Good-bye dorm life, good-bye off-campus housing. One of the most exciting parts about setting out on your own for the first time is finding a new place to call home. Knowing how to do it though, isn't always easy. In this section we'll cover the ABC's of home hunting and help get you started on the right foot.
Know your needs
It is important that you first take a moment to evaluate your current needs. Regardless of whether you ultimately decide to buy or rent, consider:
- What is your housing budget per month? Per year?
- How long do you plan to live there?
- What do you want from your home
- What type of home will best fit your needs?
- What are your top priorities in a home, a neighborhood, a community?
Credit is key
Before you go and find your dream home, regardless of whether you work on your own or through a broker, rent or buy, remember that the key to success in the housing marketplace is your credit. What you need to do is – be prepared, control your credit history, be informed about credit repair, and monitor your credit history carefully – especially if it's not squeaky clean.
1. Why worry about credit?
We've said it before, we'll say it again. In the process of obtaining a home mortgage or renting an apartment, there is nothing more important than your credit history. It is as simple as that. If you cannot demonstrate to lenders that you will repay your home loan or make monthly rent payments in a timely manner, the lender will not give you a loan and you will not be approved to rent without a co-signor or guarantor. It's just too high-risk for them.
2. Credit reports -- Contact the credit bureaus.
Most of us just graduating from school have little to no understanding of what our credit history looks like. You'll need to find out before you start looking for a place to live. Write the credit bureaus and request that a copy of your credit report be sent to you. Credit bureaus include:
Once your copy arrives, evaluate it carefully – there is usually a key on the credit report itself that clarifies the report. Depending on how solid your credit history is, you should have an idea of what range of prices you should be looking at. If you do not have a credit history or have a negative one, you may need to have a co-signor or guarantor back your application to rent or buy your new home. Normally a relative or close friend can serve in this capacity.
Rent or buy?
Now that you have an idea of what you're qualified to look at, it's time to decide whether you're in the market to rent or to buy. Your lifestyle, income, career, and timing may influence your decision. As a rule of thumb,
- If the monthly costs of buying are basically the same as renting, buy if you can.
- The shorter the period of time over which you will live in your home, the more advantageous it is to rent.
Let's look at each choice more closely now.
1. Renting
Renting a home can be a good temporary option if you have decided that either you do not want to commit to a particular location or residence, or if you currently lack the funds or lifestyle that would allow you to buy.
Renting or leasing a home can prove to be a smart choice; offering:
- Financial freedom and no long-term commitment -- With the exception of having signed a long-term lease agreement, most renters are free to change residences as frequently as their needs change.
- More for your money -- Renting can sometimes allow you to live in a location that would otherwise be unavailable to you. For example, residences in most cities are highly expensive to buy but are not quite as expensive to rent.
What are the disadvantages to renting?
Some people feel that when one rents for a long period of time, he or she ends up wasting money. Essentially, whether you are renting or buying, you are paying a mortgage – regardless of whether it is yours or your landlord's. Moreover, mortgage interest and property taxes are great money-saving tax write-offs; whereas no tax money can be saved when you rent or lease.
Owning a home can also be a great investment as your equity grows. Lastly, when you own the home, any and all improvements can add to the overall value of your home -- not your landlord's.
2. Buying
Did you know that almost half of all homebuyers are independent, single women? With today's market, a sound real estate investment can be a wise option. Consider the following:
- Your mortgage balance owed will eventually decrease as your equity grows, regardless of whether or not the value of the property increases.
- You have the ability to remodel/redecorate, and each change will help make your investment more valuable.
- Owning your home provides significant tax advantages.
Do I need an agent in order to buy my home?
No, but it is usually suggested. The buyer pays no commission and without one, you may be missing valuable representation of your interests.
HerTip: The rules of commission do not necessarily apply in terms of leasing. You may in fact pay a hefty sum for using a rental broker.
Last, but not least, be patient.
Don't be frustrated if you don't immediately find what you are searching for. In fact, be weary of finding it too quickly. This is the place you hope to call home -- make sure it suits the woman that you are.
Continue to: Part VI. Choosing a bank
Paying back student loans