Renting vs. Buying: Could This Type of Loan Help Make Home Ownership a Reality?

According to a survey done by Freddie Mac, over 80% of those surveyed said that renting was more affordable than owning. A year prior, only 67% of users believed this to be true. The question is, why have nearly 20% of people changed their mind about home ownership? And can anything be done to make home ownership more affordable?

The Home ownership Hurdle

In a perfect world, renters would likely love to be homeowners, but they simply can’t afford it. In addition, real estate agencies across the country are starting to see the inventory of available homes dry up.

With fewer homes on the market, the competition becomes fierce and renters have even less choices. With fewer homes to buy, the demand for rentals increases and landlords raise prices. Thus it creates a constant cycle of trying to save for a down payment on a home, but also having to save enough money for increasing rents.

This creates the impression that people are “locked in” to renting, even though there are efforts underway to help provide a more well-rounded real estate education to show renters the advantages (and long-term affordability) of owning a home over throwing that money away on rent every month.

Breaking the Cycle

One of the most common cycles that’s difficult to break is the cycle of renting while trying to save for a down payment on a home. For many people, it’s one or the other, and no matter how much you scrimp and save, there’s always something that gnaws away at those savings. Nevertheless, currently, the housing market is still very favorable for first-time buyers. There are plenty of homes on the market in all but the most competitive real estate areas, which means that options for first time home buyers look good.

With that being said, however, how do you break the cycle? There are many types of home loans out there, but one of the best loans to help you leave renting behind and start your foray into the world of real estate is a stated income loan.

Understanding Stated Income Loans

Stated income home loans are available for people who are looking to invest in a home either to fix it up and flip it (make money selling it after it’s fixed), or who are looking for short term financing for their real estate investment. If you’re planning to live in the home as your primary residence, you’re unable to apply for a stated income loan because of laws passed in 2008 after the mortgage crisis. 

Although these loans may have higher interest rates than your traditional mortgage loan, they also have several other benefits. For example, if you’ve found a home in need of major repair and you want to fix it up, a lender can give you up to 70% of its loan-to-value ratio to help you do just that. In addition, as the name implies, you don’t need your tax returns or to even verify your income.

Getting approved is a fast process and if you have 30% or more saved up for a down payment, you’re already halfway there to getting approved. With so many benefits, it’s no wonder that stated income loans are making a strong reappearance in the real estate world. If you’ve ever thought about investing in real estate or you’re not afraid of a little elbow grease to fix up a home and flip it for profit, this could be your opportunity to break the cycle of renting your life away and start making money in the world of real estate.

Taking the Next Step

Because stated income loans aren’t nearly as common as traditional FHA or VA loans, many lenders have never worked with them or know little about them. But we have a great deal of experience helping investors, fix-and-flippers and others apply for and get approved for stated income home loans. If you’d like to know more about the benefits of this type of loan, we invite you to give us a call. We’ll take the time to answer all your questions as well as discuss the pros and cons of these types of loans, so you can make a decision with confidence. For more information visit www.lbcmortgage.com

Comments

Post a Comment

Popular posts from this blog

Hard Money Loans: Common Pitfalls to Avoid and What to Know Before You Apply

Hard money loans (also known as private money or private capital loans) can be a great alternative to traditional bank loans. The approval process is fast and the loans are typically easy to get. In addition, hard money lenders tend to not pay as much attention to things like credit scores or problems with a user’s credit history. A lack of income is also not as important as it is for a bank or another financial lender. But are hard money loans really too good to be true? There are a few things to remember before you apply. The fact is, lenders still want to be sure that you’re worth the risk to loan money to, and since they’re not putting as much of an emphasis on the traditional documentation like income, credit score and credit history, they still want to be sure that you’re going to repay the loan. Here’s what they’re really looking for: You’re Willing to Put Some of Your Own Money Up for Investment You can get hard money loans up to 100% of the purchase price, but lenders u
Read more

Why The Self-Employed Have a Harder Time Getting Home Loans

When you’re self employed, you get to enjoy all sorts of freedoms, such as being your own boss and setting your own hours. But one of the things you’ll learn quickly is that other things, such as getting a loan for a home, can be unnecessarily difficult. Most people who aren’t self employed have a fairly straightforward process. They’ve got their W-2 and income records that show stability and a consistent income. The self employed don’t always have that luxury. You may need to provide 1099s from anyone that paid you over the last two years, In addition, you have to provide accounting records so that lenders can verify how much you made after expenses were taken out. Of course, that isn’t to say it’s impossible to get a mortgage. You’ll just need to be better prepared and organized. Here’s what you’ll want to have before you approach your bank or lending institution:   A copy of your free credit report  A letter from your tax preparer showing your gross and net annual income fro
Read more

How to Estimate the After Repair Value of a House to Flip

Want to start flipping homes but don’t know what to look for when evaluating a property? It’s an easy trap to fall into, especially for first-time investors. You have so many questions and no real direction -- until now. Let’s take a closer look at one of the key factors that will determine how quickly a fixer upper might sell after rehab -- its ARV or After Repair Value What’s an ARV? The ARV is a metric used by investors in order to determine how “strong” an investment property is. Essentially, it’s an estimate of what a property is worth after all of the work has been done. You simply estimate how much rehabilitation has been put into it, along with the sales of similar properties in the neighborhood (once the appraisal of your own property has been done). This gives you a general number to aim for when it comes to selling the property on the real estate market. How Do You Calculate the ARV? So, how exactly do you calculate this number? The first step is to apply for a loan.
Read more