If you’re thinking about purchasing your own place in the future, buying the home that you’re currently renting might be an option.
Buying the home that you’re renting makes sense from a financial and practical standpoint. Since rent payments are typically higher than mortgage payments, buying this house might reduce your monthly housing costs. And if you like and know the area, you don’t have to pick up and relocate your family. Of course, for this to happen, you’ve got to get your landlord on board.
The truth is, even if your landlord hasn’t considered selling the house, he might be agreeable to the idea if you bring it up. If you’re serious about purchasing the house you’re renting, here are three ways to make it a reality.
#1. Express your desire to purchase the home
Schedule a meeting with your landlord, —either face-to-face or perhaps a telephone conversation. Be direct and ask your landlord if he will consider selling the home to you in the next couple of years. Unfortunately, the conversation may end abruptly if the landlord doesn’t have any intentions of selling; but if he’s agreeable to the idea, this is your opportunity to suggest converting your existing rental agreement to a lease-option.
This option provides more flexibility than a lease-to-own agreement, which is a legal binding agreement obligating you to buy the house after a set period. With a lease-option you “retain a legal option to buy the property at a set price after a given period, not an obligation to buy it,”reports MSN Real Estate. Therefore, you can choose not to buy the property if your financial or personal circumstances change.
#2. Begin preparing to qualify for a mortgage loan
Getting your landlord to agree to a lease-option is just the first step. To complete the home purchase, you’ll need to qualify for a mortgage loan. It’s important that you educate yourself on lending requirements, as this can ensure a smooth, hassle-free loan process.
Generally, you’ll need a minimum credit score of 700 to qualify for a conventional mortgage loan. Additionally, these loans require a 5% down payment and you’ll need cash for closing costs.
Paying off your credit cards or other debts and maintaining steady employment are also crucial factors when preparing for a home purchase. Getting rid of debt lowers your debt-to-income ratio and builds your credit score. And since mortgage lenders prefer applicants with a stable work history, job hopping or long-periods of unemployment during the past two years can stop your approval.
#3. Get pre-approved for a mortgage loan
Once the time arrives to purchase the house that you’re renting, speak with two or three lenders and request a no-obligation mortgage quote. This way, you can compare interest rates and terms to ensure you receive the best loan package, which saves money in the long run. You can request loan quotes from your personal bank or credit union, as well as online mortgage lenders.
Even if your landlord doesn’t have any intentions of selling, he might change his mind in the future. Therefore, if you love the place you’re renting, and you would like to make this house a permanent home, it doesn’t hurt to get your credit and finances in order. This way, if he decides to sell, you’ll be in a position to submit an offer.
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