How Roommates Can Help You Afford to Buy a Home
Are you still renting because you’re afraid you can’t afford to buy a home on your own? Do you hate throwing your money away towards rent each month when you know it’d be better to build equity in a home? A lot of renters feel this way, but some would be surprised to find out that they actually can make that leap into home ownership. And a lot of renters would say “that’s great, but how?”
The answer is, roommates.
Many people are now using roommates to help them fund their home. They purchase a home with extra bedrooms that they rent out to a roommate, or roommates, which then helps them pay off their mortgage and build equity for their future. It can even help you pay off your mortgage at a faster rate if the monthly rent exceeds your monthly mortgage payment.
So, what are the steps? How do you get started? Here’s what you need to know…
- Find Out What You Can Afford And Get Pre Approved For A Mortgage
First things first, you need to find out how much you can afford. It’s important to speak with a loan officer, so that they can crunch the numbers for you based on your financial information. This will give you a starting point and help you determine what price point you should be searching in when looking at homes.
- Still Budget For Yourself First
Although the idea is to have a roommate(s) help you afford a home, it’s still important to budget for a place like you’re living alone. Lenders don’t always consider potential roommates as a source of income when you apply for a mortgage, so your approval may be based solely on your current income.
In a scenario where a roommate moves out, and your in-between roommates for a month or two, you want to make sure that you still feel comfortable paying for the home on your own for the time being. Therefore, budgeting for a place with just yourself in mind is important.
- Become Knowledgeable on Local Rental Listings
What’s the average rental price in your desired town/area? How much could you realistically rent out rooms in your home for? Do your homework. Check out local rental listings on real estate websites online, or even Craigslist. You want to make sure your pricing is realistic and fair because that should only help you rent out a room faster.
- Shop for Homes That Would be Roommate-Friendly
If you’ve decided to go the roommate route, then it’s important to factor that into what you’re looking for in a potential home. You might want to make sure you have enough bedrooms, bathrooms, parking spaces, and a comfortable shared-living space.
If you’re handy, or willing to spend money on renovations, you might also try to come across hidden investment opportunities. Maybe you can take an oversized bedroom and convert it into two rooms, or potentially take an unfinished basement and turn it into a bedroom suite with a living space. By doing so, you’re actually helping the re-sale value of your home by giving it an extra bedrooms and a finished basement.
- Still Take Advantage of Other Helpful Mortgage Loan Options
As stated before, it’s important to purchase a home that you could still afford on your own without roommates involved. So, you still might be thinking you don’t have enough money to do so. However, you do have the opportunity to take advantage of various loan programs, including a FHA Loan. A FHA Loan is for first-time home buyers and it allows for a down payment as low as 3.5%. So, if you factor in the low down payment, and monthly roommate income, I think you’d be surprised at what you actually could afford.
If you’re still unsure if this is an option for you, or we’ve convinced you to take the next step towards home ownership, call our office to speak to one of our loan officers today. Not only can they help you determine if this is a possibility or not, but they can also get you started on the mortgage process if it is!