Kate Nault is like many area landlords trying to maintain her property and relationship with tenants.
But for the 23-year-old anthropology senior, the house is her own and the tenants are her roommates.
Nault has owned the house for three years and said the process of purchasing her own home wasn't simple.
"I am from Lansing and my mom was always suggesting I buy my own house instead of throwing my money away paying rent somewhere," she said. "I didn't know what to expect, sometimes I was nervous and thought it was a big risk, but it's definitely not as big as I thought it would be."
The road to ownership
Despite her age, Nault was able to buy her home on Allen Street with ease because she had a steady income and had built good credit.
Nault said the loan officers and mortgage brokers she worked with answered all the questions she had as a first-time buyer.
"I was intimidated by the process, especially at 20 years old," she said. "But it should never scare someone away, just ask questions - people are very willing to help."
Rodrigo Doll, president of Endeavor Mutual Finance, said prospective buyers must jump through several hoops before they are handed the keys to their homes.
The first step is to contact a mortgage broker to establish an initial pre-approval. A system is set up to evaluate the applicant's situation: what type of income they have, how much they intend to spend on the home and past credit. This information is compiled to indicate how much purchase power a person has.
If the person is found to be a qualified applicant, the broker issues them a pre-approved letter to present to a realtor.
A realtor can provide a multiple listing service to look at all the houses in the prospective buyer's desired neighborhood and price range, if possible. Realtors receive a portion of the proceeds from the final sale of the property, otherwise the buyer is not charged for the service.
Once a property is located, the hopeful buyer can make an offer but it must be within their pre-approved limit. The realtor assists them with an earnest money deposit, typically between $500 to $1,000, which is refundable after closing on the property.
If the offer is accepted by the property's current owner, the buyer must return to their mortgage broker and begin the process of applying for home finance. The broker connects them with loan agencies and banks to assist them with funding for the property.
"I looked for places and found a place not far from where I live now and got financed, but it fell through," Nault said. "They didn't approve my offer, so I looked at the house I'm living in now."
Often times, younger adults might not have a financial foundation to begin with and assistance is needed. The Greater Lansing Housing Coalition (GLHC) and the Michigan State Housing Development Authority (MSHDA) provide affordable housing and financial assistance to first-time or low-income homeowners.
The benefits of homeownership
Doll said the process is the same for prospective homeowners at any age but there are benefits to buying a home young.
"Usually undergrads have no intention of buying and don't know where they will be year to year," he said. "But instead of paying rent, they are developing equity in that property."
Equity is the difference between what is owed on the initial price of the property and what it is worth or for what it could be sold.
If a house is bought today for $100,000, a year from now it will be worth $102,000.
Real estate gains value year to year at rates anywhere between 2-8 percent. As the buyer pays on the mortgage, they will owe less on it due to its natural rising value. The establishing equity allows the home to possibly be sold for $108,000 with $90,000 owed on it. At the end of the complicated process, $18,000 equity has been built for the buyer.
In the meantime, tax deductions for the amount you pay and property taxes on all the interest you pay on the loan build up and are returned to the owner.
"Right now because of interest rates, buying is almost as much as renting as far as cost," Steve Fox, real estate agent for Lana Wagner and Co. in Lansing said. "When you think of purchase price and the price you pay on the money you borrow, it's almost rent."
Fox said the City of East Lansing can't issue property taxes to MSU, so permanent residents in East Lansing have to pick up the slack - thus property taxes are high.
Nault purchased her three-bedroom house for $74,500 and rents two rooms to friends who help pay much of the monthly mortgage and utilities payments.
Although she must be a landlord to friends, Nault said she is pleased with her purchase and that it was a wise decision.
"I've known a lot of people in East Lansing who pay way more than they should be to rent," she said. "I recommend people buying as soon as they can - there are options out there."
