Guide For First-Time Homebuyers

Buying a home is quite an investment. In fact, it could be the biggest investment of your life. Well, that and investing in a child (also very costly). For this reason, investing some time in your housing investment is, er, a good investment to make! Yes, we want a housing option without gangsters playing craps on the corner, an amazing pizzeria practically in the building, and maybe a house in a good school district, too (because ya never do know!) But what about the financial and economic aspects to your housing considerations? If you haven’t thought about this side of the die, then you are doing yourself a tremendous disservice further down the line. So, think ahead!

Up your credit score

The higher your credit score is, the better chance you have of getting a good deal, such as one with a decent mortgage that doesn’t come with sizable fees, penalties and high down payments. Barry Zigas, who is the director of housing policy for the Consumer Federation of America, recommends keeping your credit score at, or above, 700. But a credit score of 750 or above will receive the best treatment from the housing market.

There are a number of things that you can do to fix up your credit score. First off, knowing what your credit score even is might help. You don’t want to go into a housing gun fight without knowing what kind of credit gun you’re working with, right? (That was a horrible metaphor.) You can request a free copy of your credit score here. Other than that, there are deliberate actions you can take to improve your credit score today.

What actually is in the cards?

What’s really being realistic, here? Don’t put a down-payment on a house that would cost you, in one payment, what you make in an entire year. Sit down and figure out what you can, and what you cannot, afford to buy. Actually, if you’re using an FHA loan, then you cannot exceed 31 percent of your monthly income to make a monthly payment on a house. And for regular loans, it can’t be more than 28 percent. That is the disqualifying line. So there are some barriers in place to prevent you from making silly financial blunders. However, crunching those numbers anyway might still be a good idea. Here’s a cool calculator that helps you figure out if you can afford to buy Beyonce’s beach house in the Hamptons or not (probably not)!

Down payments/ closing costs

In order to pay your down payment, you will need between 3 and 20 percent of the entire housing cost. This depends on that aforementioned credit history of yours (hopefully you’ve been building it up since we talked about it) and also the terms of your loans. Some FHA loans require down payments as low as 3.5 percent (with a credit score of 580 or higher). The VA (Department of Veteran Affairs) requires zero down payment.

If you are a first-time homebuyer, be sure to check out Freddie Mac’s HomeOne mortgage (only for first-time homebuyers). It has a down payment of 3 percent and will be available at the end of July this year. The definition for a first-time homebuyer here actually is broad enough to include those who have not bought a home for three years (for some reason…) so be sure to make a note if that includes you. Those who Freddie Mac lends to will have to conduct a “risk assessment” from the Freddie Mac Loan Product Advisor, which will examine such things as the potential recipient’s credit profile, an appraisal of the property and an estimation of their capacity to pay back the loan.

The latest survey from Bankrate shows that the average for closing costs for a $200,000 mortgage is $2,084. You can see the average closing costs in each state with Bankrate’s closing costs map.

Savings accounts

As nobody should have to tell you, saving money is very important. And that goes not just for saving for a house, but, well, everything. Most of us aren’t very good at it. But it is vital! If you don’t even know what where or how to use a savings account, then you took a wrong turn somewhere and you need to circle back and figure that one out.

Not that lenders will always check for this, but if you do happen to be able to pay five months’ worth of mortgage payments ahead of time, it is a great weight off of their minds. It shows that you aren’t just living by stealing food off of restaurant tables while patrons aren’t looking — not hand-to-mouth.

Lenders will often give you more leeway if you have some cash handy as a safety net for yourself. It is also important to have money for emergency repairs on your house, and things like that. If you buy a $250,000 home, aim to save $520 to $625 per month. It’s about 3 percent of $250,000, and a good rule of thumb.

You also can check out a few money-saving apps here.

Mortgages

Before you get to looking at houses, make sure all the financial difficulties are squared away. That means, mainly, a mortgage pre-approval to help with your understanding of what’s affordable for you. Again, here Bankrate comes to the rescue with their handy calculator.

Takeaway

Buying a house can be a stressful experience. Such a commitment! But, like most financial decisions, the more you know the less stress you have — even when it comes to knowing what you can’t afford and how much money you don’t have. Get prepared, and tackle the housing market one house (that you cannot afford) at a time. You’ll find a perfect fit eventually!

 

Have something to add to this story? Comment below or join the discussion on Facebook.

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Learning Is A Skill That Can Be Improved

Typically, when we think of skills, we think of writing, basketball, woodworking, or, you know, other things of that nature. We don’t usually think of learning itself to be a skill that can be improved. But that is not what the studies bear out. Apparently, one can learn to learn to learn better (was that too many learns? Probably.) Seriously though, if we put our minds to it, we can get better at putting our minds to it!

What do you mean, “learning is a skill?”

Most people think of learning as an innate gift from the gods above. Or as some immutable measure that can neither be changed, improved, decreased or in any way shape or form tampered with. But learning is more of a muscle than an inherent trait. If you don’t use it, then it gets harder to learn. That is the sad news. The good news is that you can train it by getting on the proverbial treadmill, lifting some proverbial weights, and not checking yourself out in the proverbial mirror the whole time. Stay focused on your training! What this means is that you can learn to improve your learning, which will, of course, improve your ability to educate yourself in all your aspirations that require the acquisition of a new skill or a body of knowledge.

Studies, like this one, are now showing that learners are made, not born. The development of expertise through efficient and effective methodologies is a learned skill, not a “ya got it or ya don’t get it” type deal. We can all get better at getting better (I won’t make that joke a third time. I promise). In the linked-to study above, the researcher found that focusing on how we understand is about 15 percentage points more important than one’s innate intelligence.

How are your project management skills going?

You can’t learn without being able to manage your time and your projects effectively. At least, that is what the studies show. Those who learned better were almost always better organized than those who learned at a slower pace. Setting down goals, and strategies for attaining those goals, will help us to better walk the path. Think about it this way: It is easier to drive along a road that has been built ahead of time.

It’s called a targeted approach, and it is almost always better than approaching your learning willy-nilly (which is an old-timey way of saying “I literally have no idea what to do first or next”). Stanford psychologist Alberta Bandura said that, when it comes to planning, it robs us of the opportunity to unproductively self-carp. Because you have a plan and guidelines, your mind is more engaged and less free to roam.

“Negative emotions can quickly rob us of our ability to learn something new,” Bandura said. “ Plus, we’re more committed if we develop a plan with clear objectives.”

By setting targets, people can manage their feelings more effectively, more easily and achieve progress through their ability to learn new information.

It’s called “metacognition”

Metacognition, aside from just being a really cool word, is all about your reflection time. In other words “thinking about thinking.” And, according to studies, it is a crucial part of the process of learning. Or, at least, it is a crucial part of the process of learning well. It’s a matter of asking ourselves questions like: Do I really get this idea? Could I explain it to a friend? What are my goals? Do I need more background knowledge? Do I need more practice?

When it comes to learning, one of the biggest issues is that people don’t engage in metacognition enough. They don’t stop to ask themselves if they really get a skill or concept. Studies have shown that most experts, in most fields (in addition to their own fields), are experts in metacognition. And so the correlation between success, metacognition and learning is quite well substantiated.

Remember those “shower moments?”

Sometimes we need to let go of our learning to really latch onto it! Although it may sound like a contradiction or a bit counter-intuitive, think about how many times you’ve agonized over the recovery of a memory, only to regain it when you weren’t trying to think about it ad infinitum? It happens. Another good example is the ah-hah moments people mention that they had in the shower (do you say “ah hah” aloud? … I say “ah hah” aloud.).

In short, learning benefits from reflection. Find some peace. Find some calm. Step away from the drama of the work and implement concentrated, and restrained, moments of peace. It doesn’t mean 13 hours of television time. But it might mean an hour of meditation, or any small segment of time that is occupied by doing something soothing and tension-releasing. Experts say that it often takes a bit of cognitive quiet, or a moment of silent introspection, for us to engage in any sort of focused deliberation.

Sleep is another good example. Studies show that a good night’s sleep can reduce the need for study by about 50 percent. This is owing to the fact that these same studies estimate that during sleep, much of what we have learned is effectively synthesized.

Takeaway

Although people are always innately good or bad at certain things, at the end of the day, learning is a learned behavior. The person who aced the test or learned to put together the IKEA bed fastest doesn’t necessarily happen to be the smartest person — only the best at learning to learn. And the sooner we catch on to this idea, the sooner we can really learn … to learn … about learning.

Was that right?

 

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Guide For First-Time Homebuyers

Buying a home is quite an investment. In fact, it could be the biggest investment of your life. Well, that and investing in a child (also very costly). For this reason, investing some time in your housing investment is, er, a good investment to make! Yes, we want a housing option without gangsters playing craps on the corner, an amazing pizzeria practically in the building, and maybe a house in a good school district, too (because ya never do know!) But what about the financial and economic aspects to your housing considerations? If you haven’t thought about this side of the die, then you are doing yourself a tremendous disservice further down the line. So, think ahead!

Up your credit score

The higher your credit score is, the better chance you have of getting a good deal, such as one with a decent mortgage that doesn’t come with sizable fees, penalties and high down payments. Barry Zigas, who is the director of housing policy for the Consumer Federation of America, recommends keeping your credit score at, or above, 700. But a credit score of 750 or above will receive the best treatment from the housing market.

There are a number of things that you can do to fix up your credit score. First off, knowing what your credit score even is might help. You don’t want to go into a housing gun fight without knowing what kind of credit gun you’re working with, right? (That was a horrible metaphor.) You can request a free copy of your credit score here. Other than that, there are deliberate actions you can take to improve your credit score today.

What actually is in the cards?

What’s really being realistic, here? Don’t put a down-payment on a house that would cost you, in one payment, what you make in an entire year. Sit down and figure out what you can, and what you cannot, afford to buy. Actually, if you’re using an FHA loan, then you cannot exceed 31 percent of your monthly income to make a monthly payment on a house. And for regular loans, it can’t be more than 28 percent. That is the disqualifying line. So there are some barriers in place to prevent you from making silly financial blunders. However, crunching those numbers anyway might still be a good idea. Here’s a cool calculator that helps you figure out if you can afford to buy Beyonce’s beach house in the Hamptons or not (probably not)!

Down payments/ closing costs

In order to pay your down payment, you will need between 3 and 20 percent of the entire housing cost. This depends on that aforementioned credit history of yours (hopefully you’ve been building it up since we talked about it) and also the terms of your loans. Some FHA loans require down payments as low as 3.5 percent (with a credit score of 580 or higher). The VA (Department of Veteran Affairs) requires zero down payment.

If you are a first-time homebuyer, be sure to check out Freddie Mac’s HomeOne mortgage (only for first-time homebuyers). It has a down payment of 3 percent and will be available at the end of July this year. The definition for a first-time homebuyer here actually is broad enough to include those who have not bought a home for three years (for some reason…) so be sure to make a note if that includes you. Those who Freddie Mac lends to will have to conduct a “risk assessment” from the Freddie Mac Loan Product Advisor, which will examine such things as the potential recipient’s credit profile, an appraisal of the property and an estimation of their capacity to pay back the loan.

The latest survey from Bankrate shows that the average for closing costs for a $200,000 mortgage is $2,084. You can see the average closing costs in each state with Bankrate’s closing costs map.

Savings accounts

As nobody should have to tell you, saving money is very important. And that goes not just for saving for a house, but, well, everything. Most of us aren’t very good at it. But it is vital! If you don’t even know what where or how to use a savings account, then you took a wrong turn somewhere and you need to circle back and figure that one out.

Not that lenders will always check for this, but if you do happen to be able to pay five months’ worth of mortgage payments ahead of time, it is a great weight off of their minds. It shows that you aren’t just living by stealing food off of restaurant tables while patrons aren’t looking — not hand-to-mouth.

Lenders will often give you more leeway if you have some cash handy as a safety net for yourself. It is also important to have money for emergency repairs on your house, and things like that. If you buy a $250,000 home, aim to save $520 to $625 per month. It’s about 3 percent of $250,000, and a good rule of thumb.

You also can check out a few money-saving apps here.

Mortgages

Before you get to looking at houses, make sure all the financial difficulties are squared away. That means, mainly, a mortgage pre-approval to help with your understanding of what’s affordable for you. Again, here Bankrate comes to the rescue with their handy calculator.

Takeaway

Buying a house can be a stressful experience. Such a commitment! But, like most financial decisions, the more you know the less stress you have — even when it comes to knowing what you can’t afford and how much money you don’t have. Get prepared, and tackle the housing market one house (that you cannot afford) at a time. You’ll find a perfect fit eventually!

 

Have something to add to this story? Comment below or join the discussion on Facebook.

Header image: ShutterStock


8 Reasons To Use A Credit Card

Personal finance experts spend a lot of energy trying to prevent us from using credit cards – and with good reason. Many of us abuse them and end up in debt. But contrary to popular belief, if you can use the plastic responsibly, you’re actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum. Let’s examine why your credit card comes out on top.

Signup bonuses

Applicants with good credit scores can take advantage of credit cards with signup bonuses worth anywhere from $50 to $500. Other credit cards offer a ton of points for signing up for. And these points can be redeemed for fun stuff. This is in contrast to debit cards that usually offer little or no signup bonuses or rewards.

Rewards and points

Many credit card rewards work on a point system, where you earn up to five points per dollar spent. Often, companies will offer special three-month promo periods where spending in a certain category, like restaurants or transportation, nets you double or triple the usual points. When you reach a certain point threshold, you can redeem your points for gift cards or buy items outright from the credit card company’s online rewards catalog.

Cash back

The cash-back credit card was first popularized in the United States by Discover, and the idea was simple: Use the card and get 1 percent of your balance refunded, regardless of what you bought or where you bought it. Today, the concept has grown and matured: Some cards now offer 2, 3 or even 6 percent back on selected purchases. Some cards, like the Fidelity Rewards card, offer a higher rate of cash back (2 percent on all purchases), but only if you deposit your cash directly into a Fidelity investment account.

Frequent flyer miles

This perk predates almost all the rest. Back in the early 1980s, American Airlines, followed closely by United Airlines and US Airways (now merged with American), began offering the chance to earn frequent flyer miles via an affiliated credit card. Now, it seems like every airline offers at least one credit card.

Safety

Paying with a credit card makes it easier to avoid losses from fraud. When a thief uses your debit card, the money goes missing from your account instantly. Legitimate expenses for which you’ve scheduled online payments or mailed checks may bounce, triggering insufficient funds fees and making your creditors unhappy. Even if not your fault, these late or missed payments can also lower your credit score. It can take a while for the fraudulent transactions to be reversed and the money restored to your account while the bank investigates.

Grace period

When you make a debit card purchase, your money is gone right away. When you make a credit card purchase, your money remains in your checking account until you pay your credit card bill.

Universal acceptance

Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you’ll almost certainly have an easier time if you have a credit card. Rental car companies and hotels want customers to pay with credit cards because it makes it easier to charge customers for any damage they cause to a room or a car.

Building credit

If you have no credit or are trying to improve your credit score, using a credit card responsibly will help because credit card companies will report your payment activity to the credit bureaus. Debit card use doesn’t appear anywhere on your credit report, so it can’t help you build or improve your credit.

Takeaway

There are, of course, times when it is not wise to use a credit card. If, for example, you tend not to pay your credit card bill on time, or if you tend to overspend and indulge when you simply don’t have the money, then it might be better for you to stick with cash or debit card transactions. If these are not problems of yours, then opt for a credit card!

 

Have something to add to this story? Comment below or join the discussion on Facebook.

Header image: ShutterStock


8 Reasons To Use A Credit Card

Personal finance experts spend a lot of energy trying to prevent us from using credit cards – and with good reason. Many of us abuse them and end up in debt. But contrary to popular belief, if you can use the plastic responsibly, you’re actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum. Let’s examine why your credit card comes out on top.

Signup bonuses

Applicants with good credit scores can take advantage of credit cards with signup bonuses worth anywhere from $50 to $500. Other credit cards offer a ton of points for signing up for. And these points can be redeemed for fun stuff. This is in contrast to debit cards that usually offer little or no signup bonuses or rewards.

Rewards and points

Many credit card rewards work on a point system, where you earn up to five points per dollar spent. Often, companies will offer special three-month promo periods where spending in a certain category, like restaurants or transportation, nets you double or triple the usual points. When you reach a certain point threshold, you can redeem your points for gift cards or buy items outright from the credit card company’s online rewards catalog.

Cash back

The cash-back credit card was first popularized in the United States by Discover, and the idea was simple: Use the card and get 1 percent of your balance refunded, regardless of what you bought or where you bought it. Today, the concept has grown and matured: Some cards now offer 2, 3 or even 6 percent back on selected purchases. Some cards, like the Fidelity Rewards card, offer a higher rate of cash back (2 percent on all purchases), but only if you deposit your cash directly into a Fidelity investment account.

Frequent flyer miles

This perk predates almost all the rest. Back in the early 1980s, American Airlines, followed closely by United Airlines and US Airways (now merged with American), began offering the chance to earn frequent flyer miles via an affiliated credit card. Now, it seems like every airline offers at least one credit card.

Safety

Paying with a credit card makes it easier to avoid losses from fraud. When a thief uses your debit card, the money goes missing from your account instantly. Legitimate expenses for which you’ve scheduled online payments or mailed checks may bounce, triggering insufficient funds fees and making your creditors unhappy. Even if not your fault, these late or missed payments can also lower your credit score. It can take a while for the fraudulent transactions to be reversed and the money restored to your account while the bank investigates.

Grace period

When you make a debit card purchase, your money is gone right away. When you make a credit card purchase, your money remains in your checking account until you pay your credit card bill.

Universal acceptance

Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you’ll almost certainly have an easier time if you have a credit card. Rental car companies and hotels want customers to pay with credit cards because it makes it easier to charge customers for any damage they cause to a room or a car.

Building credit

If you have no credit or are trying to improve your credit score, using a credit card responsibly will help because credit card companies will report your payment activity to the credit bureaus. Debit card use doesn’t appear anywhere on your credit report, so it can’t help you build or improve your credit.

Takeaway

There are, of course, times when it is not wise to use a credit card. If, for example, you tend not to pay your credit card bill on time, or if you tend to overspend and indulge when you simply don’t have the money, then it might be better for you to stick with cash or debit card transactions. If these are not problems of yours, then opt for a credit card!

 

Have something to add to this story? Comment below or join the discussion on Facebook.

Header image: ShutterStock


How Much Are Millennials Making From Side Hustles?

Ah. The storied side-hustle. It has long been championed as the great and almighty sword of the fearless millennial. The quintessential, earth-shattering essence of the ’90s babies that are known so fondly as the millennialismo (or something like that at least. Let’s start using that term though). But our little side hustle is all grown up now, or so it is rumored to be by BankRate. According to a new study conducted among 1,000 Americans, aged 18 to 37, more than a half(!!!) are running occasional side hustles and earning a sizable portion of their income outside of their primary job positions.

Half!

Details from BankRate’s study

Roughly 37 percent of all Americans perform some sort of a side hustle to bring in a bit of extra cash every month. This percentage includes the 28 percent that performs their side hustles more than once a month. As for millennials, just as we all might have reasonably guessed, the side hustle is of more than average popularity with them.


The most popular of side hustles is the repair/landscaping side hustle which racks up 12 percent of millennials. A total of 9 percent goes to the babysitting gigs, while 8 percent is taken in by the online selling and reselling of goods. According to BankRate’s survey “other millennial side gigs include substitute teaching or tutoring; doing hair or makeup; earning money by finishing online surveys or completing tasks for people online; or doing freelance photography and videography.”

 

 

But … just how much are these millennials earning with their superhero side hustles, you might ask?

Well, here you have that very answer!

  • 15 percent of millennials earn more than $1,000 per month
  • 20 percent earn between $201 and $1,000 a month
  • 21 percent pull in $101 to $200 a month
  • 15 percent make between $51 to $100 per month
  • 22 percent, the largest amount of millennial respondents, say that they typically earn an extra $50 a month, if not less.

Takeaway

It is an interesting factoid (yep. factoid is a word. So is factotum although it has nothing to do with facts. Tricky, huh?) that, according to BankRate’s survey, a very good portion of the millennial generation that has side hustles — in fact, nearly 70 percent queried — say they treat their side hustle income as merely disposable cash. That’s cash they can throw around for a good time at the local bar or petting zoo (or whatever it is that they do in their free time). On the other hand, “32 percent of the millennial respondents rely on their side gigs to cover necessary living costs like housing and food.” Whether they are throwing the money in the air and igniting it with one of Elon Musk’s flamethrowers as it falls to the earth, or they are using it to buy milk and eggs, it is clear that side hustles are a big part of the United States’ working economy.

 

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Guide For First-Time Homebuyers

Buying a home is quite an investment. In fact, it could be the biggest investment of your life. Well, that and investing in a child (also very costly). For this reason, investing some time in your housing investment is, er, a good investment to make! Yes, we want a housing option without gangsters playing craps on the corner, an amazing pizzeria practically in the building, and maybe a house in a good school district, too (because ya never do know!) But what about the financial and economic aspects to your housing considerations? If you haven’t thought about this side of the die, then you are doing yourself a tremendous disservice further down the line. So, think ahead!

Up your credit score

The higher your credit score is, the better chance you have of getting a good deal, such as one with a decent mortgage that doesn’t come with sizable fees, penalties and high down payments. Barry Zigas, who is the director of housing policy for the Consumer Federation of America, recommends keeping your credit score at, or above, 700. But a credit score of 750 or above will receive the best treatment from the housing market.

There are a number of things that you can do to fix up your credit score. First off, knowing what your credit score even is might help. You don’t want to go into a housing gun fight without knowing what kind of credit gun you’re working with, right? (That was a horrible metaphor.) You can request a free copy of your credit score here. Other than that, there are deliberate actions you can take to improve your credit score today.

What actually is in the cards?

What’s really being realistic, here? Don’t put a down-payment on a house that would cost you, in one payment, what you make in an entire year. Sit down and figure out what you can, and what you cannot, afford to buy. Actually, if you’re using an FHA loan, then you cannot exceed 31 percent of your monthly income to make a monthly payment on a house. And for regular loans, it can’t be more than 28 percent. That is the disqualifying line. So there are some barriers in place to prevent you from making silly financial blunders. However, crunching those numbers anyway might still be a good idea. Here’s a cool calculator that helps you figure out if you can afford to buy Beyonce’s beach house in the Hamptons or not (probably not)!

Down payments/ closing costs

In order to pay your down payment, you will need between 3 and 20 percent of the entire housing cost. This depends on that aforementioned credit history of yours (hopefully you’ve been building it up since we talked about it) and also the terms of your loans. Some FHA loans require down payments as low as 3.5 percent (with a credit score of 580 or higher). The VA (Department of Veteran Affairs) requires zero down payment.

If you are a first-time homebuyer, be sure to check out Freddie Mac’s HomeOne mortgage (only for first-time homebuyers). It has a down payment of 3 percent and will be available at the end of July this year. The definition for a first-time homebuyer here actually is broad enough to include those who have not bought a home for three years (for some reason…) so be sure to make a note if that includes you. Those who Freddie Mac lends to will have to conduct a “risk assessment” from the Freddie Mac Loan Product Advisor, which will examine such things as the potential recipient’s credit profile, an appraisal of the property and an estimation of their capacity to pay back the loan.

The latest survey from Bankrate shows that the average for closing costs for a $200,000 mortgage is $2,084. You can see the average closing costs in each state with Bankrate’s closing costs map.

Savings accounts

As nobody should have to tell you, saving money is very important. And that goes not just for saving for a house, but, well, everything. Most of us aren’t very good at it. But it is vital! If you don’t even know what where or how to use a savings account, then you took a wrong turn somewhere and you need to circle back and figure that one out.

Not that lenders will always check for this, but if you do happen to be able to pay five months’ worth of mortgage payments ahead of time, it is a great weight off of their minds. It shows that you aren’t just living by stealing food off of restaurant tables while patrons aren’t looking — not hand-to-mouth.

Lenders will often give you more leeway if you have some cash handy as a safety net for yourself. It is also important to have money for emergency repairs on your house, and things like that. If you buy a $250,000 home, aim to save $520 to $625 per month. It’s about 3 percent of $250,000, and a good rule of thumb.

You also can check out a few money-saving apps here.

Mortgages

Before you get to looking at houses, make sure all the financial difficulties are squared away. That means, mainly, a mortgage pre-approval to help with your understanding of what’s affordable for you. Again, here Bankrate comes to the rescue with their handy calculator.

Takeaway

Buying a house can be a stressful experience. Such a commitment! But, like most financial decisions, the more you know the less stress you have — even when it comes to knowing what you can’t afford and how much money you don’t have. Get prepared, and tackle the housing market one house (that you cannot afford) at a time. You’ll find a perfect fit eventually!

 

Have something to add to this story? Comment below or join the discussion on Facebook.

Header image: ShutterStock


Things To Know About Taking Out, Or Paying Off, A Student Loan

When we graduate from college, we get three things: A diploma, usually the words “good luck,” and the burden of a five-figure student loan debt. When you go off to college — landing that beautiful acceptance letter in the mail — you don’t usually give much thought to just what saddling ourselves to debtors might mean. It is something you should consider, Although it is a decision that most — if they desire to enroll in, and attend college — cannot help but make. Here’s what you should know about student loans before you decide to take them on. And if you already have graduated and are facing the herculean trash-heap that is your debt, and are wondering how to clean it up,  then there are things to know, too.

Things to know beforehand

Federal versus private loans

When you take out a loan, in general, you will have two options to choose from: Federal or private loans. The difference between the two is in funding. The former is funded by the government while the latter is funded by individual entities such as banks and credit unions. Federal student loans come with their fair share of incentives such as fixed interest rates and the ability to restructure payments based on your income. Don’t seek out a private loan before you maximize your federal student loan options. Private loan tangling is a bit like going into the Wild West. You don’t know what the terms and conditions will be, and you don’t always know what to expect. Having said that, you have a better chance of finding lower interest rates with private loans if you do your homework.

Understand grace periods

When considering taking out a student loan, know that you will be afforded the option of waiting to make your first loan payment. Not all loans come with the same grace period, though. You’ll likely need a little time to find a job out of college and then to earn a couple of paychecks. That is where the idea of grace periods come in pretty handy. Conversely, you don’t have wait until the grace period is up to make your first payment.

Deferment and forbearance

You will also have the option, with many, if not most loans, to take breaks in payments every now and then. What this means is that — with the example of forbearance — you will be permitted to stop making loan payments completely, or have them reduced for a certain period of time. Interest will most likely still accrue during this period, however. Deferment, on the other hand, will allow you to stop making payments on both your principal and interest. This is because the government may subsidize your interest while in deferment if the loans are Federal Perkins, a Direct Subsidized Loan or a Subsidized Federal Stafford Loan. Check with your loan to see if one or both is available to you, and what the circumstances must be to qualify.

A note about the financial aid award letter

Know this: the number next to the term financial aid award is not necessarily entirely free money. In order to come up with the aid total, many colleges mix loans with grants and scholarships. Doing this makes your total aid award look bigger, but as you well know by now, loans are not gifts. They need to be repaid.

Should I even take out loans?

This one may sound like a no-brainer, but, if you are thinking about taking out a student loan, think long and think hard. If it is possible to go without (it may very well not be), then this may be the best route, even if you have to make sacrifices. More than 44 million Americans collectively hold nearly $1.5 trillion in student debt — that’s roughly one in four Americans! If you are still in school, it isn’t too late to receive scholarship assistance. Contrary to popular belief, scholarships aren’t just for incoming freshman. You can search for scholarships through sites such as Cappex.com, Fastweb.com and Scholarships.com. Before you sign on to any loan, do the math to determine how long it will take you to pay back that loan at the average salary you’re meant to make in your job, and determine whether or not you’re willing to be in debt for that amount of time.

Paying it off, if you’ve already got it

Payment methods

When it comes to repaying your loans, you may be tempted into paying them off in small amounts. While this may save you some money to go out this weekend, it will also cause you to pay significantly more interest over the years. On the other hand, if you pay larger amounts each month, you will end up spending less in interest over the life of your loan.

Refinance versus consolidation

In terms of repaying your debt, there are strategies from which you may want to choose. One of these is consolidation. Consolidation is the act of combining all of your loans into one payment with an interest rate that likely will be an average of your existing loans. It will simplify the paying-off process, although it will not necessarily reduce your debt burden. Then there is refinancing. This is when you take out a new, ideally low-interest rate, loan to pay off your existing debt. While this may sound foolish, the lower interest rate of the new loan may help you dig out of your debt faster. What you do is make a single payment per month toward your new loan. You’ll need to do a little research to determine which is best for your particular situation. (This piece can help you decide if refinancing options might be good for you, while this one talks more about debt consolidation and the pros of going that route.)

Three quick tips

Stay organized!

When you have a varied list of loans with multiple different servicers, it could be a good idea to make a list of who you owe, as well as the required minimum monthly payment (and due date), and the website you go to when you need to make a payment and view your account details. Not sure who you owe? Head over to the National Student Loan Database at nslds.ed.gov.

Don’t get scammed!

Some scammers create websites that look like they belong to, for example, the U.S. Department of Education. These sites will advertise student debt forgiveness and settlement. But they will ask for an upfront fee. Here is a way to know if the student loan you are looking at is legit or a scam.

Auto-debit your debt!

Set it and forget it, as they say. It is easiest if you just don’t have to think about it. If you have that steady job needed to repay your debts, then it is a good idea to also have that steady payment plan, too. What makes that easiest of all is if you don’t have to decide each month how much you are going to pay. Instead, just auto-debit it. In other words, a set amount will go toward paying off the debt without you manually doing it. Some lenders even offer a .25 percent reduction on your interest rate if you put your monthly payments on auto-pilot. If you do happen to be on an extremely tight budget and risk overdrawing though, then this may be a reason not to auto-debit your student loan payments. Although one way to protect against that issue is by setting calendar alerts before each payment is due to make sure that you have enough dough in your account.

Takeaway

Your life isn’t over if you are considering taking out a student loan. Plenty of us have to do such things (read: one out of four Americans!). Additionally, your life isn’t over if you have already taken out student loans and are struggling to pay them off. And knowing all that you can about your debt, or potential debt, will make the process of climbing out of your debt hole much much easier.

 

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Financial Hacks for Millennials Entering into Parenthood

Yes, having a kid is a beautiful, transformative experience that many fawn over and love (or pretend to love, at least). But there are also some major financial repercussions to having a baby. And If you don’t plan ahead, and know all that there is to know, you might find yourself vastly underprepared for the undertaking of parenthood. Here’s how to attain some financial peace of mind.

Update medical and life insurance

You’ve got 31 days, from the day your baby is born, to update medical insurance coverage. A “Confirmation of Birth” will be given to you by the hospital. You must deliver this to your insurance company. As your newborn baby will have at least seven checkups for vaccines in the first 12 months, this document is pretty vital.

It is also important to speak with a life insurance agent about getting a policy or updating an existing one. Make sure that both you and your spouse are covered on your plan, too. It’s a bit dark to think about, but it’s necessary to protect the ones you love, as well as to protect your newborn babe! On a lighter note, If you need to schedule medical procedures, think about doing so during the same deductible year as when you had your kid. Because of costs that relate to the new baby, you’ll probably reach your annual deductible. This is just one example – and a very rare one, at that – where your baby can save you thousands of dollars.

Revise budgets. Yeah. Definitely…

This cannot be stressed more highly. The increase in expenditures is going to be large. Everyone knows that. But most people don’t suspect just how large the increase will be. Thinking that diapers will be just a flash in the pan? I don’t think you realize just how many you’ll be going through. Moexpertsert recommends increasing your monthly budget, if you can, by 10 to 12 percent, especially if you don’t plan on leaning on your family and your friends too much. It’s even more true if you are having your first child. Outfitting a nursery from a name-brand store can easily cost in the thousands. With a first child, parents make large, one-time purchases such as swings, cribs, changing stations, car seats and baby toys. By the way, the national average cost of an infant in day-care is almost $11,000 per year. Just mentioning.

 

Records, records, records!

Make sure to keep all pertinent and related documents in a special safe area — generally a folder or desk drawer of some kind. What should be within this folder or desk are documents such as birth certificates, Social Security cards and immunization records. On the point of the birth certificate: There should be one copy for you and your spouse, one copy for your child when they grow up, and one for your guardian. Additionally, make sure that you’ve recorded and tracked all your bills, to make double sure that you didn’t pay more than you owed, or that you haven’t made payments twice on the same charge, or for the same procedure.

The dreaded estate *gasp*

When you have a child, you need to make sure that your will, as well as any trusts that may exist, are well reviewed and managed. Also, be sure to appoint a guardian (a guardian is somebody who has legal custody over the child as well as control over the assets left to them). Absent this guardian appointee, a court, not you, will decide where your child ends up.

Open a college savings 529 account!

Upon having a child, be sure to open up a college savings 529 account. Through this, you will be able to save for your child’s future. Funds contributed to the 529 plan account can be invested and grow tax-free and aren’t taxed when withdrawn to pay for qualified educational expenses, such as tuition. In addition, more than 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions.

In 2018, the annual gift tax exclusion amount is $15,000. Beginning in 2018, each parent and grandparent will be able to contribute up to $15,000 annually per child and exclude these contributions from gift taxes.

Takeaway

Having a kid is a big deal. And, like many big deals, they can be pretty awesome. But they are also usually time-consuming and costly, and, if you don’t get prepared ahead of time, you might find that the big awesome deal becomes a big awesome pain in the butt.

 

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