Renting A Home Versus Buying A Home And Benefits Of Homeownership

This ARTICLE Is About Renting A Home Versus Buying A Home

Renting A Home Versus Buying A Home:

  • Many renters think that purchasing a home is more difficult than it actually is
  • Most are under the belief that they need a 20% down payment and also need closing costs
  • Just the thought of buying a home means having a lot of money saved
  • This is not the case
  • Home Buyers can purchase a home with a 3% down payment with conventional loans
  • 3.5% down payment with FHA Loans
  • USDA. and VA Loans do not require down payment
  • VA and USDA loan programs offer 100% financing
  • Most homebuyers do not need to worry about coming up with closing costs
  • This is because closing costs can be covered with sellers concessions and/or lender credit

In this blog, we will cover and discuss Renting A Home Versus Buying A Home. We will also discuss buying a for sale by owner home.

Qualifying For A Mortgage During A Hot Housing Market

The housing market today is booming throughout the United States. Mortgage rates are at historic lows. Despite the coronavirus outbreak, home prices keep going up with no sign of a correction. There is more demand for homes than in inventory.

  • The average median home price in the United States is $341,750
  • California’s median home prices are just under $600,000 double the national average
  • One of my mortgage loan clients realized that renting a home versus buying a home was not for him
  • But after consulting with me realized that they could easily become home buyers because  paying for a mortgage was cheaper than renting
  • This client just got a house under contract for $250,000 in northern Illinois
  • The seller of the home purchased it in 2006 for $280,000

The best part of this deal is that my client’s new housing expenses, principal, interest, taxes, and insurance is less than their current rental payment. There are many instances where the monthly housing payment on a new home purchase is cheaper than renting. Homeowners can develop equity when they pay down the principal of their mortgage payments and when the home appreciates in value.

Renting A Home Versus Buying A Home: Advantages Versus Negatives

Both renting a home versus buying a home has their advantages and disadvantages.

  • One of the main advantages of renting a home versus buying a home is that a renter has no liabilities in being a homeowner
  • The landlord is responsible if anything breaks down in the home
  • Some repairs such as the HVAC breaking down can cost hundreds of dollars
  • If the renter needs to move elsewhere, they can just give the landlord a 30-day notice if they are month to month or move at the termination of their annual lease
  • A homeowner would need to either rent their home or sell their home before they are able to move
  • Homeowners would not want to leave their home vacant
  • Another advantage of renting a home versus buying a home is that a renter does not have to worry about maintenance
  • Homeowners are responsible for their own maintenance such as roof repair, furnace repair, electrical repair, and other major repairs
  • Renters do not have to worry about maintenance and/or repairs
  • Homeowners can write off the mortgage interest
  • Homeowners are property owners and part of their mortgage payments goes towards paying down principal and have their homes as an investment
  • Homeowners will develop equity as time passes and their home appreciates

Renters cannot write off rental payments and do not develop any equity. Every rent payment renters make is an expense. Homeowners who rent out their homes collect rent and with the rental payments pay their mortgage. Renters help pay their landlord’s mortgage and help landlords develop equity in their rental homes.

Many Renters Are First Time Home Buyers

Renting A Home Versus Buying A Home: Advantages Versus Negatives

Many renters are not knowledgeable about how to go about purchasing a home. Many first time home buyers and think that they need a substantial down payment as well as great credit.

  • A renter can qualify for an FHA mortgage loan with a 3.5% down payment
  • As long as a renter has a two-year work history, fair credit, and the down payment, they can qualify for an FHA Loan
  • For those who have bad credit or a prior bankruptcy or foreclosure, there are certain requirements
  • Outstanding collections and charge off accounts do not have to be paid to qualify for FHA Loans
  • HUD allows home buyers with credit scores down to 500 FICO
  • However, borrowers with under 580 credit scores and down to 500 FICO need a 10% versus 3.5% down payment per HUD Agency Guidelines

Homebuyers can qualify for 3.5% down payment FHA Loans with 580 credit scores.

Home Loan With Bad Credit

Home Buyers can qualify for FHA Loans With Bad Credit.

  • First Time Home Buyers who have filed Chapter 7 bankruptcy can qualify for FHA Loans 2 year after Chapter 7 Bankruptcy discharged date
  • Home Buyers with prior foreclosure, short sale, or a deed in lieu of foreclosure, the waiting period is 3 years from the recorded date of the DIL/Foreclosure or short sale date
  • The 3-year waiting period starts from the date of the sheriff’s sale or the date the name of the homeowner was transferred out of their name into the name of the mortgage lender
  • People in Chapter 13 Bankruptcy Repayment plan are eligible to qualify for an FHA loan during the repayment plan after they have been in the repayment plan for at least one year
  • They need to have made 12 timely payments to the bankruptcy trustee with no late payments
  • They need trustee approval
  • 99% of the bankruptcy trustee will approve a home purchase during the Chapter 13 Bankruptcy repayment plan
  • Chapter 13 Bankruptcy does not need to be discharged
  • There is no waiting period after the Chapter 13 Bankruptcy discharged date
  • However, any Chapter 13 Bankruptcy that has not been seasoned for at least two years need to be downgraded to a manual underwrite

Late payments during Chapter 13 Bankruptcy and/or bankruptcy discharged date is frown upon by lenders. However, one or two late payments during and/or after Chapter 13 Bankruptcy is not always a deal killer. Gustan Cho Associates helped countless borrowers with late payments during and after bankruptcy.

Buying A For Sale By Owner Home

Home Loan With Bad Credit

There are instances where renters get offered to purchase the home they are renting by their landlords.

  • For Sale, By Owner (FSBO) Homes do happen occasionally. Most FSBO homes do not have realtors agent representation
  • The home sellers and buyers normally work the transaction out among themselves
  • Buyers and sellers can hire a realtor to represent them
  • However, who is going to pay them?
  • FSBO home transactions should be represented by the seller and buyer attorneys
  • It is a must for both parties to hire real estate attorneys to represent them on an FSBO real estate transaction
  • For buyers, they need to make sure there are no liens on the property and the monthly payments get allocated towards the purchase of the home
  • Sellers, they need to protect their sale and make sure the buyers are vetted and qualified

Anything the home occupant does to your home, the homeowner of the record is responsible and liable. Therefore, the few bucks spent on a real estate attorney to represent each side is worth every penny.

First Time Home Buyer Mortgage Requirement

There are various types of mortgage loan programs. However, FHA Loans is the most popular loan program in the United States for first time home buyers and buyers with less than perfect credit.

  • To qualify for a 3.5% down payment FHA mortgage loan, the minimum credit score required is 580 FICO
  • Outstanding open collections and charge off accounts do not have to be paid to qualify for FHA Home Loans
  • If a borrower has credit below 580 FICO, and down to 500 credit scores they can still qualify for an FHA Loan with an approve/eligible per Automated Underwriting System with 10% down payment
  • VA and USDA loans do not have any down payment requirements
  • Gustan Cho Associates offers 100% financing on VA and USDA loans
  • There is no maximum loan limit on VA loans as of January 1t, 2020
  • First-time homebuyers can qualify for a 3% down payment home purchase conventional loan
  • A first-time homebuyer is defined as a homebuyer who did not have any ownership in a home in the past three years
  • Homebuyers can qualify for Non-QM loans one day out of bankruptcy and foreclosure
  • High-end homebuyers can qualify for our Jumbo Non-QM loans with credit scores down to 620 FICO
  • Gustan Cho Associates offers 12-month bank statement mortgage programs with no income tax returns required and no maximum loan limit
  • Gustan Cho Associates offers alternative non-QM investment mortgage programs such as our popular fix and flip, asset depletion, and P and L statement only investment loan programs for real estate investors

Renters or first time home buyers interested in getting qualified for a home mortgage, please contact us at Gustan Cho Associates at 1-262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates is a national mortgage company with no lender overlays on government and conventional loans. We are also experts in non-QM and alternative financing home mortgages. GCA Mortgage Group are experts in originating and funding primary owner-occupant properties, second homes, and investment properties. We have a national reputation of being able to approve and close loans others cannot. We are known as a one-stop lending shop. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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