Can Buying Your First Home Actually Hurt Your Credit?

For generations, owning a home has been considered an integral part of the American Dream. Life without a home of your own, two kids, golden retriever, and a white picket fence just didn’t make sense. Okay, that last part may be a bit of an overstatement, but the fact remains – family members and financial experts have long recommended home ownership as a sensible path to financial stability.

When done correctly, buying a house can be one of the smartest investments you’ll ever make. It will undoubtedly be one of the biggest. As a first-time home buyer, your finances will face the scrutiny of mortgage underwriters, so it’s essential to have all your economic ducks in a row before you even begin applying for a mortgage. And while a smooth financing process is reason enough to be smart with your money, financial stability can also help when your credit takes a hit for five or six months following your big purchase. Wait. What?! Yep. That’s right. Your credit score can, and probably will – drop a bit for a few months after you become a homeowner.

Great for you. Not so great for your credit. Why does buying a house – which, by all accounts, is a wise financial decision – have a negative impact on your credit? The answer isn’t as crazy as you might think. When you apply for real estate financing, mortgage companies pull your credit report to determine whether it makes sense for them to lend you money. In credit industry terms, this is known as a “hard inquiry.” Since these inquiries signal you could be incurring additional debt, they often result in a small, temporary dip in your credit score.

Fortunately, it’s relatively simple to limit the negative impact of hard inquiries. If you’re going to apply for financing with multiple mortgage lenders, do your best to conduct all of your searches within a 30-day window. Because they understand that many people shop for the best rate even though they’ll only secure a single loan, major credit bureaus structure their rating systems to account for multiple inquiries within the same one-month reporting period. While there may still be a dip in your score, grouping your credit pulls will help you minimize the damage. And don’t worry, once you start making payments on time and establishing a positive mortgage history, your credit score should bounce back to where it was before.

Experience a little short-term pain for a long-term gain. From the opportunity to build equity to the satisfying sense of home ownership, there are a variety of excellent reasons to leave the renting life behind. A temporary dip in your credit score shouldn’t scare you away. If you entered the homebuying process with your finances in order and you resist the temptation to rack up additional debt as you furnish your new home, your credit rating should be just fine in the long run. And let’s be honest, you’ll probably be so busy remembering the new route to work and rearranging your living room furniture, that six months will pass before you’ve had a chance to think about your credit score anyway.

If you’re just beginning your home search and in the Monmouth or Ocean County area, your local First Financial Federal Credit Union branch is a fantastic place to start. In addition to reviewing your current financial situation, our representatives can also help you determine how much house you can afford and which mortgage program is right for you. We may even be able to help you get prequalified, which can give you the extra leverage you need when you do find that perfect house. If you have questions about the mortgage process or don’t know how to get started, we are here for you. Contact the Loan Department at 732-312-1500, Option 4 or learn more about First Financial mortgages on our website.

*Subject to credit approval. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties in New Jersey. See Credit Union for details. Federally insured by NCUA.

 

The 3 Best Categories for Boosting Your Home’s Value Without Going Broke

Everyone makes home improvements for different reasons, but most of the time they’re either a necessity like a roof repair, something for personal enjoyment, or intended to increase a home’s market value. Whether you’re getting ready to move or just sprucing things up, it’s wise to be mindful of how the improvements you’re making will affect your home’s value when it comes time to sell your home.

Based on what real estate experts say, the top home improvement categories that deliver the biggest bang for your buck are:

1. Practical Appeal

When we think of home renovation, our minds jump to fun projects like updating a kitchen or adding a deck, but standard projects like routine maintenance and repairs go a long way in creating a baseline appeal and value to your home.

  • Maintenance & Repairs

Home hunters want to know the place they’re considering is in good condition. No matter how great a renovated bathroom looks, it won’t persuade a buyer to overlook a major repair they’ll have to deal with right away. Performing routine maintenance on furnaces and septic systems, fixing problems like plumbing leaks or rusty gutters, and making practical improvements, are all investments that will raise and maintain your home’s value in the long run.

  • Energy Efficiency

Home buyers are looking more carefully at utilities – one of those controllable expenses that can be drastically improved with energy-efficient appliances and heating/cooling systems. Besides the personal savings on your utility bills and taxes, making your home greener may also improve the value of your home by up to 20 times the annual energy savings.

2. Curb Appeal

Potential buyers decide within the first few moments of walking up to a house whether or not they’re interested in seeing more. First, there’s landscaping. Overhanging trees and unruly bushes can obscure your home’s best features, darken the interior, encourage mold, and can even cause expensive damage.

Then there’s the entryway. Is it neat, well lit, and protected from weather? Is your front door in good shape and does it look secure?

Finally, fix other exterior issues like missing siding or chipped paint. These small fixes can make a pretty big difference when it comes to shaping the first impressions of anyone who sees your home.

3. Modern Appeal

It’s now time to give your home some modern appeal after the basics are taken care of. Real estate professionals say home buyers are looking for open floor plans, natural light, updated flooring, and bathroom and kitchen upgrades. A few of the most value driven ways to make your home look more modern, are to knock out a non-structural wall or kitchen island, and to improve light by replacing broken panes, or installing less expensive tubular skylights. You also want to fix squeaks in your floors, patch and repair boards and tile, and maybe even rip out some wall-to-wall carpeting and replace it with engineered hardwood. Updating a bathroom on a tight budget could mean cleaning grout, removing any rust stains, re-caulking, updating door knobs, or replacing faucets.

The bottom line is that you don’t have to spend a lot of money on improvements to increase your home’s value. Just choose your improvements wisely and you can easily recoup that investment back. The more you value your home by taking care of it, the more others will value it, as well.

In need of some home improvements but could use a little help? First Financial’s Home Improvement Loan is designed to help you create the home you’ve been imagining. It’s time to move your “wants” to the top of your to-do list.*

*Available on primary residence only. A First Financial membership is required to obtain a Home Improvement Loan and is open to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties. See credit union for details. Rate will vary based off of applicant’s credit rating. Not all applicants who apply will be approved, subject to underwriting guidelines and credit approval. Lien position and appraisal valuation may affect the maximum loan amount. Not all applicants will qualify for maximum Loan to Value (LTV) ratio. It will be based off of creditworthiness, property type, occupancy, lien position, and loan amount. Rates will be affected by LTV or combined LTV if there is another lien on the property. Loan amounts over $7,500.00 will be required to give First Financial FCU a security interest in their property. Rates will vary based off of lien position and whether the loan is mortgage secured or unsecured. For mortgage secured Home Improvement loans First Financial FCU (FFFCU) will waive closing costs at inception of loan. If loan is terminated within the first 2 years of opening, closing cost waiver is revoked and are required to be paid back by member to FFFCU.

Article source: Jessica Sommerfield for Moneyning.com

3 Things You Should Never Hide from Your Mortgage Lender

You’re ready to apply for a mortgage. The process of meeting with a lender and a getting a mortgage can be very complicated, especially for first time homebuyers. To help with this process, here are a few things to consider being up front about from the very start.

Career changes

When handing out large loans, lenders look for employment stability and steady income; most will check your employment history and income throughout the mortgage application process. Therefore, it’s better to be straightforward from the beginning. Failing to do so may jeopardize your eligibility or cause other problems prior to closing.

Other loans

If you have taken out other large loans or made a big purchase before applying for your mortgage, your lender needs to be in the loop. Making these financial decisions will affect your mortgage as it increases your “debt-to-income ratio” or DTI. Having a high DTI will also result in a higher mortgage interest rate, which makes you riskier in the eyes of your lender. So, come clean about that new car or any other significant loans – because it may affect the type of mortgage you qualify for.

Large deposits

When applying for a mortgage, the lender will usually ask for two months’ worth of bank statements. If they notice you’ve made multiple large deposits of over $100 (that are not attributed to income from your job), it’s imperative you provide them with documentation explaining the source of the income. These large deposits can be deemed quite questionable during the underwriting process – so in order to avoid delays, be prepared with all necessary documentation.

Looking to buy a home in the Monmouth or Ocean County area? You saw our last four short financial solutions videos on the benefits of a First Financial mortgage, how First Financial works with our members’ lending needs, personalized service, and personalized loan options. Now check out our final video in this series: creative loan solutions. If you have questions about the mortgage process or don’t know how to get started, we are here for you. Contact the Loan Department at 732-312-1500, Option 4 or learn more about First Financial mortgages on our website.

*Subject to credit approval. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties in New Jersey. See Credit Union for details. Federally insured by NCUA.

 Article Source: Wendy Moody for CUInsight.com

5 First Year Homeowner Expenses to Prepare For

Most of us are prepared for costs like homeowner’s insurance, property taxes, and HOA dues. We can work these predictable expenses into our housing budget as we begin to shop around and start the purchasing process. But what about the other things? Many who share their experience and advice, learned the hard way that certain expenses crop up with surprising predictability the first year you own a home. If you’re not prepared, these expenses could create a budgeting crisis, or even worse — a debt crisis.

1. Appliance Repair or Replacement

Your prospective home’s appraisal will bring to light just about every major and minor repair you’ll need to complete within the next 10 years, whether it’s flooring, roofing, siding, plumbing, electrical, or structural issues.

The appraisal also lists the appliances included with your home, and this is something you’ll want to pay special attention to. Take careful note of how old the appliances are and how heavily they’ve been used, so you’ll have a game plan for repairs or replacements. For instance, are you purchasing from a single person who didn’t use the dishwasher much or a family of five who used it daily? Here’s a list of the usual life expectancy for major appliances:

  • Washers, dryers, refrigerators, and dishwashers: 10 to 13 years (depending on prior use)
  • Gas ranges: 15 years
  • Stovetops: 15 to 18 years
  • Microwaves: 9 to 10 years
  • Water heaters: 10 to 20 years (tankless water heaters last longer)
  • Furnaces: 15 to 20 years

2. Cosmetic Upgrades

During your first few walk-throughs, you probably started brainstorming about the fun projects you want to do, like painting and updating light fixtures or window treatments. These types of things don’t seem expensive, but they can quickly add up when you’re doing several of them at once.

Separate what you need to do from what you’d like to do (the torn window blinds versus the ugly shade of purple in the bathroom), and draw up a cost estimate so you can start preparing for these upgrades before you move in.

3. Additional Furnishings

You may plan to use your current furniture, but typically you’ll need additional furniture items for your new home – especially if you’re gaining a guest bedroom or additional bathroom. Budget for this expense as well, and look for deals on swap sites and apps like CraigsList, Let Go or Offer Up.

4. Setting Up Services

This one is easy to take for granted, especially if you plan to keep the same services you’ve been using (at the same prices). Don’t forget that transferring services like telephone, internet, cable TV and satellite to a new location usually requires an installation and/or equipment fee. To save a little money, treat it as a new negotiation: don’t be afraid to ask about promotional deals and negotiate pricing based on the competition.

5. Re-keying All the Locks

Last, but not least, it’s always a good idea to re-key your home. Why? Unless your house is a new build, there have been multiple owners or even renters who could possess duplicate sets of keys to your house. This isn’t a major expense. Still, it could run as much as several hundred dollars depending on the number of doors and locks you have, so the expense will need to be budgeted to avoid charging up your credit card.

Handling These Expenses

Besides the previous advice, here are three more tips for preparing and handling these first-year home expenses:

  • Buy less house than you can afford to leave some wiggle room for these expenses in the housing category of your budget.
  • If time is on your side, save more than you think you’ll need for first-year expenses.
  • Prioritize these extra expenses and complete them slowly. After all, you plan on being in this house for awhile, right?

Looking to buy a home in the Monmouth or Ocean County area? You saw our last three short financial solutions videos on the benefits of a First Financial mortgage, how First Financial works with our members’ lending needs, and personalized service. Now check out video #4: personalized loan options. If you have questions about the mortgage process or don’t know how to get started, we are here for you. Contact the Loan Department at 732-312-1500, Option 4 or learn more about First Financial mortgages on our website.

*Subject to credit approval. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties in New Jersey. See Credit Union for details. Federally insured by NCUA.

 Article Source: Jessica Sommerfield for moneyning.com

5 Tips for Homebuyers in a Seller’s Market

Just because it’s a seller’s market doesn’t mean buyers can’t get their dream home. It may just take a mix of pre-planning, patience, and timing.

Here are few ways buyers can fast track their way into a new home:

Have your own real estate agent.

It may be tempting to think you can get a better deal working with the listing agent. That’s not necessarily true. Neutrality among listing agents means they can’t help one side over the other. So who is there to help you?

Set a realistic budget.

When you set a budget, make sure you include more expenses than just the monthly mortgage payment, down payment, and closing costs. Have you planned for utilities, insurance, Homeowner’s Association fees, lawn care, pest control, and more? Can you still fund your emergency savings account, college for the kids, and retirement?

Figure out what you want vs. need.

Do you want to be in a specific school district? Do you need a big backyard? It may mean compromising on other home wants such as hardwood floors or stainless steel appliances, which could be addressed later. What are you willing to compromise on? Having a clear idea will help in the homebuying process.

Get preapproved.

Want to show sellers you are a serious, qualified buyer? Take the extra step to be preapproved. A preapproval letter shows a buyer’s creditworthiness and ability to get a loan by the lender. But don’t stop there. Once preapproved, buyers should shop around to find the best deal. Don’t be afraid to review the different offers and negotiate with lenders to get the one that works with your budget.

Make a fair bid.

When there is a shortage of inventory, don’t miss out on your dream home because you failed to make a strong opening offer. If you find a home you love in the right location and price range, don’t wait to make an offer or try to lowball sellers. Buyers should be ready to submit a fair offer quickly, or they may risk missing out on the home altogether.

Looking to buy a home in the Monmouth or Ocean County area? You saw our last two short financial solutions videos on the benefits of a First Financial mortgage and how First Financial works with our members’ lending needs, now check out video #3: personalized service. If you have questions about the mortgage process or don’t know how to get started, we are here for you. Contact the Loan Department at 732-312-1500, Option 4 or learn more about First Financial mortgages on our website.

*Subject to credit approval. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties in New Jersey. See Credit Union for details. Federally insured by NCUA.

 Article Source: Myriam DiGiovanni for financialfeed.com

 

Are You Ready to Buy a Home?

The transition from renter to homebuyer is a big one. Owning your own home gives you assurance that your monthly housing costs won’t go up, (assuming you get a fixed-rate mortgage), and that your rent won’t get jacked up when you are least expecting it.

Home ownership also comes with added responsibility. When something breaks in your rental unit, it’s a quick call to the landlord to get it fixed. Homeowners are always on the hook for both making and financing any repairs.

It’s a big financial leap to becoming a homeowner. Experts recommend asking yourself these questions before you start out on the house hunt:

Do you know how much you can afford?

Take the time to calculate how much home you can afford to buy. This isn’t the time to ballpark numbers. Overcommitting to a mortgage payment can leave you house poor, meaning there’s very little money leftover at the end of the month for other things.

Add up all your spending, including current rent, food, transportation and discretionary expenses like travel, eating out and entertainment. Don’t forget to include debt like student loans and car payments. Once you know how much you have coming in and going out each month, determine a number you can afford to spend on housing.

Generally, personal finance experts recommend aiming to spend around 28% of your monthly income on housing. Getting preapproved for a loan will also help give you a sense of your housing budget. But note that just because a bank agreed to give you a loan, doesn’t mean you have to (or should) spend that much.

Do you have a down payment?

You don’t need a 20% down payment to get a mortgage loan. But putting more down can work in your favor. It can help you get better loan rates, beat out the competition in hot housing markets, and will lower the amount of interest you pay over the life of the loan.

You can get a mortgage with as little as a 3.5% down, but anything less than 20% means paying private mortgage insurance (PMI), which will increase your monthly payment.

Working to save for a large down payment shows financial responsibility and gets you used to living on a strict budget.

Will you have money left over after closing?

Your bank account shouldn’t be zero after closing. You should still have an emergency savings fund that will cover around three to six months of living expenses, on hand.

In addition to the emergency fund, it is recommended that you have six to nine months of mortgage expenses available. First-time homebuyers are typically looking at older homes because of their lower price point, and they require more work. You should have a back-up fund in savings, in case the A/C or heater goes.

Is your credit in good shape?

You want to get your credit score as high as possible when shopping for a mortgage. The higher the score, the better the lending terms and rates.

A credit score of 750 and up is generally considered excellent and will make you the most attractive borrower.

Have you paid down other debt?

Your debt-to-income ratio plays a major role in the health of your finances.

You can calculate your debt-to-income ratio by adding up all your monthly debt payments and dividing it by your gross monthly income.

The general rule of thumb is your debt should not exceed 43% of your available credit, in order to take out a mortgage.

Where do you see yourself in five years?

If you don’t plan on staying in an area for more than a couple of years, buying a house might not make financial sense.

The huge upfront investment including the price of the home, plus the added expenses like taxes, closing costs, and escrow fees, might take a while to pay off.  Be ready to make a long term commitment to a home and area, if you are taking out a mortgage.

Looking to buy a home in the Monmouth or Ocean County area? You saw our previous short video on the benefits of a First Financial mortgage last time, now check out part 2: how First Financial works with all our individual members’ lending needs. If you have questions about the mortgage process or don’t know how to get started, we are here for you. Contact the Loan Department at 732-312-1500, Option 4 or learn more about First Financial mortgages on our website.

*Subject to credit approval. A First Financial membership is required to obtain a mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties in New Jersey. See Credit Union for details. Federally insured by NCUA.

 Article Source: Kathryn Vasel for Money.cnn.com