Can You Afford to Move Out?
Updated November 4, 2019 . AmFam Team
Moving out into your own apartment for the first time is exciting. It can also be a big challenge. So before you start packing boxes, take a look at our tips on what it takes to move out. You’ll be ready for this next chapter ahead. And you’ll have what you need to help ensure that you’re making the right call on this big decision.
Questions You Should Ask Yourself Before Moving Out
Whether you’re moving to a new city or leaving your parent’s house for the first time, it’s a good idea to have a plan in place. Start thinking about what it’s going to take to be financially independent. From paying your bills on time to managing your personal finances, young adults like you have a lot to manage when they’re living on their own. Keeping a steady job and being able to afford health insurance are big responsibilities.
How does your credit look?
Landlords will often perform a credit check on you to learn about your credit history after you fill out a rental application. When you ask yourself, “Can I afford to move out?” you really need to be asking yourself about your credit rating.
How much money do you have saved?
Remember, you’re going to need extra savings to navigate unexpected expenses while still being able to pay for rent. Start by asking yourself, “How much money should I save to move out?” and think about the moving expenses now. You’ll need to have an emergency fund in place with a few months’ rent saved in case something happens.
Where are you looking to move?
Stay flexible when thinking about your rental options. And don’t forget that the cost of living and real estate prices shift across cities. Review rental market trends in your target neighborhood. That way, you’ll be prepared for rent increases and inflation, too.
Can you afford to pay your monthly bills?
Put together a budget that covers every aspect of the move and your total monthly commitments. Think about your main source of income right now: will your job pay you enough to keep you financially stable?
The Biggest Costs of Moving Out
Moving can be expensive, and living alone can be, too. Think about finding a trustworthy roommate to help keep your monthly costs down. You can help each other move and save a few bucks. Here are a few big-ticket expenses you’ll encounter when moving out:
Moving
You’re going to need cash to hire a moving company. But you and your roommates may be able to save a little as you move from your parents’ homes if you recruit friends and family to get the job done.
Rent
If you’ve lived at home prior to moving out now, you may be surprised to find out how expensive rent can be. Select your neighborhood carefully and stay realistic on where you can afford to live.
Security deposit
Be sure you review the terms of your lease to understand how much you’ll need for the deposit. If you’re bringing pets along, you may need to pay more.
Renters insurance
It’s key to have a great renters policy in place. You’ll not only be insulating your finances if you damage the rental in a covered loss, you’ll also have key protections if your personal belongings are lost or stolen.
Utilities
One way to help keep costs down is to find a rental that includes heat and water or other amenities in the cost of the rent. When you’re wondering, “Can I afford to move out of home?” you’ll need consider the cost of paying these utility bills monthly:
- Electricity
- Gas
- Water
- Trash
- Internet
Furnishing
Making your home uniquely yours can get costly. Budget for furniture, rugs and window treatments, among other things.
Personal spending
Now, it’s time to start thinking about additional living expenses. Plan on budgeting for food, groceries and transportation — and don’t forget those monthly credit card and student loan payments!
Are You Ready to Move Out?
Moving out of your parents’ house can be exciting. And embarking out on your own after completing your studies is just as thrilling. Still not sure you’re ready to make the big move? You’re not alone. But that doesn’t mean you can’t take steps now to help build up your credit rating or start saving money. When the time comes, you’ll be better prepared.
Once you start apartment hunting, remember to check in with your American Family Insurance agent. They’re your trusted advisor that can help you select policies and coverage — and help protect everything you’ve worked so hard for.
This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.
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Every situation is different, so it’s important to do the right research and choose the best option for you. Luckily, we’ve done some of the breakdown for you to help you decide whether to pay off your student loan entirely or buy a house.
Can Student Loans Affect Buying a House?
Typically, student loan debt doesn’t prevent you from getting a mortgage. The biggest thing to note is that student loan debt does influence your debt-to-income ratio, which is a factor lenders consider before giving you a loan. It can also affect the interest rate you pay on your mortgage.
Buying a house with defaulted student loans
If you’ve defaulted on your student loans, it’ll be more difficult — but not impossible — for you to get a mortgage. Because defaulting negatively affects your credit score, lenders will be less likely to want to give you a loan or will charge a much higher interest rate on a loan.
Getting a home loan with student loan deferment
If you’ve deferred your student loans, this usually won’t affect your chances of getting a mortgage. Just be sure to consider how the future estimated payments will factor your debt-to-income ratio. Some types of mortgages may reject applicants with deferred loans, so do your research on the different types of mortgages before shopping.
Should You Pay Off Student Loans Before Buying a House?
Buying a house is expensive, there’s no doubt about that. It can seem smart to hold off on house shopping while you still have student loan debt, and it can be even more difficult to save for a house if you’ve got a high debt-to-income ratio. But if you have enough income to handle the payments for both, you may want to consider investing in your first home.
Signs You Should Pay Off Student Loans
When considering whether to pay student loans or save for a house, there are a few factors that can help you decide if paying off your student loans should be a priority.
Your debt-to-income ratio is too high
If the amount of money you bring in monthly or yearly is almost the same as the amount of money you pay out in debts — like student and car loans or credit cards — it may be best to pay down your debt before buying a house.
You’ve defaulted on your loans
Defaulting on your loans has a severe negative impact on your credit score, which tells lenders that you’re a bigger risk to take on. Work on improving your credit score before shopping for a mortgage.
You’re struggling to make payments
If you feel like you’re living paycheck to paycheck or struggling to make payments on your loan every month, it’s best to hold off on saving for a house. Need help keeping track of your student loan payments? Try our student loan payment tracker to get organized.
You haven’t saved for a down payment or emergency fund
Before you start picking out which houses you want to tour, you should take a look at your savings. If you don’t have enough for a 5 to 10 percent down payment or enough as an emergency fund for home expenses — like a broken dishwasher or damaged roof — take more time to put money away for your first home.
