Essential information for renters wanting to make the jump from renting to owning
Jul 7th, 2007 by mortgage
10 things any renter can do to help qualify for an Ohio Mortgage Loan
1 – Establish a spotless rental history before applying for a mortgage loan – Hopefully, you’ve always paid your rent on time and left every rental situation without owing the landlord any money. Even if you haven’t, it’s never too late to establish a timely payment history and to smooth out any past disagreements with landlords. The sooner you start towards establishing good credit/references with your landlord and past landlords, the better off you will be when you do finally apply for a mortgage loan.
2 – To the best of your ability, plan your home purchase and Ohio mortgage loan application with the termination of your current lease. It is a rare landlord who will let you out of your lease so that you can buy a home. What’s in it for the landlord? Usually, a vacant apartment is all the landlord stands to gain from you moving out early. Do not rely upon your landlord’s word that he/she will let you break your lease simply so you don’t have to pay a mortgage and rent at the same time. It’s better that you pay extra on a month to month tenancy than to later pay both a mortgage and a rental obligation. Plus when you apply for a mortgage, you can show one less financial obligation on your mortgage application when you no longer have to pay rent.
3 – Be aware of the different types of mortgage loans that exist. When I bought my first house, I assumed that a 30 year fixed mortgage was the way to go. Understand that many different types of mortgage loans exist and determine what mortgage loan is right for you. Most home buyers stay in their first home for 5-7 years. With that in mind, consider a 5 or 7 year adjustable rate mortgage which will often have a lower interest rate than a 30 year fixed mortgage. For example a 5 year adjustable rate mortgage is 0.125% lower than a 30 year fixed mortgage at the time I am writing this (March 2007). An adjustable rate mortgage is at a fixed rate for the initial term (a 5 year ARM would be fixed for the first 5 years) and then it adjusts according to the market after that five year period of time. If you stay in the house, you have to pay off the note or refinance.
4 – When calculating your mortgage loan payment, don’t forget to add in annual home owner’s insurance and property taxes as well as private mortgage insurance (PMI). Many mortgage loan calculators will let you do this. When determining what you can afford make sure you add in all potential costs. Annual insurance runs about $350, property tax information can be found on the county auditor’s website, and private mortgage insurance rates can be determined by your lender.
We have 6 more to go – stay tuned.
Upcoming topics –
Unforeseen financial considerations when buying a home
How to save for your down payment
Consider buying more house than you think you can afford
Private Mortgage Insurance defined
Location considerations
How do you get a mortgage loan pre-approval
Should you get a lawyer to represent you at the closing
Things to do once you are in your new home