If you have never owned a home before, or owned a home in the past, or previous circumstances require you to rent a home now, and you’re thinking about buying a home again, we have good news. An opportunity in the market is to purchase the home you live in. That’s right make a purchase offer to your landlord about buying the home you presently rent. The blanket belief your landlord doesn’t want to sell is simply not true. By communicating your intention to purchase the house directly from your landlord, transaction becomes easier for both parties.
√ virtually no other competition, just you and the seller
√ you in turn benefit because the seller enjoys reduced selling costs without using a listing broker
√ can be done with or without a real estate agent
√ more allowable time to perform on the sales contract
√ no need to search for more homes as you may have already customize the home to your liking
3 Lynch Pin Steps To Take Buying Your Home From The Landlord
Step One- Get Preapproved: if you’re serious about buying a home, especially in today’s credit market, emphasis is placed on your ability to perform on a real estate sales contract. Unless you have your purchase offer in cold hard cash in the bank, you’ll need mortgage financing. Find a mortgage lender that has experience and the ability to close a loan transaction from buyer and seller both with and without real estate agent representation. This way later on down the road if you or the seller decide to bring in a real estate professional in the transaction, you can still secure financing. To attain a proper loan pre-approval, you’ll need to provide supporting financial documentation to a mortgage lender as well as give them a loan application and give them permission to obtain a copy of your most recent credit report.
Step Two– Make An Offer: bring an offer in writing to your landlord and present to them a fair market price for what you think the home is worth. Two ways to accomplish this, bring a real estate agent into the transaction so they can make the offer on your behalf or depending on the nature of your relationship with your landlord, a one-page piece of paper stating the sales price, terms of the transaction between you and the seller and signed and dated both parties is sufficient for mortgage loan financing.
Step Three- Get Into Contract: chances are you’ve been living at the home for some time and you already have a feel for what life is like at the property. As an informed buyer you’ll want to obtain a pest inspection, and a home inspection if you feel it is necessary, typically recommended. The only required fee is an appraisal, cost is around $400-$500. An appraisal is needed to determine sales price meets the actual valuation of the home. Your mortgage lender will lend on the appraised value or the sales contract, whichever is lower.
…If appraised value is equal to purchase price, then you meet the lending guideline
…If appraised value is above the purchase price, lender will make the loan on the sales contract and you purchase home equity moving forward
…If appraised value is lower than the purchase price, you can choose to pay the difference or purchase price can be reduced to match appraised value.
Essential Home Loan Characteristics
Getting a mortgage does require providing thorough supporting financial documentation as well as acceptable debt ratios, credit score and liabilities. Successfully closing escrow loan is simply a function of having enough income coming in every month offset monthly liabilities. Liabilities lenders look for are such things as child support, alimony, and typical liabilities that show up on a consumer credit report such as credit card payment obligations, car loans and student loans etc.
- Credit Score requirement will need to be at least 620 or above
- Income will need to be approximately 55% higher then all liability payments and total new housing payment. Put another way, take a house payment you can afford, add present minimum payment obligations then divide this figure by .45%. This will calculate the minimum income you’ll need to qualify for the house payment. If no liabilities, take your monthly income multiply by .45% and that’s the total house payment you qualify for including principal and interest, property taxes, fire insurance and potentially monthly mortgage insurance (incumbent upon down payment amount & loan program).
- Down payment amount varies, unless you’re buying a home in a rural area which allows for no minimum down payment, you’ll most likely be looking at a down payment needed of approximately 3.5%.
- Be prepared to show all supporting financial documentation including all pages of personal income tax returns and any applicable filed income tax extensions
If you are presently renting a home, and can afford a house, we can run a cost-benefit analysis for you to determine the most appropriate loan package for your situation. Get pre-approved to buy a house today by getting prequalified with us online for free.
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