Everything You Need to Know About Renting a Home
Personal preferences and finances are some of the factors why renting a home might make more sense for some people. You may consider renting a home if you want to live an independent life that’s close to your workplace. Renting is also a viable option for young families who are still saving for a down payment for their dream home. As someone looking to rent a single-family home, it’s important that you understand how the process works especially if this is your first time.
Rental application and lease contract are two separate forms
Rental application and lease contract or rent agreement are the two separate forms that you’ll encounter as you look for a home to rent. A rental application is a form that you’ll need to furnish a landlord to inform him or her that you’re interested to rent his or her property but it doesn’t guarantee you’ll get the home. The information that you’ll provide on the form will help potential landlords determine if you’ll be a desirable tenant and you’re amenable to pay the monthly rent. Aside from your basic information, a landlord will require you other details like your employment and income details, other family members who will live with you, and if you’re going to bring in pets. Submitting a rental application in some states could cost you around $30 to $50 and a landlord may charge up to $200 if the home you plan to rent is in a good neighborhood. Landlords use the rental application fee to pull out your credit reports as well as background checks. Depending on the state where you plan to rent a home, you may want to find out how much is the average rental application fees landlords charge and if it’s possible for you to get a refund.
Lease contract, on the other hand, is the document where you’ll find the renting terms and conditions that you’re about to agree to. Unlike a rental application, a lease contract could be complex in nature because of the detailed terms and legalities that you’re going to be bound to with a prospective landlord. But before you affix your signature on the dotted line you need to pay attention if the rent that you’ll pay every month, along with other costs and terms, coincides with your application. For example, you may want to know if your rent includes utility bills which means that the landlord is responsible to cover such costs. In this California Residential Lease Agreement sample, the tenant is responsible for paying all utilities and services supplied on the premises.
As of October 2019, the average rent for a one-bedroom home according to Apartment List is $960. You have two options if you don’t agree on most of the terms you find in a lease contract: You either need to compromise or just look for another rental property that meets the majority of your needs.
There are laws that landlords must follow
Landlords must screen potential tenants based on credit reports and finances. They must reasonably notify an applicant if they will refuse their application to rent. If a landlord decides to charge more money, it should be based on the applicant’s credit report. Keep in mind that it’s unlawful and discriminatory for landlords to reject you or unreasonably alter a rental deal because of your race, national origin, color, religion, gender, family status, and disability. The U.S. Department of Housing and Urban Development or HUD handles all kinds of housing discriminatory complaints.
Your home rental application’s fate relies on your credit score
Similar to large purchases like homebuying, it’s common for landlords to check your credit score to figure out if you’ll likely pay your monthly rent on time. You have a good credit standing if you have a FICO score of 700. To give you an idea of what kind of credit you need to rent an apartment in a hot rental market, the magic score is 740 or higher according to rent.com. If you have a credit score of around 600, you may want to delay shopping for a rental home until you make positive and significant changes with your credit. Notwithstanding, potential landlords may still consider your application even when you have a less appealing credit score if either you provide them with your income or employment documents that show you can pay monthly rents, an explanation for having a seemingly bad credit report or paying a lump sum that covers at least three months of rent in advance. It’s advisable to check your credit score first in Equifax, Experian, and TransUnion before you submit a rental application form.
Security deposit is a separate upfront payment
Landlords or the owner of the home that you’re about to rent will require you to settle a one-time security deposit on top of the monthly rent you’re expected to pay. Oftentimes, the amount of security deposit varies depending on the limit set by the state. It could be equivalent to a month’s or two months’ rent. Some landlords may even increase your security deposit if you will bring in a pet. Security deposits protect landlords from any inconveniences that you may cause them as a tenant.
The landlord will keep your security deposit while you stay on the property. Ideally, you would want to get back your security deposit once you move out. However, your security deposit may not be returned to you if you’re moving out of the property leaving it with damages or you’re moving out before the end of your lease contract.
Aside from the security deposit and the first month’s rent, a landlord may also charge you extra rent if they determine that you have a not-so-good credit history.
Be suspicious if a landlord requires you to send your security deposit using wire transfer. As you shop for a rental home, you might encounter fake landlords who will try to lure applicants with enticing rental offers and make transactions with them even if they don’t have properties to rent out.
Tips first-time renters may consider when filling out an application form
Filling out an application form for rental may frustrate you as a first-time renter, simply because you don’t have a history of renting a home. The situation could be even worse if you have a bad credit score. As a first-time renter, it’s critical that you understand all the information being asked in the application form. Some first-time renters may have to provide a written explanation for any entries in the application form that they cannot answer. You may need to support your application with a character reference that landlords can verify.
Make sure that your application is error-free, and every detail is correct before submitting it.
HUD may help you find an affordable home for rent
There are situations that HUD may help you find an affordable home that you can rent. For example, you may want to apply for the Housing Choice Voucher Program or commonly called “Section 8” that lets you decide where to live and pay the rent or a portion of it, using vouchers. Section 8 is designed to help families with very low income, the elderly, and people with disabilities find an affordable home that they can rent. If you think you may qualify for this program, you may contact the Public Housing Agency in your area to help you find a landlord.
The real deal with rent-to-own homes
According to consumer.gov, renting to own a home is not a good idea because after paying a lot of money to the landlord, you may no longer have enough credit to buy the home you’re renting. Moreover, you may simply lose all your hard-earned money if you’re transacting with a dishonest landlord who will make it hard for you to buy the home. Renting to own a home is simply a costly financial mistake that you can make.
Final thoughts about renting a home
Generally, renting benefits the landlord, not you, as a tenant. Renting a home could be a viable option if you want to live independently near your workplace for a short period of time. As a tenant, you need to strictly follow the terms and conditions in your lease. There are things you can do to convince a landlord to offer you rent even if you don’t have a rental history. You may find renting a good opportunity to save funds if you have plans of taking out a mortgage to fulfill your homeownership dream.