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Moving from Renter to Home Owner


Although some first-time homebuyers will be making the transition to home ownership from living at home or the military, the vast majority will be making a move from renting to owning. This transition can be either smooth or rocky, depending on the understanding of and the preparation for the change. This transition will often be somewhat frightening, somewhat exciting and a good bit confusing. Still, it is a journey that millions have made before you, so there is a fairly good road map if you are ready to follow it.

When you will have made the move from renting to owning, one of the first transitions you will need to adjust to is one of your mindset--where you live now belongs to YOU and not to someone else. This can have both positive and negative connotations. The positive is obvious--you own your own home. It all belongs to you. The negative, for some, is that BECAUSE you own your own home you will now need to deal with your own needs. No more calling the landlord when the faucet drips or the roof needs repair. You'll now need to make your own arrangements.

The majority of transition issues will be financial. For example, most buyers will find a marked difference in their income tax computations. In the United States, mortgage interest (with a few exceptions--consult a tax advisor regarding your situation) is deductible on your federal income tax return. This can make a considerable difference in the amount of income tax you will be paying (definitely a positive!).

Another important financial aspect is the equity you will be gaining in the home. Equity is, simply, the difference between the value of your home and the amount you owe on the mortgage. This number should be growing every month since the home's value will generally be increasing while the balance owed on the mortgage will be decreasing as you make your monthly payments. The equity in your home is like an unseen bank account, slowly but steadily gaining value. You can never have this advantage when you rent-- the equity growth goes to the landlord, not to the renter!

A financial aspect that surprises some first time home owners is the expense that it often takes to maintain and repair a home. They may not all be "money pits" but owning a home can take a big bite out of the monthly budget. Not only will you be responsible for ongoing minor maintenance and repairs, it is probably a good idea to put a set amount into savings each month designated for larger expenses (roofs that need replaced, new furnaces, etc.) that are certain to arrive. Many homeowners find that by putting away $75 - $100 per month, the expenses for these repairs are largely covered when they are needed.

Both Used and New Homes Require Expenditures

Another expense that is often unbudgeted by the new homeowner is furniture. In most cases, you will be moving from a smaller apartment or rental home to a larger one. Larger houses usually mean more and larger rooms and that usually equates to more furniture.

If you are coming from a rental to a NEW home, you will need to be prepared less for repairs and maintenance than if you buy a previously owned home. You will,however, need to be aware of some expenses that can catch you unprepared:

* New homes generally have very basic (or no) landscaping.

* New homes will need window treatments--blinds, drapes, curtains and the like. If these are "normal" sizes they can be expensive, but if they are custom sizes the prices can give you a real case of sticker shock!

* New homes are usually fairly bland--white or off-white walls and no wallpaper. Personalizing a new home can involve added expense.

Repairs and Maintenance: Handling Things on Your Own

If you have been used to phoning the landlord when you had a problem, you will now need to adjust to ways of handling things on your own. You can learn to handle many repair and maintenance items on your own, but for more major projects you will most likely need to deal with professionals. It is a good idea to develop a list of who to call--by trade or profession--before you need someone. Better to know of a good plumber BEFORE you have a water heater blow out rather than later when you need one immediately because there is an inch of water on the kitchen floor. A good way to develop such alist is to ask friends, co-workers and relatives for the names of professionals with whom they have had good success. The categories you will need on your list include:

Electrician
Plumber
Heating/Air Conditioning Technician
Roofer
Carpenter
Painter
General Handyman

Summing Up

Many buyers make the transition from renting to buying with little or no preparation. For some, it may be a smooth process, but others may be blindsided by unexpected expenses and/or responsibilities. The simplest way of preventing such surprises is to review all potential responsibilities as well as taking some time to determine your total home ownership budget. This should be done even before you take the first steps in purchasing a home to make certain that you make decisions that will best fit your needs and wants.

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