It’s a fact that homeowners are wealthier than those who rent homes. In fact, the average net worth of U.S. homeowners is $231,400.
Renters? $5,200. Crunch the numbers and you’ll learn that the net worth of homeowners is 44.5 percent higher than that of renters.
Sadly, the net worth of those who rent has actually decreased from $5,500 in 2013, according to the Federal Reserve’s Survey of Consumer Finances.
If you’d like to get on the homeowner wealth train, but are not sure if you’re ready, ask yourself the following questions.
How secure is your employment picture?
Love your job? More important, does your job love you? Job security – knowing you’re in it for the long haul – is a good sign that you can take on a monthly mortgage payment and be responsible for maintaining a home.
It’s also one of the things a lender will look at when considering how risky it might be to lend you the money for a home.
While it’s not impossible to get a mortgage when you’re new to a job, lenders like to see a two-year minimum tenure. If the new job is in the same field as your old one, it shows commitment to a field of work, which is attractive to lenders.
Do you have any money saved?
Don’t believe the myth that you need 20 percent of the purchase price of a home for a down payment. While this may have been true in the past, it isn’t any longer.
Depending on your circumstances, you can obtain a mortgage for nothing down or a down payment as low as 3 percent. Then, there are the many down payment and closing cost assistance programs.
You will, however, need a bit of cash when you purchase a home for the earnest money deposit, down payment, closing costs, and moving expenses.
If you don’t have any savings, you may not be ready to buy a home. If you do have some money set aside, speak with a mortgage broker to find out if you qualify.
How’s your credit?
If you’re unsure, order your free annual credit report from AnnualCreditReport.com. This is the only site authorized by the federal government that offers free credit reports.
A strong credit score (as compiled by Fair Isaac Company, or FICO for short) is higher than 700. Borrowers with strong scores get lower interest rates so raising your score is a worthy endeavor.
This doesn’t mean you can’t get a mortgage with a lower score, because you most certainly can. In fact, the Federal Housing Administration (FHA) wants to see a score of 580 or higher but even those with lower scores may otherwise qualify.
It isn’t as difficult or time-consuming as you may think to raise your credit score. Learn “How Student Loan Borrowers Improve their FICO Scores” at FICO.com. And, learn some general information on how to raise your credit score at NerdWallet.com.
Do you need more room?
If you’re currently in an apartment, the chances are good that you’d like or maybe even need more space. Apartments by their very nature are typically small and very cramped. Worse, they lack sufficient storage space.
Especially if you’re starting a family or hope too soon, dreams of a house may be swimming in your head. If so, you may be ready to become a homeowner.
Are you tired of paying your landlord’s mortgage payment?
Paying rent every month and watching that money go into someone else’s bank account gets old after a time. As mentioned earlier, one way to accumulate wealth is through putting that monthly payment in your own pocket by building equity through home ownership.
Depending on the current market, you may be able to purchase a home with a monthly payment that is less than or only slightly more than your current monthly rent payment. A mortgage professional can crunch the numbers for you to find out.
Feel free to reach out to us with any questions.