23
Jan
By Mike Pfefferman
Home Buyer Tips

Is It Time to Stop Paying Rent and Start Building Equity?

Have you ever calculated how much rent you’ve paid over the years? It’s a staggering number. According to studies, the average American spends between $133,000 and $155,000 on rent in just six to seven years. Let’s break that down and explore what it means for your financial future—and how you might be able to change that narrative.

What Does This Number Represent?

These figures aren’t just numbers; they’re the cost of temporary housing over time. Rent payments are necessary to secure a place to live, but unlike a mortgage, they don’t build equity. When you rent, your monthly payments benefit your landlord—not you.

If you’re spending $1,800 per month on rent, here’s how it adds up:

  • 1 year: $21,600

  • 5 years: $108,000

  • 7 years: $151,200

For many renters, that’s money they’ll never see again.

The Cost of Renting vs. Owning

One of the biggest arguments in favor of homeownership is that it allows you to turn your monthly housing expenses into equity. Here’s the difference:

  • Renting: You pay your landlord, and that money is gone forever.

  • Owning: Your monthly mortgage payments go toward paying down the loan and building equity in your home. Equity is essentially the ownership stake you have in your property, and it can grow over time as you pay down your mortgage and as your home’s value increases.

For example, if you buy a $300,000 home with a 5% down payment, after six years, you may have tens of thousands of dollars in equity depending on your mortgage terms and market conditions.

Why Renters Stay Renters

Despite these advantages, many people continue to rent for a variety of reasons:

  • Lack of a Down Payment: Saving for a down payment can be challenging, especially with rising living costs.

  • Uncertainty: Some people aren’t sure if they’ll stay in the same area long enough to make buying worthwhile.

  • Credit Challenges: Credit score issues can make it harder to qualify for a mortgage.

  • Misconceptions: Many believe homeownership is out of reach, but programs for first-time buyers and low down payment options are available.

How Homeownership Changes the Game

When you own a home, you’re making an investment in your future. Instead of paying rent every month, your mortgage payments contribute to something you own. Here’s how:

  • Build Equity: With each payment, you’re closer to owning your home outright.

  • Appreciation: Over time, real estate tends to increase in value. This means your home could be worth more than you paid for it when it’s time to sell.

  • Tax Benefits: Homeowners often qualify for tax deductions, such as mortgage interest and property taxes.

  • Financial Stability: While rent prices can rise year after year, a fixed-rate mortgage locks in your housing costs.

What’s the Alternative?

If you’ve been renting for years, it’s worth considering whether homeownership could be a smarter financial move. To get started, ask yourself:

  • Can I afford a down payment? (Some loans require as little as 3%.)

  • What’s my credit score, and how can I improve it?

  • How long do I plan to stay in one place?

Taking the leap to homeownership can feel daunting, but it’s one of the best ways to build wealth and gain financial stability.

The average American spends well over $100,000 on rent in just a few years. That’s money that could be going toward building equity in a home. If you’re ready to stop paying your landlord’s mortgage and start building wealth for yourself, it might be time to explore homeownership.

Want to learn more about how you can make the switch from renting to owning? Give us a call to explore your options!

26
Dec
By Mike Pfefferman
Bankruptcy History

Steps to Secure a Mortgage After Bankruptcy

Experiencing bankruptcy can feel like a significant setback, but it doesn’t mean the end of your dream to own a home. With time, effort, and careful planning, you can rebuild your financial foundation and secure a mortgage. Here are some key steps to guide you through the process of buying a home after bankruptcy.

Step 1: Get a Professional Credit Assessment

After your bankruptcy is discharged, there is typically a waiting period before you can apply for a mortgage—usually two years for Chapter 7 bankruptcy and as little as one year for Chapter 13, depending on the loan type. Use this time to focus on improving your credit score.

Your credit report will be closely scrutinized by lenders, so taking proactive steps to improve it is essential. The better your credit profile, the more likely you’ll be approved for a mortgage—and with better terms.

Step 2: Create and Stick to a Monthly Budget

Rebuilding financial stability after bankruptcy starts with creating a budget. A clear budget helps you manage your income and expenses, ensuring you don’t overextend yourself and remain on track toward homeownership.

Start by listing all your sources of income and subtracting your necessary expenses, such as housing, utilities, and groceries. Use budgeting tools like apps or spreadsheets to make tracking your finances easier. The goal is to allocate a portion of your income toward savings for a down payment and other home-buying costs.

Step 3: Save for a Down Payment

Saving for a down payment is one of the most critical steps in securing a mortgage after bankruptcy. A larger down payment reduces the lender’s risk and shows your commitment to the home-buying process.

The amount required for a down payment depends on the loan type and home price. Conventional loans often require around 20%, but some government-backed loans, like FHA loans, may allow down payments as low as 3.5%. Start saving as early as possible to meet your target amount.

A substantial down payment not only increases your chances of approval but may also qualify you for better interest rates and loan terms.

Step 4: Maintain Financial Discipline

Once your bankruptcy is discharged, maintaining strict financial discipline is crucial. Avoid unnecessary purchases, pay off any remaining debts, and refrain from opening new lines of credit.

Staying disciplined also helps improve your credit score over time, which is vital for qualifying for favorable loan terms and interest rates.

Step 5: Stay Positive and Patient

Rebuilding after bankruptcy is not an overnight process. It takes time, patience, and dedication to improve your financial health. However, by following these steps and staying committed to your goals, homeownership can become a reality.

Remember, your financial past does not define your future. With the right plan and support, you can move forward, secure a mortgage, and build a brighter future in the home of your dreams.

19
Dec
By Mike Pfefferman
Home Mortgage Tips

What If My Mortgage Pre-Approval Expires?

A mortgage pre-approval is one of the most valuable tools in your homebuying journey. It’s not just a letter stating how much you’re qualified to borrow; it’s a written commitment from your lender that assures sellers you have the financial backing to make a competitive offer.

Having a pre-approval letter in hand can give you a significant advantage in a competitive housing market, signaling to sellers that you’re serious, financially prepared, and ready to move forward.

However, like many things in life, pre-approval letters have an expiration date. If you don’t find your dream home before that date passes, you may be wondering what your next steps should be.

When Does Pre-Approval Expire?

Pre-approval letters typically expire within 60 to 90 days from the date they are issued. The exact expiration period depends on your lender and personal financial situation. A variety of factors may contribute to the expiration of your pre-approval, including changes in your credit, income, or debt. It’s important to stay mindful of the expiration date so you can plan ahead and ensure you’re still on track for purchasing the home of your dreams.

What Happens If You Don’t Use Your Pre-Approval?

It’s important to remember that just because your pre-approval expires doesn’t mean your home search is over. If you haven’t yet found the right property, or if the market has been particularly competitive, don’t be discouraged.

If your pre-approval expires, all you need to do is refresh it. This is a common step in the homebuying journey and is relatively simple to do. You’ll need to provide updated documentation—such as your most recent bank statements, pay stubs, or any changes to your financial situation—to ensure your pre-approval remains accurate and valid. This allows the lender to reassess your qualifications and ensure you still meet the necessary requirements for a mortgage.

Steps to Take When Your Pre-Approval Expires

  1. Contact Your Loan Officer
    • The first step is to reach out to your loan officer as soon as your pre-approval is about to expire. They’ll be able to guide you through the process of renewing your pre-approval and make sure everything is up to date.
    • Be open and transparent with your loan officer about any changes in your financial or employment situation that might affect your application. This could include a new job, a change in income, or any other significant financial adjustments.
  2. Update Financial Documents
    • Your lender will need to verify your current financial situation before issuing a new pre-approval. To do this, you’ll need to provide your most recent bank statements, pay stubs, tax returns, or other requested materials.
    • These updates will allow the lender to reassess your qualifications and determine if you still meet the criteria for your desired loan program. The more timely and accurate your documents are, the faster the process will go.
  3. Obtain a New Pre-Approval
    • After reviewing your updated documents, your loan officer will issue a new pre-approval letter, which will have an updated expiration date. This new letter will enable you to continue your house-hunting journey with confidence.
    • Keep in mind that your new pre-approval will reflect your current financial standing, so it’s important to stay on top of any changes that could impact your mortgage application.