As you head toward your new goal, you’ll likely come up with a myriad of questions. You’ll also hear opinions on whether you should rent or buy, where you should live, what kind of space is right for you and more.
While those sharing their opinions just want to be helpful, many of these decisions are personal and may require some soul-searching of your own. To start the process and find your new space, consider the ideas presented throughout this chapter.
Once you’ve considered the “am I ready to move out?” scenario and have determined the answer is “yes,” it’s time to make a few more decisions. One of the first is whether you should rent or buy.
In many cases, when living on your own for the first time, renting might be the easiest option. However, sometimes purchasing a home is possible. To begin, consider the following questions:
This is not a surface level question, but it may provide a baseline for moving forward. Are rental units expensive where you live? How do they compare to a monthly mortgage?
Remember, renting has its own upfront costs, like a security deposit and maybe the first and last month’s rent. But, purchasing a home requires a down payment, closing costs, and maintenance. So, while rental prices may be comparable to monthly mortgage costs, it’s worth looking at each cost individually before making a permanent decision.
In chapter 1, we discussed the importance of determining where you want to be in the next three to five years, and what that timeframe looks like for your individual situation. If you’re unsure of where your career will take you or where you’d like to settle down, a rental may be a better choice.
If, however, you’re getting married or you’re moving out later in life, you may be ready to settle down. In these cases, a purchase may be the best fit for you.
When you rent an apartment or home, most repair expenses will be covered under your monthly rent. If the washer breaks or the heating system stops functioning, the repairs will likely be covered after you make a simple call or submit a repair request. On the other hand, when you own a home, the expenses and upkeep are all yours. Additionally, there may be more upfront expenses such as a down payment and closing costs.
According to the Bureau of Labor Statistics’ latest study on the topic in 2012, owning a home may cost less in terms of mortgage and interest fees vs. rent, but the average homeowner spends $1,788 on repairs and upkeep each year, whereas the average renter spends $13. The average utility costs are also lower when renting vs. owning.
When purchasing a home, your credit score will be a contributing factor in whether you are approved for a mortgage or not. When renting, while the requirement may not be as high, many landlords will check your credit before entering into an agreement. In some cases, a lower credit score might mean a denied rental application or a higher security deposit.
PSECU members have free* access to their credit scores. A credit score is a number lenders use to decide whether certain credit cards, loans and mortgages will be approved based on potential credit risk.
To check out what’s impacting your credit score, you can check your report with each of the three main credit reporting agencies once a year.
If you’re unsure about how your credit score is determined, there are five main contributing factors:
To raise your credit score, consider the components above and act to remedy the areas that are under your control.
Remember, renting or buying is a personal decision. If you’re unsure about which option to pursue, spend time thinking about each of the questions listed above.
If you decide to go with a rental, you’ll likely have several questions about how to find one.
Start your search by talking to others. Where do your friends live? Would you like to live near a certain location — like close to work or family? When you think about moving out, where do you picture yourself living? Answer these questions to help yourself find direction in the beginning.
Then, search for rental units in the area you’d most like to live. Take the time to read reviews of the various communities you come across and look at pictures. Then, make a few calls to set up tours of the properties you’re interested in. Ask to see specific units and walk around the property. Remember, you don’t need to decide right away. It’s okay to look at multiple properties. Take your time and enjoy the process. Don’t sign a lease just because you feel pressured by the landlord or rental company.
During your search, consider the following questions:
One of the most important aspects of a potential home, whether you’ll be renting or buying, is the safety of the area it’s located in. If you’re local to the area, you probably have an idea of which neighborhoods are the safest. Since you’ll be living on your own, feeling comfortable is critical.
If you’re unsure of the safety of a property, take a walk or drive through the area at nighttime. Pay attention to lighting and signs. Does it seem well-marked? Are there adequate speed limit signs, crosswalks and stoplights? Is it well-lit? Lighting may seem insignificant, but areas that are well-lit have, on average, 21% less crime than areas with poor lighting.
On your walk, consider other details as well. How far will you need to park from the entrance of your rental? Are the parking lots and the spaces between those lots and your unit well-lit? Is the landscaping maintained properly? Signs of trouble could include unkempt sidewalks, poor maintenance and signs of graffiti and destruction. Would you feel comfortable walking through the complex if returning home at night by yourself or with others? If something feels off, it might be best to continue your search elsewhere.
In addition, ask your new landlord for references. Do your homework and follow through on each one. Ask if previous or current renters felt or feel safe in their surroundings. Ask if they have any advice or tips that you may find helpful. The more information you can gather, especially relating to safety, the better.
Living on your own is a big step that comes with new expenses. Consider the information shared in chapters 2 and 3 to help decide whether a given unit will be affordable. Will it be a stretch that will require extra income, or can you afford it comfortably?
Talk to your landlord to find out about perks you may not be aware of. If your complex has a gym, you may be able to drop your current membership. If cable television or heating is included, that may make it a better choice than another comparable unit.
Moving out is a major decision, but understanding your financial limits can make your options easier to process. The more aware you are of your financial standing, the less likely you are to sign a lease for a flashy apartment you can’t afford.
We live in a mobile society, so the approximation of a given rental unit to your place of work doesn’t need to be your biggest consideration. In fact, the average commute time for U.S. workers is just over 25 minutes, according to the Census Bureau.
However, the commute is still something to consider, as a longer commute will mean higher transportation costs. In addition to cost, will you be comfortable with your new daily commute in your new home? Are there certain areas that tend to get congested that may interfere with your route?
Having a rough commute could make it difficult to settle into your new space. If you’re unsure about traffic, drive that route during the times you’d be going to and leaving from work on various days. If you’re comfortable with it, you may be closer to finding the right place for you.
Think about other needs, outside of those listed above. Your situation is different from everyone else’s, so this will require some extra thought and consideration.
If, for instance, you’ll be working from home, an office space might matter to you when searching for the right unit. If you’ll be living with a roommate, you’ll want there to be enough space to share. If you’ll be bringing a pet into your new environment, you’ll want to be sure this is allowed in the lease and fully understand any associated fees or costs.
Your goal is to find a comfortable place to live that will accommodate your needs for the next year or more. The questions above may help serve as a starting point to help narrow down your choices.
As a renter, it’s important to understand your rights. Before you sign anything, take note of the following tips:
Your lease is the foundation of your move. It outlines what is permitted and what is not. As such, you should keep it on hand to reference if you have questions during your occupancy. Developing a positive relationship with your landlord and keeping lines of communication open from day one are important steps to avoid headaches down the line.
If earlier in this chapter you decided that buying may be an option for you, it’s important to understand the steps associated with finding the right home to purchase.
Before your home search, you’ll want to find a buyer’s agent. To begin the process, it’s important to become educated on the various titles you’ll see while selecting an agent. A real estate agent is an individual who has earned a designation and license to sell property. The process generally involves taking a certain number of hours of coursework and passing an exam specific to a given state.
A broker is a real estate agent who has continued in his or her studies past the standard designation. These individuals can hire other agents to work under them. Realtor is another popular title, which is any professional real estate agent or broker who is also a member of the National Association of Realtors®. These individuals are committed to adhering to specific ethics codes and standards required by the association.
When you’re ready, start your search by talking to friends and family members or looking online for reviews and recommendations. Remember, your real estate agent will guide you through the homebuying process, so a good relationship is key. You’re not obligated to select the first agent you meet.
During your meetings, share exactly what you’re looking for and ask whether the agents you speak with have experience in the area you’re considering. Ask if they’re comfortable in helping you find a home that meets your expectations.
Keep all lines of communication as open as possible and be honest in providing feedback as you tour different properties. The more your agent can understand your needs, the more likely your search is to end in success.
When you’re ready to take the next step, it’s time to start the preapproval process for obtaining a mortgage.
A preapproval will help you determine the price range of homes you can consider. It will let you know what may be out of your price range and what will be more affordable, saving you from searching for properties that might not be the best fit for your budget. It also makes the final mortgage application process smoother, since certain documents will have already been submitted at the start.
Your lender will review your financial documents and ask specific questions. Once the process is complete, the lender will provide the pre-approval letter, which will help provide extra backing to any offers you may make on potential homes.
When you do make an offer on a home and it is accepted, the formal mortgage approval process will begin. It uses the preapproval as a starting point.
If you have questions about obtaining a PSECU mortgage, check out PSECU’s mortgage Q&As, which are designed to answer everything from what you can expect during the process to how to obtain funds for a down payment.
After you’ve received your preapproval, you can begin your formal home search. Use the steps outlined above relating to finding a rental unit to begin the process. Remember to identify whether your new home is in a safe area, whether it is comfortably affordable and whether you can see yourself in the home for the long term.
Purchasing a home is a major decision that comes with its own benefits when the timing is right. Consider the information presented in the beginning of the chapter to determine which choice is best for your specific situation.
Whether you’ll be renting an apartment or purchasing a new home, you’ll likely need a few one-time purchases to make it feel like “home.” When possible, wait to make any large purchases until you’ve moved in and determined what you really need.
One-time purchases related to a new home or apartment might include:
Options to make the process more affordable include buying used furniture at yard sales, talking to family members about furniture they may be replacing, and browsing consignment store inventory. While it’s nice to have all new furniture, it might be better to put that money elsewhere and save for new furniture down the road. To begin the process, focus on what you need — a bed, couch and so on — and save those “want” items for later.
While free financing is an option, be sure to wait to apply for new credit until your mortgage or rental is approved. If you take advantage of a free financing offer, be sure to make monthly payments and to pay it off before the free period ends to avoid paying fees that may accumulate.