down payment http://www.wisebread.com/taxonomy/term/3776/all en-US 8 Signs You're Paying Too Much for Your Mortgage http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youre-paying-too-much-for-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-495980844.jpg" alt="Learning signs that you&#039;re paying too much for your mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Buying a home can be a great step along the path to financial freedom, but it can also become a burden if you're not careful. A mortgage can be a heavy weight on your finances if you either buy a house you can't afford, or get locked into unfavorable loan terms.</p> <p>Here's how to tell if your mortgage is too expensive.</p> <h2>1. You Are Having Trouble Making Ends Meet</h2> <p>No matter what you do, you feel like you're struggling to get ahead financially. It always seems like there's only a small amount leftover at the end of each month to pay bills or place into savings. It could be that your house is weighing you down. If you're working too hard to get ahead with your money, it may be time to <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">refinance your mortgage</a> or move into a less expensive home.</p> <h2>2. It's Eating Up More Than 30% of Your Income</h2> <p>The federal government advises that homeowners should avoid paying more than 30% of their income on housing. The theory behind this number is that for most people, keeping payments below this level will leave them with enough to pay for other non-discretionary spending. Keep in mind that many lenders will approve prospective homeowners for a loan even if their payments would be above that 30% threshold. Lenders will often instead refer to a person's &quot;debt-to-income&quot; ratio, and will lend if that ratio is as high as 43% &mdash; and banks went even higher during the housing bubble.</p> <p>Even if you are comfortably able to make your mortgage payments, it's wise to try and get under the 30% threshold. After all, more money in your pocket means more money to take care of your other financial obligations, invest for the future, or simply enjoy life.</p> <h2>3. Your Interest Rate Is Higher Than Everyone Else's</h2> <p>It's very easy to get a fixed-rate mortgage, make the payments, and not concern yourself with how interest rates are going up and down. But you never want to be locked into a higher rate than necessary. If you bought your home more than a decade ago, chances are your interest rate is higher than what's available now. The rate on a 30-year fixed rate mortgage is a little over 4% right now. If your rate is considerably higher, look to refinance and see what you can save.</p> <h2>4. You Are Barely Making a Dent in the Loan Principal</h2> <p>You've been making mortgage payments for years, but every time you look at your account statement, it seems like the principal balance barely budges. What gives? It's normal to pay mostly interest when you first get a loan, but over time your money should increasingly go toward paying off principal. If you find that you're not paying down the loan as quickly as you want, it could be because your interest rate is too high or your term is too long (or both.)</p> <h2>5. Your Income Has Gone Up</h2> <p>When you bought your house, your interest rate was based at least partially on your household income. But if you've received multiple pay raises since, you might qualify for a lower rate. Or, you may be able to refinance into a shorter loan term, thus saving you money in interest over time.</p> <h2>6. Your Credit Score Has Improved</h2> <p>A mortgage interest rate is also partially based on a homeowner's credit score when they apply for a loan. If your credit score was mediocre back then, there's a chance you got stuck with a high rate. If you've worked hard to be financially responsible ever since, your credit score may be much higher. Thus, you may be able to refinance your mortgage into a lower rate. According to FICO, a person with a credit score of 650 might pay as much as $100 more per month on a $200,000, 30-year fixed loan than someone with a score of 800. That could add up to tens of thousands of dollars over the course of a loan. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-raise-your-credit-score-this-year?ref=seealso" target="_blank">7 Easy Ways to Raise Your Credit Score This Year</a>)</p> <h2>7. Your ARM Just Adjusted</h2> <p>During the housing bubble, many homeowners were lured into adjustable rate mortgages that offered low interest rates initially and then jumped after a certain number of years. (In 2005, these loans made up nearly 40% of the mortgage market.) Many families saw their payments increase sharply and beyond what they could afford. If you currently have an adjustable rate mortgage, make sure you are prepared to make payments once the interest rate adjusts upward. Otherwise, consider refinancing to a fixed mortgage with a low rate.</p> <h2>8. You Are Paying for Mortgage Insurance</h2> <p>Many lenders require borrowers to pay <a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway?ref=internal" target="_blank">private mortgage insurance</a> (PMI) if they put less than 20% down on a home. This is to protect the lender if a home ends up in foreclosure. Mortgage insurance essentially adds to your cost of homeownership, often to the tune of hundreds of dollars annually. This requirement goes away once your principal balance drops below 78%. Ideally, you want to avoid paying PMI altogether by putting more than 20% down. This also means you're borrowing less overall and will save money in the long run. But if you can't quite save that much up front, work aggressively toward paying off your loan so you can get rid of the PMI requirement sooner.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home">8 Times You Need to Walk Away From Your Dream Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing adjustable rate down payment fixed rate interest loans mortgage pmi private mortgage insurance saving Fri, 10 Mar 2017 10:00:23 +0000 Tim Lemke 1902766 at http://www.wisebread.com 4 Surprising Things Lenders Check Besides Your Credit Score http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-surprising-things-lenders-check-besides-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_paperwork_house_83751927.jpg" alt="Man learning things lenders check besides credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know how important your FICO credit score is to mortgage lenders. They rely on this number to gauge how well you've handled credit and paid your bills in the past. A high credit score means that you'll qualify for a low mortgage interest rate. A low score? You might not qualify for a loan at all.</p> <p>But mortgage lenders don't look only at <a href="http://www.wisebread.com/7-reasons-you-are-more-than-your-credit-score" target="_blank">your credit score</a>&nbsp;when you apply for a home loan. They also consider several other key factors &mdash; everything from your job history to the size of your down payment.</p> <p>Here is a look at four noncredit factors that lenders will be studying when you apply for a mortgage loan.</p> <h2>Debt</h2> <p>Outside of your credit score, your debt-to-income ratio is the most important number for mortgage lenders. This ratio measures the relationship between your monthly debt obligations and your gross monthly income.</p> <p>As a general rule, lenders strongly prefer your total monthly debts &mdash; including your estimated new mortgage payment &mdash; equal no more than 43% of your gross monthly income (your income before taxes).</p> <p>If your debt-to-income rises past this level, lenders won't be as willing to lend you mortgage money. They'll worry that you're already overburdened with debt, and the addition of a monthly mortgage payment will only make your financial situation worse.</p> <h2>Job History</h2> <p>Lenders prefer borrowers who have worked for the same employer, in the same position, for at least two years. Lenders believe that such workers are less likely to lose their jobs and, therefore, less likely to lose the income stream they need to pay their mortgage loan on time each month.</p> <p>But there's a lot of flexibility with this rule. For instance, if you took on a new job with your same employer in the last two years, this probably won't hurt you. Even if you moved onto a new job with a different employer in your same industry, lenders probably won't worry.</p> <p>But what if you've taken a new job in a new industry in the last two years? That might cause some concern. Lenders might worry that you'll be more likely to lose that new position. However, you can usually still qualify for a loan.</p> <p>If you've been unemployed for a significant amount of time in the last two years, that can cause more problems. Be prepared to explain to lenders why you have a gap in your work history. As long as you have a solid income now, the odds are still good that you'll be able to qualify for a home loan.</p> <h2>Savings</h2> <p>To qualify for the lowest interest rates, make sure you have enough money in savings. You'll need money to pay for your down payment, closing costs, and a certain number of months' worth of property taxes, of course.</p> <p>But lenders often require that you also have enough in savings to pay at least two months of your new mortgage payment, including whatever you're paying each month for property taxes and insurance. If your total monthly mortgage payment will be $2,000, you'll need at least $4,000 in savings in addition to whatever you'll be paying for closing costs and down payment.</p> <p>Lenders want to see that you have savings in case you suffer a temporary reduction in your monthly income. This way, you'll be able to use your savings to pay for at least a couple months of mortgage payments.</p> <h2>Down Payment</h2> <p>The size of your down payment plays a big role in the size of your mortgage interest rate. In general, the bigger your down payment, the smaller your interest rate.</p> <p>That's because lenders consider you less of a risk to default on your loan if you come up with a larger down payment. You've already invested more in your home, the theory goes, so you'll be less likely to walk away from it.</p> <p>You can qualify for mortgage loans today with a down payment of as little as 3% of your home's final purchase price, in many cases. But if you want to qualify for the lowest interest rates? Putting down 20% of your home's final purchase price &mdash; admittedly not an easy task &mdash; will increase your chances of nabbing that ultralow rate.</p> <p><em>If you're getting ready to buy a house, have you taken steps to improve these parts of your finances?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-personal-finance-calculators-everyone-should-use">15 Personal Finance Calculators Everyone Should Use</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops">Why You Shouldn&#039;t Panic If Your Credit Score Drops</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Real Estate and Housing closing costs credit history credit score debt down payment FICO score interest rates job history lenders loans mortgages savings Mon, 29 Aug 2016 10:00:09 +0000 Dan Rafter 1779806 at http://www.wisebread.com My 2016 Budget Challenge: How to Buy a House When You Live Paycheck to Paycheck http://www.wisebread.com/my-2016-budget-challenge-how-to-buy-a-house-when-you-live-paycheck-to-paycheck <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/my-2016-budget-challenge-how-to-buy-a-house-when-you-live-paycheck-to-paycheck" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_buying_house_000085206861.jpg" alt="Couple buying house while living paycheck to paycheck" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><em>[Editor's Note: This is another episode in Max Wong's journey to find an extra $31,000 this year. Read the whole series </em><a href="http://www.wisebread.com/topic/max-wongs-budget-0" target="_blank"><em>here</em></a><em>.]</em></p> <p>Living paycheck to paycheck is a nightmarish financial treadmill. No extra cash means you cannot take full advantage of small financial windfalls that come your way by compounding your savings.</p> <p>Compounding savings is a key financial skill to master. Too often, we try this or that money saver, but then we don't actually <em>bank </em>the money we save so that it can accrue interest for our benefit, or reinvest the money on skills or tools that result in even greater savings or earnings.</p> <p>When I pitched this story idea to my Wise Bread editor, he responded with this personal tale of woe:</p> <p><em>When I quit smoking, I stuffed $4 a day into a jar (because that's what that nasty habit was costing me) and kept that up for 90 days. I blew it on a big cocktail party with friends. Like an idiot, I stopped stuffing $4 a day in that jar, but if I had&hellip;Calculates&hellip;(4850 days x $4 = $19,400). Dang. I wish I hadn't done the math.</em></p> <p>Not to rub it in, but if my editor had put his cigarette money in the bank and let the interest compound, he could have saved even more than $19,400!</p> <p>I compounded my savings to crawl out of poverty when I was in my 20s and living paycheck to paycheck. At age 28, largely due to hyper-vigilant saving and strategic reinvesting on small items, I was able save the down payment on my house in Los Angeles. Here's a super simple version of how you can dramatically improve your financial future, even if you can only scrape together $100 in cash. By the way, the below case study is actually based on my real life.</p> <h2>My Five Year Plan to Buy a House Before Age 30</h2> <p>My goal was to buy a house before I turned 30. However, my first job out of college only paid $12,000. Since I could barely keep food on the table on that salary, the only reason why I had $100 in savings at the end of the year is because I dutifully recycled bottles and cans from the trash at work.</p> <p><strong>Total Savings</strong>: $100</p> <h3>Year Two</h3> <p>I use $50 from my savings to buy a used <a href="http://www.amazon.com/gp/product/B00ALM5ZFM/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B00ALM5ZFM&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=ORERZWVW6XZ5PB4V" target="_blank">soy milk maker</a> for $20 at a garage sale. Even though I spend $30 to buy a year's supply of organic soybeans, I use about five quarts of soy milk per week for cooking and drinking, so making my own soy milk saves me $10 per week. This weekly savings allows me to stretch my food budget because I now have the spare cash to bulk buy my staples when they go on sale. I save $520 on soy milk and an additional $500 on groceries for the year. I am still collecting bottles and cans&hellip;</p> <p><strong>Total Savings</strong>: $1,170</p> <h3>Year Three</h3> <p>I keep $500 in savings. Yay! I finally have an emergency fund! I spend $100 on canning jars and spend the remaining $570 on classes and tools to start keeping bees as a hobby. I make $700 off selling homemade jam and $960 from selling honey. My beekeeping hobby pays for its start-up costs in five months!</p> <p><strong>Total Savings</strong>: $3,330</p> <h3>Year Four</h3> <p>I put an additional $1,000 into my emergency fund. I spend $1,300 on computer classes. I spend $1,000 on a fancy Dutch bike to take the place of my car for commutes under five miles. Overshare: I spend $30 on a <a href="http://www.amazon.com/gp/product/B000FAG6XA/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=B000FAG6XA&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=62SGLXA5ZHGM24L4" target="_blank">menstrual cup</a> to replace tampons. My additional education allows me to get a promotion to a position that pays $40,000 per year instead of $12,000. The bike saves me $1,200 in gasoline and car costs. I save $72 in tampon costs over the course of the year.</p> <p><strong>Total Savings</strong>: $30,772</p> <h3>Year Five</h3> <p><em>I buy a house</em>! I spend $25,000 on the down payment for my house and related real estate expenses. I use $4,000 to open a Vanguard IRA. I keep $1,500 in my emergency fund. I use the remaining $222 to pay for additional beekeeping equipment that allows me to expand my honey and jam business. I make $4,000 off of honey sales.</p> <p><strong>Total Year Five Savings</strong>: $5,500</p> <h3>Year Six</h3> <p>Rinse and repeat.</p> <p>I neither invented nor perfected the idea of compounded savings. In fact, a number of financial gurus have calculated how much money could be saved in a lifetime just by giving up small purchases like fancy coffee or cigarettes. Banking small savings is such a common financial trope it even has a nickname: <a href="http://www.wisebread.com/3-reasons-why-keeping-your-latte-factor-will-help-you-save-money" target="_blank">The Latte Factor</a>. I originally learned about compounded savings from <a href="http://www.amazon.com/gp/product/0375752250/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0375752250&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=2FM2RHPKGARQJTGP" target="_blank">Amy Dacyzyn</a>. Her newsletter and books taught me that strategically reinvesting tiny sums of money in the form of tools and education would improve my bottom line exponentially. It's not enough to put your money in savings. It's much smarter to use part of your savings to reinvest in you.</p> <h2>Here Are Some Tips To Keep You on Track</h2> <p>If you'd like to try compounding your savings, here are some hard earned bits of advice &mdash; and a few caveats.</p> <h3>Do What You Love</h3> <p>This type of savings plan is a multi-year commitment to living in extreme poverty. When choosing tools and skills, it's best that your purchases are related to a moneymaking activity you love, so you can stay motivated on the job over a long period of time. For example, if you hate the great outdoors, do not buy an axe so you can start your firewood company, even if you live next to a huge stand of deadwood and can harvest firewood for free.</p> <h3>Reduce and Reuse</h3> <p>Buy reusable replacements for expendable goods or tools that allow you to make DIY versions of your favorite things. For example, replace disposable diapers with cloth diapers to save on baby costs. Or, use cleaning rags, made from worn out clothes, instead of paper towels for gross chores.</p> <h3>Make Money From Your Pastimes</h3> <p>Look for opportunities to monetize low-cost activities you already do for free. I bought canning jars because I love to make preserves and knew it would be a pleasurable way for me to make extra money. If you are a parent who already has to babysit your own kid after school, why not babysit someone else's kid at the same time for cash?</p> <h3>Set Goals</h3> <p>Most importantly, set a specific goal for your money. I really wanted to buy a house before I turned 30. I was able resist <a href="http://www.wisebread.com/is-peer-pressure-keeping-you-poor" target="_blank">the peer pressure</a> to spend money I didn't have and <a href="http://www.wisebread.com/one-simple-thing-you-can-do-today-to-start-living-frugally" target="_blank">resist the urge</a> to buy pretty much everything for almost half a decade, because I wanted a house so badly.</p> <p>Here are some other things to note about my case study.</p> <h3>My Strategy Was Conservative</h3> <p>If I were financially more sophisticated, I could have made much more in those five years by investing in the stock market or, at least, <a href="http://www.wisebread.com/10-places-to-stash-your-money-besides-a-savings-account" target="_blank">parking my money someplace other</a> than a savings account.</p> <h3>I Failed to Take Advantage of Government Services</h3> <p>I was so financially unsophisticated, that I didn't realize that my low salary made me eligible for food stamps. That extra $100 each month would have revolutionized my life. If you are living paycheck to paycheck, make sure that you are using all the benefits that are available to you.</p> <h3>That Big Promotion Really Helped</h3> <p>While it is rare to get a promotion anywhere near $28,000, it's also rare for a college graduate to accept a starting salary of $12,000. Most people who have the time to read personal finance blogs are either totally unemployed or make wages that don't put them so far below the poverty line. If I had made even $15,000 a year those first few years, that would have given me an enormous advantage &mdash; for example, I could have opened a retirement fund much earlier.</p> <h3>I Trusted Education Would Pay Off</h3> <p>Since I paid for two entire years of my life by selling items that I had trash-picked at garage sales, I seriously considered buying a used pick up truck for $1,300 instead of taking computer classes in Year Three. It was a gamble: I knew that I could make an additional $12,000 each year trash-picking with a truck and didn't know if continuing my education would amount to a raise that was equal to that. Luckily, my extra schooling paid off in a huge way.</p> <h3>I Was Lucky</h3> <p>I was fortunate that I didn't have a major health crisis during my 20s. That would have wiped out my savings.</p> <h3>I Ate Well</h3> <p>To live on $12,000 a year I had to eat a near vegetarian diet. I rarely purchased meat and my big foodie splurge was buying 2% milk for my coffee when it went on sale.</p> <h3>Rental Housing Was Cheaper Then</h3> <p>Up until I purchased my house, I had never spent more than $550 on housing. Although living on $12,000 would now be much harder to do in Los Angeles due to insanely high rents, I am replicating a lot of strategies I learned when I was saving up for my house purchase for my 2016 Budget Challenge.</p> <h2>Progress Report</h2> <p>After five months of grinding away, I feel like I've finally gotten some momentum. In the past two weeks, I have created another job to my spectrum of part-time employment opportunities: bee dealer.</p> <p>It's swarm season in Los Angeles. This sounds alarming, but really, when bees swarm they are just looking for a new place to live. I was lucky enough that three separate swarms took up residence in empty hive boxes in my backyard. When I mentioned my new popularity to the master beekeeper I am assisting, he told me that he has an orchard client that will buy bee packages from me for $150 per colony. He picked up the three boxes of bees the next day, and I made a cool $450 from free bees. The master beekeeper also showed me how to convince my bees to make extra queens so I can split my two huge hives into smaller colonies that I can sell to the orchard. I made two splits and made an additional $300. The orchard wants to buy 25 packages of bees this year, so potentially I could make $3,750 from selling bees over the next few months.</p> <p>I joined forces with a fashion designer friend and my tea importer friend and hosted a sample sale in my house. I made $56 selling jam and honey and $458 selling random vintage stuff that I've been too lazy to put on Etsy. The sale was so successful for my two friends that we're going to do another sale in July. I took a bunch of items that didn't sell to a local consignment store that takes house wares. I got $100 in store credit that I used to buy presents for friends and family. While this $100 credit won't count toward my $31,000 budget challenge, it will save us on gift costs come Christmas.</p> <p>I also gathered up every piece of old video equipment I could find in my garage that I am not using and sold it for $575. Although I'd originally spent around $1500 to buy the equipment used, in another year most of what I sold will only have value as parts, so I was happy to get the $575.</p> <p>I managed to have a few little windfalls. I managed to sell a video game that should have cost $5 for $23 to a rabid collector who wanted a pristine copy of Ratchet &amp; Clank: Quest for Booty. (I am not going to judge.) I also sold a book on half.com for $93 that had been up for sale for so long, that I had given up on selling it online, and stuck it into a box earmarked for the next garage sale. Also, it pays to tell everyone you know that you are looking for work. My friend Giselle paid me $100 to drive her to the airport. (She gave me the Uber's surge pricing rate! Sweet.)</p> <p>Last but not least, I made $450 from writing gigs. In total, I made $2,505 in the last two weeks!</p> <p>Alas, Mr. Spendypants has been working 18-hour days all week so he has not had a chance to do anything but sleep when he comes home. His savings will be added (or subtracted) from the total of the next pay period.</p> <p><strong>Goal</strong>: $31,000</p> <p><strong>Amount Raised</strong>: $18,880.84</p> <p><strong>Amount Spent</strong>: $10,653.66</p> <p><strong>Amount Left to Go</strong>: $22,772.82</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/max-wong">Max Wong</a> of <a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-buy-a-house-when-you-live-paycheck-to-paycheck">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-what-to-do-with-a-totaled-car">My 2016 Budget Challenge: What to Do With a Totaled Car</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-three-lessons-about-saving-one-husband-learned-in-a-year">My 2016 Budget Challenge: Three Lessons About Saving One Husband Learned in a Year</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-everything-breaks">My 2016 Budget Challenge: Everything Breaks</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-reduce-debt-or-save-for-an-emergency">My 2016 Budget Challenge: Reduce Debt or Save for an Emergency?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-job-creation">My 2016 Budget Challenge: Job Creation</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living budget challenge compounded savings down payment max wongs budget Fri, 03 Jun 2016 20:00:05 +0000 Max Wong 1723911 at http://www.wisebread.com You Shouldn’t Buy a Home If… http://www.wisebread.com/you-shouldn-t-buy-a-home-if <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/you-shouldn-t-buy-a-home-if" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2912740253_b611b92612_z.jpg" alt="living room" title="living room" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Buying a home has often been held up as the &ldquo;American dream.&rdquo; Problem is, the idea that home ownership is a goal that everyone can &mdash; and should &mdash; aspire to is exactly what got a lot of homeowners in trouble during the housing U.S. mortgage meltdown. In pursuit of the dream to own a home, people threw logic (and basic math) out the window and bought into homes that were not only bigger than they needed, but also more expensive than they could afford. Of course, many lenders were only to too eager to help them get in over their heads. The rest, as they say, is history. (See also:&nbsp;<a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really&nbsp;Ready to&nbsp;Buy a Home?</a>)</p> <p>The reality is that home ownership isn&rsquo;t for everyone. And even if it&rsquo;s right for you, it might not be right for you right now. Whether you&rsquo;re tired of renting, looking to settle down or just want to put your money toward something bigger, there are a few factors that should serve as a warning against taking the leap. You shouldn&rsquo;t buy a home if &hellip;</p> <p>&nbsp;</p> <h2>You Aren&rsquo;t Planning to Stay</h2> <p>Whether your job situation is a bit uncertain, you&rsquo;re in a relationship you&rsquo;re not sure will last, or you&rsquo;re longing to make a move to another city in the not-too-distant future, renting is your best bet. That&rsquo;s because home values tend to fluctuate a bit throughout the year and from year to year. If you are forced to move out in the near future, you may suffer a loss on the sale of your home. That&rsquo;s why most experts recommend that unless you can stay put for at least five years, you&rsquo;re better off renting. It&rsquo;ll take at least that long to make up the costs associated with a home purchase.</p> <h2>You Don&rsquo;t Have a Down Payment</h2> <p>It&rsquo;s still <a href="http://www.wisebread.com/want-to-buy-a-home-with-no-money-down-try-a-usda-loan">possible to buy a home without a down payment</a>, but that doesn&rsquo;t mean it&rsquo;s a good idea. The simplest reason is that forgoing a down payment costs you a lot more over the life of the loan. The more money you borrow to buy your house, the more interest you pay.</p> <p>Unfortunately, that&rsquo;s not the only extra you&rsquo;ll be on the hook for. The other major cost you&rsquo;ll have to pay is Private Mortgage Insurance (PMI), which is typically charged to borrowers who put down less than 20% of the price of the home. On a $300,000 house, PMI will cost you almost $1,000 per year. You&rsquo;ll keep on paying that insurance every year until you&rsquo;ve paid down more than 20% of the appraised value of your home. And unlike with a down payment, you don&rsquo;t get anything for that money &mdash; it&rsquo;s just there to protect the lender in case you default.</p> <p>Last but not least, having a down payment protects you from going underwater on your loan, or owing more than the house is worth. This can happen when you buy without a down payment and then home values drop. It&rsquo;s a real bummer if you want to sell.</p> <h2>You Aren&rsquo;t a Saver</h2> <p>Speaking of a down payment, if you find saving for one to be a challenge, that in itself may be a sign that you aren&rsquo;t ready to own your own home. When you&rsquo;re a renter, all you have to worry about is covering your rent. Once you&rsquo;ve done that, the rest is up to your landlord. When you own your home, the responsibility is all yours. So, whether your problem is a leaky toilet or a broken water pipe, you will have to pay to fix it (and in many cases, it&rsquo;ll cost you dearly). Without a strong habit of saving, you&rsquo;ll lack the cash to take care of all the expensive repairs you <i>will </i>face as a homeowner. If you&rsquo;re already living paycheck to paycheck, the ongoing financial responsibility of owning a home is likely to land you in debt.</p> <h2>You Have a Debt Problem</h2> <p>Another sign that you may not be a good candidate for home ownership is that you&rsquo;re carrying a lot of debt or you struggle to avoid taking on debt of any kind. Not only will debt keep you from saving for emergencies, but those who can&rsquo;t resist tapping into available credit may find their home&rsquo;s equity irresistible. It&rsquo;s not uncommon for homeowners to be tempted to use their home equity as a piggy bank through a home equity line of credit (HELOC) or home equity loan. This is especially true when home prices are rising (thus creating more equity). &nbsp;According Bloomberg, HELOC lending rose by 30% in 2012, the highest level since the start of the financial crisis in 2008. If you&rsquo;re not someone who can resist using available credit, steer clear of homeownership; not only will it allow you to dig yourself deeper into debt, but using your house as collateral could also leave you homeless.</p> <h2>You Have Bad Credit</h2> <p>If you have lousy credit, you may be able to find a lender who&rsquo;s willing to give you a mortgage. That lender isn&rsquo;t doing you any favors though. Bad credit makes you a high-risk borrower, which means that any lender you can get to give you the loan will charge you considerably higher interest and offer fewer options. This can make it more difficult to pay down your mortgage in a timely way &mdash; or at all.</p> <h2>You Think a Home Is an Investment</h2> <p>Real estate can be an investment &mdash; and a good one &mdash; but <a href="http://www.wisebread.com/the-worst-investments-you-can-make">your home doesn&rsquo;t count</a>. In order to really be able to capitalize on any kind of investment, you have to be able to sell it when the time is right. That&rsquo;s hard to do with the real estate you call home because, after all, you&rsquo;ll still need somewhere to live. Plus, even if you are able to high-tail it out of your home when it appreciates, chances are you&rsquo;ll have to plunk that gain right back down into your next house.</p> <h2>You Aren&rsquo;t Into Maintenance</h2> <p>Whether it&rsquo;s painting, weatherproofing or general repairs, <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">homes require lots of ongoing maintenance</a>. If you&rsquo;re the type to put things off, homeownership may not be for you. After all, the longer you leave your rotten porch, the more rotten it&rsquo;ll get &ndash; and the more expensive it&rsquo;ll be to fix.</p> <p>Many people feel that they should aspire to home ownership; many are even ashamed to call themselves renters. But while we tend to view a home of our own as a status symbol, we often overlook the fact that it&rsquo;s a very big &mdash; and usually very expensive &ndash; responsibility. Owning your own home can be a great experience, but only under the right conditions. If home ownership isn&rsquo;t a good fit for you and your current financial situation, chances are you&rsquo;ll be too broke to enjoy it.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tara-struyk">Tara Struyk</a> of <a href="http://www.wisebread.com/you-shouldn-t-buy-a-home-if">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick">Buy a Home You Can Afford With the Mortgage Suitcase Trick</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don&#039;t Prepare For</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/real-estate-terms">21 Real Estate Terms Every Home Buyer Should Understand</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing down payment first time home buyer home mortgage when to buy a house Thu, 21 Mar 2013 10:24:35 +0000 Tara Struyk 969861 at http://www.wisebread.com Quiz: Am I Really Ready to Buy a Home? http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/quiz-am-i-really-ready-to-buy-a-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/6037999486_531d422d5d_z.jpg" alt="couple on a car" title="couple on a car" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Home prices are on the uptick for the first time in several years, which means that you may have a limited window of opportunity to become a homeowner before prices shoot through the proverbial roof again.</p> <p>I don&rsquo;t have to tell you that buying a home is serious business, a major milestone, a huge responsibility, and probably the largest purchase you&rsquo;ll ever make, but are you asking yourself the right questions to make sure that you&rsquo;re prepared for all the amazing and not-so-amazing aspects of home ownership? (See also: <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for">9 Costly Things New Homeowners Don't Prepare For</a>)</p> <p>To help you decide whether you&rsquo;re ready or not, I&rsquo;ve designed this quick quiz. Answers are below. No cheating!</p> <p><strong>1. When contemplating the decision to buy a home, what&rsquo;s the first thing you should do?</strong></p> <ol type="A"> <li>Contact a loan officer</li> <li>Take a good look at your finances</li> <li>Call a real estate agent</li> <li>Attend a few open houses</li> </ol> <p><strong>2. When you start looking for the perfect home, what should you have?</strong></p> <ol type="A"> <li>Cash for a down payment</li> <li>A good credit score</li> <li>A steady source of income</li> <li>All of the above</li> </ol> <p><strong>3. What&rsquo;s the best way to calculate the price range in which you should be shopping for a home?</strong></p> <ol type="A"> <li>Your anticipated monthly payment is 30% of your income, to include your mortgage, taxes, and insurance fees</li> <li>Add up all your assets, and work with 50% of the sum</li> <li>Multiply your current rent by three</li> <li>Multiply your annual salary by 30, then divide it by two</li> </ol> <p><strong>4. How much cash should you save for a down payment?</strong></p> <ol type="A"> <li>7% of the purchase price</li> <li>10% of the purchase price</li> <li>17% of the purchase price</li> <li>20% of the purchase price</li> </ol> <p><strong>5. To secure the best mortgage rate, what&rsquo;s the minimum FICO credit score you must have?</strong></p> <ol type="A"> <li>560</li> <li>660</li> <li>760</li> <li>860</li> </ol> <p><strong>6. How much money should you set aside for closing costs?</strong></p> <ol type="A"> <li>1% to 2% of the purchase price</li> <li>3% to 6% of the purchase price</li> <li>7% to 9% of the purchase price</li> <li>10% to 12% of the purchase price</li> </ol> <p><strong>7. If you don&rsquo;t have the cash for closing costs, you should put your dream of owning a home on hold.</strong></p> <ol type="A"> <li>True</li> <li>False</li> </ol> <p><strong>8. The bank has approved you for a loan that exceeds the budget you set for yourself by $50,000. You should:</strong></p> <ol type="A"> <li>Accept it. Now you can get a house with a pool.</li> <li>Politely decline and tell the loan officer where to stick it.</li> <li>Use the extra $50,000 to buy a new car.</li> <li>Reexamine your budget to see if you can afford it.</li> </ol> <p><strong>&nbsp;9. How long should you plan to live in your new home for it to make good financial sense to buy?</strong></p> <ol type="A"> <li>3 years</li> <li>5 years</li> <li>7 years</li> <li>10 years</li> </ol> <h2>ANSWERS</h2> <h3>1. B</h3> <p>Before you can start the home-buying process, you need to examine your budget so you know where you&rsquo;re at with your finances and to find out how much you can afford to spend on a home. Using your existing budget, it&rsquo;s not a bad idea to create an anticipatory budget too, which should include your monthly mortgage payment, insurance, property taxes, and other <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">associated costs of home ownership</a>. This will help you determine if your budget can handle these expenses.</p> <h3>2. D</h3> <p>In this economy, cash for a down payment is important to a lender &mdash; it lets them know you&rsquo;re a serious buyer and that you&rsquo;re responsible &mdash; and a good credit score will help you lock in a low interest rate. Of course, to save for a down payment and establish a good credit score, you&rsquo;ll need a reliable, steady source of income in the form of a full-time job.</p> <h3>3. A</h3> <p>Financial experts suggest that the percentage of your monthly income that you should use to establish a budget for home buying should be from 25% to 33%, which makes 30% a safe compromise.</p> <h3>4. D</h3> <p>If you don&rsquo;t want to pay for private mortgage insurance, 20% of the purchase price is the sweet spot that you should aim for when saving for your down payment. Anything less will require you to purchase private mortgage insurance so the lender is protected from default on the loan. However, it doesn&rsquo;t hurt to save even more than 20% to put toward the down payment so you can ensure that you get the lowest interest rate possible.</p> <h3>5. C</h3> <p>A FICO score of 760 or higher will help you lock in the best mortgage rates. If your <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score">score is lower than 760</a>, you&rsquo;ll still be able to purchase a home, but you&rsquo;ll pay for it in the long run with a higher mortgage rate.</p> <h3>6. B</h3> <p>Between 3% and 6% of the purchase price of the home is the ideal margin of savings you should have for closing costs. These costs usually consist of loan origination fees, title insurance, attorneys&rsquo; fees, property taxes, transfer taxes, and other fees.</p> <h3>7. B</h3> <p>You don&rsquo;t necessarily have to give up your dream of owning a home if you&rsquo;re short on the closing costs. While it&rsquo;s ideal to have that cash on hand to avoid a high monthly payment because you had to finance the closing costs, you can also ask the seller to cover closing costs, especially if the place is a fixer-upper.</p> <h3>8. D</h3> <p>Remember when the government bailed out the banks a few years ago? That was largely due to large loans given to homeowners who couldn't afford them, resulting in the inability of the homeowners to pay them. To avoid the trap if the bank approves you for a loan more than you think you can afford, re-crunch your numbers to see what makes sense. Just because more money is available doesn&rsquo;t mean you have to take it &mdash; because eventually you will have to pay it back.</p> <h3>9. B</h3> <p>It takes about five years to build up equity in a home, the amount of which increases as you make payments toward the mortgage loan. If you don&rsquo;t plan to stay in your new home for at least half a decade, <a href="http://www.wisebread.com/when-you-should-and-shouldnt-rent">it may not be a good decision to buy</a>.</p> <p>Buying a home is a big decision and one that will change your life &mdash; most of the time for the better &mdash; but it&rsquo;s important to ensure that you&rsquo;re financially secure before embarking on this milestone. While home ownership comes with plenty of perks, it also comes with lots of problems &mdash; problems that you have to fix, and fixing them will usually cost money. Use this quiz as a guideline to help you make the initial decision on whether or not to start the home-buying process, but ultimately it&rsquo;s your own common sense that will dictate if you&rsquo;re ready to take the plunge yet.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy">How to Evaluate a Neighborhood Before You Buy</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">What It Really Costs to Own a Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buying-your-first-home-what-to-do-and-when-to-do-it">Buying Your First Home: What to Do and When to Do It</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-a-home-you-can-afford-with-the-mortgage-suitcase-trick">Buy a Home You Can Afford With the Mortgage Suitcase Trick</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-shouldn-t-buy-a-home-if">You Shouldn’t Buy a Home If…</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Real Estate and Housing buying a house down payment first home first time home buyer Tue, 20 Nov 2012 10:24:32 +0000 Mikey Rox 955350 at http://www.wisebread.com How Much Car Can You Afford? http://www.wisebread.com/how-much-car-can-you-afford <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-much-car-can-you-afford" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/4988691467_a9fcc3a980_b.jpg" alt="new car" title="new car" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>If you are interested in buying a car and you are set on leasing, it is very important that you maintain a good balance between the type of ride you desire and your ability to finance it. Remember that even though you may qualify for a car loan, burdening yourself with one that is beyond your payment ability can easily destabilize your financial status. To rightly determine what you can afford, it is important to create a budget. Here are some things to keep in mind when creating said budget. (See also:&nbsp;<a href="http://www.wisebread.com/guide-to-buying-a-used-car-without-going-crazy">Guide to Buying a Used Car Without Going Crazy</a>)</p> <h2>The 20% Rule of Thumb</h2> <p>The general rule on car payments is that they should not exceed 20% of your take-home or net monthly income. This value is inclusive of car insurance, repairs, and monthly payments. The value should also include every vehicle you own. Even if you do not take care of other major monthly expenses such as rent, you should still stick to the rule. Obviously, if you will be making a full cash payment for your new car, you will not need to apply the 20% rule. But the rest of you, take note.</p> <h2>Your Interest Rate Matters</h2> <p>Your <a href="http://www.wisebread.com/how-to-improve-your-credit-score">credit rating</a> will help determine the interest rate you will be required to pay. If you have a poor credit rating, you will most likely end up paying a higher interest rate than someone with a good credit rating. It is important that you factor your loan's interest rate into your budget, so that you can choose a car that truly matches with what you can afford. Different times of the year also have different market interest rates. If rates are lower, your monthly payment will be reduced, and you might be able to afford a car with a higher value than you initially thought (as long as it is still within your budget). This is also one reason why so many people talk about trying to achieve a perfect credit score.</p> <h2>You&nbsp;Should Make a Down Payment</h2> <p>Not so long ago, customers were required to make a down payment before getting a car. Today, however, many car dealers are willing to offer cars even with no down payment. In spite of this change, it will work out best for you if you make a substantial down payment, since you will be able to afford a car with a better value and still stick to the 20% limit.</p> <p>Once you have determined how much car you can comfortably afford, it is important that you stick to your budget when you step into the show room. This is because you will most likely find <a href="http://www.wisebread.com/save-on-your-new-car-send-mom-not-dad-to-the-dealer">persuasive salespeople</a>, most of whom work on commission and are therefore only interested in getting the highest pay. Most of these salesmen are least concerned about whether or not you can afford a particular car. It is therefore important that you remain adamant in the midst of all the persuasion to avoid spending money that you do not have.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/david-ning">David Ning</a> of <a href="http://www.wisebread.com/how-much-car-can-you-afford">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-before-leasing-a-car">What You Need to Know Before Leasing a Car</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-mistakes-everyone-makes-when-buying-their-first-car">7 Money Mistakes Everyone Makes When Buying Their First Car</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-problem-with-car-title-loans">The Problem With Car Title Loans</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-cut-car-ownership-costs">How To Cut Car Ownership Costs</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-the-moment-you-decide-to-buy-a-car">6 Money Moves to Make the Moment You Decide to Buy a Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation car shopping down payment financing interest rates Mon, 25 Jun 2012 09:48:13 +0000 David Ning 935332 at http://www.wisebread.com Buying a Home Without the Money http://www.wisebread.com/buying-a-home-without-a-20-down-payment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/buying-a-home-without-a-20-down-payment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2959833537_af77ed5003_z.jpg" alt="dice and houses" title="dice and houses" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Buying your first place is stressful enough, but trying to buy it when you don't have the money is even worse. (See also: <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">What It Really Costs to Own a Home</a>)</p> <p>I recently confessed that I&nbsp;<a href="http://www.thewriterscoin.com/2009/09/02/buying-a-house-cant-afford-it/">don't have the 20% down payment</a> for the place M and I&nbsp;want to buy. Coming from someone that writes about personal finance every day and tries to get other people to be more responsible with their money, it makes me feel like a hypocrite.</p> <p>In my &quot;confession,&quot; I&nbsp;justified my decision to buy by acting like a child: &quot;<a href="http://www.wisebread.com/what-you-need-vs-what-you-want-and-how-to-tell-the-difference">because I&nbsp;want to</a>.&quot; Upon further review, I&nbsp;actually have some decent reasons.</p> <h2>The Case to Buy</h2> <p><strong>Mortgage rates are low.</strong> We're talking <a href="http://en.wikipedia.org/wiki/File:US-mortgage-rates-30yrFix.png">historically low</a>. Less than ten years ago, people were buying homes and paying up near 10% in interest. Which is crazy compared to the 5-6% you can get right now.</p> <p>And only a few months ago, people were refinancing left and right at rates below 5%. Over the life of a 30-year, $250,000 mortgage, you'd pay $261,000 in interest at 5.5% vs. $410,000 at 8%. So the rate matters quite a bit.</p> <p><strong>Prices are low. </strong>The housing bubble has popped and prices are coming down all over the country. You've probably read all about it on the news, but I've actually seen prices come down over the past year.</p> <p>Listings M and I&nbsp;looked at a year ago have come down quite a bit, and they're still coming down as some people are desperate to sell.</p> <p><strong>The Obama tax credit. </strong>Until the end of November, first-time home buyers will get an $8,000 tax credit that they don't have to pay back. Pretty sweet, right?</p> <p>I&nbsp;<a href="http://www.thewriterscoin.com/2009/07/21/perfect-time-to-buy/">asked for advice</a> on this a few weeks ago, and most of my readers pointed out that $8,000 is peanuts compared to the amount of money you're going to pay over the life of your mortgage. And I&nbsp;agree. But it's hard not to see this credit and pretend you're just knocking off almost $10,000 off the purchase price. The credit <a href="http://www.baltimoresun.com/business/real-estate/bal-re.filler30aug30,0,4318788.story">might get extended</a> so that might buy people some extra time.</p> <p><strong>Equity building. </strong>The sooner you start building equity, the better. Although we like the place we're <a href="http://www.wisebread.com/when-you-should-and-shouldnt-rent">renting</a> right now, it does feel a little wasteful giving all that money up every month knowing you'll never see any of it again.</p> <p>I like the flexibility and safety of renting (I don't care if an appliance breaks), but I want to start building equity as soon as possible.</p> <h2>Bottom Line: To Wait or Not to Wait</h2> <p>Buying a home without having the 20% down payment is not a financially sound decision&mdash;I know that. The thing is, these are not financially sound times. If it takes M and I another year and a half to save up the money to go from 13% to 20%, we could miss the boat on the low prices, low interest rates, and the time to build up our equity.<strong><br /> </strong></p> <p>By then we might not be able to afford the places we can afford today.</p> <p>Are these good enough reasons to break the 20% rule or am I&nbsp;just another home buyer getting in over his head?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carlos-portocarrero">Carlos Portocarrero</a> of <a href="http://www.wisebread.com/buying-a-home-without-a-20-down-payment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/low-interest-rates-do-not-make-homes-affordable">Low Interest Rates Do Not Make Homes Affordable</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buying-your-first-home-what-to-do-and-when-to-do-it">Buying Your First Home: What to Do and When to Do It</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-ever-consider-a-balloon-mortgage">Should You Ever Consider a Balloon Mortgage?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home down payment mortgage Wed, 02 Sep 2009 18:00:02 +0000 Carlos Portocarrero 3558 at http://www.wisebread.com Seller Funded Down Payment Assistance Charities - Scammers or Saints? http://www.wisebread.com/seller-funded-down-payment-assistance-charities-scammers-or-saints <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/seller-funded-down-payment-assistance-charities-scammers-or-saints" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/gavel.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>The United States House of Representatives just passed a massive mortgage bailout bill that includes many changes to the Federal Housing Administration and the Government Sponsored Enterprises. One particular change in the bill is that seller-funded down payment assistance through a third party is now prohibited in obtaining FHA loans. This in direct response to the unscrupulous behavior of many seller funded down payment assistance charities that sprang up in the past decade.</p> <p>The way seller funded down payment assistance charities worked was to take a &quot;charitable&quot; donation from a home seller and then pass on the money to a home buyer since laws prohibit home sellers from directly giving down payment assistance to buyers. These gifts were often given to low income or low credit individuals and families and allowed them to qualify for a home loan from the Federal Housing Administration (FHA) that requires a 3% downpayment. The charity would receive a processing fee from the home seller and the home seller often bumped up the price of the home so that the amount of their &quot;gift&quot; would be recovered from the purchase price. Since these charities were non-profits oftentimes the home sellers received a tax deduction for their contribution. The result was that the home buyer gets to get into a home without putting anything down, but eventually had to pay back the money they received in the form of fees or increased home prices.</p> <p>The pioneer of these charities is Nehemiah Corp. of America. According to <a href="http://www.columbusdispatch.com/live/contentbe/dispatch/2006/05/06/20060506-A1-01.html" target="_blank">this article</a> from the Columbus Dispatch, Nehemiah received 99 percent of its revenue from donations from home sellers. In particular, it had a partnership with a home seller called Dominion which routed money for thousands of home sales in central Ohio. Some home buyers have <a href="http://www.columbusdispatch.com/live/contentbe/dispatch/2006/02/25/20060225-A1-02.html" target="_blank">filed suit</a> against these companies for the extra costs they had to incur in taking the &quot;assistance&quot;.</p> <p>Some proponents of these programs say that they really do help people who have little savings get into a home, but the cost of these loans to the FHA is very high. In April, FHA Commissioner Brian Montgomery said the following: &quot;Insured loans relying upon seller-funded down payment assistance have been demonstrated to have an unacceptably higher risk of default and foreclosure - harming borrowers they intend to help and risking the integrity of the entire FHA program and its ability to help more at-risk low- and moderate-income homeowners. Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments. We simply cannot sustain this business.&quot; Today <a href="http://money.cnn.com/2008/07/23/news/economy/housing_bill/?postversion=2008072312">in the news item</a> for the bailout bill it was reported that these programs are &quot;largely the reason why the agency&#39;s reserve has fallen by $4.6 billion&quot;.</p> <p>From my point of view, it seems that these seller funded payment assistance programs were just a way for home sellers to close deals in the guise of being charitable. True charity is when nothing is expected in return. Personally, I cannot believe that these scams lasted for so long. I am glad that Commissioner Brian Montgomery looked into this problem and actually did something about it. There are legitimate down payment assistance programs such as churches that receive donation from people who are not home sellers. Though smaller in scale, these programs are still around for those who need them. I am sure that schemers are finding new ways to exploit the insured FHA loans, but at least one large hole is plugged with the current bill.<br /><em><br />Have you been helped by a down payment assistance program? What is your take on the issue?</em> </p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/seller-funded-down-payment-assistance-charities-scammers-or-saints">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8000-housing-tax-credit-can-now-be-turned-into-cash-at-closing-according-to-fha">$8000 housing tax credit can now be turned into cash at closing according to FHA</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-the-new-home-appraisal-rules-good-for-consumers">Are the new home appraisal rules good for consumers?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-does-the-fannie-mae-and-freddie-mac-bailout-affect-you">How does the Fannie Mae and Freddie Mac bailout affect you?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/will-obamas-new-mortgage-plan-really-reward-responsibility">Will Obama&#039;s new mortgage plan really reward responsibility?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-create-a-speculative-bubble-and-profit">How to create a speculative bubble and profit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Consumer Affairs Real Estate and Housing charity down payment housing laws news Thu, 24 Jul 2008 00:21:35 +0000 Xin Lu 2261 at http://www.wisebread.com Money Metaphors (You wouldn't punch a kitten, would you?) http://www.wisebread.com/money-metaphors-you-wouldnt-punch-a-kitten-would-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/money-metaphors-you-wouldnt-punch-a-kitten-would-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/kitten_money.jpg" alt="money cat" title="money cat" class="imagecache imagecache-250w" width="250" height="196" /></a> </div> </div> </div> <p>My boyfriend and I occasionally (at least weekly) argue over money. I like to spend it, he likes to save it. We have fundamentally different ways of looking at money. He carefully researches purchases and buys high quality goods. I like to buy the first thing that catches my eye. He spends money when he has some extra to burn on things he needs, I spend money to make myself feel better, regardless of whether I have the actual cash to blow. (See also: <a href="http://www.wisebread.com/relationships-and-money-two-sides-of-the-same-coin" title="Relationships and Money: Two Sides of the Same Coin">Relationships and Money: Two Sides of the Same Coin</a>)</p> <h2>That's My Money!</h2> <p>Not that long ago, my boyfriend said something that really threw me for a loop. I was defending my <a href="http://www.wisebread.com/new-year-new-spending-habits" title="New Year, New Spending Habits">spending habits</a>, which aren't easily defensible, and we ended up arguing over something like a dental bill. It wasn't for much, but it was something I forgot to pay. And I was hit with a late fee. And then another late fee.</p> <p>And I, as usual, casually brushed the fees aside with one of those &quot;It's JUST money&quot; type of comments that so infuriates the beau. If I accrue late fees, I pay them. Money, to me, is often something to just be tossed at problems. I don't look at my receipts after buying groceries. I don't worry about being charged too much, since I figure that carefully studying my receipts makes me look petty. In fact, this is an attitude that gets me nowhere. I don't protect my money.</p> <p>&quot;You don't protect your money!&quot; my boyfriend exclaimed, clearly exasperated and in need of a drink.</p> <p>&quot;Protect? It's not an infant. It's money.&quot;</p> <p>&quot;Well, maybe it's time you start thinking of it as an infant.&quot;</p> <p>He could see my wrinkling my nose, mentally picturing changing my money's diapers. &quot;Ok, then, how about a puppy? Or a teeny weeny wittle kitty? Remember when the cat was small, like 4 weeks old?&quot;</p> <p>My heart melted, recalling the times when our cat was too tiny and delicate to shred the curtains or torment the dogs or knock vases off of shelves.</p> <p>&quot;Yes. She was just this little orphaned baby kitty....&quot; my voice veered off into dangerously high-pitched territory as I pictured her teeny little claws and pink nose, and the way she would try to meow but ended up sort of hissing instead.</p> <p>&quot;Well, think of your money like that. Whenever you go to spend something, imagine that you are handing someone our kitten. And think about what the results are going to be. When you just casually lay your money down without thinking about it, you are putting the kitten at risk.&quot;</p> <p>&quot;You mean, when I get hit with a late fee, it's like someone punching our kitten?&quot;</p> <p>&quot;Ok, that's just sick.&quot; He walked out, and I found him 20 minutes later, curled up on the couch with a purring cat on his lap, both of their eyes directed at an episode of The Sopranos. They both turned to glare at me as I walked in. No doubt the cat had been filled in on abuse-by-proxy and was already planning which of my shoes she would leave her next hairball in.</p> <p>Alright, kitten-punching is a little sick. But it was powerful for me, because I hate the idea of animals being mistreated (so much so that I refused to finish watching The Brothers Grimm, an already awful movie that stupidly features a cheap, obnoxious &quot;tragic gag&quot; in which a small white Persian kitten is chopped to pieces). In fact, I once got angry at a friend who had a virtual pet, one of those Japanese toy-devices that has a digital puppy on the screen. My friend thought it was hilarious that if you &quot;kicked&quot; the &quot;puppy&quot;, it would &quot;squeal&quot;. I wouldn't talk to her for about a week after that.</p> <p>So I've got issues. But let's say that I can turn those issues to work in my favor. If I really manage to equate my money, emotionally, with something that I find dear and worthy of protection, I might be able to force myself to treat my money with the respect it deserves, thereby giving myself the kind of financial security that I deserve (and need).</p> <h2>Save Me!</h2> <p>I don't have a lot of money in savings, even though I know I should. I haven't become adept at saving money yet. Better than I used to be, but still not <strong>good</strong>.</p> <p>But there was a brief period a year or so ago, when I saw the light when it came to the benefits of saving. And it was a bright light indeed.</p> <p>You already know that <a href="http://www.money-rates.com/savings.htm">you earn interest</a> on the money in your savings account. You probably know that you should shop around for an account, be it savings or money market, or whatever, that gives you a good interest rate. But I never appreciated with this meant until I saw the results.</p> <p>Last March, I was in the process of buying a home. Not being the saving type, I was using my inheritance from my grandmother, along with a loan from my parents, to put the necessary money down on the house. The money had all been transferred into my savings account, and it sat there for a while as we signed papers and secured inspections and fretted over the neighborhood (too close to the freeway? safe to walk at night? etc.).</p> <p>It was only a while later, when I was in the process of transferring the down payment from my savings to my checking account, that I noticed the interest that I was earning on it. I generally earn about $0.11 per year on my savings account. I'm not going into detail about how much was in there, but it was a really good sum. And I don't even remember how much interest I was earning, but I know that it was enough to pay for lunch every day for a month and then some.</p> <p>And that's with a not-so-high interest rate at a not-so-incredible bank. I wish I had put it into my credit union, because I probably could have had dinner every night for a month with THAT interest rate.</p> <p>So, with savings, I have to think of the money I put in there as my lunch program. The phrase &quot;make your money work for you&quot; doesn't mean that much to me, but the thought <em>that I end up with a free lunch everyday</em> <strong>does</strong> mean something to me.</p> <p>It's with that in mind that I've started squirreling away a bit of money. Nothing to brag about at this time, but I'm glad I'm doing it. And while my interest rate is nothing to crow about, it's nice to see the money ad up like that. Whenever I feel like I'd rather take the money out and, say, buy dog sweaters or something, I remember that that money can earn me a free lunch, and carelessly spending it is like punching my kitten.</p> <p>Odd as it may sound, that helps.</p> <p><img width="431" height="310" alt=" " src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/wisebread_imce/tinykitten_0.jpg" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-karim">Andrea Karim</a> of <a href="http://www.wisebread.com/money-metaphors-you-wouldnt-punch-a-kitten-would-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rich-people-spend-350k-to-park-their-cars-heres-how-wed-spend-it-instead">Rich People Spend $350K+ to Park Their Cars — Here&#039;s How We&#039;d Spend it Instead</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage">8 Signs You&#039;re Paying Too Much for Your Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-times-cash-is-not-king">8 Times Cash Is Not King</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-navigate-3-common-money-arguments-with-your-significant-other">How to Navigate 3 Common Money Arguments With Your Significant Other</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/managing-your-short-term-money">Managing Your Short-Term Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Extra Commentary checking down payment interest kitten money mortgage protect savings account spending Wed, 11 Apr 2007 03:49:24 +0000 Andrea Karim 485 at http://www.wisebread.com