The hardest part of getting into house hacking is moving forward with purchasing the property after analyzing your options. Crafting the offer that works for both parties is important to getting a deal under contract and starting to build wealth through real estate. In real estate, you make your money when you purchase the property not when you sell it. When working on your offer, it’s important to factor in the pre-approval showing what your lender will lend you based on your finances and the current/future rental income. You should have a pre-approval before starting your search and once you find the right property, you can pull potential rental comparables two ways; (1) Ask your realtor to pull the details or (2) Use Rentometer.com – my favorite tool. Once an offer has been submitted and accepted the fun can begin and listed below are a few key terms and steps.
Pre-Approval- Pre-qualification provided by your lender with the purchase price you can afford
Purchase Price – The price to buy the property
Closing Date – Date chosen and agreed on by both parties to finalize the purchase of the home
Earnest Money aka deposit – Amount of money placed in escrow that shows the seller you’re serious about buying the property. You will only lose this if you back out of the deal outside of the agreed-upon contingencies.
Contingency – Clause in the contract that covers you if an issue arises like if there is an issue with the inspection or mortgage, you can back out of the deal and get your earnest money back. (Depending on the contract, other contingencies can be added.)
Closing Costs – This is the amount of money you will need upfront to physically purchase the property. Depending on where you are, the closing costs can range from 2 to 5 percent of the purchase price.
- Tell Your Lender – Call your lender and let them know you found a property and you’re putting in an offer. They’ll take you through the process from there.
2. Set Up Inspection – Once under contract, schedule your inspection for the property within 24 hours. Need a recommendation? Ask your realtor.
3. Title Due Diligence – Title company will review the home’s title and ensure there are no liens or other issues with the home title.
4. Appraisal – This will be ordered by your lender and the appraiser will come out and tell you and the lender what the property is worth. Some of the things the appraiser uses are square footage, the size of the lot, and previous sales of similar homes in a specific radius.