What makes Christmas and New Year’s better than friends, family, and savings? How about owning a home? The holiday season is a cheerful time spent with family, but for those of us with families
5 Ways A Rotten Roommate Can Sink Your Home Buying Dreams
For most people, buying a house is the smart move versus renting, but most of us rent before we buy. Renting can be a valuable way of preparing to secure a home loan. It can give you the time you need to get your credit house in order, save a sizeable down payment, and find just the right deal. However, if you’re renting with a roommate, you need to plan your financial steps carefully. A rotten roommate can sink your home buying dreams singlehandedly if you’re not prepared.
What’s “Ours” is “Yours”
Are you thinking about getting a roommate so you can save money each month? Before you sign on the dotted line of a lease, stop. Signing a lease with a roommate is like co-signing a loan. In the end, you’re on the hook. If your roommate doesn’t pay or skips out, the contract is still binding and you are held responsible. The landlord can go after both of you for any outstanding bills.
When shopping for a rental property, think of it as a marriage; what’s his is hers, what’s hers is hers, and what’s ours can very quickly becomes just yours if things go south. Find a property you can afford if your roommate decides to skip out or can’t come up with rent. If you depend on their ability to pay their share every month, you could be setting yourself for financial and credit disaster.
Utility Bills Spiral Out of Control
The utility bills can become problematic in a couple ways. First of all, if your roommate isn’t responsible with their power and water usage, you could see an astronomical bill. Couple that with their coming up short to pay it, and you’re facing a dilemma – especially if the bill is in your name.
Let’s say you decide to move out because the co-inhabitants isn’t working. You might not be able to disconnect the power to have your name removed. In most states, it’s illegal to disconnect while the property is occupied just to change the name on the account. You’ll need to figure out how to change every utility bill over to your roommate and then follow-up to ensure the change takes place. Otherwise, your credit could take a huge hit thanks to unpaid utility bills.
Did you know most cases of identity theft involve a roommate? It’s a sobering thought. There have been documented cases across the nation where a roommate stole the other roommate’s identify and even went so far as mimicking their appearance and using their name in sticky legal situations.
Identity theft is one of the leading credit killers. It can set back your home buying plans by years and leave you in a money pit of huge proportions. A single case of theft can take years to resolve and recover from fully.
Screen any potential roommate in the same manner as a landlord would. For the duration of the lease, you will be yoking your financial stability to them. The last thing you want is to attach yourself to a criminal or someone who meets such dire financial straits that they steal from you.
Buying a house becomes exponentially harder with every bad mark on your credit, and credit isn’t something you can fix overnight. It is imperative to keep a close eye on what’s happening with your credit score and history. The risks involved in co-signing a lease with a roommate may outweigh the potential savings for a down payment or closing costs on your first home purchase. It’s up to you to weigh the pros and cons before signing on the dotted line, which brings us to an unknown factor you might not have considered.
Surprising and Costly Habits
They say you never truly know someone until you live with them. Whether you’re screen roommates off the street or moving in with a friend, you’ll never see their living habits until you’re sharing the same roof.
Some people aren’t the best housekeepers, and this can cause a problem when it comes time to move out. Property damage can become a major issue with a rental company, an issue you’ll be charged to fix. If the bill isn’t paid, it hits your credit. Paying the bill might be painful, and you’ll have to work out just who pays for it.
For example, if your roommate didn’t keep a clean room and there is mold or mildew growing, you may see a bill for repairs from the property. Most of us would demand the roommate cover the bill, but since you co-signed a lease, you’re both responsible. If the bill doesn’t get paid, you’re stuck with it and so is your credit if you don’t pay it.
Expecting a Handout
Some roommates don’t take renting seriously. When rent is due, they’ve spent their money elsewhere and ask you to spot them until they have the cash. You’ll need a backup plan in case you find yourself in this situation.
Monitor rent, utility bills, and your credit as you rent with a roommate. The sooner you catch an issue, from an unpaid bill to a suspicious charge, the quicker you can handle it. Half the battle of keeping your credit clean is catching errors and hiccups fast.
When your lease ends and you part ways, be sure to get a statement from your landlord stating the balance owed is zero. You should do the same for all utilities and accounts associated with the rental. Be sure everything is zeroed out before walking away. Then, continue to check your credit for at least six to twelve months after moving to ensure nothing creeps back up from those closed or zeroed out accounts.
If you are renting with a roommate, take care to protect your financial assets before signing a lease. As you continue your house search, keep an eye on the neighborhoods throughout Virginia Beach. You never know what deals will present in neighborhoods like Bay Breeze Condos and Alanton.
Having lived in other cities, such as Cleveland and Idaho Falls, I only appreciate Hampton Roads that much more. Why? Because from almost anywhere in our area, a beach is only about a 20 minute dri....