Katy mentors and educates young professionals and helps those beginning their careers and financial journeys to make informed decisions.
New to renting? Or unable to find a house to rent in your budget? Need tips on renting in a hot market? Use this guide for everything you need to know about getting into a house you love and you can afford.
Checklist for Renting a House
Renting a house can be exciting, but there's a lot no one tells you. Don't go in unprepared. Take time with each item on this checklist:
- Budget: Find out how much you can afford.
- Credit: Look up your credit history.
- House Search: Find housing search resources in your area and online.
- Utilities: remember to start the extra services like water and trash.
How Much Rent Can You Afford?
For most of us, housing is the majority of our monthly expenses. The home you choose will have a huge impact on your savings rate.
Before you even begin looking at the house rental market, figure out your budget for housing. Ideally, this takes into account both what you need and what you can afford every month. Start with what you are able to afford by adding up all the housing costs.
Other Costs to Consider
Renting a home presents additional financial considerations over renting an apartment or even a townhouse. Realize that if you move into a house, not only is the rent going to increase with size but there are also additional utilities that come along with a stand-alone house. Get prepared, and don't let these be a shock when you get the first month's bills.
In an apartment, you typically pay electricity, gas, Internet, cable, and a flat fee to the rental company for the rest. For a house, the renters will typically pay all that plus water, trash, and sometimes sewage and HOA.
Also, keep in mind you are paying heat and electricity for a bigger space, so expect those bills to increase. In order to figure out how much you can afford, you need to get good estimates for these bills in your area.
Evaluate Your Criminal History and Credit
The property management company or the private owner will have applicants for a credit check and a background check for every adult that is moving in. The credit check will show your score, any late payments that were reported, and any accounts that have gone to collections. The background check will show any violent convictions or evictions.
That means it is important to pull your own credit report from a free or paid site before you start house hunting. It is also important to understand the credit and criminal history of everyone you're moving in with. Your buddy might have a charge a while ago that he forgot to mention, or your girlfriend might have terrible credit because she doesn't have any history. You have to know this going in.
Important note: if you do get rejected after paying the application fee, ask why and ask for your credit report and background check results. The landlord or owner is legally obligated to provide you with the reports (you did just pay for them). Take a look at the negative information, so you know why you were rejected. Now you'll know what every landlord will see when they run your reports, so you can be upfront about the information in the future.
Renting a House With Bad Credit
In many cases the listing from a property management company will specifically state the minimum score they will consider (usually 600 or 650). This does not mean that if you are above this you are automatically approved. If you are below this there are cases when the landlord will accept your application with the stipulation that you pay a higher deposit upfront. But if the market is hot, they probably have enough applicants already that are over their cutoff, so it's not worth asking.
That does not mean you're doomed to never find a home! There are listings you can find that say bad credit is okay. Also, you might have better luck renting from a private owner. Most likely, they'll run a credit check, too, but you can tell them upfront what your score is.
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Ways to Compensate for Bad Credit
- Prove a gross monthly income that is 3x or more than the rent
- Offer to pay a higher deposit
- Offer to pay the last month upfront
- Show a solid rental history and provide previous landlords as a reference
Renting with bad credit is not impossible, but it does make it more difficult. Some homes managed by property management locations will be out of the question, and you will have to be willing to go the extra mile to either prove your creditworthiness or lower the landlord's risk by letting go of cash upfront.
Know Your Housing Needs vs Your Housing Wants
Before you run out and go to every open house in town, take a bit to think clearly about what you want in a house. Talk to the person or people you are moving with.
What to Know Before Looking at Listings
- Location: It's good to keep this broad at first but do set limits.
- Price Range: Think about what you can pay and what you should pay. Come up with a hard upper limit you know you can't go beyond. Keep in mind the criteria you would need a home to have in order to commit to one at your price limit.
- Lease Length: Most places rent for 12 months, but some will only take tenants that will sign a 2-year lease.
- Move-in Date: If you can be flexible about this, you will find more options.
- Number of bedrooms: Take into account kids or housemates and if you want an extra room for an office or guest room.
- Pets: Many places accept pets, and most are more accepting of adult animals.
- What Extras Are Important: This could be a yard, a garage, extra storage, a garden, a finished basement, etc.
Understand Your Needs
Many rental search engines have filters you can apply with your answers to these to ensure you're not wasting your time looking at a place that isn't the right fit for you.
Combing through listings and going to a few showings might change your mind about a few of these. And that's okay. It will help you realize which ones are important to you and which ones you can be flexible on.
The Housing Application Process
Okay, now that you have decided what you can afford, what's important to you, and you found a few great options, can you just apply to all of them? You might be tempted to apply for as many as you can because you want backups if your favorite doesn't pan out.
Costs of Applying for Houses
- application fees
- a hard pull on your credit
Avoid paying too much in application fees and unnecessary hits to your credit score by having an honest conversation with the rental company or owner. Make sure you have the information you need from them to be absolutely sure you want to live there before applying.
$25–$75 is a typical application fee and should include the background and credit check. Also, ask about how many other people are interested in the house and if there are already applications. If there is already an application being processed, it's usually not worth the money and time to apply unless it's a really great deal or the application fee and credit pull don't mean much to you.
Impact on Credit Score
Be aware that if you have a borderline score, then a few hard pulls from housing applications can knock you down 10–30 points, and then when the one you truly want comes along, you might not pass the check. Keep in mind some utility companies require a hard pull for first-time customers, which might you might need when moving into your new house.
Transitioning From an Apartment to a House
The first thing you will notice when you move into your new house is how much more space you have! And how small your belongings seem. But with a few exceptions for cleaning and lawn care, there is no need to immediately stock up on more stuff. Instead, save your money and enjoy the extra space. Purchase items as you need them.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2016 Katy Medium