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Saving for a Downpayment

Is it time to buy?

With interest rates down and inventory up, there’s little doubt that you’re probably  taking a good, long look at investing in a home of your own as many others are doing. Home ownership brings many benefits so if the only thing keeping you back is a down payment, then today is the day you can get started!

It’s not always easy to save the necessary funds  just get into a house of your own. Here are some simple things you can put into your action plan for saving that down payment money in less time.

Set a Deadline

Setting a deadline can be a powerful motivator to accomplishing great goals, and buying a home is a pretty big goal! So pick a date – one year from today, three years from today, maybe on your 30th birthday. Once you know where you are, it will make setting a timeline easier.

Pay off Debt

If you have any outstanding debt – college loans, credit cards – then your first step is to pay down or pay off as much as you can. Not only will this repair your credit score, but it will also let you save even more money for your downpayment. Take the highest interest rate one first, get it paid off, and then get to work on the next one.

How much do you need?

The bigger your downpayment, the smaller your monthly payment will be. This is a great time to sit down with a mortgage loan officer and with a real estate professional to determine your needs and wants. They’ll help you figure out how much house you can afford and what kind of mortgage you qualify for. Different types of mortgages require different downpayments, and this isn’t a step you can skip.

 money in a jarCreate a “Down Payment” account

Ever see those little ceramic pots with “House Fund” or “Vacation Fund” on them, or the piggy banks with the “do not open ‘till holiday shopping time” labels? By opening a savings account just for your future home purchase, you help lessen the likelihood of tapping into that money for other things. Check with your bank or even local credit unions to see if they offer any special interest rates or programs for first time home owners looking to buy.

Automate your savings

You may have heard the expression “Pay Yourself First.” Money you put into your down payment account is money you’re paying yourself, before you buy your morning coffee or hit the mall. Once you’ve figured out how much you can sock away every month, have that amount automatically withdrawn from your account and put into savings before you even see your paycheck! Most employers can do this in a simple step if you are direct depositing your paychecks. Out of sight, out of spending reach.

 Ask about IRAs

If you have IRAs, check to see if yours has any first time home buyer credits. Some will allow you to invest a considerable amount of pre-tax dollars and withdraw without penalty for home purchases and they often provide more return on your investment than a traditional savings account. Check with your IRA provider or financial advisor first.

 Every little bit counts

This is the fun part. Get a money container for your house. You can make it as decorative or as plain as you like. Use anything from a beautiful glass jar (where you can see your results) to a coffee can (where you can hide your treasure). Make a pact with yourself, your spouse or significant other, and even your kids. Each week, put whatever you can in the jar towards your house fund. From leftover change from the store to a couple of dollars here or there – into the jar it goes. In fact, whatever you’d normally spend, save instead, such as forgoing the coffee house vente latte at $6 a pop every day – that would be $42 a week you could put in your jar. Or pack a lunch instead of buying. You could save $5-$10 or more a day.  Make it a fun thing every day and at the end of the week to count up your accomplishment, put it in an envelope with a deposit slip, and put it in your savings. It’s amazing how fast it can add up when you make it a contest or a fun thing for the whole family!

Everything worth having is worth working for.

Saving for a home of your own can be challenging, but it can be exciting too. The feeling of reward and accomplishment is extraordinary. Start with these steps and very soon you too can enjoy the long term benefits of setting down roots and investing in your future.

What’s a Credit Score?

Credit scores measure the risk of defaulting on a loan. When you apply for a mortgage, the mortgage company will measure how likely you are to default based on established criteria and then make a decision if they think you’re worth the risk. Here are the 7 factors that affect your score:File:Credit-cards.jpg

  1. Loan repayment behavior –  Have you paid back loans on time, or have you made late payments or missed payments.
  2. Credit score inquiries or requests for credit – When you check your credit, counter-intuitively, your credit score goes down. Applying for a loan also reduces your credit score. Save those inquiries and loan applications for when you need it.
  3. Delinquency – If you’ve defaulted on a loan, your credit score will drop.
  4. Length of established credit – If you’ve never had a credit card or a loan before, you is less likely to have a high credit score. Having a credit card, and paying the balance every month, boosts your credit score a little bit each year.
  5. Composition of credit – Revolving debt, such as with credit cards, affects your credit score differently than a loan that you pay back in installments. A variety of types of cards will benefit your credit score.
  6. Quantity of credit already available – The more you can borrow, the higher your credit score.
  7. Amount of outstanding loans – If you already have debt, you’re less likely to qualify for more debt.

The most widely used credit score in the United States is the FICO score. FICO is named for the Fair Isaac Corporation.

The FICO score is calculated according to the following categories:

  •  Payment history                35%
  • Amounts owed                   30%File:Credit-score-chart.svg
  • Length of credit history       15%
  • New credit                         10%
  • Types of credit in use          10%

FICO scores range from 300 to 850.

For more information on mortgages and credit:

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Mortgage Rates Still Dropping!

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Happy 2012!

Mythical King Janus, depicted with two heads on ancient Roman calendars, could look forward and backward and therefore became the symbol of resolutions. It’s no coincidence that January was named for King Janus.

If you’re anything like me, your New Year’s resolutions are usually the same thing – lose weight, spend more quality time with the family, blah blah. In fact, here are the top 10 New Year’s resolutions, according to USA.gov:

Quirckology.com  says that only 12% of people who make resolutions actually achieve them.  Forbes.com has these suggestions to help keep your resolutions:
  1. Choose resolutions that will make you happier – fix something negative or add something positive.
  2. Choose concrete, measurable actions to bring change.
  3. Start small. Be realistic about how much you can achieve in a small period of time and then make small consistent steps.
  4. Hold yourself accountable.  Keep a food, budget, or fitness diary if those are your goals. Join with others and help keep each other accountable. The Happiness Project is one way to connect with people traveling your same path.
And so, we wish you a joyous, prosperous, and healthy New Year and we look forward to continuing our conversations with you in 2012!

Should auld acquaintance be forgot, and never brought to mind? 
Should auld acquaintance be forgot and days of auld lang syne?

For auld lang syne, my dear, for auld lang syne, 
We’ll take a cup o’ kindness yet for auld lang syne.


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