Category Archives: Budgeting

5 Tips to Help You Survive the Holiday Shopping Season

4 Tips for Surviving the Holiday Shopping SeasonShopping for the holidays can turn the most wonderful time of the year into the most stressful time, but a little planning and creativity can turn the season’s most dreaded task into a bearable (even a pleasant) one…and these tips will help you save money! BONUS.

(1) Do Your Homework

Before the start of the holiday season, compile a list of the people in your life you need to buy gifts for. When your loved ones start dropping hints about electronics they would love to own or start admiring a sweater in the store window, you can make note and start your shopping early. Also, if you buy gifts for clients or business associates, plan those well in advance, so you are ready and are not “panic shopping” which can lead to overspending.

(2) Avoid Overspending

Decide how much money you want to spend this holiday season, and divide that amount among the people on your list. Be sure to leave some of your budget for those holiday extras that take so many people by surprise, like holiday dinners and clothes for work parties. Once you have your budget set, stick to it.

Check the app store for apps that will comparison shop for you, and sign up for your local retailers’ e-newsletters—insiders will often get access to sales and coupons not offered to the public. And when you’re shopping—whether online or in person—keep your focus. Buy only what’s on your list, and avoid the holiday displays and Instagram feeds meant to tempt you into breaking your budget.

(3) Personalize Gift Cards

Gift cards are a popular present, because they are easy  and suit all ages, budgets and tastes. They can, however, seem impersonal, especially when you tuck one into an envelope and hand it over at the holiday party. To personalize a gift card, include a small extra present with it. Tuck a gift certificate for a movie pass for two into a tin of gourmet popcorn, or wrap a gift card for a clothing store in a scarf.

(4) Skip the Presents; Give Experiences Instead

Do your children really need another gaming console? When the kids can’t figure out what they want, skip the stores and give them an experience instead. A day’s adventure can cost less than the newest electronic gadget, and it will still be remembered even when the gaming console is collecting dust in the basement.

For a sports enthusiast, try a day’s pass on a ski slope. A daredevil would love a trip to a treetop obstacle course. And if you have a teenager into culture, take them into the city for a tour of a museum and dinner at a high-end restaurant. Wrap up a lift ticket, a flyer for the adventure park, or a museum brochure to hint at what’s to come.

(5) Bonus Shopping Tips:

  • Don’t wait til the last minute. This can cause you to “panic shop” which is expensive and often leads to your buying any gifts, not necessarily the ones you want to buy.
  • Go during off-peak hours – maybe during your lunch hour, later in the evening, or first thing in the morning, before the mad dash of shoppers hits your favorite stores.
  • Subscriptions are an easy gift to buy (and give) online, allowing you to give a gift that truly keeps on giving.
  • Online shopping has become so much easier. While this is helpful in many cases, it can also lead to overspend. We recommend filling your shopping cart of items you want to buy, checking it against your list to be sure you aren’t buying too much, and then “sit” on the shopping cart for a day. Go back and if you still want to buy those gifts, go ahead! If not, delete unwanted items from your cart before checking out.
  • Make sure you get gift receipts and know what store return policies are before you inadvertently buy a gift that can’t be returned!

Get Closer to Your Dream Home in 2017 with These 3 Steps

Is buying a home in 2017 one of your New Year’s resolutions? If so, then you’ve come to the right place. Here I will tell you the top 3 things you must do this year to make your dream a reality, adapted from Realtor.com.

  1. Automate your savings. Whether you plan to put 3 percent or 20 percent down, saving for a down payment requires discipline. I recommend that you automatically set aside savings, whether it is an automatic transfer from your checking to your savings each month or a payroll deduction that goes directly into your savings account. However you do it, make saving money automatic. If you don’t see the money, you won’t spend it, right?
  2. Establish credit and maintain a solid credit history. It can take time to build up credit, but if you do it right, it doesn’t have to be difficult. Start with a low interest rate credit card, or a department store card like Macy’s or Target. If you’re paying on a student loan, be sure that’s being reported in your name. Installment loans like car loans are also helpful in establishing credit. Now that you’ve got credit, keep it clean by paying on time every month and by not exceeding more than 30 percent of your total credit limit on each of your accounts. For example, if your Macy’s card has a $1,000 credit limit, don’t spend more than 30 percent of that limit. Make sure you check your credit periodically (once a year) to be sure there aren’t any discrepancies.
  3. Stick to a budget. Owning a home is a big investment, and along with it, come big bills – utilities, homeowner’s insurance, mortgage payments, property taxes and more. To get used to those higher bills, learn to develop and stick to a budget. This will make it easier to discipline yourself once you move into your dream house to be sure you can afford it.

As with any new habit, these behaviors will take time to become ingrained in you, but just think at the reward once you’ve mastered them – your very own home! Well worth the hard work.

 

 

Homebuyers, Have You Saved Enough for Closing Costs?

Many homebuyers and home sellers believe they need at least a 20% down payment in order to buy a home or to move on to their next home. There are many loan programs where you can put down as little as 3% – or even 0% with a VA loan.

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you’ve saved enough for your closing costs which include everything from homeowner’s insurance and title insurance to appraisal and legal fees.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage.  These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

Many first-time homebuyers say they wished that someone had told them closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

Is there any way to avoid paying closing costs?

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in order to get the deal finalized.

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to. Want some guidance? My team can help explain the closing costs you might have to pay on the homes you are considering.

The Mortgage Process: What You Need to Know

As we said in our Oct. 17 blog post, this is a seller’s market, so it is important that you get pre-qualified or pre-approved for a mortgage. Here’s what you’ll need to qualify in the current real estate market:

  • A down payment. This can range from 5% to 20% of the purchase price. According to Freddie Mac, 40% of buyers are putting down less than 10% with some as low as 3%.
  • Income verification, credit history and asset documentation
  • Third-party appraisal
  • Stable income
  • Good credit history

Freddie Mac recommends these 5 next steps.

The Mortgage Process: What You Need to Know

 

Have questions? Not sure what’s next? Team Marti can help. Contact us today to set up a no-obligation appointment!

 

Getting Pre-Approved for a Mortgage: the 4 Cs

Know the 4 Cs of Mortgage Pre-Qualification and Pre-ApprovalRight now we are in a seller’s real estate market, because the number of homebuyers exceeds the number of  homes for sale. This means that, to buy your dream home, you need to stand apart from other home buyers. Not only do you need to have professional representation from an experienced Realtor to make a solid offer, but you also need to get mortgage approval to ensure a smooth home purchase.

We recommend starting with pre-qualification or pre-approval from a qualified mortgage lender or broker. The pre-approval process will tell you how much you can afford to spend on a home. Freddie Mac recommends that you focus on the 4 Cs which determine the amount you will be qualified to borrow:

Capacity: Your current and future ability to make mortgage payments
Capital or Cash Reserves: The money, savings and investments you have that can be liquidated
Collateral: The home that you want to purchase
Credit: Your history of paying bills and other debts on time

Before you start shopping for a new home, get mortgage lender and broker recommendations from your local Realtor. Work with that lender or broker to find out what your credit score is, how much down payment you’ll need and how much you can afford to borrow. Then you can begin your search with the confidence that you’ll qualify to buy the home of your dreams. Happy House Hunting!

[To learn the difference between pre-qualification and pre-approval, see my June 6, 2016 blog post.]

Financial Literacy: Setting Financial Priorities

April is National Financial Literacy Month, so we’ll be posting information throughout the month on our blog and social media channels to help you make smart money decisions as you plan for your future.

How Credit Affects Your Home Buying AbilityLet’s start by talking about setting financial priorities. Whether you are just starting out or are an adult with a long-established credit history, it is important to set – and periodically review – your financial priorities. Money Management International recommends a three-tiered system of priorities:

  • First priority debts cover your basic needs and include your monthly rent or mortgage payment, taxes, insurance, auto loans, utilities and food.
  • Second priority debts include secured loans like a car loan.
  • Third priority debts are credit cards, medical bills and unsecured creditors.

Keep in mind that everyone’s financial priorities will be different, and that all financial priorities should be addressed, whether they are first or third priorities. For example, let’s say your hours at work have been reduced, so your income is temporarily lower than usual. You still need to pay your third priority debts, but perhaps you can contact your creditors to see if you can lower your payments until your income returns to normal. Being honest and working with your creditors is always better than ignoring them or waiting for things to get better.

To help you set your own financial priorities and to make smart financial choices, use this handy worksheet. Good luck!

 

For Homebuyers: 7 Ways to Save for a Down Payment

For Homebuyers: 7 Ways to Save for a Down PaymentIn 2014, the largest group of homebuyers were Millennials (age 34 and younger), according to the 2015 National Association of Realtors® Home Buyer and Seller Generational Trends study.

In fact, Millennials represented 32% of all homebuyers. Generation X (ages 35 to 49) was next at 27%, followed by Baby Boomers (ages 50 to 68) at 31%, and the Silent Generation (ages 69 to 89) at 10%.

In addition, NAR reports that over 80% of Millennials and Gen X buyers consider a home purchase a good financial investment. This and the desire to own their own home are the top reasons Millennials give for buying a house.

At a median age of 29 and median income of $76,900, how can younger buyers afford a home? In addition to establishing and maintaining good credit, saving for a down payment is an important step toward home ownership.

The first question is “how much should we save?” A 20% down payment will increase a buyer’s chances of qualifying for a home loan. However, other programs like FHA loans require lower down payments, making getting into a home more affordable.

Next, you need to determine how much you need to save. If you are considering homes in the $300,000 range, you’ll need to save $60,000 for a 20% down payment. Now onto the saving part. Here are 7 ways to help you achieve your dream of home ownership:

  1. Establish a budget. Once you know how much you need to save, you need to establish a budget to determine your approximate timeline. For example, if you want to own a home in two years and need to save $60,000, you’ll need to save $2,500 a month. If you are OK waiting for three years, you’ll need to save $1,666 a month. Now write down your net income after taxes. Subtract all of your fixed costs like rent, student loans, car payments, etc. and then your variable costs like groceries, gas, etc.
  1. Reduce expenses. Now that you’ve got your budget, look at where you can back on expenses. Start with small items that you won’t miss. For example, cut back your weekly pizza night to once or twice a month, take your lunch to work, and make your own lattes at home. Instead of going to the movies every month, subscribe to Netflix or Amazon Prime.
  1. Increase your income. You don’t want to make a major job change before buying a home, but you can increase your income with a temporary, part-time job, doing freelance work for friends, selling unwanted items online, or opening an Etsy store to sell your art or other handmade items to others. Think about what talents and treasures you have that you can turn into cash.
  1. Downsize your current housing. Rent is probably your highest monthly expenditure. Find a way to cut that cost by moving to a smaller space or a more affordable neighborhood. You might also consider getting a roommate to share expenses, or moving in with your to save on living costs.
  1. Create an automatic savings plan. Once you’ve decided how much you need to save, have your employer automatically deduct $XXX from your paycheck, putting it directly into your savings or money market account. This will reduce the temptation to spend.
  1. Save your change. Saving leftover coins in a change jar won’t make a significant dent in your down payment, but it can get you in the habit of saving something and it will add up over time. It is also money you won’t miss.
  1. Tap into your IRA. If you have an IRA, you can get a one-time, penalty-free distribution per person of $10,000 for your first home purchase, says Betterment. If you are withdrawing from a traditional IRA, you’ll be taxed on the money at year-end. If you are withdrawing from a Roth IRA, you have already been taxed. Consult your tax advisor to explore this option.

9 Tips to Keep Your Budget and Credit Score on Track This Holiday Season

9 Tips to Keep Your Budget and Credit Score on Track This Holiday SeasonWith so many people on your gift list, it’s easy to get carried away with holiday shopping. However, overspending can negatively impact your credit score, which can affect your home buying ability, if you’re not careful. Here are some tips to keep your budget and credit score on track this holiday season:

  1. Set a budget. Before you hit the mall – or your favorite online stores – decide what your budget is for each person on your list. Choose gifts within that price limit before you ever go shopping, and commit to staying within that pre-set limit. Being sensible now will give you more financial power later.
  2. Pay with cash instead of credit or debit cards. It is easy to overspend using credit or debit cards because you aren’t seeing the money that goes in and out of your accounts. It is also easy to exceed your budget this way, promising yourself you will pay off the bills after the New Year. You don’t want to use more than 30% of your total credit limit, so maxing out your cards is a bad idea. Paying with cash will help you stay within your budget.
  3. Skip the gift exchange this year. Most of us find our budgets stretched to the limit during the holidays. Talk to friends and family with whom you normally exchange gifts and agree to skip the gifts this year or maybe just buy gifts for the kids. Instead, you can do a white elephant exchange, make homemade treats for each other, or exchange services like babysitting or cooking lessons. You’ll be surprised how many people will be grateful for the suggestion, and it’s fun to see how creative people can be.
  4. Be vigilant about identity theft and credit card fraud. If you’re doing online shopping, make sure you are on a secure site and a secure WiFi network, like your home network. Never make online purchases or access your credit or bank accounts online using public WiFi, and check your bank and credit card statements every few days so you can catch any unauthorized purchases immediately. If you suspect identity theft or credit card fraud, contact your card issuer and bank right away. It is a good idea to let the credit bureaus know too.
  5. Shop online cautiously. If shopping online, pay with PayPal to make sure your information is secure, and not shared with the seller. Does a price seem too good to be true? It just might be. Don’t go just by a site’s product photos. Look at the product details and dimensions, and look at customer reviews. If something seems a bit off, it just might be. Shop elsewhere.
  6. Don’t spend your whole holiday bonus on gifts. If you are lucky enough to get a Christmas or year-end bonus, don’t spend the whole thing on gifts. Buy you or your family a fun treat or reward, and save the rest for a down payment on your next house, the kitchen remodel you’ve always wanted, or to give yourself a financial cushion for emergencies.
  7. Don’t load up a low-limit card. The closer your balance is to the limit, the lower your credit score will be. You’re better off getting a higher limit card and spending less on that to pay it off. Remember, the benchmark is spending no more than 30% of your total credit limit on all cards and credit lines.
  8. Avoid opening a ton of store loyalty credit cards. We’re talking about cards like the Target Red Card or Alaska Airlines’ credit card. Every time you apply for credit, your score will get dinged a little. The more often you apply for these cards, the more your credit score will go down. The savings in store or the cash back rewards may seem worth it, but lowering your credit score isn’t.
  9. Don’t close your credit card accounts. It may be tempting, because you think you’ll save money in the long run, but you won’t. This will take credit away from the calculation used when seeing how much credit you utilize. If you need to limit your spending, put your credit card in a safety deposit box or a safe at home. That way it is available for emergencies, but it isn’t in your wallet for easy spending.

It is easy to get caught up in the spirit of the season and to spoil your loved ones with gifts. You can still spoil them, but do so in a way that fits within your budget. This will allow you to enjoy the holidays while also achieving your long-term financial goals – like buying a house. Happy Holidays!

 

6 Costly Mistakes to Avoid When Buying a Home

house-and-magnifying-glassWhether it is your first home or your third one, you don’t want to make costly mistakes when buying a home. Here are six mistakes that you can avoid with a little time, effort and knowledge:

  1. Not checking your credit score. If you don’t know to expect with your credit history, it’s likely that buyers and lenders may not take you seriously. Looking at listings and pre-planning is fine, but you need your credit score to provide accurate information about your credit history. Review your score a few months before you’re ready to start shopping for a home. This gives you time to ensure everything is accurate and to dispute mistakes. As an added bonus, if you have a high credit score, the pre-approval process will be easier, and you’re likely to get a lower interest rate.
  2. Forgetting about hidden costs. Sure, you’ve budgeted for your mortgage payments and your monthly bills (e.g., utilities, insurance, etc.), but don’t forget about property taxes, homeowner’s association fees, closing and moving costs. These could set you further back if you’re not prepared. You can learn more about closing costs here.
  3. Creating a long-term budget. Budgeting is critical when buying a house. You should think about what you can afford on a monthly basis for the length of the mortgage with a focus on the here and now. No more than a third of your monthly income should go toward housing expenses. If the house you’re considering will cause you to go over that, work with your Realtor to find something that’s closer to your price range. Bottom line: If you can’t afford it now, it won’t matter if you will be able to afford it five to 10 years from now.
  4. Not working with trained professionals. Some people choose their real estate agent blindly, and that works to their disadvantage. Ask for referrals, do some research, and make an appointment to interview a couple of Realtors. Look for someone who has your best interests in mind, and is willing to work with you and your budget to find a home perfect for you. Ideally, choose someone who has been in the real estate business for a while, is familiar with the community where you wish to live, and listens to your wants and needs.
  5. Falling in love with a home before someone inspects it. You may have found your dream home, but sometimes even dream homes have hidden flaws. Before you get your heart set on a home, have someone thoroughly inspect it. This could possibly save you additional time and money, and you’ll know if a house is going to be more work than it’s worth. Find an inspector that is independent from the real estate broker you choose to avoid a conflict of interest.
  6. Failing to research. You may love a home but not the neighborhood. Research the area to make sure it will be a good fit for you. If you want to live in an area with good schools, research before you look at homes. Look into the resale value of your home. If you decide to sell it later on, will you be losing money should you try to sell it?

Talk to all your Realtor about all of these potential pitfalls, and she’ll be able to help you avoid them.

8 Tips for First-Time Homebuyers

8 tips for first-time homebuyersTired of apartment living? Have a growing family? Want a space you can call your own? Buying your first home can be complicated, but these tips will make buying your first home easy-breezy.

  1. Know how much home you can afford. Look at your average monthly budget and see what you can spend on your mortgage comfortably. Find a home that fits in your budget, but that also has the features most important to you. Skip the upgrades if they don’t fit in your budget, and ask your Realtor® to tell you what closing costs to expect.
  2. Know what you need and want in a home. If you need lots of space, make that a priority. If you love cooking, make sure a well-equipped, modern kitchen is a must have. Make sure you also include neighborhood, schooling, and commute in your list of priorities as well.
  3. Get pre-approved for a loan. This will also help you figure out how much you can afford and make things less scary when trying to figure out which houses are not only in your budget, but also in your priorities list.
  4. Explore your mortgage options. Are you a person who never plans to buy another home, and are only interested in a fixed-rate mortgage? Do you want to use this as a starter home and have an adjustable rate mortgage? Compare different banks and home loan options, and don’t be afraid to do your homework. Need a referral? Your Realtor® will be able to help.
  5. Find the right Realtor®. You need someone you not only trust, but like to work with. You want quality advice when you need it. Ask friends and family who they have worked with, and if they had a good experience. This won’t work if you’re moving to a new city, however. Ask potential agents how many homes they’ve sold in your target area or what certifications they have. You can also look for testimonials for Realtors® in the area where you’re moving.
  6. Understand the offer process. So you’ve found a house. Know how long the house has been on the market, how the asking price compares to different homes in the area, and how comparable other properties are. Negotiation is normally inevitable, so make sure to leave a little leeway. Make sure your offer also includes other factors like financing and property inspections, and be aware of any deal breakers (e.g., cracked foundation, a roof that needs to be replaced, etc.) before you make an offer.
  7. Get a home inspection. This will tell you if there are any problems with the home that you weren’t aware of when you made the offer. Know what’s inside the walls, underneath the floors, if the roof leaks or there is flood damage. You’ll be happy you did. Check with local associations to find a reputable inspector or ask your Realtor® for a recommendation.
  8. Know what you’re signing before you sign. Ask for draft copies of anything you are supposed to sign before the closing date. This will help you figure out what you’re signing. If you don’t understand something, don’t be afraid to ask someone in your network of contacts to explain.

Still have questions? Ask an experienced local Realtor® what you need to know before buying your first home.