Can two unrelated people who buy a house as an investment get a mortgage?
How Much House Can I Afford?
To determine how much house you can afford, most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt -- that includes housing as well as things like student loans, car expenses, and credit card payments. The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month.
Why your house is an investment, and an asset, too
Having more house than you need is a hit on your net worth if you live in it, because you take on more massive debt on something that provides you with a consumer good – living space, as well as accumulating an asset. Over the course of a 25-year mortgage you pay about twice nominal for the house, maybe 1.5 times real terms 2. You have to heat, furnish, maintain and service that space, and the more there is of it the higher your running costs will be. You do, of course, build up equity is a larger asset – when they have paid off their mortgages my ex-colleagues will have houses that are worth a lot more than mine. After which, by the looks of some who have got there, they will rattle around in them and keep spare rooms for the kids to visit, though those kids will not visit as often as they’d like. So they keep a lot of their net worth tied up in bricks and mortar, which doesn’t pay any financial return. Note this is totally different in the case of the buy to let owner – they may also have a lot of their net worth tied up in housing, but the return arrives in the form of the rent cheque every month.
Co-Owning a House with Friends, Relatives and Others: Facts You Absolutely Need to Know
As Realtor.com explains, when each co-owner has an equal share of the home, the official status is known as “joint tenants with right of survivorship” (JTWROS). That’s another way of saying that title is held between all co-owners. If a co-owner dies, their share goes to the other owners. In a “tenants in common” (TIC) agreement, each co-owner can pass along their ownership through a will, meaning the remaining tenants might end up sharing the home with someone they never intended to. This is an area for which you should consider getting legal advice.
5 Reasons Why Your First Home Should be an Investment Property
Many people, especially in the wake of the mortgage crisis, have found themselves wondering: “Is buying a house a good investment?” One way to ease your worries about whether buying a house will pay off is by renting out the first home you buy. By turning your home into an investment property, you can leverage your less-than-perfect credit, less-than-perfect lifestyle and limited responsibilities into an investment. All it takes is a little bit of smarts and real estate shrewdness.
5 Problems with Buying a House with a Friend
Since both you and your friend are listed on the mortgage, you are both responsible for making payments – on time and in full each month. If the two of you fall behind for whatever reason, the lender will report both of you to the credit agencies for non-payment or foreclosure (if it comes to that), even if you have diligently paid your share of the mortgage payment every month. Because both names are on the mortgage, your friend’s non-payment could end up costing you big on your credit report. (See also: 10 Ways to Improve Your Credit Report.)
Chris Hogan is the #1 national best-selling author of Retire Inspired: It’s Not an Age. It’s a Financial Number and host of the Retire Inspired Podcast. A popular and dynamic speaker on the topics of personal finance, retirement and leadership, Hogan helps people across the country develop successful strategies to manage their money in both their personal lives and businesses. You can follow Hogan on Twitter and Instagram at @ChrisHogan360 and online at chrishogan360.com or facebook.com/chrishogan360.
How to Get a Mortgage Once You Are Retired
As long as the borrower is 59 ½ the lender can use recent withdrawals from retirement accounts as proof of income. For example, assume recent bank statements show withdrawals of $4,500 per month from an IRA (the lender needs to see withdrawals for at least 2 months). This $4,500 would be considered monthly income. Sometimes the lender will need a letter from the financial planner or financial institution confirming these withdrawal amounts.
Buying in 2018? 7 Steps to Take Now
A credit score is a numerical representation of your credit report. FICO scores range from 300 to 850, and the higher your score, the better. “Good credit is like gold when obtaining a mortgage,” says Denise Supplee, a Pennsylvania agent. Typically, you’ll get the best interest rate on a loan if your score is 740 and above. “A higher credit score should net you a lower mortgage rate,” says Lee Gimpel, co-creator of The Good Credit Game, which specializes in financial education. “That lower rate, even if it’s only 1 or 2 percent lower, can mean saving thousands of dollars per year.” If your credit score falls short, get busy repairing it. Correct any errors that might be on your report, start paying all your bills on time, and get your credit limit raised. Note, though, that you shouldn’t max out your card each month. It’s best to use 30 percent or less of your total available credit.
Choosing to pay with cash might not be an easy decision to make.Often, the decision will come down to where you’re buying a home, your future goals and your financial health now and later.
“If I had $500,000, would I buy a house for that or invest it and let it grow to pay off that house at a later date?” explains John Gattulli, financial advisor and president of Capital Education Network of Albany, N.Y. “Lots of folks can pay cash for a house. In our area, you can buy some smaller homes for $150,000. But that’s still a significant amount of money.”