How to Rent Like You’re Going to Own

If you’re currently renting an apartment but would like to own a home someday, you’ve probably started to think about what it will take to get the keys to that house. As a renter, you should know that there are a number of ways you can use your time paying for your lessor’s mortgage as a springboard toward getting your own.

Live below your square footage means
Bottom line: splurging on a big apartment with all the extras can feel satisfying, but it can also take money away from your home-buying goal if it comes with a bigger price tag. Consider downsizing your current living situation to get into a house more quickly.

Don’t accumulate aggressively
If you’re earning a comfortable income, you may also be experiencing a desire to feather your nest a bit. Not only will a larger pile of possessions cost more to move into a home, but it can also lead you to buy more house than you need just to fit it all in. Getting in the habit of creating a comfortable and pleasant home without a lot of clutter will help you save and also make for a thriftier transition.

Goal reminders
Your apartment doesn’t have to be just the place where you store your stuff and sleep at night. It can also serve as a way to keep you focused on your home-purchasing goal. Keep pictures of the type of home you are interested in taped to your laptop or fridge. Keep a saving chart displayed prominently inside a cabinet or your wallet. By having these reminders around, you can maintain your focus even when saving isn’t at the forefront of your mind.

Get utilities smart
Consider renting as a trial run for mastering the delicate art of efficient use of utilities. By brainstorming ways to save on water, electricity, heat, etc., you establish positive habits that will serve you well when you make the big move into a home of your own.

Be lease careful
In your drive to improve your credit, don’t forget about the potential impact to your credit of breaking a lease. Like individual rent payments, breaking a lease isn’t going to show up on credit reports in most cases. However, if the person or company leasing you the apartment takes legal action against you to recover the deficiency amount you owed on the rental agreement, this could result in an ugly judgment showing up on and damaging your credit reports.

Pay your mortgage now
If you haven’t done so already, now is the time to sit down with pencil and paper – or laptop and spreadsheet – to figure out what you can truly afford for a future mortgage payment. While there are different ways to arrive at this number, a rough estimate in many cases is to figure that your mortgage payment should be no more than 35% of your monthly pre-tax income. If this 35% figure is more than your current rent payments, make a commitment to start depositing the difference into a savings account each month. This way, you train yourself to adjust to this new monthly obligation while also beefing up your down payment, closing fee or maintenance fund.

Renting an apartment doesn’t have to feel like serving out a sentence while waiting to get to the home you really want. Instead, think of it as a way to prepare yourself for dominating the process of getting into that home.

Checklist: Post-Natural Disaster Mortgage Steps

In the days after a natural disaster has struck, it can be hard to focus your thoughts on restoring financial order to your life. This checklist is designed to guide you step-by-step through the process of understanding your options for your home or for securing new housing.

Get organized
You are going to have a lot of information flowing back and forth in the coming weeks and month. Invest in a filing system, even if it just comprised of a few plastic folders from a dollar store. Keep track of all correspondence and what was promised by either party.

Insurance agent(s)
Beginning the claims process will help you achieve resolution faster. If you don’t have a copy of your insurance policy, request one from your provider. If you bought disaster insurance separate from your homeowners policy, make sure to reach out to the provider of that plan too.

If you didn’t have homeowners insurance
If for some reason you didn’t have a homeowners policy at the time of the disaster, you may qualify for help with repairs via the Assistance for Individuals and Households program. If you are in this situation, call 800.621.3362 to see if you qualify for help.

Mortgage servicer
The first task is to make sure the mortgage servicer is aware of the damage to your home or your land. Keep in mind that your responsibility to pay your mortgage doesn’t cease because of the natural disaster. The lender can grant you forbearance on payments, but they are generally not required to. If your lender offers you concessions, make sure to get any agreements in writing with all the details clearly spelled out. Make sure you understand all the particulars of a new agreement before you sign anything.

If you don’t know the name of your mortgage servicer, call the Mortgage Electronic Registration Systems at 888.679.6377 for assistance.

If your loan is backed by the Federal Housing Authority or the Veteran’s Administration, you may be guaranteed certain post-disaster payment protections. Call the Department of Housing and Urban Development (HUD) at 888‐297‐8685 to learn more.

Utilities providers
Contact your gas, electric, water, cable, garbage, etc. service providers to ensure your service is suspended if your home is too damaged to live in.

Federal Emergency Management Agency
Call FEMA at 800.621.3362 to learn about disaster assistance you may be eligible for. If you have an immediate need for new housing, ask about options in your area.

Small Business Administration
Even if you didn’t own a business of any kind, you may be eligible for a disaster assistance loan from the SBA for up to $200,000. This loan is for restoring the home to its original state, or relocating your home to another site if you are unable to obtain a building permit for the previous site.

HUD’s Homeownership Center
If your home was damaged or destroyed in the natural disaster, you may qualify for a zero-down payment, government-insured 203(H) FHA mortgage to rebuild or repair. Call the Department of Housing and Urban Development’s Homeownership Center at 800.225.5342 for more information.

Assess your finances
With the new post-storm financial reality, you may need to prioritize your bills. As best you can, try to complete a budget to make sure you can cover your housing expenses until the situation clears up a bit.

Don’t hurry into bankruptcy
Many people who have experienced a natural disaster quickly file Chapter 13 bankruptcy believing it will help to alleviate the pressure they are facing from creditors. Since Chapter 13 allows you to keep your home – the logic goes – at least you don’t have to worry about your housing for a while. This shortsighted approach can damage your credit long-term when other options were available.

State bar association
In times of disaster, state bar associations often step to the forefront to help victims with their legal concerns. Call 800.285.2221 if you need to find the number of your state’s association.

Beware scams
Anyone who offers you help but asks that you pay a fee or sign over the property to them is just trying to rip you off. Decline their services and report them to your state’s attorney general office.

Also exercise caution with any loans tied to your equity in the home. These high-priced products can result in you losing your home outright.

Monitor your credit reports
Having to endure the natural disaster was bad enough. You shouldn’t have to have your credit damaged too. You can get copies of your three major credit reports for free once a year by calling 877.322.8228 or by visiting www.annualcreditreport.com.

Any negative information added to the report as a result of the disaster should be marked “AU” to signify that it was disaster-related. Contact the credit bureaus – Equifax, Experian and TransUnion – using the contact information on the credit reports to dispute any items you feel should be classified as AU.

Continue to research the available help
Many of the assistance programs for disaster victims come in the months after the destructive event. Make a habit of researching online any programs that have become available to help with payments, repairs, relocation, etc.

You’ve been through a lot. Don’t let the enormity of the situation become too much. Take the process one step at a time and you’ll get through it.

Advantages and Disadvantages of FHA Loans

If you’re looking to buy a home, you may have been attracted to the loosened approval standards that can come with a government-backed Federal Housing Authority (FHA) loan. But before jumping into an FHA mortgage, it’s important to understand the possible benefit and drawbacks.

Potential advantages

• Less challenging credit requirements: If you have little or no credit history, it can be comforting to know that FHA approval requirements tend to be less stringent than those for conventional loans. At this time, it only takes a 500 credit score to qualify for a loan, according to the FHA. Maximum financing is available for anyone with a score over 580.
• Smaller down payment: Whereas conventional mortgages often require down payments of 5-10% of the purchase price of the home, FHA loans can be nabbed for only 3.5% down.
• Friendlier debt ratios: Keeping in the theme of more forgiving approval requirements, FHA loans can make qualifying easier if you already have a large amount of existing debt. For conventional loans, you are normally limited to having monthly housing and other debt payments equaling no more than 36% of your income. With FHA loans, this number gets boosted to 41%.
• Potentially better interest rate: If you’re in the not-so-great credit category, you may run into a lot of big numbers while interest rate shopping. Since FHA rates are the same regardless of credit and are generally competitive, you could end up saving a lot on interest payments with an FHA loan if your credit is lacking.

Potential disadvantages

• Lack of reward for good credit: The flip side of the same-for-all interest rate is that you may be missing out on a lower interest rate if you have great credit. Over the life of the loan this could cost you thousands of dollars.
• More mortgage insurance paid: Because you are making a lower down payment, you will have to pay more private mortgage insurance (PMI) to make up the difference. With FHA loans, you also have to pay an upfront mortgage insurance fee. This can be financed, but it will cause your mortgage insurance payments to be more expensive than with a conventional mortgage.
• Inspection standards: To qualify as an FHA-eligible property, a home must go through a property standards inspection. This may limit your choices of available homes and can also make it difficult or impossible to get an FHA loan for a fixer-upper.
• Fewer loan choices: You aren’t going to find the variety of loan options with the FHA that you typically would with conventional loans. This is especially true if you are looking for an adjustable-rate or interest-only mortgage.
• Lower loan ceiling: The maximum amount you can borrow for an FHA loan is different from county-to-county. In certain areas with low supply and high demand, you may find that an FHA loan won’t allow you to buy the house you want because the price tag falls outside the allowable amount.
• Limited condo supply: If a condominium fits your housing needs, be aware that the list of available FHA-approved units could be pretty short. The FHA is known to be very tough on giving the green light to condos, so be prepared to really hunt if you go with the FHA/condo combo.

The consensus among housing experts is that – all things being equal – FHA loans will usually cost you more over the life of the loan. However, if your only current option for becoming a homeowner is through the FHA’s eased standards, you can certainly consider a government-backed loan as a way to quite literally get your foot in the door.

Tips for Renting Out a Room

One of the absolute best – and often quickest – ways to generate substantial extra income for yourself or your family is to invite someone to share your living space with you. However, you may have found yourself intimidated by the process or concerned about entrusting your home to another person. With that in mind, there are steps you can take to make opening your home to a renter a less difficult endeavor.

Know the tax consequences
You will need to report the income from your rental on your taxes. Consult with a tax professional to understand the tax ramifications of taking on a renter before you get started.

Ask family or friends first
In many cases, the best renting candidates are going to be the ones you either already know well or that have been vetted by your family members or friends. This isn’t to say that acquaintances are always going to be perfect roommates, but it can help to weed out people who will be major headaches.

Create your ad
The nicer your room listing, the better rental candidates you will attract. Include well-lit and comprehensive pictures as well as measurements and all relevant house/neighborhood details. Make sure your listing price is competitive with other rooms or apartments for rent in the area. You can use a rental service if you would like help finding a renter, but know that many people have had great success using free sites like Craigslist.org.

Run the reports
It might seem like overkill to check up on your potential renters’ background, but in a situation like this, it’s better to be safe than sorry. Ask for copies of credit reports to check for a high number of outstanding debts, like collection accounts, judgments or tax liens. It’s also a good idea to complete a criminal background check and check local court case and sex offender databases. Finally, ask for a reference from any past landlords and from a current employer.

Learn more about the candidates
It’s a good idea to ask respondents to your ad to tell you a little about themselves. You don’t want to end up with a 20-something who loves to have wild parties if you value your peace and quiet. However, remember that by law you are not allowed to make a decision to rent your room based on race, religion, national origin, gender, age, familial status, or physical or mental disability. It’s also a good idea to research your state’s laws since many extend this list to also include marital status, gender identity and sexual orientation. It’s not a bad idea to list in your ad that you prefer that potential renters not disclose any of this kind of information to avoid the any appearance of any bias.

Make the rules clear
You are bound to have different lifestyle quirks than your renter. By establishing up-front conditions – before anything is agreed on – you can help avoid any stressful misunderstandings or conflicts later on. Cleanliness, schedule, noise, bill paying, smoking, access to common areas, pets and guests loom as potential problem areas, so make sure you are on the same page about your expectations in these areas. In fact, it’s smart to literally be on the same page by asking your renter to sign a “House Rules” agreement that can be attached to the lease.

Use a lease
You may feel like taking on a renter should be a fairly informal process, but be warned that you could potentially be opening yourself up to legal problems if you don’t protect yourself with the proper paperwork. Contact your state’s Association of Realtor’s office or visit Nolo.com to get a free lease template you can use.

Additional tips:

• Contact your local town, city or county government office to determine if there any local laws you will need to comply with or permits you will need to obtain.
• If you are a homeowner, contact your insurer to see if you need to make changes to your policy.
• Make sure your lease contains a section about a security deposit and collect this money before your tenant moves in.
• Ask applicants to bring a copy of their proof of income when they come to interview with you.

Renting out a room in your home probably isn’t going to be as easy as handing over the keys and getting money every month. But with a little attention to detail, you can successfully create a very helpful and ongoing source of extra income.

Ready to Look for a Home Checklist

One of the most common questions for potential homebuyers is, “How do I know when I’m ready?” While different people have different levels of comfort with preparedness, there are several key steps that are always a good idea to check off your list before beginning your search in earnest.

Generally speaking, it’s a good time to start seriously looking when you have:

• Taken the time to educate yourself about the entire home buying process.
• Researched homebuying programs you may qualify for.
• Decided what type of mortgage you want.
• A steady source of income.
• At least two years of steady employment within the same industry.
• Plans to stay in the area for at least three years.
• Completed a forward-looking budget to see what monthly mortgage payment will fit into your spending and savings plan.
• Determined how much the move will cost and accounted for this in your current budget.
• Examined your credit reports for errors or ways to improve your credit standing.
• Talked with lenders about their lending standards and their rates.
• A debt-to-income ratio of no more than 43-45%.
• Gotten at least pre-qualified for a mortgage, and hopefully pre-approved by your lender.
• Saved at least the minimum amount required for down-payment, if not more.
• Researched neighborhoods that fit your wants and needs.
• Decided on the baseline standards for the particulars of your house, such as number of bedrooms and bathrooms; square footage, amenities, etc.
• Three months worth of mortgage payments in savings to guard against unexpected time away from work.
• A plan to put 1% of the value of the home into savings every year for maintenance and repairs.
• Decided whether you will look for a home on your own or use a real estate agent.
• Interviewed several real estate agents if you plan to go that route.
• A plan for covering closing costs.

A home purchase is not something to rush into. You will put yourself on much steadier ground by preparing yourself well before you start the process of tracking down your ideal home.

How To Have An Estate Sale

When you think of estate sales, you might think of surviving relatives dispersing the household items of a passed family member. However, more and more seniors are having estate sales as part of the downsizing process. If you are looking to move into a smaller place, you can actually liquidate your unneeded items fairly easily and give yourself a little extra cash to enjoy in your new home.

Get help
Conducting a sale without any help – professional or otherwise – spells trouble. There are so many tasks to complete you would run yourself ragged trying to shoulder the entire burden. It’s wise to either hire a local estate sale company or enlist the help of family and friends to divide and conquer. If you hire an estate sale company, read online reviews and ask around to find a reputable and respected outfit.

Perform a thorough search
Obviously there are going to be a few items you or other family member are going to want to keep. But also make sure to remove from the sale any important financial documents or other items with key personal information. In addition, remember to look through any hiding places there may have been in the house. You don’t want to have someone walk out of the house with a priceless family heirloom ring because you forgot it was taped to the underside of the coffee table.

Advertise
To get lots of buyers to your sale, you have to think like the devoted packs of bargain hunters who regularly attend estate or tag sales. These folks usually check sites like EstateSales.net for items that interest them. Put lots of pictures of your most attractive sale items in your listing on this site. Also put an ad on craigslist.org with lots of descriptive words for the goods you are selling. If you live in a smaller community, put up fliers on bulletin boards at coffee shops, convenience stores or other high-visibility places. If your community allows it, put up signs around your neighborhood.

Know what you are selling
Most items in the home can be safely tagged without a lot of research. However, if you have rare or expensive items for sale, try to look up similar merchandise on eBay. If you are conducting the sale on your own and you are not able to find pricing information, ask an antique dealer for an appraisal.

Make a nice presentation
Using a card or kitchen table to display some of the more attractive items is good not only for your pre-sale visual marketing, it also allows you to call attention to special items once you’ve got people in the door. Another handy strategy is to declutter as much as possible. Buyers may not find that antique toy train set if it’s buried behind the old newspapers and wadded up shopping bags.

Price items to move
Those cute salt and pepper shakers from that family trip to Niagara Falls may hold some fond memories for you, but buyers aren’t going to put a premium on your nostalgia. You will get to your selling goal a lot faster by offering bargains than by trying to squeeze every last dollar out of your goods.

Be security conscious
You will meet some terrific people during your sale, but there can be some bad apples too. Make sure to keep especially valuable items near the checkout area so someone can have an eye on them at all times. Also, have a sign-up list the morning of the sale and then give out numbers to the people on the list a half-hour before the sale starts. Determine how many people you can safely manage inside the house at one time and initially only let that many people in. You can let more in as people leave. Ideally you will be able to have one staff member in every major room of the house to keep an eye out for anything shady going on.

Acquire the tools of the trade
At the very least, you will need some price tags and/or stickers. If you have rooms you want people to stay out of during the sale, put up signs to advise them of this. Printer paper and markers make this simple. To make it more manageable for your buyers to buy delicate things, have a supply of bags, boxes, packing paper and bubble wrap on hand.

Mobile devices usually have calculators, but if the person working the checkout doesn’t have one, be sure to provide a hand-held calculator. A cash box stocked with lots of small bills will make transactions a breeze. Finally, make sure to have a note book or receipt book to keep track of all items that sold and their price.

Post-sale liquidation
After the sale is over, it will probably make sense to donate many of the remaining items to a thrift store. If you have items you feel are of significant monetary value, take them to a few dealers to gauge their interest. Then you can decide if you can get more by selling the item to a dealer or by selling it online.

If you have a house full of antiques or rare items, it probably makes sense to give yourself peace of mind by hiring professionals. Even with the estate sale company taking their 25-35% cut, you may still come out ahead because of the pricing expertise you gain. However, if you have a solid grasp on the value of your items, or you don’t own a lot of expensive goods, you might just do better to have the sale on your own.