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Tips For Buying Your First Duplex

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Buying a home is a major investment, and for many first-time homeowners the idea of pouring a large portion of their income into a home they won't own for 30 years can be daunting. Fortunately, there are alternatives to the traditional single-family starter home model. One method that can allow you to pay off your home more quickly is to invest in a duplex. The following guide can help.

Why a duplex?

The benefit of duplex ownership is that you live in one half while renting out the other half. If you can find the right deal, the rent should cover your monthly mortgage payment at a minimum. This means you are effectively living rent- and mortgage-free, so you free up your income for savings or to make extra payments on the mortgage so you can pay off your mortgage more quickly.

Can this lead to a dream home?

There are two methods to choose from if you want to use a duplex as a stepping stone to a dream home.

  1. Save your extra income and use this to one day buy your dream home with a hefty down payment. You will then rent out both duplex units and use the extra income from these to pay off the mortgage on your dream home more quickly.

  2. Pay off the duplex early and then sell it at a major profit. This depends upon property values going up sufficiently to achieve this. You then use the money from the sale to step up into your dream home.

Can you qualify for the mortgage?

There can be some challenges to getting a mortgage, especially if this is your first home purchase. The following tips can help you qualify:

  • Save up a down payment. Ten percent is good, but 20 percent is better. The more you have to put down, the less of a risk you are to the mortgage company.

  • Look for duplexes in areas that are popular with renters. A fixer-upper in a highly desirable area can be an excellent deal, and the mortgage company will feel more at ease with lending if they can be reasonably assured the extra unit will remain occupied.

  • Choose a unit with a longtime tenant. If you already have a dependable tenant in the duplex, getting a mortgage is much easier.

  • Keep an eye on your credit. Good credit is a must if you want to ensure that you qualify for a mortgage at the best rate.

  • Make sure the extra unit is allowable. This means that the property is listed with the municipality as a two-family dwelling. Some homes are illegally divided, which means they don't technically qualify as two family, so the mortgage company can't consider rental income into your qualifying amount.

For more help, contact a mortgage lender in your area.