This ARTICLE On Renting A Home Versus Buying A Home Was UPDATED And PUBLISHED On October 3rd, 2019
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 20% down payment and also need closing costs
- This is not the case
- Home Buyers can purchase a home with 3% down payment with conventional loans
- 3.5% down payment with FHA Loans
- USDA. Loans and VA Loans do not require down payment and these 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
In today’s market, there are many deals throughout the United States.
- Homes that were appraised at $300,000 plus are now going for substantially less
- 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
- This client just got a house under contract for $150,000 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.
Renting A Home Versus Buying A Home: Advantages Versus Negatives
Both renting a home versus buying a home has its 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
- 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.
Many Renters Are First Time Home Buyers
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 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
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.
Buying A For Sale By Owner Home
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 occassionally. 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, but who is going to pay them? FSBO home transactions should be represented by seller and buyer attorneys.
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, they can still qualify for an FHA Loan with an approve/eligible per Automated Underwriting System with 10% down payment
Renters or first time home buyers interested in getting qualified, please contact us at Gustan Cho Associates at 1-262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.