How to Buy a Home to Rent Out
Many people are looking for ways to earn extra income to pay debts or supplement their income. However, due to lack of time, some people are considering ways to earn passive income. Buying a rental property is one way to earn passive income. You can purchase a home and find tenants for the property. The tenants become responsible for the payments, and you earn a little profit every month.
Other People Are Reading
Instructions
-
-
1
Check your personal credit. To buy a home to rent out, you'll have to qualify for a home loan. Order your credit report and check for negative remarks or errors. Increase your credit score by eliminating debts and maintaining a good payment history.
-
2
Save money for a down payment. If you have an excellent credit history, you may qualify for 100 percent financing, in which case you won't need a down payment. However, if you have a fair or low credit score, save money for a down payment. You don't need the traditional 20 percent down payment. However, lenders may prefer a 3 percent down payment.
-
-
3
Gather financial statements. To buy a home to rent out, gather your personal financial statements, such as W-2's, tax returns and bank statements. Before approving your loan application, lenders will scrutinize your assets and debts to determine whether you qualify for a home loan.
-
4
Apply for a home loan. Contact a mortgage broker, and discuss your plan to buy a house to rent out. Because you won't live in the property, you'll need to obtain a home loan that allows nonowner occupants. Brokers will provide quotes from multiple lenders, and you'll be able to compare the loan offers and pick the best deal.
-
5
Schedule your appraisal and home inspection. Home inspections are optional but recommended. However, mortgage lenders require an appraisal. The appraiser will walk through the property and determine the property's value. Lenders will not complete the deal if the sales price exceeds the property's value.
-
6
Attend the loan closing. Schedule a closing date with your lender and sign the loan documents. This is where you pay your closing costs or settlement fees, and receive the keys to your new rental property.
-
1
