4 Steps That Can Help You Go from Renting to Owning a Home

Rents have risen significantly over the last year, and for many renters, it has them feeling trapped. They spend thousands on a property that’s not theirs — and as that property gets more expensive, they can save less and less toward buying and owning a home. 

It’s an endless cycle that can often feel both unfair and hopeless.

Fortunately, there is a way out — but it does take some forethought and careful planning.

Are you looking to get out of the rent race and buy your own house in the near future? Take these steps to get well on your way to owning a home.

1. Take a look at your credit score.

Your credit score will heavily influence your ability to both qualify for a mortgage and afford one. Ideally, you want at least a 740 or higher for the absolute best interest rates, but you can still qualify for a loan well into the 600s (it will just be more expensive).

To start, pull your credit score and see where you currently stand. If it’s not where you’d like it to be, there are a few things you can do to help:

• Ask your landlord to start reporting your rent payments to credit bureaus. This will help increase your score over time (on-time payment history accounts for more than a third of your score!)
• Tell credit bureaus if there are any errors on your credit report. This includes inaccurately reported late payments, accounts that aren’t yours, or anything else that looks off. Once these are removed, it could help your score significantly.
• Reduce the balances on any credit cards or loans you have out, and consider asking for a credit line increase (but don’t use it). Doing so will reduce your credit utilization rate — or how much of your available credit you’re actually using. This increases your score in step.

Settling any overdue accounts or collections efforts is crucial to improving your score, too, so make sure to address these ASAP if buying a house is on your radar.

2. Create a household budget.

Sit down and map out a strict budget for your household expenses — rent, groceries, utilities, and all the must-haves. Then, determine what discretionary income you’ll have leftover each month, and plan to dedicate a good portion of that toward your homebuying goals. 

A good option? Funnel the cash into an interest-earning savings account that will actually grow your money over time. 

3. Do your research.

Understanding both your housing and mortgage options is critical to setting manageable, achievable goals, so start by doing some good old research. Contact a local mortgage lender to find out what types of loan products would be best in your scenario, and ask about qualifying requirements, fees, and more. In the meantime, you can also study up on first-time homebuyer programs in your city and state, or learn more about FHA loans — a common, low-cost mortgage used often by first-timers.

You should also start researching homes in your area, and contact a real estate agent too. They can help you set a home buying budget and give you a good idea of what you might be able to buy for that money. If you’re particularly close to buying a house, you can even ask them to set up listing alerts to notify you when a potential home hits the market.

4. Be smart about work.

Your employment history and income are going to be important when buying a home. For one, mortgage lenders like to see at least two years in a job. This shows them you have steady, reliable income with which to make your monthly mortgage payments.

If your income isn’t great (or you’re just unable to save much due to rising rents), you can also consider taking on a side gig of some sort. This can help you earn extra cash to put toward those savings, which you can eventually use for a down payment, closing costs, or both.

Some good options might include driving for Uber, running errands for Favor or another similar app, babysitting, pet sitting, or doing some sort of freelancing or consulting work. If you’re the creative type, opening an Etsy shop can be another fun way to earn extra money in your off-hours.

Owning a home is within reach

Getting stuck inside the rent race can be frustrating, but there’s always a way out. If buying and owning a home is one of your 2022 goals, then get in touch with a loan officer at Embrace Home Loans in your area today. They can help you map out a plan to make it happen.