How to Make the Move from Renter to Homeowner

If you’re currently renting a home and you’d like to buy your own place, you’ll need a down payment and good credit. Here are some tips to help you reach your goal.

Set Aside Funds for a Down Payment

Open a savings account with a sole purpose – to save money for a house. Having a separate account will help you track your progress and resist the urge to spend that money on something else.

Before you open an account, compare interest rates. Online financial institutions generally offer higher interest rates than traditional banks and credit unions. If you put your money in an account with a higher rate and let the interest compound, it will reduce the burden on you.

Automate your savings. Every time you get paid, have a specific amount automatically transferred into your down payment account. Transferring money before you have a chance to spend it will help you stay on track.

Reduce Your Monthly Spending

To achieve your dream of becoming a homeowner, be prepared to make some temporary sacrifices. That might mean eating out less, cooking meals at home more often, taking your lunch to work, canceling subscriptions you don’t use, and spending less on clothing and entertainment.

If you’ve paid off your car and it’s still in good shape, you can keep it instead of buying a new one. Every month you don’t have a car payment, you’ll be able to put that money toward a house.

Consider a Side Hustle

If you’re struggling to cover your bills and save for a house, look for ways to boost your income, such as freelancing, delivering food, dog walking, or house sitting. Even if you only earn a few hundred dollars per month from a side gig, that money can add up.

Sell Things You Don’t Need

Now is a good time to go through your closets and drawers and get rid of things you don’t use. That can generate cash to put toward a down payment, and it will make moving easier. You’ll have fewer belongings to pack and load into a moving truck, and your new house won’t be cluttered as soon as you move in.

Use Windfalls to Pad Your Savings Account

If you receive a large sum of money from an income tax refund or a bonus, resist the temptation to splurge. You can use some of that money to treat yourself, but don’t lose sight of the big picture. If you put most of it toward a down payment, you’ll reach your goal faster.

Get Help with a Down Payment

If you’re interested in buying your first house, you might qualify for down payment assistance. A variety of programs are available at the state and local level. Look online for resources in your area.

Your parents or other family members might be willing to give you money as a gift to help you cover a down payment. When you apply for a mortgage, a lender will review your financial records and might ask questions about a large deposit. A person who gives you funds for a down payment might have to provide a letter stating that the money is a gift, not a loan.

Build Strong Credit

Your credit score is one of the most important factors that will influence your ability to buy a house. Good credit can help you qualify for a mortgage with a competitive interest rate. That will make your loan payments manageable and give you financial breathing room.

To improve your credit, pay your bills on time and reduce your credit card debt. You don’t have to eliminate all debt before you buy a house, but lowering your debt-to-income ratio will help.

Set Realistic Expectations

If you’ve recently finished school and started a career, don’t set your sights on a mansion. Look for a starter home that’s in good condition and located in a neighborhood where you’ll be comfortable living for the next several years. In the future, when you’re earning more money and you’ve built equity, you might decide to renovate your house, build an addition, or move to a different area.

Review Your Lease

Check your lease to find out when it ends and to learn about any penalties that will apply if you move out before then. Ideally, you’ll want the date when you close on a house to line up with the date when your lease ends. If that’s not possible, you might be able to continue renting on a month-to-month basis, or you might have to move out of your rental and stay at a hotel or with a friend or family member until you can move into your new house.

Learn about the Homebuying Process

Buying a house can feel overwhelming, especially for first-time buyers. Friends and relatives who have good intentions might give you incorrect information or advice that doesn’t fit your situation.

Financial Freedom Voyage’s First-Time Homebuyer Masterclass breaks down the process and explains it step by step. In the course, you’ll learn how to figure out if you’re ready to buy a house, how to find a home that’s right for you, and how to choose the right type of mortgage. You’ll be able to approach the homebuying process with clarity and avoid expensive mistakes. Enroll today.

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