February 20, 2019

Counting Costs: Landlords, Leases and List Prices

You've decided renting is the route for you— so now what? Before you start scoping out the perfect rental, you need to get a firm handle on your finances. It's important to take inventory of your financial situation and create budget before signing a contract.

Start by asking yourself the following financial questions:

When is the last time you checked your credit?

Landlords want to be assured that you will pay your rent on time every month. One indicator they often use to assess your ability to pay your rent is your credit history and score. Having a better score will often make you a more appealing applicant, giving your landlord confidence that you'll pay your rent in full and on time. Be sure to pull your credit report a few months before you start looking for a rental so you have time to correct any errors.

Credit also plays a role after you sign your lease. Missing payments, bouncing checks or terminating your lease improperly could hurt your credit rating.

Have you saved for upfront costs?

  • Application Fees: During your search, you may have to pay an application fee. If you apply to multiple properties these fees could rack up quickly.
  • Deposits: In addition to your first month's rent, many landlords will require a security deposit of about one month's rent upfront. A security deposit protects the landlord from potential damages, and if the property is in good condition when you move out you are entitled to get your security deposit back.
  • Pets: If you have a pet, your furry friend may come with additional fees. Some landlords may require you to pay a onetime pet deposit or a monthly pet fee.

Have you accounted for recurring costs?

  • Utilities: Apartment utilities will likely include electric, gas, water, trash, internet, and cable if you choose to have it. Be sure to ask if your rent includes any of these utility costs – and which ones you're responsible for.
  • Amenities: Some communities may charge a monthly fee for amenities such as onsite gyms and pools.Additionally, some rental agreements charge an extra cost for parking.
  • Insurance: Renter's insurance is important – and many rental agreements require that you have it. If disaster strikes, renters insurance generally protects your belongings inside of your home for a relatively low monthly cost. Shop around and evaluate multiple renter's insurance offerings.

What you spend on housing should still allow you to build savings. You need financial reserves for life's unexpected emergencies and should consider future major expenses such as a down payment on a home, a wedding, or college tuition. 

To learn more about renting visit My Home by Freddie Mac®.

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