How To Go From Renting to Owning Real Estate
It does not matter your obstacles, if you want it bad enough, you can go from renting real estate to owning your own home.
As a single mom, I made sure to rent apartments in good school districts so that at the very least I felt my son was getting the best public education that I could afford. But the rent was STEEP and they just kept increasing the rent every year, there was no escape!
This motivated me to get serious about buying a home. My mindset was, if I can find something with the monthly payments similar to what I am paying in rent and a property that I would at least be able to sell for the same price I purchase it at (break-even/get my “rent money back”) I would be happy. I just wanted to keep as much money as possible in the long run.
While there are more expenses associated with owning property then renting, if you factor those into your total monthly housing expenses and keep them within the range you were paying in rent, it may be worth it for you to make the transition to owning.
Here was how I was able to buy my first property as a single mother and how you can work towards the goal of owning real estate regardless of your circumstances.
Step 1. Contact a Mortgage Broker
Don’t have any money saved? Have a low credit score? Have high minimum payments on debt? Still call. If you have a referral from someone even better. The mortgage brokers I have spoken to are open to building a long term relationship so even if you are not ready at this moment they will have useful information about obtaining a mortgage that can help direct your next steps.
The best thing, they do this for free. It is free advice from a professional so that you are not aimlessly trying to pay down all your debt when maybe you only need to pay off some of it and save more money. You want to work smarter not harder so it is best to speak with a professional.
Another thing they can discuss with you after making a plan to being ready for approval is, once you follow the plan what price range you could be approved for (there will be caveats like how much taxes are, etc).
When I first spoke with a mortgage broker I was surprised to learn that even with my income level remaining where it was I could get approved for a mortgage that would allow me to buy a condo in my area. To qualify, I likely would not have to pay off all of my credit card debt I just needed to not add any to it and save a little bit more and then I would be ready to close. I think if more people found out their options they may be pleasantly surprised.
Step 2. Execute On Their Advice
If you need to increase your income to qualify for a mortgage consider if you could take on a second job. Perhaps you are coming up on a bonus or raise at your primary job. As a single mom I did not want to take on a second job because I already had limited time with my son. I decided to focus on positioning myself and communicating with my boss about my performance, intention on growing with the company and the fact that I was interested in learning specific things I could do to increase my base salary and annual bonus.
As for me, I have always been upfront with my supervisors about my life goals outside of work. You are not working for free and everyone has a life. Some people do not think this is a wise decision but I am working hard for them, taking time away from my son so that we can be secure in our housing situation as an example. Hopefully your employer sees the value in investing in your continued growth with the company.
Do you need to pay off debt and save? Get serious! Start tracking what you’ve been spending. Come up with a strict budget. Reduce your spending immediately. Start paying attention to where your money is going. Cut your subscriptions, cable, anything that is not a serious need.
Start an automatic transfer of a set amount of money twice a month from your checking to savings account and do not touch your savings, pretend it does not exist. Before you know it, you will have reached your savings goal.
Any large sums of money you have coming to you should definitely be reserve for your savings towards buying a house. This could be annual tax returns, lump sum past due child support, bonuses or some other windfall. If your primary goal is buying a home do that first before getting new furniture, car or any other big expense.
Step 3. Learn the Real Estate Market
During this time you are working towards getting a pre-approval for a mortgage, study the real estate market that you plan to buy in. I used to go on Zillow, look at places in my price range, see what the HOA fees were like on average, taxes, how much older units went for, newer units, I would compare units in a few different towns. I even started comparing condos nearby where I was working to homes the same price but an hour drive north.
As you keep investigating the market, you will know when there is a good deal. The best time to make a move on a property is when you are obviously financially ready, but also when there is a property that you can purchase for a great price. Something that with minimal changes will increase in value.
A lot of real estate agents will allow you to sign up for notifications with them so each week or day you will get an email with listing in the areas you are looking within your price range. This is a great way to get to know the market as well and sometimes will have more detailed information then what you can find on Zillow for example.
Remember to have hope. Find out where you are by speaking to a mortgage broker in your area, get tangible goals you need to become pre-approved and take action to make that happen. Good luck!