BROOKLYN (Workers World Today) — Do you find yourself moving from apartment to apartment within one and two years, just to pack up and move again? Do you get annoyed with disruptive knocking, texting or calling every first day of the month for the rent? You need to fire your landlord today. How? By becoming a homeowner. When you are a homeowner, you are in charge of whether you stay for decades, pass on generational wealth, or earn profits in equity and rental income. Here are some key things to know before you fire your landlord.
Know your financial situation
Before you toss your keys to your landlord, you need to know your financial situation. This will help you make a decision about what type of property you can afford and where you may want to live. You should have money saved up for the down payment on a home, at least 3.5% of the desired price. If you’ve saved enough cash to purchase a home without a mortgage, then you can close faster. Just be aware that you will need room in your budget for any additional fees, such as legal and title fees.
If you need a mortgage, you may speak to several lenders about your options and interest rates before you commit to a mortgage. You may be able to purchase a home that brings enough rental income to help pay the mortgage, so that your wages stay in your pocket. Once it is clear that you can purchase a home, you will receive a pre-approval from the mortgage lender.
Fix your credit
In order to be granted a pre-approval, you need a good source of income and good credit. Mortgage lenders will ask for documents showing your income, like taxes and pay stubs, and they will need your credit score. If you are in serious debt, you may consider a credit repair program or speak to a bankruptcy attorney about resolving your credit before you can purchase a home.
Decide what type of home to purchase
Now that you’re pre-approved for a loan, you will be shown your loan amount, the home size that you may purchase, and the property taxes that you can afford to pay. If you’re purchasing with cash only, then the ultimate decision on the type of home is yours. There are condos, single family, multiple dwellings, and co-ops that you may choose from based on your loan amount and market value of the desired property. Co-ops are not considered to be real property but are shares in a cooperative stock. When you purchase co-op shares, you own the share; you must adhere to the house rules of the cooperative and pay maintenance fees. Condos are real property, and you have full rights of ownership—you just have to pay the common charges. Single and multiple dwellings are real property. You should familiarize yourself with any local rules and codes that apply to your type of home.
Understand the loan closing process
Since you received your pre-approval and offered to purchase a home, you should have a contract reviewed by an attorney and you should have signed it after reviewing it. You will need to speak to the lender about your next steps toward a loan commitment. The lender will order an appraisal of the property. If the property is appraised at a higher value or at an equal value to your offer, then you will be cleared to receive funds towards the purchase of the home. If the appraisal is lower than your offer, you will have to contribute the difference between the lender’s appraised value and your offer. At times, the lender may not approve because of your financial situation. So it is important that you research the home’s value when making an offer with a mortgage.
Understand your legal rights and responsibilities
Once you receive the commitment for the loan, your lender will work with you on closing the transaction on your new home. You are now a homeowner. You should understand your rights and responsibilities. Know your property. There may be easements that you share with your neighbors; you may share a fence or a driveway. Understand your rights to use those easements. You typically find out your home’s survey and easements on the title report before closing.
As a homeowner, you should know your local rules, such as building permits to make certain renovations and even garbage disposal rules. You should also be aware of whether you need to register your home with your local administrators; for instance, multiple dwellings in New York City must register with HPD. Knowing your local rules is important because they may result in fines. As a homeowner, you need to be aware of any liens placed on your property and whether any fraudulent transactions, such as fraudulent deeds, are being made against your property. Speak to a real estate attorney on your legal rights and responsibilities.
Take control of your taxes
As a homeowner, you should be aware of tax incentives and deductions. You can deduct the interest you pay on your mortgage as well as the points you were charged. If you use part of your home as an office, you can deduct the cost associated with it. Check your locality for any tax abatement for low- income earners. In New York City, low- income earners can receive STAR abatement. Homeowners should speak to a tax representative on your tax options.
When you find yourself cramped in your tiny apartment or room, you should fire your landlord. Speak to a real estate broker, real estate attorney and a mortgage lender about your options and your rights. There are programs that can help you with the home-buying process and those representatives can inform you. Fire your landlord and enjoy the benefits of homeownership.
Chereen James is an aspiring lawyer who enjoys writing in her spare time. Chereen has written for publications such as The Statesman and is now a writer for Workers’ World Today. She also co-hosts a radio show, “Ask the Lawyer.”