If you decide to purchase a house or apartment to rent, there are a lot of factors to consider before paying any money. It’s always best to prevent any surprises!
5 THINGS TO KNOW BEFORE BUYING A PROPERTY
1. Your credit score
First of all, you have to check your credit score. This affects the interest rates on the possible loans you could take out to buy the property, which means it’ll indirectly raise or lower the total amount of money you’ll have to pay. You can go to the three major bureaus and learn your personal credit rating. If it’s good, you’ll know you have more chances to get a better deal on your loans.
Take into account that the score you’ll receive may not be exactly the same as the one your future lender gets when they investigate your personal finances to know how trustworthy you are. You can learn in this article the reasons why everyone can have many possible credit scores. In essence, you should work for a strong rating, especially if you’ve received your report back and isn’t good enough.
Remember that your FICO score isn’t the only thing that will change your mortgage’s interest rate!
2. The market
Next, you should get information on the real estate market. If it’s peaking, there are high chances that more people will want to invest in this field through homeowning, which can lead to the market tanking. Talk to professional real estate investors, ask for advice, and don’t be shy to do your research!
3. Your money
Another element to consider is your money. Not only what you’ll need to make the purchase and pay off your loans, but also the overall costs of a house or apartment, even if it’s just for rent. It’s advised to hold a property for seven years at least before reselling, which should significantly lower your risks and increase your profits. Check if you have that much money saved or if you’ll have enough money in the future to cover these costs before diving head-first into real estate investments.
4. The area
You should also pay attention to where you’re buying a house or apartment. The location shouldn’t matter as much, as long as there are people there who are willing to rent your place. There are areas where renting is more expensive than homeowning and vice versa. You need to consider these markets in order to know whether you’ll be able to profit from renting or if it won’t be enough to cover for your costs.
5. The laws
The state or city where you plan on becoming a landlord may also have different laws that apply to rent. Landlord laws can be more restrictive in some areas, and you’ll find that there are places where the renter is much more benefitted. Learn these rights and obligations thoroughly!
5 HIDDEN COSTS OF OWNING A HOUSE
Many Americans dream of becoming homeowners, and buying property is actually considered one of the most important milestones there are. And it is a pretty big deal, but you need to know that there are certain costs that are often overlooked.
1. Homeowners insurance
There is some confusion in this area, but here’s the main thing you need to understand: when you apply for a mortgage, your lender will probably require you to get insurance. But that insurance is for the mortgage, not for the house.
Getting home insurance is necessary and it can add to your expenses. Make sure you shop around to find the best option.
2. Catastrophic insurance
In some areas, regular home insurance won’t be enough. If you live in a state prone to natural disasters, you also need to get catastrophic insurance, as these incidents are usually not covered by regular policies.
3. Property taxes
If you thought that you needed to calculate your mortgage monthly payment to determine whether you could afford to buy a home or not, you are wrong. In addition to that, you also need to consider property taxes that, depending on your location, can be more or less expensive, but they definitely add thousands of dollars per year to the cost of being a homeowner.
4. HOA fees
Homeowner or Condo Association fees can be a surprise if you are not ready for them. Depending on where you live, they can be $25 or $200 a month, so it is important to know this number before actually buying the property. These fees usually cover building maintenance, but in some cases, it can also include trash pickup, snow removal and sewer maintenance.
5. Heating and cooling systems
These systems usually add to the overall cost of owning property, because they require checkups, inspections and maintenance, which are usually done at least once a year. This ongoing cost can add up to the total cost of homeownership expenses, but they are necessary if you want to save more money in the long run by keeping these systems healthy.