How Credit Karma can help you buy a home
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Are you considering getting started with real estate investing? Buying an investment property comes with plenty of benefits, but getting started can be challenging. The best way to navigate the real estate investment world is to have the right tools by your side.
One of those tools is Credit Karma. This personal finance company can connect you with real estate agents and help you buy your next investment property.
Why invest in real estate?
Real estate is one of the most popular investment opportunities. In fact, a 2019 Gallup poll found that 35% of Americans believe real estate to be the best long-term investment, above stocks, savings accounts and gold. So what is it about real estate that makes it such a great investment?
Cash flow
Real estate, more than most other investments, can provide a consistent source of cash flow. For example, if you own a rental property, you’ll have cash flow coming each month from the rent your tenants pay. This cash flow can be a reliable source of income. And depending on how much real estate you own, could eventually become your primary source of income.
Appreciation
Real estate can also be a profitable investment because of the appreciation of the property value. While the real estate market can ebb and flow — most of us remember the decline in property values as a result of the 2008 housing crisis — overall, home prices tend to rise over time. In fact, the average sale price of a home in the United States has more than doubled over the past 20 years.
Diversification
For many people, their first experience with investing is with stocks, bonds and pooled investments in a workplace retirement plan or a taxable brokerage account. Investing in real estate is an excellent way to add diversification to your portfolio. There’s no direct correlation between the stock market and real estate returns, meaning real estate can provide some protection when the stock market is down.
Leverage
Real estate is one of the few investments that you can easily leverage for greater returns. You probably aren’t buying real estate outright. Instead, you’re able to buy and enjoy the benefits of real estate by initially paying just 20% of the cost in the form of a down payment. As your equity in a property grows, you can use tools like cash-out refinances to continue to leverage the property.
Tax advantages
Real estate investing comes with plenty of opportunities to reduce your tax burden by taking advantage of the many tax deductions available. The tax benefits go far and beyond those available to traditional homeowners. As a real estate investor, you can also deduct other costs associated with owning and maintaining a property, such as maintenance.
How Credit Karma can help you buy a home
Buying your first investment property is no small task, and it’s important to have the right tools available to you to help you get started. Here are a few ways Credit Karma's tools can help you buy a property, whether it be a second home or your first rental property.
Related: How to buy an investment property
Track your credit score
Most people know Credit Karma as a company that can help you track your credit score. In fact, the company was initially created because its founders believed people should have access to their credit and financial data for free.
When you sign up for Credit Karma, you can use its tools to track both your TransUnion and Equifax credit scores. In addition to showing you your latest credit score, Credit Karma will also show you the factors affecting your credit score and suggestions to boost your score.
So how does this play into real estate investing? Your credit score will be one of the most important factors in determining whether you qualify for a loan for your investment property, as well as what interest rate you qualify for. Using Credit Karma to track your score can help you save thousands of dollars in interest.
Sign up to Credit KarmaGet your home buying checklist
If you’re buying your first investment property, it’s easy to get overwhelmed. With so many steps to complete, you may not be sure where to get started. That’s where Credit Karma’s home buying checklist comes in.
Credit Karma’s home buying checklist includes every task you’ll need to complete to purchase a new home, whether it’s your primary residence or a rental property. The checklist includes often overlooked items such as finding the right type of loan or applying for pre-approval.
Discover your buying power
Not sure how much you can afford to spend on a rental property? Credit Karma can help with that through its buying power simulator.
To use the simulator, you enter information such as your credit score, monthly debt, income, savings and more. With that information, Credit Karma will tell you how much you can afford to spend. You can even see your home buying power based on a comfortable, manageable or aggressive monthly payment.
Find a real estate agent
Your real estate agent will be one of the most important resources during your journey of buying an investment property. Not only will your agent help you find the perfect property, but they’ll be your advocate through the entire closing process.
One of the features Credit Karma offers is access to the best real estate agents. In your home buying hub, simply click the button that says “find a real estate agent” and you’ll be directed to a tool that makes it simple to find the top real estate agents in your area.
Shop the best mortgage rates
Choosing the right lender is the key to maximizing your real estate investment. Credit Karma can help all homebuyers find the best rates available to them based on their credit score, budget and more.
But Credit Karma takes it one step further. The platform specifically allows you to use its mortgage rate tool to find an investment property or second home loan. By shopping for the right type of loan, you have the best chance of seeing the most accurate rates.
Credit Karma’s home buying power tool
We’ve already talked about some of the tools Credit Karma offers to help you buy your next (or first) investment property. But what’s just as important is how they package them.
Credit Karma’s home buying power tool is specifically designed to package all of the most important home buying tools in one place. When you visit your home buying power page, you’ll see all of the tools and resources you need to buy your next property, including your:
- Buying power
- Credit score
- Home buying checklist
- Curated mortgage offers
- Real estate agent match
- Home buying articles
Credit Karma’s home buying power tool takes all the stress out of buying a second home or rental property. They offer all of the tools you didn’t even know you needed to plan your home purchase.
Pros and cons of using Credit Karma to buy a home
Before using Credit Karma to buy a home, it’s important to weigh the pros and cons to make sure it’s the right tool for you.
Pros
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Credit Karma’s home buying tools are completely free to use, meaning all of your money can go toward your home purchase.
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Credit Karma doesn’t just show you your credit score — it takes the extra step of giving you tailored advice to help you boost your score, which can improve your homebuying experience.
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The platforms' home buying power tool shows you all of the tools and resources you need to plan your home purchase. This includes a home buying checklist that can guide you through each step of the process.
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Credit Karma can show you curated mortgage offers, meaning you aren’t starting from square one when it comes to finding the right lender.
Cons
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Credit Karma shows you curated mortgage offers based on your credit profile. It can’t guarantee you’ll be approved for the offers you see.
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Credit Karma shows you your VantageScore credit score, while mortgage lenders generally use your FICO score. As a result, the score you see may not be exactly what a mortgage lender uses to determine your loan eligibility.
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Many of Credit Karma’s home buying tools and resources are tailored to those buying a primary residence, not an investment property.
The bottom line
Investing in real estate is one of the best ways to diversify your portfolio and create a regular source of income. Because of that, it’s no surprise that real estate investing continues to increase in popularity. But it can also be difficult to get started, which is where Credit Karma’s home buying tools come in.
So is Credit Karma worth it?
Credit Karma has some of the most robust home buying tools available in its home buying power hub. And its tools are entirely free to use. The best part about Credit Karma’s home buying tools? You can pick and choose which are valuable to you to help streamline your home buying experience.
Sign up to Credit Karma
Erin Gobler is a freelance personal finance based in Madison, Wisconsin. After seven years working in state politics, she left to pursue writing full-time. Now she writes about financial topics including mortgages and investing.
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