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How to go from being a renter to becoming a home owner.

Jennifer Mackay

I was a renter for many years myself a few years back and I am well aware of the difficulties many renters face: rent affordability, Credit issues, neighbor issues, community issues etc.

Many times it is more difficult being a renter then it is being a home owner.

What many renters fail to realize however, is that their ultimate goal should not be the ability to rent a nice apartment in an upscale neighborhood. The ultimate goal for every renter should be to purchase their own home one day.

Whether that home is a detached or attached single family home doesn't matter in the beginning. The idea is to one day stop paying someone else’s mortgage and start building your financial security for yourself and your family!

The tax advantages alone should be enough to cause a renter to sit up and take notice (always consultant a qualified tax proessional regarding the tax advantages of home ownership).

Being a property owner and landlord myself, I offer all my tenants assistance in becoming home owners themselves.

I do this because I have first hand knowledge of the process and also selfishly, I receive a very high degree of self-satisfaction helping others achieve the goal of home ownership. The smile and look on the face of a first time home owner when I hand them the keys to their new home, to me is priceless and makes job rewarding, fun and satisfying!

 

I can tell you first hand, there is no better feeling waking up in the morning knowing that the home you slept in last night is your own. You can freely: paint it, remodel it, place carpeting or other flooring without the consequence that when you move you will have to replace what you have done using your security deposit!

There are many reasons renters are hesitant to purchase a home, some of the more common concerns that renters (potential first time home buyers) have expressed to me personally are:

  • My credit isn't very good
  • I'm "Afraid" to have a mortgage for fear of losing the home
  • The maintenance costs of owning a home are too high
  • I have no money for a down payment

Let's examine each of these concerns to hopefully alleviate these issues:

My credit isn't very good

The are several reasons why a lender would not finance the purchase of a home. They include:

  • Low Credit Score
  • Appraisal Value below the asking price

While low credit scores are a concern to everyone, this obstacle is one of the easiest to overcome! How? To start with, begin and continue to pay all bills on time. Sounds easy right? Well it is. Paying bills on time allows the credit reporting companies to receive positive communications from credit card companies, lenders and others who report payment history. What many renters don't realize is that some landlords also report late payments and payment history.

The first step in repairing credit is knowing what your credit score is. Many real estate professionals will have their customers qualify for a home purchase before proceeding to look at properties for sale. This is accomplished by having the potential buyer contact a lender and submit an application for a loan.

This is done not to embarrass the buyers but to provide both the potential buyer and real estate professional the ability to focus and show only those homes that meet the financial qualifications of the buyer. Why look at a home for $500,000 (other then to produce envy in the buyer) when the buyer is only able to obtain financing for a home valued at $250,000?

By viewing homes within a buyers financial ability to purchase will help remove the "Appraisal Value below the asking price" obstacle. Many qualified real estate agents are able to judge the value of a property very close to that of a qualified real estate appraiser. This helps the potential buyer make an informed price offer on a property that meets their financial ability to purchase.

When loan applications are denied, the loan officers provide a report and rationale regarding the denial which help both the consumer and the real estate professional. Knowing what the issues are with low credit scores such as:

  • Too many credit inquiries
  • Too many late payments
  • Judgments or liens on file

provides a clear understanding of what is needed to repair the credit score. Many lenders offer assistance and guidance programs to help repair low credit scores. But in order to fix a problem, you must first know what the problem is or that a problem even exists! Many times following this procedure I've had customers who were pleasantly surprised to learn their credit was acceptable for purchasing a home.

I'm "Afraid" to have a mortgage for fear of losing the home

Also known as the "fear" factor.

Make no mistake about it, owning your first home may very well be the scariest, most important financial decision most people make in their lifetime. But it does not have to be a fearful experience or decision. Using the guidance of a qualified real estate professional may help reduce the "fear" factor of purchasing a first home. Many real estate professionals deal with this situation almost on a daily basis. In addition, many real estate professionals specialize in assisting first time home buyers!

Their knowledge and guidance in the process of buying a home will help make that first purchase a pleasant, stress free situation.

The fear of losing a home due to changes in employment or other financial status issues is a very real concern for everyone. Renters are not the only ones with this concern either. Home owners face this dilemma often.

However, a significant difference in the concern between a renter and a home owner, is that home owners often have financial assistance to help them through tough financial times in the form of "equity" that renters do not have. Equity is the difference between what a home owner owes a lender (the mortgage) on a property and what the property is worth. A simple example of equity is: Let's say a home is purchased for $100,000, the appraisal value of the home is $110,000. The equity for the home is $10,000. What this means to a home owner is that if they are ever in need of financial assistance, they may have the option of applying for a loan against the equity they have in their home.

As a home owner continues to pay off a mortgage, in most cases their equity continues to increase. This doesn't even factor in the appreciation (the increase in value of an asset) a home receives over time!

The maintenance costs of owning a home are too high

While maintaining a home does indeed have a significant cost factor associated with it, it should not be an obstacle to becoming a home owner.

Home owner maintenance chores such as: Painting, mowing the lawn, cleaning the pool may actually become less of a chore and more of a fun task! If you have a family, it may even be a way to bring the family together. Turning home maintenance tasks into family oriented weekend projects, many times brings a family closer together. It provides children with not only a sense of responsibility, but also the ability to learn the importance of maintaining a financial investment, as well as provide a learning opportunity for their designated specific tasks.

I have no money for a down payment

Many renters believe they must have allot of money for a down payment on a home. This is not always true and not in all market places.

Many lenders offer programs to first time home buyers in the form of 100% financing or other affordable programs. The only way to find out what programs a lender offers is to contact them and inquire and apply for the program!

While there are costs associated with purchasing a home such as closing costs that are required at the time of closing the sale, even these costs can be minimized by the lender.

There are also purchasing options that a real estate agent can suggest such as: asking the seller to pay for some or all of the closing costs upto a given dollar amount, or requesting the seller refund a portion of the asking price to be used to offset the down payment requirements.

Summary

Home ownership is not only in reach of many renters but should also be a life goal. Educating yourself and understanding the obstacles and issues each of us faces as first time home buyers provides the information necessary to eliminate the obstacles and overcome the issues.

Using qualified real estate and financial professionals to help in the purchase of a home is an invaluable tool. Their knowledge and ability to offer recommendations can make the transition from renter to home owner a stress free, fun opportunity.

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Jennifer Mackay REALTOR®
Keller Williams Success Realty
2110 W. 23rd Street, Suite A. Panama City Fl 32405
Direct: (850) 774-6582
Office: (850) 392-1700
Fax: (850) 522-3697
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