Are you currently renting an apartment while daydreaming night and about buying a home? Perhaps you are someone who has been doing that for years. Well…have you ever considered buying a house while renting an apartment? Buying a property can be a daunting process, especially with rising interest rates. In this article, we’ll explore some of the things you’ll need to take into account when buying a property while still being tied to a lease of a rental
It is possible to buy a house while renting an apartment?
You’re probably thinking, “It sounds great and all, but buying a house while renting an apartment sounds expensive.”
Well, you’re not wrong; but it is 100% possible. You can explore the following options:
- Rent-to-Own Option—A rent-to-own contract offers buyers the chance to own their home after renting it for a certain period of time (usually one to three years). The contract will specify what percentage the bank will pay toward purchasing the home at its fair market value when it is ready for sale. Once you reach this required amount, you can apply for a mortgage and purchase the property outright!
- Lease with Option to Buy—Lease with option agreements allow renters who want to buy their homes at some point down the line to do so without having any money tied into them initially or giving up options like negotiating price adjustments or closing early if they decide they don’t want them anymore.”
Work out how much the property you want to buy will cost per month.
If you don’t know what you want in a home, now is the time to iron out the details. To work out how much a home will cost per month, multiply the annual percentage rate (APR) by 12 and add on any fees (like closing costs, realtor fees and any possible legal fees).
Here is a FREE mortgage calculator you can always utilize. This will provide you with a pretty solid foundation when considering how much money you’ll need for your deposit and for the first year or so of home ownership. The calculator asks for details about your salary, savings and other financial commitments so make sure you’re being completely transparent so the amount you need is accurate.
Be sure not to change jobs during the application process.
Be sure not to change jobs during the application process. Typically you need to be employed by the same employer for at least 12-18 months to be considered a favorable candidate. This can be a big no-no for a couple reasons:
- You may not have enough income to qualify for your mortgage loan. If you’re currently working part-time or on contract, and your job ends before the closing date of your home purchase, that could be a serious problem. It’s best to avoid this situation entirely by staying at the same place if possible.
- Your lender may require proof of employment when you apply for a mortgage loan — so even if you stay put at work, it’s still in your best interest to keep things as consistent as possible until after closing on your house purchase.
Avoid opening credit cards when applying for a mortgage
One thing you should avoid doing when applying for a mortgage is opening new credit cards. This can have a negative impact on your credit score, and lenders may see this as a red flag as carrying too much of a debt to income ratio. Many aspiring home buyers opt to use debit cards than credit cards to keep things simple months leading up to home buying. In addition, a high limit on a credit card could also deter lenders, as they would have less assurance that you can pay them back in full each month if you’re carrying significant credit card debt.
Avoid making any large purchase when applying for a mortgage
Of course, some things are more flexible than others. If you’re planning to buy a car, for example, it may be easier to delay that purchase until after you’ve purchased your home.
But if the idea of delaying a desirable, big purchase makes you nervous—or if you’re unsure whether or not doing so will actually have an impact on your loan application—you should talk with a mortgage professional who can help walk through what’s the best option for you.
Make sure you pay all of your bills on time
You might be thinking, “Well…that’s obvious.” You’d be surprised. Banks want to see that you are managing your money well; thus, you’ll need to pay all of your bills, especially utility bills, on time and not carry significant debt. You also have to have a good credit score, enough money in your bank account, and a good credit history.
If you’re already doing everything we aforementioned, you really are in excellent shape and home ownership is less of dream as it a reality for you. For more answers to difficult questions, contact a realtor at Zukin Realty. For over 50 years Zukin Realty has been West Chester’s premier realtor.