For someone thinking about becoming a landlord and either buying a non-owner property or converting their own house into a rental, there are five tips and things to think about before doing so.
The first is to know and follow the rules since landlords must adhere to federal, local and state housing laws and health and safety codes.
The second thing to remember is that unless you hire a property manager, you’re on call 24/7. Emergencies can occur any time of the day and you, as the owner, are ultimately responsible for remedying the problem and providing a livable unit for your tenant.
The third thing to keep in mind is that interviewing potential tenants can be difficult; options include social media to advertise the space, or receiving referrals from friends and family. You may also want to consider using a property manager or property management company. The fourth thing is to assess your ability to fix things when they break. If the unit is not near you, or you are not “handy”, you’re in better shape than having to hire someone as those costs add up.
Lastly, prepare for the unexpected as there are things that will come up that you won’t be able to repair, so having a list of vendors that you can contact when something goes array (cockroaches, A/C breaks), will be beneficial. But once the decision is made to own a rental unit, loan originators have various programs that are similar to owner-occupied programs for financing. And there are some very attractive terms!
The industry is always looking for ways to streamline and finesse the mortgage loan process, and ideally, lenders should start with the very first step—pre-approval. For borrowers, it really does pay to work with a lender who asks the right questions and procures all the appropriate documents, as they’re less likely to make a misstep and stall the process.
A common lender mistake is simply not doing enough research. Even if a buyer has a pre-approval letter from an esteemed mortgage lender, the loan application will be declined if the lender hasn’t looked into tax returns and credit reports sufficiently to find out that the borrower has, for example, already financed the maximum number of properties as dictated by Fannie and Freddie.
Given the importance of credit, many people have their credit report run every year. Although this is primarily to watch for suspicious activities on one’s credit card, knowing your credit score is an important step if considering a home purchase or refinance.
Self-employed borrowers also pose problems when it comes to income, as institutions won’t issue a loan based only on assets. If a borrower isn’t able to demonstrate any income—he or she is starting a new business, for example—the application will be declined, even if the borrower has several million in the bank and a pre-approval letter from a well-regarded lender.
Oversights like these leave everyone with a bad taste in their mouth—the seller loses time in selling the property, and the buyer loses time in searching for a property and has to cover the cost of the appraisal, at the minimum. Time and energy is wasted by all, and the mistakes are entirely preventable if lenders are diligent throughout the pre-approval process.
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$10,000 HHF DAP Available
Kentucky Housing Corporation (KHC) is proud to announce a new round of Hardest Hit Fund (HHF) Down payment Assistance Program (DAP), a total of $5 million will be available for new reservations beginning:
Tuesday, January 9, 2018, at 10 am, ET. The HHF DAP will be available on a first-come, first served basis, based on the completion of the first mortgage and HHF DAP Reservations.
HHF DAP Program Guidelines:
- $10,000, zero-percent interest, forgivable second mortgage loan with a five-year term.
- Property must be located in one of the four counties:
- No New-Construction properties allowed.
- Property has to have been previously occupied.
- Secondary Market Purchase Price and Income Limits apply - $130,725 - Kenton Co
- Borrower must be a first-time home buyer (no ownership interest in the last three years).
- Most recent three-year federal tax returns or tax transcripts required.
- Pre-purchase homebuyer education required for all borrowers.
Please contact us today for more Information.
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Loan officers come across people who have never owned a home, and don’t even know how to go about it. The American Bankers Association is offering tips to help consumers prepare for one of the first steps in the home buying process: saving for a down payment. Before transitioning from renter to home owner, potential buyers must typically save between 5 and 20 percent of the home’s value for the down payment – and it may not be as difficult as renters think!
First, develop a budget and timeline. What kind of home does the renter have their eye on? What is the price estimate? Determine how much the borrower will need for a down payment, and then work backwards to create a budget and calculate how much should be, and can be, saved every month. That will help the borrower gauge when they will be ready to transition from renter to homeowner. Some renters establish a separate savings account for the down payment to lower the temptation to spend it. Make the monthly contributions automatic.
Potential buyers should shop around to reduce major monthly expenses on current expenses such as car insurance, renter’s insurance, health insurance, cable, internet or cell phone plans. Not that only renters should do this, but there may be deals or promotions available that allow anyone to save hundreds of dollars by adjusting contracts. On the flip side, monitor spending. With online banking, keeping an eye on spending is easier than ever, and seeing where most of one’s income is going is very enlightening.
Lastly, loan officers can help potential borrowers look into state and local home-buying programs. Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.
There are plenty of benefits to home ownership, and buying one is an event to be celebrated – but laying the groundwork is critical! And originators are in an ideal place to help borrowers on their way
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