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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 hoping to buy a house again, there’s one possibility you might not have considered: purchasing the home you’re currently renting. That’s right — make a purchase offer to your landlord to buy the home you presently live in. The blanket belief your landlord doesn’t want to sell simply may not be true. By communicating your intention to purchase the house directly from your landlord, the transaction becomes easier for both parties.
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, down the road if you or the seller decide to bring a real estate professional in on 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 permission to obtain a copy of your most recent credit report.
Bring an offer in writing to your landlord and present to them a fair market price for what you think the home is worth. There are two ways to accomplish this. You can 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 document — stating the sales price, terms of the transaction between you and the seller, signed and dated by both parties — is sufficient for mortgage loan financing.
Chances are you have lived in 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 — is typically recommended. The only required fee is an appraisal, costing around $400-$500. An appraisal is needed to determine whether the 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.
Considerations for this:
Getting a mortgage does require providing thorough supporting financial documentation, as well as acceptable debt ratios, credit score and liabilities. Successfully closing the escrow loan is simply a function of having enough income coming in every month to offset your monthly liabilities. Liabilities lenders look for are things such as child support, alimony and typical liabilities that show up on a consumer credit report such as credit card debt, car loans and student loans.
Lending Tips:
If you are presently renting a home, and can afford a house, ask your lender to run a cost-benefit analysis for you to determine the most appropriate loan package for your situation.
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December 13, 2023
Mortgages
June 7, 2021
Mortgages