4 Factors to Consider when Transitioning from Renter to Home Owner


When transitioning from being a renter to a home owner, there are several things that you need to keep in mind in order to help ensure the process goes as smoothly as possible. To help prevent any unpleasant surprises, here are a few things to keep in mind as you make this exciting change.

Upfront Costs

When renting a place to live, you may be called upon to make a security deposit and to pay the first month’s rent. When buying a house, there are more upfront costs that you can expect to pay. The largest of these expenses is the down payment, which can range anywhere from 3 percent to 20 percent of the purchase price of the home depending upon the type of mortgage loan you acquire. You will also have to pay closing costs before taking ownership of the home, with the average cost being around $2,100 for a $200,000 home. These costs cover fees for things such as title insurance, loan origination, home inspection, land surveys, appraisal and insurance escrow.

Monthly Costs

Just as with rent, you will need to make a monthly payment toward your home if you have taken out a mortgage loan. In addition to paying the monthly cost of your loan repayment, you will also have to pay for homeowner’s insurance and any associated property taxes. These extra costs are typically put into escrow and are included in the monthly payment that you make to your lender.

Maintenance and Repair Costs

As a renter, you can expect your landlord to take care of maintenance and repairs. When you own your own home, you are financially responsible for handling these matters. This means you need to set aside an emergency fund that can be used to pay for unexpected issues with your home, such as appliance failure or major repairs. Most experts recommend having enough money in this emergency fund to cover at least three months of living expenses.

In addition to handling repairs as they are needed, you will also need to take care of maintaining your home. This includes monitoring major appliances, such as your furnace and water heater, and anticipating when the time may come to replace them or to upgrade them. Other big ticket items that you should be prepared to replace include your roof and siding. Of course, not all maintenance expenses are large, but the costs do add up. These costs include those associated with maintaining your lawn or applying a fresh coat of paint to your walls every few years.

Staying for the Long-Term

In addition to the financial changes associated with transitioning from a renter to a home owner, there are also lifestyle changes to consider. For example, buying a home is far more permanent than renting a place to live, which means you might be living next to the same people for a very long time. It also means you will be stuck with the same work commute for years to come. Be sure you enjoy the neighborhood and the commute is acceptable before you make a commitment.

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