Purchasing or building a new home is an exciting venture for first-time homebuyers. Whether newly married, expecting a baby, or relocating for a new job, you may find yourself wondering if homeownership is right for you. If so, you may have asked yourself, “Is it time to build or buy?”
Having a landlord to cover repair costs, lawn maintenance, and property taxes may give you peace of mind when you rent. Your monthly rent may also be lower than a mortgage on a home of equal value if you have less-than-perfect credit. This isn’t always the case, however. Lower credit scores do typically come with higher interest rates.
Despite these factors, there’s one major disadvantage of renting to consider. You will never build equity in a home you rent! Unfortunately, you pass that benefit over to your landlord with each rental payment. When you own your own home, you essentially put money away each month through the equity you build when you pay your mortgage. Along with many first-time homebuyers, you may also gain added security knowing that you no longer have landlords who will raise your rent or sell the property.
Now that we’ve weighed the pros and cons of owning vs renting, let’s review some important next steps.
Review Your Budget
For first-time homebuyers, the decision to buy vs. rent often boils down to timing and income. If you are hard pressed to make your rental payment, you may need to wait until your earning power increases before taking the plunge into homeownership. If you have good credit and a down payment saved, however, you may find homeownership more cost effective than renting. The folks at NerdWallet have a handy calculator to help you crunch the numbers.
Check Your Credit Score
Before you start shopping for a home, you need to know your credit score if you plan to finance. The top three major credit reporting agencies are Equifax, Experian, and TransUnion. Your lender can pull your credit rating for you, but many first-time homebuyers find it helpful to know their credit score going in so that they can shop around without being locked into a timeline, as preapproval typically expires after 60 days.
Set Your Priorities
Many first-time homebuyers find themselves torn between buying an existing home or building a new one. Being a first-time homebuyer doesn’t mean you have to settle for a fixer upper or a starter home, however. Review your priorities before diving in.
Once you make the decision to buy, it’s a good idea to tour several existing and/or model homes to get a better feel for the features that are most important to you. What are your nonnegotiables? Perhaps it’s your commute to work or the size of your yard. You may decide that you want a large kitchen or an open floor plan. Whatever the case may be, write them down.
Weigh Your Options
So you’ve found the perfect house but . . . Sometimes you just do not find the home that feels worthy of all your hard earned cash. If you’ve found yourself in this situation, you’re not alone.
Like many first-time homebuyers, you may have a nagging feeling in your gut that says, “It’s okay, but it’s going to be a money pit. Perhaps it’s time to build.”
Building a home is a very exciting undertaking, especially with a reputable, experienced builder. Even so, you must take time to thoroughly research your options before you build. It will not matter how beautiful your home is on paper if you hire an inexperienced contractor. Here at Passage Island Construction, we have over 40 years of construction experience and offer buyers the very best in style, quality, and functionality.
Remember, you don’t have to settle for a fixer upper or a starter home just because you’re a first-time homebuyer. With a little research and some patience, you can build a new custom home within budget that will grow with you and your family for years to come.