The Mackenzie Rae Team (MRT) loves to help renters become buyers. Renters, however, are sometimes stuck between a rock and a hard place. Despite rental prices slowing home ownership, isn’t any cheaper.
A recent consumer report shows that renters are carefully weighing the benefits of home ownership versus renting. In the past year, 46 percent of renters who moved considered buying a home after a rent hike of at least $125.
Here are some tips to get you started on home ownership.
Alleviate personal finance concerns with a pre-qualification. The number-one concern renters have about buying a home is the ability to afford a monthly mortgage payment. First-time home buyer should complete pre-qualification form.
The process allows you to use basic information, such as annual income, mortgage term and interest, credit score, monthly recurring payments for things such as credit card, student loan and car loan debt, as well as monthly estimated property tax, insurance and homeowner’s association fees.
After providing these estimates, you’re able to find out the maximum loan amount you can qualify for.
From here, you are also able to start the pre-approval process, which is similar to the pre-qualification process, except you must verify your financial information with tax returns, W-2s, etc.
Some will be pleasantly surprised at what you can afford. Others realize that they have more work to do, such as improving their credit score, paying down debt or increasing their down payment.
Use a comparative market analysis (CMA)
Renters with a comparative market analysis can look at rentals and for-sale homes. The analysis focuses on rental and for-sale listings that are similar in terms of square footage, amenities, condition, and location.
A CMA often reveals that renters can save money by buying.
Understand the number of mortgage loan and down payment assistance options that make home ownership more accessible.
Renters should know about the difference between conventional loans and FHA loans, both of which provide low down payment options.
e.g. Creditworthy renters can qualify for conventional home loans with low down payments such as Fannie Mae’s non-FHA backed HomeReady mortgage and Conventional 97. These loans allow buyers to put down as little as three percent, but must pay a monthly mortgage insurance premium (MIP) until 20% of the loan is paid.
For renters who don’t qualify for conventional loans, they may be able to get a Federal Housing Administration (FHA) loan that only requires 3.5 percent down and a monthly MIP.
Learn about down payment assistance programs offered by individual cities, such as:
In conclusion, there are situations where buying just isn’t an option, whether it’s a financial situation or lifestyle need. We still give you as much guidance as possible, but never push someone into buying a home if it isn’t good fit. We will work with you to find your perfect rental and keep in touch to help you reach your goal, just send us a note.