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Homeownership

4 Proven Ways to Save Money as a Renter

This post is sponsored by Fidelity Investments®. All thoughts and opinions are my own. Fidelity does not adopt, endorse or sponsor any other content on this website, including links to other third-party websites and is not responsible for any views expressed outside of this sponsored post.

Renting an apartment can be both an exciting and slightly stressful experience. Having a place of your own will grant you freedom but many financial responsibilities will be added to your plate as well.

Given the high market rent rates throughout the country, along with expenses like utilities, food, parking fees and a security deposit, many first time apartment renters are searching for a way to cut back on costs so they can avoid struggling financially.

Consider some of these money saving tips before looking for your next place.

Choose an Affordable Area

Location is very important when you’re trying to get more bang for your buck. The area that you choose to live in can significantly affect your rent. Most of the time, housing in a large city is going to be more expensive than in a small suburb.

But apartments closer to shopping malls, tourist attractions, and popular high-traffic areas of a city or suburb are going to cost more. The idea is that people who choose to live near these conveniences are willing to pay more.

Skip All the Amenities

Apartment complexes that have a gym, pool and clubhouse are nice, but if you’re trying to save money on rent, they may not be the best option. The apartments with the most amenities and luxury features will have higher rent because the tenants are expected to help pay for the extra add-ons.

If you leased an apartment at a complex that has a private gym and a hot tub, you may be paying an extra $100 in rent for luxuries you don’t often use. If you think your car will be safe parked outside of your apartment year-'round, then opt out of spending the extra $20 or $30 per month for a parking space.

It’s nice to have these things nearby but by choosing a basic apartment that has everything you need and little extras can really help you knock $200+ off your monthly rent. That will help you save $2,400 a year or more. That extra cash can go toward debt repayment or even help boost your savings.

When it comes down to it, you have to ask yourself what you value more and choose an apartment that fits your expectations in value, quality and affordability.

Get a Roommate

Living with a roommate can significantly lighten the financial burden that comes along with renting your own place for the first time. When you split the costs of rent and other bills, you’ll both save some money and you won’t be expected to pay for everything yourself.

If you choose to get a roommate, you’ll have to be okay with sharing your living space. Make sure you pick someone you can get along with and who has similar goals and values as you. Drafting up a brief agreement would be a good idea to lay out ground rules and make sure you and your roommate are on the same page. You’ll also want to make sure that both of your names are on the lease so you’ll both be equally responsible for paying the rent each month and maintaining the apartment.

Lower Your Utilities and Bills

As a renter, your landlord may cover some of the utilities like garbage and water and make a few repairs here and there, but you will likely be responsible for paying your own way as well covering your electricity, internet, gas and so on.

It’s very rare that a landlord will pay your electric bill because this utility can vary a lot based on your usage and it’s usually the most expensive bill you’ll have. Therefore, it’s important to do a quick sweep through the house before you leave for the day to make sure everything is turned off and if you have programmable thermostat, set it to automatically reduce heat or air at certain times during the day or night.

Budget

Delay turning your heat on for as long as you can during the fall and do the same with your air conditioning in the spring. Be very conscious of how often you use certain things in your home and try to conserve energy, water usage etc. You can also reduce your cable expense by opting for the most basic cable package. You can track your spending and saving using a tool like Cinch from Fidelity. With Cinch you can see your spending in one place and create a customized savings target. I can think of several times that I missed a payment because I didn't pay attention to all of my spending. Cinch helps with this.

Living on your own for the first time is full of financial challenges making it crucial that you prioritize your spending and cut expenses however you can.

Figured out the renting thing and looking to take the next step? Use this helpful tool from Fidelity to see if you should rent or buy.

Learn more about MyMoney, a website created by Fidelity Investments® to help you make sense of your personal finances. Fidelity Brokerage Services Member NYSE, SIPC.

Originally posted 2016-03-14 09:00:34.

Categories
Homeownership

5 Tips for First Time Homebuyers

Ready to buy your first home? First-time homebuyers have a few things to consider before shopping for a home. A home is one of the largest purchases that you will make in your lifetime so its important to get it right. Here are 5 tips to consider as you start your home buying  process.

Tip 1: Check your credit

Before you even search for a home, lender, or look for picture frames to place on your new walls, you must check your credit report. Incorrect information could delay your mortgage approval process and screw up your entire moving process. Head over to AnnualCreditReport.com to get a copy of each of your credit reports for free. This will give you your credit reports, but not your FICO score. Lenders sometimes make the initial decision based on your FICO score. You can get your FICO score from myFICO.com. If you’ve noticed that you have some items to clean up, take the time to do that before you start home shopping. You can contact the credit bureaus to fix any incorrect information.

Tip 2: Create a homebuyers budget

Credit score ok? Great. It’s time to figure out how much home you can afford. Even though a lender will provide an approval number for you, that number is based on your gross income. But after taxes, retirement contributions, and expenses, your net income is what’s left. That’s what you should base your expectations on. The question is not, how much home CAN I afford, but how much home, SHOULD I afford? This calculator from CNN Money assumes that with an income of $52,000 and a 20% down payment, you can probably afford a home worth $271,000.

But what if you have monthly debt in the amount of $1,000? Well, you just slashed your home dreams in half. Now you should look for a home worth $102,000. Get rid of that debt! Here’s an easy way to figure out how much home you should afford. Use the same calculator but type a monthly savings goal in the “debt” section. Want to save $800 a month? Look for a home in the $136,000 range instead. Play around with a few assumptions until you find a monthly mortgage number that looks good in your household budget.

Tip 3: Create a homeowner budget

Being a homeowner is so much more than having a mortgage payment. There are repairs and expenses beyond the monthly mortgage payment. Real estate investor Paula Pant recommends saving 1% of the purchase price for repairs and maintenance. Purchased a $200,000 home? That’s $2,000 a year in expected costs. Take this money and put it aside for that rainy day you know is coming.

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Tip 4 and 5: Shop for a lender and Shop for a home

Now it’s time to shop around for a lender. At this point, you want what is called a pre-qual letter. It’s not a full mortgage, simply an estimate of how much the lender is willing to give you based on your financial qualifications. The reason these two tips are together is that they go hand in hand. Here's why. I had the opportunity to chat with a new home counselor on a recent visit to a Beazer new home site. Beazer Homes is one of the nation’s largest homebuilders and they have a program to help make the first time home buying experience easier.

Most home builders use one in-house lender and if you decide to purchase a new home from that builder, you are locked into using that sole lender. Beazer Homes offers the Mortgage Choices program so that you can shop for your own lender. They provide a list of preferred mortgage lenders and they keep the closing process on track. If you have friends that have purchased a home, you know that the closing process can be an elaborate one. Buying a home is not as easy as choosing a model and signing the paperwork.

There are forms upon forms upon forms.

Well, you get the picture.

The preferred lenders that Beazer Homes chooses to work with must meet strict performance criteria to stay a preferred lender. That means quick approvals and on-time closings. There have local lenders and national lenders on the list and you are never locked in to using just those lenders. The don’t pay or provide any kickbacks to Beazer Homes to stay on the list but they do have to meet that criteria.

Beazer builds some of the cutest homes in the nicest locations so if you are looking for a new home, I suggest you check them out. The Mortgage Choices program is perfect for first time home buyers.

Now you’re ready to find your very own home! Do you have more questions on what you need to know before buying a home? Leave them in the comment box below.

This post was created as part of a partnership with Beazer Homes.

Originally posted 2015-06-26 06:29:39.

Categories
Homeownership

How Much Home Can I REALLY Afford? Mortgage Calculator

Are you ready to buy a house? We've previously talked about what you should save to buy a house but what if you have saved and you want to know how much your monthly payment will be? That's where a mortgage calculator comes in. There are mortgage calculators online that will estimate certain inputs for you but you might be wondering what those inputs mean.

What Makes Up a Mortgage Payment?

A mortgage payment is the payment on the loan that was borrowed from the lender. Unless you are paying cash in full, you will have to borrow the balance. You will typically borrow from a bank, but there are other ways to pay for the balance, like borrowing from a hard money lender, securing owner financing or contacting the Mafia.
Ok, I was joking on that last one, but I just wanted to make sure you were still paying attention. 🙂
Click here to find a lender in your area.
There are several components to a mortgage payment but the two basic components are principal and interest. The principal is essentially the purchase price, or borrowed amount on the home. The interest is the payment you make for borrowing the money. A loan will amortize, or pay off, over its life. The payments at the beginning of the loan term will be mostly interest but as the loan is amortized and the principal shrinks, the loan payments will be mostly principal.

Taxes and Insurance for Homes

It is absolutely essential to protect your home with insurance and so most mortgage calculators will want you to estimate the insurance payment to factor that into your mortgage payment. There is also a possibility that you will have to pay private mortgage insurance or PMI, if your down payment puts you at less than 20% equity. According to the Mortgage Insurance Companies of America, average PMI will run you about 50 to 80 dollars a month on a home priced at $159,000. You also need to remember that you will have to pay property taxes as a homeowner and that could affect your monthly payment if the mortgage payment makes prepaid tax payments.

Interest Rates and Credit

Before you even start shopping for a home, you should check your credit report and make sure that everything is accurate. There are a variety of factors that go into a bankers decision to loan to you but you don't want to get denied because there is erroneous negative information on your credit report. The mortgage interest rate that you get is directly influenced by your credit worthiness, as determined by your credit score and what's on your credit report so be sure to check it. Then, shop around for mortgage lenders to find the best rate.

Using a Mortgage Calculator

The best part of using a mortgage calculator is the ability to play around with the numbers and test different home prices, interest rates and loan terms. Now that you know what goes into the calculation, try it yourself!

Have you used a mortgage calculator to estimate your monthly payments?Compare mortgage rates in your area.


Search to compare mortgage rates in your area.

How To Qualify for a Mortgage as a Young Adult

Moving out on your own is a big deal, especially if you are purchasing your first home right out of living with your parents. Many young adults assume that you need to wait until you are in a certain age bracket in order to purchase a home, but nothing could be further from the truth. Following the steps below will help any young adult find their way through the housing market and on their way to purchasing their own home.

4 Steps to Buying a Home as a Young Adult

Get Your Credit in Order

As long as you didn’t go out and sign up for several credit cards as soon as you turned 18, then you likely don’t have much if any credit at all. Having no credit is just as bad as having bad credit. Try to sign up for one major credit card and one department store credit card. This will help show a revolving credit history.

Make an Appointment With a Lender

Meeting with a lender and discussing what you need to do to purchase a home is a great second step. They’ll be able to run your credit, let you know if you have any issues that need to be resolved, or if you can move ahead fairly quickly with obtaining a loan. Click here to find a lender in your area.

Find a Home

Once you’ve met with the lender they will give you an idea of the mortgage loan amount you’ll qualify for. A real estate agent will be a great tool in finding a home within your budget. Keep in mind that homes outside of your budget can sometimes be talked down to your budget or close.

Gather your Documents

Once you’ve found your home, had you’ll need to get your loan approved and this require important documents. You’ll need to gather any tax returns you have; if not possible your lender will discuss what else they can use. You’ll also need proof of income you have, social security card, banking information, and photo ID. Each lender is different and may require more or less documents; this should be discussed with you your initial visit.

Once all 4 steps are completed you shouldn’t have to wait too long before your new home is yours and a set of keys is being handed to you. Be sure to shop around to different lenders before settling on one, each one specializes in something different and you may be eligible for programs that help with down payments, closing costs or reduce the interest rate on your home loan. Compare mortgage rates in your area.

Originally posted 2011-11-08 10:00:52.

Categories
Homeownership

How to Buy a Home without Draining Your Bank Account

This post was created in partnership with the National Association of Realtors.

Thinking of draining your bank account to buy a home? There are more expenses likely to arise after purchasing a home. A recent report by Home Advisor shows that homeowners spend an average of $10,182 per year on repairs and maintenance. That number includes both minor repairs like replacing a shower head; and major repairs like the average cost of $7,000 to replace a roof. Unless you purchase a brand new home, repairs are highly likely and they have an expected timeline. For example, according to Energy.gov, storage water heaters only last 10-15 years and a central air unit lasts about 15-20 years. However, even if you purchase a new home, a regular maintenance schedule can help delay larger repairs.

Unexpected and Expected Expenses

With this in mind, within the first few months of moving in, it is possible that you will have to spend on expected or unexpected repairs or maintenance. Therefore, it is important to have funds in your bank account to cover these expenses.

No emergency funds? Some states have programs that provide grants for emergency repair. For example, the Tennessee Housing Development Agency has an Emergency Repair Program. However, in order to qualify, the homeowner must be older than the age of 60 or disabled. So a program like this may not be a fit for you.

Another option, if you don’t have funds on hand is to use your credit cards.

However, using unsecured debt, like a credit card, to cover repairs for a property linked to secured debt, a mortgage, is not advisable. This is primarily because credit cards often come with higher interest rates than a home equity line of credit,

A home equity line of credit (HELOC) is another option, but it is additional debt that can take months to pay off.

You should not only expect these home repair and regular maintenance expenses, but plan for them as well. That means setting aside a home repair savings fund.

A Bank Account Strategy to Cover Expected Expenses

Instead of draining your bank account to purchase a home, create a strategy to cover the mortgage as well as those expected repairs and maintenance.

When purchasing a new home, a good rule of thumb is to put aside around 4% of the purchase price set aside as a home repair fund.

For a mortgage of $100,000, that would equal $4,000 in the bank.

If you purchase a newer home, those funds can be earmarked for regular maintenance.

If you plan to purchase a home that is a bit older, ask about the expected life span for the roof, a/c unit, and the water heater. These are 3 of the costliest repairs.

Then, take the expected cost to replace each and divide that number by the number of years of useful life remaining.

For example, a roof with 4 years of expected life remaining divided into the average cost of $7,000 would mean an annual savings of $1,750. Divided by 12 months in the year, that would equal a set aside of $145.83 per month.

How Much Home Can I Really Afford?

In order to buy a home without draining your bank account, it is important to factor in not only the purchase price of the home, but also consider the those expenses that come with owning a property.

Start with your monthly expenses and debt. Then look at your income so you can calculate your debt to income (DTI) ratio.

Lenders typically look for a DTI under 43%. To calculate this number, add all of your bills including utilities, debt payments, and current rent, etc. Then, to factor in your expected home expenses, add 4% of the expected home price to your current monthly expenses and divide that number by your monthly gross income.

Here’s an example.

Monthly expenses = $3,500

4% of 150,000 home = $500 per month

Total monthly expenses = $4,000

 

If your monthly gross income is 120,000

 

Take 120,000 * 43% = 51,600

Then, divided by 12 months = $4,300 per month

 

If your monthly gross income is 100,000

 

Take 100,000 * 43% = 43,000

Then, divided by 12 months = $3,583 per month

 

To purchase a home worth $150,000 and still have a home maintenance and repair fund, your total monthly expenses including your mortgage should not exceed $4,000.

In the second example, a home of $150,000 could potentially cause financial stress.

Think ahead to factor in expected home repairs and expenses before purchasing your home. While you may think that you can avoid setting funds aside when purchasing a new home, there is still suggested maintenance that would require funds.

And if you purchase an older home, determine what repairs or expenses are likely to occur. Either way, a good rule of thumb is to put aside 4% of the home’s value in case of emergencies or expected repairs.

Originally posted 2017-07-17 10:00:02.

Categories
Homeownership

How to Choose a Neighborhood

This post was created in partnership with the National Association of Realtors.

Location is everything when you’re searching for a home. Finding your dream neighborhood may seem like the easiest part, but once you factor in budget, non-negotiable home features, and proximity to the things you can’t live without, it may be less obvious where you should live.

Property Taxes

Property taxes can play a huge role in your overall cost of living. To get a sense of what your property taxes might look like in a particular county, check out this simple property tax map. Also, property taxes for specific homes are typically included in online property listings.

What to consider: How much will my property taxes be?

Safety and Crime

Before you sign on the dotted line, search sites like City-Data.com and CrimeReportsto get a sense of the safety level of a particular neighborhood. As with all homebuying decisions, determining what level of crime you feel safe with is all part of the process of choosing a neighborhood.

Your real estate agent can guide you to various resources to help you answer questions about the neighborhood, but can’t voice an opinion about it per the Fair Housing Act. The act aims to provide equal access to housing for all groups of people and to protect against discrimination.

What to consider:

  • What is the crime rate in this particular neighborhood? How about the neighborhood next door?
  • What level of crime do I feel comfortable with? 

Topography and Geography

Land geography can play a role in costs — especially if you’re overlooking a scenic vista or you’re right by the water. On the flipside, look out for flood zones or other danger-prone areas when making a decision.

What to consider: 

  • Do I need special insurance in addition to homeowners insurance?
  • Is this property in a flood zone?

Property Value

If there have been some sales recently, then you can get a better idea of the potential value of the homes in the neighborhood. Typically, homes of the same type in the same location will sell within a few thousand dollars of each other. When looking at homes, your agent will pull listings of comparable properties, or comps, to see what other similar homes sold for so you can see if the home you’re interested in is priced correctly.

Question(s) to ask:

  • What are the comps in this area?
  • What’s the projected growth rate for this area?

School Zones

School zones come to mind when thinking of location, especially if you have children (or plan to have them soon), as they tend to affect home values. If schools are important to you, evaluate the schools in your neighborhood and which homes fall into which district. Additionally, there may be community centers or parks that increase the value of the neighborhood.

What to consider:

  • What school would my child attend if we moved here?
  • Are there parks or community centers in this area?

Using these factors as a guide for finding the right neighborhood can help you evaluate what you care about and make the decision that’s right for you.

Originally posted 2017-07-06 08:00:56.

Categories
Homeownership

The 4 Most Important People to Know When Homebuying

This post was created in partnership with the National Association of Realtors.
How do I get approved for a loan? Who will help me find the right home? Who can help me? Don’t panic! Here are the top four people you need to know when it comes to buying a home.

1. The Person Who Approves the Loan

One of the first people you’ll need to work with is a loan officer or lender. This is the person who helps you understand the ins and outs of getting a loan, as well as any requirements or conditions.

Before speaking with the loan officer, however, you may want to estimate what a monthly mortgage payment may look like, which you can do with a simple mortgage calculator. Your monthly payment will include homeowners insurance, property taxes paid into an escrow account, and, if you put down less than 20%, PMI or private mortgage insurance.

Remember: The bank will provide an initial number of what it thinks you can afford based on your gross monthly income. But it’s up to you to account for your own personal budget and living expenses.

Once you’ve spoken with the lender, it’s worthwhile to get a preapproval letter, which shows how much the bank would be willing to lend you based on your full financial picture. Without this letter, most sellers won’t take you seriously and may not even accept your offer.

2. Next Up: The Person Who Finds the Home

A real estate agent is usually the first person that most people speak to during the homebuying process. Before my husband and I moved to Tennessee, we contacted an agent who specializes in out-of-state relocations. She did an excellent job of searching for properties in Memphis that met our needs and even suggested a few that we wouldn’t otherwise have considered.

When you begin your home search, you might start with an online search. While these property listing sites provide formatted data on available properties, a REALTOR® will have access to the latest information and can provide any updates or correct misinformation found online.

A REALTOR® can work on your behalf or on behalf of the seller. When you’re buying a home, it’s important to work with a buyer’s agent, whose responsibility is to you, not the seller.

You should ask the agent all the questions that are important to you — how much other homes in the area recently sold for, how long those homes were on the market, and any other questions that might help you make an informed decision.

While we were searching for a home, we really wanted to get a sense for what types of events are held in the city as well as activities around the area, all the things that the REALTOR® had a great sense for.

3. Don’t Forget: The Person Who Inspects the Home

Once you have found a home, made an offer, and signed the contract to buy, it’s time to hire a home inspector. The contract will specify how many days you have to get the inspection. The home inspector will come to check things like structural integrity, plumbing, electrical systems, heating and cooling, the condition of windows, walls, door frames, ceilings, the attic — basically anything that can be seen without going into walls.

4. The Last Stop: The Person Who Checks Ownership of the Home

The title officer or title company checks the ownership of the home to make sure there are no potential disputes with previous owners, and, ultimately, will issue title insurance for the property. This insurance protects you and the lender if there are claims or lawsuits against your ownership of the property.

Each person has a distinct role in the homebuying process and being informed about exactly what you need from them helps make the process run smoothly. The key is patience — it’s all worth it when you get the new keys to your home!

Originally posted 2017-06-26 08:00:38.