Rental income is a great source of cash, and can boost your borrowing power and your income. Many property owners find that once they start making rental income, they buy additional properties to boost their income; it’s that effective. When you’re looking at a single family home, you can still find ways to make rental income. If a house-sharing situation doesn’t appeal to you, consider converting a part of your property to make money from your home.  

Conversion Possibilities

An in-law apartment, granny flat or other type of non-traditional rental unit can be a great way to add rental income to your home. Whether you’re looking to make money from a single-family home that you already own, or whether you’re considering buying and a single-family is all you can afford, a property conversion can help you boost your income and make money from your home.

The easiest type of property conversion involves a multi-story home with amenities on multiple floors. If you’ve got a two-story home and have bathrooms on both floors, it might not be a huge stretch to convert to two units and have a ready-made rental property. When doing a property conversion, the things you’ll need to look at are bathrooms, kitchens, entrances, bedrooms and living space.

If your two-story home has a bathroom, kitchen, dining room and living room on the first floor, you might be able to convert the dining room to a bedroom and have yourself a rental unit. Then you’d need to add a kitchen and a separate entrance to the second floor, or build out the existing staircase to make it accessible from the outside. Depending on the home, this type of conversion can be surprisingly cost effective.

Check Your Local Zoning

Before you buy a property with a conversion in mind, check local zoning and building laws. Make sure you can comply with local laws. Some areas don’t permit this type of conversion to a multi-family unit, and others have strict building codes that may make this type of conversion quite expensive.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

If you’ve found your dream home but you’re a single person or you simply don’t earn enough money to cover the payments, it need not be the end of the dream. The right home may lend itself to a house-sharing situation. Housemates may not be convenient or particularly desirable, but they can make owning a home possible even when you don’t make enough to pay for it yourself. Be savvy when you consider housemates and you could find yourself in a great home and even make money on the deal.  

Finding a Home that Lends Itself to Housemates

When considering housemates, you’ll want to be sure that your home lends itself to housemates. A small, single-bedroom home isn’t going to be a particularly desirable home to share with a stranger – for you or the stranger. Look for a nice, multi-bedroom home with good kitchen access and good bathroom access.

A master bedroom with a master bath, and a second bedroom with a second bath, can negate the house-share situation nicely by enabling both you and your housemate to have your own bathroom. Consider house access, parking, and desirable home features when you’re looking for a property to share. If you can find a house with an apartment over the garage or other in-law-style apartment, you can make even more money on your house share.

Housemates Don’t Count Toward Your Borrowing Power

Keep in mind that in most cases, housemates don’t count toward your borrowing power. If a lender can’t approve you for a loan based on your income, housemates aren’t going to help convince the lender – they’ll just help you with the income. You may still need a co-borrower or a co-signer on the loan to get a lender on board. Adding a housemate or two is a great way to help you pay the bills, but you may need other tactics to help you get your loan.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Most new homeowners are quite careful about their spending and credit in the months and years leading up to a home purchase. Homeowners budget and save, and avoid making unnecessary credit inquiries in order to qualify for a home loan. What many people don’t realize is that qualification doesn’t equal a successful closing. When you’re buying a new home, make sure you preserve your financial status all the way through closing to make sure you don’t compromise your loan.  

Qualifying for a Loan is Only the Beginning

Some homeowners erroneously believe that qualifying for a home loan means you’ll automatically get it, and you’re home free on the home purchase. In reality, qualifying is only the beginning. A lot of steps are still involved to make sure you get your home.

Once you’re approved for a home loan, the lender still has to do a lot of homework to verify your debts, your employment, your income and all of the details on your application. You’ll also need an appraisal to demonstrate that your home is worth the loan amount you’re requesting, and you may need an inspection to prove the home is sound. In other words, qualification is only the beginning – there’s still a long road until closing.

Avoid Changing Your Financial Status Before You Close

Homeowners who believe they’re “home free” during this period sometimes change their financial status before closing. This is a bad idea. Changes to your financial status, such as buying a new car, quitting your job or opening new credit cards and maxing them out can be a major red flag.

If your lender discovers these things during the closing process, you may find that you’re no longer eligible for the same terms, or may even be denied for a loan altogether. Don’t take care of your financial status only to wreck it during closing. Wait until your home loan is closed to make any changes to your finances, and when you do, make sure it won’t impact your ability to make the payments on your new home!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

One large factor in being approved for a home loan is your debt relative to your income. For many people, it may not be an easy task to boost income, and you’ve got to demonstrate an increase in income over time to have it count for mortgage qualification. Reducing your debt is a faster solution; you can achieve results within months instead of years, and the effects are positive and far-reaching.  

Pay Down Debt

Paying down debt is a good way to boost your borrowing power. One factor that lenders evaluate is how much debt you have relative to your income, and also how much debt you have relative to your potential credit limits. Carrying a little debt on a credit card isn’t such a bad thing, but having your credit cards maxed doesn’t look good. Make it a point to pay down revolving debt to less than 30 percent of your available credit limit, and consider paying installment debt a few months ahead to look good to your lender.

Pay Off Debt

When possible, pay off debt. The less debt you have, the more breathing room you have between your debt and income levels. With more space between your debt and income, it’s easier to qualify for a home loan. If you’ve got three credit cards and you can afford to pay one off, pay it off. That’s one less minimum payment you have to make, and less overall debt in your big-picture finances.

Be careful What Debt You Eliminate

Not all debt is bad debt. Installment debt, such as a car loan or student loan, is self-eliminating. As long as you make the payments on time, that debt can help you build a positive credit history. Likewise, revolving debt that is low relative to your potential credit limits is also good for your credit. By paying off revolving debt entirely, you lose the opportunity to demonstrate a positive payment history and can actually hurt your credit. Know what you’re eliminating before you pay it off, and calculate how it will affect your credit score and your overall borrowing power.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

It doesn’t matter how successful you are, financially – if a lender can’t see it, your financial success doesn’t count. You could have a six-figure income with no debts and a great stock portfolio, but unless you can show documentation to the lender, it won’t matter. Create a complete, easy-to-follow paper trail to demonstrate your financial health when you’re ready to buy a home.  

Document Everything

Income doesn’t exist unless you can document it. If you get paid in cash and pay most of your bills in cash, most lenders would consider that the income never passed through your hands. Unless you can document the income and the bills being paid, lenders have no way of knowing what you’re actually earning and what you’re spending.

Make sure you can document everything relating to your financial health in order to give your lender a complete picture. This includes things like prior years’ tax returns, pay stubs, bank statements and copies of any outstanding loans or debts. You may also need to provide documentation of other earnings and assets, such as a stock portfolio that pays dividends, alimony or rental income you receive from another property.

Make Your Paper Trail Easy to Follow

Don’t just throw a bunch of papers at your lender and expect him or her to make sense of it. Make your paper trail easy to follow. It helps if you assemble a budget, and attach copies of relevant documents. That way your lender can more easily follow what you’re showing, and you can double-check to make sure you didn’t leave out any income or debts.

Do this over a couple of months before you start home shopping to make sure you develop a complete picture. If you have an accountant, review your paper trail with your accountant before you take it to your lender to make sure you’ve completely documented everything that’s relevant.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

One of the big things lenders look at when they’re deciding whether to approve a home mortgage is your qualifying income. Your income has to be high enough to cover all of your financial responsibilities; most lenders look for a ratio based on percentages of your total income. If the mortgage for the home you want to buy would be too high based on your income, you might not be able to qualify for the mortgage. One way to boost your borrowing power is to lift your qualifying income.

What is Qualifying Income?

When lenders evaluate your income, they look at several types of income. They look at things like wages, commission, overtime, bonuses and other work-related income. Lenders also consider your welfare, pension, tips, dividends, interest, consulting fees or rents.

Qualifying Income Must be Regular and Continuing

To qualify as income for the purposes of approving a home loan, you must demonstrate that your income is regular, stable and continuing. Specifics vary, but you may have to demonstrate a two-year history – or more – to count income as qualifying income. You must also be able to demonstrate that your income is likely to continue in the same range in the future.

This means that if you get a new part-time job or start consulting on the side, you may need to do it as long as two years before a lender will accept this income as stable and continuing. Don’t expect to get a part-time job a month before you start house-hunting and count the income toward your loan approval. The plan you create to lift your qualifying income must be a long-term plan to be effective.

Rent as Qualifying Income

Alternately, if you buy a multi-family property, you may be able to count the rent for the other units toward your qualifying income. This enables you to expand your buying power, and collecting rent can also help you financially. You can establish equity quickly and earn far more during the same period of time as in a single-family home.

Be creative in thinking of ways to lift your qualifying income to boost your home-buying power. Keep in mind that you must demonstrate that your income is stable and continuing, so a short-term spike in earnings won’t count toward getting a bigger loan. But with the right long-term plan, you can boost your borrowing power and buy your dream home!

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Buying a home is something that most people plan for a long time. Many people rent apartments for years while they wait to be in the financial position to buy a home, and decide where they want to settle down. Ultimately, this strategy can cost you valuable time and money. You could lose years of opportunity to build wealth by renting, so make home ownership your first priority in your quest for financial success.

Home Ownership Builds Wealth

Renting a home or apartment is literally throwing money into a black hole. You’ll never see the cash again, and you’re not getting anything for your money; you’re essentially renting long-term storage for yourself and your belongings.

Home ownership, on the other hand, builds wealth. From the very first mortgage payment you make, you’re building equity in your home. If your home appreciates in value, or you buy a fixer-upper and make improvements to the home, your investment can yield drastic benefits. It’s not impossible to double your investment in a few years, depending on where you buy and how much the property appreciates. A home is an investment; not just a place to store you and your stuff.

For every year you delay in buying a home, you’re literally costing yourself money. Depending on the home you could buy, you could be costing yourself anywhere from $5,000 per year to $25,000 per year – or more – by not owning your home. Over five years, this could add up to well over $100,000.

Don’t wait to buy a home. You’re just costing yourself money for every year that you don’t buy. Invest in your future and your financial health and make the decision to buy your home now. Stop paying money to a bottomless hole and start seeing a return on your investment. You might need to start small, but in a few years you can move up to a beautiful new home, while your friends are still renting or just starting the home ownership process.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

As a home buyer and as an individual, you need to understand that you control your buying and investing power. The estimates that you get from lenders only shows a small portion of your financial life, shown through the lens of that lender’s product. It’s up to you to take a big-picture view of your buying and investing power, both in the present and in your future. Don’t rely on lenders to tell you what you can and cannot do; decide for yourself what you can afford and plan your life according to your vision.  

Lender Viewpoints May Not Reflect Your Lifestyle

When lenders calculate how much money they’ll loan you, they typically go according to a formula that they’ve established to balance potential risk. Depending on the lender, you may encounter a more or less conservative formula than your personal thoughts on financial risk. For example, a lender may say that you make enough money to borrow $150,000, but you may look at the potential mortgage payments and decide that your lifestyle is such that you can only afford to borrow $120,000. It’s up to you to evaluate all of the pieces of your life and decide what you can afford and want to spend; don’t rely on a lender to do this for you.

Consider Your Long-Term Investment Plans

When you’re thinking about how much to spend on a home, consider not only the mortgage payments but also your long-term investment plans. A home should not be your sole investment planning. You should also invest in an IRA or other retirement savings plan to ensure you’ll have enough money when you retire.

Make sure that any home you buy leaves you enough money to invest in your other long-term plans and still meet your financial obligations. You may decide that you need an extra $500 per month for retirement savings and want to buy a smaller home as a result. Only you can make this determination, so think about your long-term plans and other investment options when you buy.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

The key to achieving long-term success is to have a plan. You need to know where you want to be in 5, 10 and 20 years in order to begin working toward those goals. The same thing applies to home ownership. Envision the properties you want to own in 5, 10 or 20 years. Do you want to own a single-family home for the rest of your life, or do you want to own real estate as an investment and source of income? Is there a certain type of property you want to own, or properties you’d like to generate income?  

How Do You Think of Real Estate?

How do you think of real estate? Is a house merely a home to you, or are real estate properties potential investment opportunities? If you think of real estate as a potential income source, it’s time to put together a plan to decide what type of properties you want to own, and how you can achieve this success. Formulate a plan for buying and selling that will help you achieve your goals.

If you think of real estate as simply a place to live, it’s still important to envision the properties you want to own to get you to your dream house. Most people don’t start out in the house they’ve always wanted; many people buy a ‘starter’ house and then sell it and move up as their financial situations change. Think about your ultimate dream home. How can you achieve your goal of owning this home? Do you need to start with a smaller home and sell in five years?

It’s equally important to envision the properties you want to own and your path for reaching those properties whether you’re looking for your dream home or whether you see real estate as your path to financial success.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

Buying a home presents a lot of challenges at the best of times. Buyers must find their dream home, make an offer, negotiate a price and get financing. For more and more families, obtaining financing presents its own challenge.

Many families feel that they simply can’t overcome the hurdles to home ownership, and tell themselves that they can’t do it or buying a home isn’t for them. That kind of negative self-talk can actually prevent you from achieving your goals, so you’ve got to make sure you tell yourself the right story to achieve financial success.

What You Tell Yourself Matters

What you tell yourself about your financial success and what you believe about what you can achieve makes a big impact on what you can actually do. If you believe you can’t save enough money to make a downpayment on a home, you won’t do it. You won’t go through the steps of making a budget, finding ways to cut corners and working toward building a savings account. These are things you’ll only do if you believe you can achieve your goals, and if you don’t think you can have financial success, you won’t have financial success.

Learn to tell yourself a positive story and create a plan for you to reach your financial goals. If you feel daunted by trying to save a 20 percent downpayment for a home, start with saving 5 percent. If that seems too difficult, start by saving one percent. The key is to actually begin taking the steps to achieve your goals.

As long as you believe you’ll never own a home, you’ll never own a home. If you know you face challenges, learn to think of them as challenges you can overcome; not hurdles that stand in your way. With the right kind of positive attitude, you can achieve your goals and become a financially successful homeowner.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.