Home Qualifying Series Part 4
What are the 3 most important things when buying a home?
With your pre-approval letter in hand, you’re now able to make a confident offer on a home knowing you’re in the best situation possible. You’ll be working with your realtor to tour homes and talk about what you like and dislike in your living quarters. Just remember that your mortgage lender will always be here for questions and payment estimates . I’ll keep this answer short, as it is mainly your real estate agent who will help with this part. Location, budget and property conditions are paramount when buying a home. Choose a location that aligns with your lifestyle, establish a realistic budget, and prioritize a property condition that you’re comfortable and confident with.
Whether you’re looking to buy your next primary home, a vacation (second home) or an investment property it’s important to keep these in mind. If you don’t feel comfortable at this point it might be okay to look at continuing to rent.
Should I buy or rent a home?
The decision to buy or rent a home depends on the individual circumstance. While buying builds equity, renting offers flexibility. If you’re planning on moving around in the short term renting is a valuable option. A good rule of thumb is if you plan to stay in one place for 2 years, you’ll break even with closing costs and realtor commissions. Ideally, you’ll want to stay in the home for longer.
Consider factors such as long-term goals, market conditions, and lifestyle preferences when making this decision.
What is house hacking?
Going back to whether buying a single family, vacation (second home) home or multi-family home is right for you.
A single-family home is your standard residential home with one livable unit. Although a lender cannot use rental income for qualifying purposes, you as a client can rent out the additional rooms to earn rental income. This house hacking method is gaining popularity especially with the home prices appreciating and interest rates on the rise. This is a sure way of offsetting your mortgage payment, and in some cases you can even earn money by doing this.
Now what if I told you there are options to buy up to a 4-unit property. With multi-family housing (2 to 4 units) you can earn income from all units and even all bedrooms. You can use recorded leases on the property as qualifying income, which will help you increase your buying power.
As of October 2023, Fannie Mae came out with a 5% down payment on multi-family housing as long as you live in one of the units as your primary residences. FHA has always allowed a 3.5% down payment. There are options for using assistance programs for up to 2 units (See other blog posts for more information regarding each loan program).
Have you ever thought about buying a lake home in northern MN, a beach home in FL, or a mountain home in Aspen? We can use the same house hacking strategy to help buy these properties. Utilizing local property managers to rent out the properties on a short to midterm rental basis to offset your mortgage payment, or even earn income. This is great way of having a second vacation home in your portfolio.
As you can imagine, it’s not an easy task having renters and properties to take care of. There are sometimes headaches and work involved. The alternative route is to surround yourself with the right people. Make connections in the area that can help with maintenance or help finding tenants/dealing with tenants. You may have to share the profits with them, but at least you own an asset that is being paid down by another person while you’re still doing your job and living your life.
Housing Hacking is a great way to lower your housing payment while building a real estate portfolio. There are multiple different strategies, and this should only be used as a beginner crash course. It’s good to do your own research and have deeper conversations about this topic before entering a transaction.
Conclusion:
Thank you for reading my series on the home buying process and qualifying for a mortgage. Navigating the intricacies of this process requires careful consideration and informed decision making. By understanding the nuances of the pre-approval process, qualification criteria, and other key aspects, you’ll be well- equipped to unlock the door to your new home!
Remember, as a mortgage lender I’m your ally on this journey. Provide personalized guidance to ensure a smooth transition to homeownership.
