Let’s Talk: How to Transition from Renter to Home Owner

written by Sonja Gushinere

Real Estate and Business Structuring conversations always excite me! My journey started in my early 20’s assisting a couple of “Millionaire” Loan Officers and then transitioning to Underwriting Building programs thru all phases across the USA. Eventually, I jumped from finance into the Real Estate backyard. That’s where I wore the “hats” of Real Estate Closer, Wholesaler and became a Licensed Real Estate Agent where I conquered sales and management. This path led to wearing my current hat as a Real Estate and Business Consultant Professional.

I’ll put on my Real Estate hat for this article and focus on the “First Time Homebuyer.” Sharing a little information that hopefully will provide better understanding or simply the confidence to buy. With that said, “Let’s Talk: How to Transition from Renter to Owner!”

What does it mean to be in a position to buy, when is the right time to call your Real Estate Professional, and what does your starter team look like?

First, I encourage you to always reach out to your real estate professional. Most would welcome you and any concerns you may have.

Buying a house is a hugely exciting move! You want to avoid creating disappointments initially, such as directing your real estate professional to take you out looking at dream houses without key positioning, like financing.

Taking steps to get in position as a prepared Homebuyer leads to a priceless experience for all–Yourself, the agent, and the team in the long run. Yep, proper preparation is what prevents poor performance indeed!

CHEAT CHECKLIST:

1 - CREDIT

Credit Score and Credit History reflect how you paid your debts in the past. Credit score numbers are generally between 300 and 850. Improving your Credit Score can better your options and terms, loan interest rate and help you qualify for lender programs.

If your credit needs work, you have options to hire a credit repair professional or self-repair. Either way, note credit “seasoning” or credit “building” requires time, patience, and consistency.

Go online to www.freecreditreport.com to review your credit from all three credit reporting bureaus: Equifax, Experian, and TransUnion. All three because some creditors may report to one and not the other credit reporting agencies.

Let’s get on “good behavior!” Bring any late payments up to date, pay current dues on time and work on paying down credit card debt to 30% or below usage. Do not max out credit card limits. Lenders like to see credit available but relatively little borrowed.

Look over your credit reports for any problems and inaccurate information. You will need to rectify any concerns with the credit bureau reporting it. Most importantly, pay all of your bills on time.

If you are a part of the no credit group, you need to build. A secured credit card, along with opening a couple of accounts, will start you.

2 - PROOF OF INCOME

Proof of income can cover a lot of ground! Complete W-2 or 1099 Tax Returns for the last 2-3 years, plus gather recent paycheck stubs from current employer, commissions/bonuses received and supported by W-2 or 1099.

Additionally, Child Support and/or Alimony Payments, 401K and IRA account statements, retirement accounts, Social Security, Pension, and Brokerage accounts, including shares of stocks you own… you get the idea!

And, If Self Employed – Financial copies of Profit and Loss Reports, Balance Sheets and tax return for the previous three years from CPA. And any additional requests from the lender.

3 - SAVINGS

First, avoid bad behavior with your account, meaning no overdrafts and no NSF’s. Most Lenders will require you to provide between 1 to 3 months’ worth of complete bank statements reflecting sufficient funds to cover the Down Payment, Closing Costs, and Reserves at 1-3 months, possibly.

One Rule of thumb, three months’ worth of mortgage payments in the bank is a good start.

Also, note the future unexpected shenanigans. It’s good that you are focused on saving for that down payment and closing costs but make sure to include a Reserves Savings Plan line covering maintenance and emergency repairs. Maybe, each paycheck set aside funds to rebuild your savings for these unpredictable expenses. Some recommend setting 3% of the purchase price yearly for maintenance. Ex 250k purchase, 3% @ $2500 yearly/or $200 monthly. As a renter, your budget may look possibly like rent, electricity, gas. As a HomeOwner, your budget possibly looks like mortgage, electricity, gas, insurance, taxes, water, sewer, trash (include association fees and special assessments if condo owner).

4 - DECISIONS

What type of property do we want? Would a house best serve your needs or an income-generating property that you can call home? Or, maybe a mixed-use home to support your business ideas with rental income!

Most first-time homebuyer financing covers the purchase of a single-family home and 2-4 units properties as well as mixed-use! Down payment norms are about 3.5% versus the 15-20% minimum down payment required of investor buyers.

5 - LOAN APPLICATION READY!

With all the above said, You should now be in a position to apply for financing. Contact Financial Institutions, Credit Unions, Banks, etc., for financing options, or ask your real estate professional. The primary financing options for first-time homebuyers are FHA, FHA-203k, Conventional, VA, and a host of options that your lender can review with you.

Get the Pre Approval/Pre Qualification letter showing you How Much House you can afford. Get the team in place: REALTOR, HOME INSPECTOR, ATTORNEY, HOMEOWNER INSURANCE PROFESSIONAL, and CONTRACTOR (if applicable). Now, you are ready to Shop!!

Remember! Knowledge, understanding, preparation, and a great team will get you keys!! Let’s Talk!! Join me here next month as we Talk and Explore both Real Estate and Business Ideas. Thanks again, and Let’s Talk soon!!!

Email: SpaceMstrSg@gmail.com