership.


Know the Full Cost of Home Ownership

When you pay rent, one single fee covers your entire housing cost.


As a homeowner, however, there are several factors that go into your monthly housing payment:

  • Principal on the loan amount
  • Interest on the loan
  • Taxes
  • Homeowners insurance
  • Homeowners Association (HOA)


Understanding these costs can help you determine how much of a house payment you can actually afford.


Principal and Interest

The principal and interest on your monthly mortgage payment go to your lending bank. The principal pays down the loan amount, while the interest is your fee for borrowing the money.



Taxes are property taxes and are assessed by your home county. They vary from region to region but expect to pay a little more than 1 percent of your home’s value each year.


Homeowners Insurance

Homeowners insurance is required by your mortgage lender, but you may select your insurer. You may receive breaks on your auto insurance by purchasing homeowners insurance from them. The home must be fully covered for rebuilding after any disaster – this “replacement cost” is determined by your insurance company. Expect to pay between $700 and $1200 per year for your premium.


Homeowner’s Association Dues

If you choose to buy a condo, or if you buy in a neighborhood with a Homeowners Association (HOA), then the dues for this will also go into your monthly payments. These go for amenities, such as communal landscaping, a clubhouse, or pool maintenance. They can range from $100 per month on up to $1000 per month for owners of luxury condos.


You Have Tax Benefits as a Homeowner

When you file your tax returns, mortgage interest and property taxes may be deducted from your taxable income. These can significantly lower the cost of homeownership.


Rent vs. Buy? Do the Math…

In order to compare renting versus buying, many people equate their monthly rent with the total cost of mortgage and interest, insurance, and property taxes. This doesn’t paint a clear picture of renting versus buying, however. In order to get a better grasp, you have to compare the after-tax benefit of home ownership costs versus rental costs.


Don’t forget to factor in a downpayment of 20 percent, however, when you are looking at renting versus buying.


Determine A Mortgages that Fits Your Timeline and Budget

If you don’t have the 20 percent down payment, you may still be able to obtain a mortgage with as little as three percent down. If your down payment is less than 20 percent, however, you’ll have to pay mortgage insurance, which is about 85 percent of your home’s value and is not tax deductible.


Your monthly payment would then have to include the mortgage insurance as well as the other four items. You could lower your monthly rate with a shorter-term loan, such as a 5 year ARM, but rates on these loans will adjust in 5 years, so you risk having a higher payment if you plan to stay in the home longer than that.


Boost Your Credit Score

Credit scores will affect how much home you’ll be eligible for, as well as getting the best mortgage rates. Lenders want reliable payment history, as well as credit depth.


Buying a home can be daunting, but we’re here to help! If you have questions, feel free to call or text us anytime! 909-921-2544


2017-12-28T17:10:33+00:00 By |Categories: Buying a Home|0 Comments

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When choosing the Lisa DiNoto Group, clients can count on the “DiNoto Factor” service, built on customer satisfaction, client education, strategic planning, Internet marketing, experienced negotiations, uncompromised integrity and positive results. If you're looking to buy or sell real estate, call Lisa Dinoto today! 909-921-2544

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