About Real Estate: Buying a home doesn’t allow tenant to break existing lease
Tenants who have signed a lease may be responsible for making future rental payments, even if they plan to buy a home soon.Q. I have rented the same apartment for several years, and signed a one-year lease renewal in January. However, I recently made a down payment to purchase my first home, and the sale is scheduled to close in July. A friend says that a federal law allows tenants to break a lease without penalty if they sign a contract to buy their first house. Is this true?
A. No, there#146;s no such federal law. I also called the rent board in your current community and was told that there#146;s no such local ordinance, either.
You signed a one-year lease at the start of this year, and the landlord has the right to enforce it. That means you are legally required to pay the rent until January, even though you hope to close on a new home this summer. And if you don#146;t pay, the landlord can sue you for his lost income and maybe even report your unpaid rent to the credit bureaus.
The landlord, however, will have to make a #147;good faith#148; effort to rent the property out quickly after you leave in an effort to minimize both your losses and his own.
Talk to the apartment#146;s owner or manager about your home-buying plans. Though he might not let you walk away from the rental contract scot-free, it#146;s possible he might be willing to negotiate a modest lease buyout that would cut your potential losses and allow him to put the apartment back on the market quickly.
Also, haul out the original rental contract that you signed when you first moved into the apartment, as well as the renewal that you inked earlier this year. You may have the right to sublet the apartment to someone else in order to cover your future rent, provided neither document specifically prohibits you from doing so.
Rent laws vary from one area to the next, so call your local rent board or similar agency to discuss all of your options.
Q. I finally paid off the last of my credit cards, because I want to buy a home soon and qualify for the best interest rate possible. How long will it take before my credit report shows that I am now debt free?
A. It probably will take between 30 and 45 days for your report to show you have paid off all of your debts and for your score to rise accordingly. Most creditors report to the bureaus once a month, after they have had time to process a borrower#146;s payment and update their own records.
Q. You recently wrote about flood insurance, but didn#146;t say how much it costs. What should I expect to pay if I decide to purchase a policy?
A. It depends on where your home is located.
Annual premiums for a policy in an area that the federal government deems #147;low risk#148; are relatively inexpensive: They run about $400 for the federally set maximum coverage of $250,000 for your home and $100,000 for its contents.
The same coverage likely would cost at least $1,500 a year if the property is in a moderate-risk area, and $2,600 or more if it#146;s in a high-risk zone.
The polices are sold through local agents but underwritten by the National Flood Insurance Program. The NFIP#146;s floodsmart.gov website has lots of useful information, including a tool that allows you to type in your address to see your property#146;s flood risk, get an estimate of the cost of a policy and locate an agent who serves your area.
Q. I am interested in buying a foreclosed home that is being marketed by a bank. Must the bank disclose any problems with the house, just as an individual seller would?
A. Yes, the lender must disclose any problems that it knows about. But that might not be much because, unlike the previous owners, the bank has never lived in the home.
Most lenders allow a buyer five or 10 days to have a foreclosed property inspected after an offer has been accepted. Make sure you take advantage of this opportunity by hiring a professional inspector to give the home a thorough review.
Also talk to neighbors. If the previous owners had major problems, such as plumbing or roofing trouble, at least one or two other people on the block probably knew about it.
Ÿ For the booklets #147;Straight Talk About Living Trusts,#148; or #147;Free and Clear: Getting the Mortgage Monkey Off Your Back,#148; send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
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