Looking to rent or buy a new home? Let me show you how to do it without ended up struggling

Are you trying to buy your first home or rent your first home/apartment? What’s stopping you from making this life-changing decision? Let me break it down for you to help you make an easier decision from the renting perspective & buyer perspective. By the end of this newsletter, you will be confident in the knowledge you gained to move forward with your decision on buying or renting a home.

Let’s start out with buying, have you heard of a FHA loan? Well, let me explain it to you.

An FHA (Federal Housing Administration) loan is a type of mortgage loan that is insured by the U.S. Federal Government through the FHA, a division of the Department of Housing and Urban Development (HUD). FHA loans are designed to make homeownership more accessible, particularly for first-time homebuyers and individuals with lower credit scores or limited down payment savings. Here's an overview of what an FHA loan is and how to get and use it:

Key Features of FHA Loans:

1. Low Down Payment: FHA loans typically require a lower down payment compared to conventional mortgages. As of my knowledge cutoff date is September 2021, and the minimum down payment is 3.5% of the purchase price. This can be particularly beneficial for buyers who have limited funds for a down payment.

2. Credit Score Flexibility: FHA loans are more lenient when it comes to credit score requirements. Borrowers with credit scores as low as 500 may qualify, although a higher score is generally advisable for better loan terms. Keep in mind that individual lenders may have their own credit score requirements.

3. Fixed and Adjustable Rates: FHA loans are available with both fixed-rate and adjustable-rate options, allowing borrowers to choose the type of interest rate that suits their needs and financial goals.

4. Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (MIP) and an annual MIP. The insurance premiums protect the lender in case the borrower defaults on the loan. The MIP can be rolled into the loan amount or paid as a separate fee.

5. Loan Limits: FHA loan limits vary by location and are set by the federal government. These limits define the maximum loan amount that can be borrowed in a specific area. Be sure to check the loan limits in your area.

How to Get and Use an FHA Loan:

1. Find an FHA-Approved Lender:

   • To get an FHA loan, you'll need to work with an FHA-approved lender, such as a bank, credit union, or mortgage company. These lenders are authorized to originate and process FHA loans.

2. Check Eligibility:

   • Confirm that you meet the eligibility criteria, including credit score, income, and debt-to-income ratio requirements. FHA lenders may have their own additional requirements, so inquire with your chosen lender.

3. Complete a Loan Application:

   • Start the application process with your chosen FHA-approved lender. You'll need to provide information about your financial situation, employment history, and personal details.

4. Provide Documentation:

   • Prepare and submit documentation, including proof of income, tax returns, bank statements, and other financial records. Your lender will guide you through the required documentation.

5. Get Preapproved:

   • Obtaining preapproval can help you understand how much you can borrow and make the home shopping process more efficient.

6. House Hunting:

   • Once you're preapproved, begin searching for a home that fits within your budget and the FHA loan limits for your area.

7. Make an Offer:

   • When you find a suitable home, make an offer, and if accepted, move forward with the purchase contract.

8. Loan Processing and Approval:

   • Your lender will process your loan application, order an appraisal to assess the property's value, and underwrite the loan to ensure it meets FHA guidelines.

9. Closing:

   • After loan approval, you'll attend a closing meeting to sign the final documents and pay any required closing costs.

10. Move In:

    • Once the closing process is complete, you can move into your new home.

Remember that the specific steps and requirements may vary depending on the lender and any changes in FHA guidelines or policies. It's important to work closely with your chosen FHA-approved lender, as they will guide you through the entire loan application and approval process.

FHA loan is used for BUYING not renting

There are a few rules for buying a house and two of those are Rule 28 and Rule 36:

The rule of 28 states that 28% of your gross income should cover your mortgage monthly payments

If you make 80k/year - ($6,666 monthly income) $1,866 monthly mortgage payment maximum

If you make 40k/year - ($3,333 monthly income) $939 monthly mortgage payment maximum

If you make 150k/year - ($12,500 monthly income) $3,500 monthly mortgage payment maximum

The 36 rule states that all your debt including your monthly mortgage divided by your total income shouldn’t extend past 36% of your monthly income so you can be approved for a home. I will provide you the equation below and you simply fill in the blinks.

Monthly mortgage + all your debt /total income = ___ needs to be less than 36% of your monthly gross income to be able to get approved for the house

There's another rule called the 30/30/3 rule. The 30/30/30 rule states:

30% of your income is the max spending for total housing spend (mortgage/property tax/insurance)

40k/year - $1000 at most for total housing spend

80k/year - $2000 at most for total housing spend

150k/year - $3,750 at most for total housing spend

Have 30% of the home purchase price in cash to avoid PMI

“PMI” means “private mortgage insurance”= which protects the lender if you don’t pay your insurance/mortgage by feeing you monthly along with your mortgage without putting that money towards the mortgage.

You shouldn’t buy a house that is more than 3x your yearly income

100k/year - $300,000 is your maximum price for a house

80k/year - $240,000 is your maximum price for a house

40k/year - $120,000 is your maximum price for a house

Buying a house is a significant financial and personal decision. Here are some important tips to consider when buying a house:

1. Determine Your Budget:

   • Before you start house hunting, establish a clear budget that includes your down payment, monthly mortgage payments, property taxes, insurance, and maintenance costs. Stick to this budget to avoid overextending your finances.

2. Check and Improve Your Credit Score:

   • A good credit score can help you secure a better mortgage interest rate. Review your credit report for errors and take steps to improve your credit score if needed. Pay down debts and make payments on time.

3. Get Preapproved for a Mortgage:

   • Before you start looking at houses, get preapproved for a mortgage. This not only gives you a clear idea of your budget but also makes you a more attractive buyer to sellers.

4. Work with a Real Estate Agent:

   • Hiring a qualified real estate agent can simplify the home-buying process. They can help you find suitable properties, negotiate offers, and navigate the complex paperwork involved in a real estate transaction.

5. Define Your Needs and Wants:

   • Make a list of your must-have features and nice-to-have preferences for your future home. Consider factors such as location, size, number of bedrooms and bathrooms, and proximity to schools, work, and amenities.

6. Research the Neighborhood:

   • Investigate the neighborhoods you're interested in. Consider factors like safety, school quality, property values, and future development plans in the area.

7. View Multiple Properties:

   • Don't rush into a purchase. Take the time to view multiple properties and compare them to find the best fit for your needs and budget.

8. Inspect the House:

   • Hire a qualified home inspector to thoroughly evaluate the property for any potential issues. This inspection can uncover hidden problems that may affect your decision or negotiation.

9. Consider Future Expenses:

   • Factor in potential future expenses, such as home improvements, repairs, and property taxes. Be prepared for the ongoing costs of homeownership.

10. Negotiate Wisely:

    • Be prepared to negotiate the price and terms with the seller. Your real estate agent can assist in this process, ensuring you get the best deal possible.

11. Read and Understand Contracts:

    • Carefully read and understand all contracts and documents related to the purchase. Seek legal advice if needed to ensure you fully comprehend your obligations and rights.

12. Plan for Closing Costs:

    • Budget for closing costs, which can include fees for appraisals, inspections, title insurance, and attorney services. These costs are typically in addition to your down payment.

13. Don't Skip the Final Walkthrough:

    • Before closing, conduct a final walkthrough of the property to ensure it's in the condition you expect and that any agreed-upon repairs have been completed.

14. Stay Financially Stable:

    • Avoid making major financial changes, such as changing jobs or taking on new debt, during the home-buying process, as this can affect your mortgage approval.

15. Plan for the Long Term:

    • Think about your long-term plans and whether the house meets your needs for the foreseeable future. Buying a house is a long-term commitment, so consider how it fits into your life goals.

Buying a house is a complex process, and it's important to approach it with careful planning and consideration. Working with professionals such as a real estate agent and a mortgage lender can greatly assist you in making informed decisions throughout the process.

I’m going to provide you with 5 good reasons why you should buy:

1. Building Equity:

   • As you make mortgage payments, you build equity in your home. Over time, this can result in substantial wealth accumulation, as your property's value may appreciate, and your mortgage balance decreases. You can tap into this equity through home equity loans or by selling your home.

2. Stability and Long-Term Investment:

   • Buying a house provides stability, especially if you plan to stay in the same area for an extended period. It allows you to establish roots in a community and create a sense of permanence. Additionally, real estate historically appreciates over time, making it a potentially lucrative long-term investment.

3. Freedom for Personalization:

   • As a homeowner, you have the freedom to personalize and make changes to your property to suit your preferences. You can renovate, decorate, and landscape according to your tastes and needs without seeking permission from a landlord.

4. Tax Benefits:

   • Homeownership often comes with tax advantages. Mortgage interest and property tax deductions can reduce your taxable income, potentially leading to lower tax bills. Consult with a tax professional to understand the specific tax benefits available to you.

5. Predictable Housing Costs:

   • With a fixed-rate mortgage, your monthly housing costs remain relatively stable over the life of the loan, providing predictability in your budget. In contrast, rents can increase over time, leading to uncertain housing expenses for renters.

It's important to note that while buying a house offers these advantages, it also comes with responsibilities, including maintenance costs, property taxes, and insurance premiums. Additionally, the housing market can be subject to fluctuations, and homeownership may not be the best choice for everyone, depending on individual financial circumstances and lifestyle preferences. Be sure to carefully assess your situation and consult with financial professionals when considering the purchase of a home.

Now for renting:

If you make 40k/year - $1000 a month at most for rent

If you make 80k/year - $2000 a month at most for rent

If you make 150k/year - $3,750 a month at most for rent

Renting a house can be a practical and flexible housing option. Here are some important tips to consider when renting a house:

1. Set a Budget:

   • Determine how much you can comfortably afford for rent each month. Be sure to include additional costs such as utilities, insurance, and maintenance in your budget.

2. Check Your Credit:

   • Many landlords will check your credit history as part of the rental application process. Review your credit report and address any discrepancies or issues before applying for a rental.

3. Start Your Search Early:

   • Begin your house-hunting process well in advance of your desired move-in date. Good rental properties can be in high demand, so starting early gives you more options.

4. Define Your Needs:

   • Make a list of your must-have features in a rental property, such as the number of bedrooms, bathrooms, location, and parking. Prioritize your needs and wants.

5. Research Neighborhoods:

   • Investigate the neighborhoods you're interested in. Consider factors like safety, proximity to work or school, public transportation options, and amenities.

6. Inspect the Property:

   • Schedule a viewing of the house to inspect its condition. Look for any signs of damage, wear, or maintenance issues. Take photos during the inspection for your records.

7. Ask Questions:

   • Don't hesitate to ask the landlord or property manager questions about the property, lease terms, and any rules or policies. Clarify details about utilities, maintenance responsibilities, and rent payment methods.

8. Read the Lease Carefully:

   • Carefully review the lease agreement before signing. Pay attention to the terms and conditions, including rent amount, security deposit, lease duration, and any special clauses.

9. Document the Move-In Condition:

   • Document the property's condition with photos and written notes before moving in. This can help protect your security deposit when you move out.

10. Understand Your Responsibilities:

    • Familiarize yourself with your responsibilities as a tenant, such as paying rent on time, maintaining the property, and following any rules outlined in the lease.

11. Know Your Rights:

    • Understand your rights as a tenant, including eviction laws, privacy rights, and the process for requesting repairs. Laws vary by location, so research the local tenant laws in your area.

12. Secure Renter's Insurance:

    • Consider obtaining renter's insurance to protect your personal belongings in case of theft, fire, or other unforeseen events. It's often affordable and provides peace of mind.

13. Plan for Moving Costs:

    • Budget for moving expenses, including the cost of hiring movers or renting a truck, packing supplies, and any security deposits or fees required by the landlord.

14. Build a Good Relationship with Your Landlord:

    • Maintain open communication with your landlord or property manager. Address any issues or repairs promptly to maintain a positive rental experience.

15. Be a Responsible Tenant:

    • Respect the property, your neighbors, and the terms of your lease agreement. Pay rent on time, report maintenance issues promptly, and follow any community guidelines.

Renting a house can be a convenient and flexible housing solution. By carefully considering your needs, understanding your rights and responsibilities, and maintaining good communication with your landlord, you can have a positive renting experience.

I’m going to provide you with 5 good reasons why you should rent:

1. Flexibility and Mobility:

   • Renting a house provides flexibility in terms of your living situation. You're not tied down to a long-term mortgage commitment, making it easier to move to a new location if your job or personal circumstances change. This flexibility can be especially valuable for those who expect to relocate in the near future.

2. Lower Maintenance Responsibilities:

   • Renters typically have fewer maintenance responsibilities compared to homeowners. In most cases, the landlord is responsible for major repairs, landscaping, and property upkeep. This can save you time, money, and the stress of handling home maintenance tasks.

3. Amenities and Services:

   • Many rental houses are part of communities or neighborhoods that offer amenities such as swimming pools, fitness centers, parks, and security services. You may also have access to services like trash removal and lawn care without the hassle of managing them yourself.

4. Financial Flexibility:

   • Renting often requires a lower upfront cost than buying a home, as you don't need to make a substantial down payment or cover property-related expenses like property taxes or homeowners' insurance. This can free up funds for other financial goals or investments.

5. No Long-Term Commitment:

   • Rental agreements typically have shorter terms, such as one year, which allows you to reassess your living situation more frequently. If your needs change or you decide you'd like to explore other housing options, you have the flexibility to do so without the constraints of homeownership.

It's important to note that the pros of renting a house may vary depending on your personal circumstances and preferences. While renting offers flexibility and reduced maintenance responsibilities, it may not provide the same level of equity building and long-term financial benefits as homeownership. Consider your short-term and long-term goals when deciding whether renting or buying is the right choice for you.