4 Tips for Buying Your First Home

The search for your first home can be stressful. Finding the right one is no cakewalk. You look at dozens of houses and neighborhoods, trying to find the perfect fit. And that’s only half the battle. If you’re looking to buy your first home, here are some tips to help you through the process.

Have a good grasp on your credit: Your credit score is of the utmost importance when trying to buy your first home. It can drastically effect your interest rate and even prevent you from getting the loan altogether. Make sure you credit is in good shape before you start the journey to purchasing your first home.

Figure out how much home you can afford: Imagining yourself in the empty mansion across town is fun, but be realistic. Look at your budget, find out how much extra money you have at the end of each month (add your current rent & utilities to this total), and you’ll have a good idea of what kind of mortgage payment you can handle. If you’re going from an apartment to your new house, remember to factor in the difference in utilities, taxes, insurance and any unexpected expenses that could pop up along the way.

Sort out the needs and wants: It’s good to make a list of the things you NEED to have in your new house, and the things you WANT to have in your new house. When buying your first home, it’s important to remember that you may not necessarily be buying your dream home. You can definitely find a home that meets a lot of the criteria on your checklist, but know you may have to give up a few of your wants in order to find a home that fits your budget.

Find the right realtor: Your realtor’s job is to help you out on this nerve-wracking journey and make the process as easy for you as they can. Pick a realtor who makes you feel comfortable and knows what they’re doing. If they don’t seem to care about meeting your needs, find someone who will.

First Financial offers a number of great mortgage options, including refinancing – click here to learn about our 10, 15, and 30 year mortgage features and see what a good fit for your home is!*

*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. Subject to credit approval. Credit worthiness determines your APR.

Article Source: John Pettit for CUInsight.com

Use this Simple Trick to Pay Off Your Mortgage Sooner

There’s a simple trick to paying off your mortgage quicker. Anyone can do it. It costs very little in the short term, will save you thousands in the long term and could shave years off your mortgage.

All you have to do is make one extra house payment a year, and even that may be easier than you think.

Making even just one extra payment a year can dramatically impact your finances when that extra payment is applied to the principal of your loan. When you pay down the principal, or the amount you originally borrowed, it saves you money in the long term because you’re no longer paying interest on that amount.

Even a good interest rate can add significantly to the cost of your home, so the more you can do to pay down principal, the more money you’ll save in the long run.

To make an extra payment a year with the least pinch to your wallet, simply divide your mortgage payment by 12 and add that amount to the total you pay each month.

For example, if your monthly payment is $1050, divide it by 12. You get $87.50. Add that amount to the $1050 for a total of $1137.50. Pay that amount (or more if you’re able) each month.

You can further speed up your pay off date (and overall savings) by applying bonuses, tax returns, and other sources of income to your principal as well.

First Financial offers a number of great mortgage options, including refinancing – click here to learn about our 10, 15, and 30 year mortgage features and see what a good fit for your home is!*

*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. Subject to credit approval. Credit worthiness determines your APR.

Article Source: Jennifer Reynolds for CUInsight.com

 

4 Simple Strategies for Coming Up with a Mortgage Down Payment

house key and dollars.Real estate concept

Buying a home is often seen as an important rite of passage and a major part of the American dream. Depending on your situation and where you live, it can also be cheaper than renting. But, unless you have a large chunk of money just sitting around, the down payment it requires is a big obstacle. As higher costs of living continue to shrink our net income, it can be a real struggle to save that recommended 20%, especially if you’re a first-time homebuyer with few assets. Thankfully, there are plenty of assistance and low-down-payment options out there if you really need them, but there’s also a unique sense of accomplishment if you can do it on your own! Here are some simple strategies for saving up for a mortgage down payment.

1. Open a Dedicated Savings or Investment Account and Automate It

Separating your down payment fund from your other savings accounts will make it easier to calculate its progress. You can simply create a new savings account with your current bank for ease of transfer, but it’s also a good opportunity to open up a high-yield savings account that offers higher interest rates. Money market accounts and funds are also low-risk ways to earn more for your dollar. If you have a year or more to save, CDs offer even higher interest rates.

Next, set up your direct deposit or bank account to automatically transfer a certain amount from each paycheck (ideally based on your projected savings goal and timeframe). Even if you can’t afford to set aside much, consistency leads to accumulation.

2. Get Ruthless with Your Net Income

After savings and retirement contributions are deducted, your bills are paid, and your consumables are purchased, what’s left? What are you spending your money on? Can you live without any of those things for awhile? Being ruthless as you slash your discretionary spending is hard, but it’s also one of the easiest ways to ‘find’ money to apply to your down payment.

If you’re a two-income household, see if you can tighten up your finances enough to live off of one income for awhile and bank the second. It’s not easy, but it’s also much more possible than many people think.

3. Throw Every Windfall and Spare Dime at It

Tax refunds, monetary gifts, bonuses, cash-back rewards cards, even that annual raise – every time you find yourself with “extra” money, put it toward your down payment.

If it’s too hard to save larger chunks of money, save your “change.” Although there’s no shame in raiding the couch cushions or the console of your car, you can still apply the concept of “spare change” to your automated finances. Enroll in bank programs and apps that automatically round up debit transactions to the nearest whole dollar, transferring the difference into your designated savings account. You could also adopt the popular $5 rule – every time you get this (or another chosen amount) in change, it goes toward your down payment fund.

Check out First Financial’s Save Your Change Program – get started today!

4. Liquidate, But Don’t Rob Yourself

Carefully consider liquidating stocks, bonds, CDs or other non-cash assets if you own them. However, this does not include retirement accounts. As tempting (and allowable) as it is, borrowing from your future security could turn into robbing from yourself, not to mention taking these funds out early often will lead to having to pay penalties and taxes on it. Definitely not worth it!

There’s no way around it: saving money for a down payment takes planning, sacrifice, and time, but the reward will be worth the effort.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500 option 4.* 

*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. Subject to credit approval. Credit worthiness determines your APR. 

Article Source: Jessica Sommerfield for MoneyNing.com

 

3 Steps to Take Before Seeking Preapproval for a Mortgage

Wooden house with keys

With interest rates rising, many people are rushing to buy a home early this season. If you are one of these people, then know that it’s especially important to get preapproved before you begin hunting for that dream home. With a competitive seller’s market, getting that proof gives you a leg up because the seller knows you’re “good for it,” so to speak. Here are some steps that will ensure you get the home loan that’s right for you.

#1: Determine what you can afford.

Being assured by a lender that you’re approved to borrow a certain amount doesn’t mean you can afford the sum. Despite laws that hold lenders more accountable than before the housing crisis, these companies are still known for offering larger loans than borrowers can afford. So, how do you know what you can actually afford?

  • Look at what you’re currently paying for housing, and try to stick as close to it as possible.
  • Look at the whole picture. Calculate the true expense by combining the principal, interest, taxes and insurance (an easy acronym to remember is PITI). What’s your down payment? If it’s less than 20%, you may also need to factor in an extra $50 to $300 per month for mortgage insurance. Don’t worry about the math though — there are plenty of online calculators that can help! Check out First Financial’s right here.

#2: Know what you’ll need to provide.

To get pre-qualified, a lender will ask simple questions about your income, assets, and debt. Preapproval means you’re offered a particular loan amount, so it’s a little more serious and usually comes with an application fee.

The lender will consider your debt-to-income ratio, your ability to repay the loan, and your FICO credit score (which influences your interest rate). To do this, they’ll run a credit check and ask for a list of financial documents, usually the following:

  • Bank statements for the last few months
  • Tax returns and W2s for the past few years
  • Proof of employment and income (pay stubs)
  • Anything else they believe could strengthen your loan application

Having these documents ready to go will streamline the process.

#3: Get your finances in shape.

Once you know what a lender will be looking for, work on anything that’s below standard. For instance, have you held a regular job for at least a few months? Lenders look for job stability. If you’ve jumped around, or if you’re considering a career move, staying put for now might improve your loan terms.

Have you taken on any new credit accounts or loans or closed old ones? Recent shifts in credit, such as getting a bunch of credit cards even if your intention was just to grab those sign-up bonuses, can affect your debt-to-income ratio and perceived financial stability.

Finally, take a look at your credit report and score. Is it below 620? You might have trouble qualifying. Is it at or above 720? You’re in the sweet spot for the best interest rates.

Simple things like making payments on time and paying off your credit card balance each month can improve your score and save thousands of dollars in interest over the lifetime of a loan. This process takes time though.

You really need to make sure you are ready to buy a house long before you even start planning to purchase it. If a home is at all on your radar, then start immediately and get prepared well before looking for a good mortgage lender.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500 option 4.* 

To receive updates on our low mortgage rates straight to your mobile phone, text FIRSTRATE to 69302 and each time our mortgage rates change, we’ll send you a text message.** We’re here to help you achieve your financial dreams!

Don’t miss our FREE Homebuying Seminar on March 15th at 6pm in our Freehold/Howell Branch. Register today!

*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. Subject to credit approval. Credit worthiness determines your APR. **Standard text messaging and data rates may apply.

Article Source: Jessica Sommerfield for MoneyNing.com

How to Get the Best Mortgage Rate

conceptual image with piggy bank, coin and house

Credit score

The MOST important thing is your credit score. If your credit score isn’t good, not only will you not get a good deal, but you probably won’t even get approved. So the key here is to have a high credit score. The higher the score the better your rate.

Compare

Once you start looking for a mortgage, don’t get set on the first one you find. It’s better to shop around. There are tons of choices out there, so do your research and figure out what’s best for you. Make sure you compare not only interest rates, but fees as well.

Down payment

If you don’t have the money for a 20% down payment, there are mortgages available with lower down payment requirements, but you’ll have to purchase mortgage insurance and you’ll probably get a slightly higher interest rate too. If you’re only planning on staying in the house for a few years, this may not be as important for you.

Need help calculating if you can afford to buy a home or what your monthly payments will be based on what you put down? Check out our free mortgage calculators at firstffcu.com!

Debt-to-income ratio

Lenders will focus on how much your current gross income is going toward ongoing debt, so try and keep this ratio as low as possible. If you have any debt that is within reach of being paid off before you apply for a mortgage, definitely put some extra money on it and get it paid off.

Income stability

Lenders like to see a steady job history. If you’ve been in your job for at least a couple of years, you’re probably good to go. If you’re self-employed, the lender will probably want to see a few years’ worth of tax returns to make sure you have a solid stream of income coming in.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500 option 4.* 

*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. Subject to credit approval. Credit worthiness determines your APR. 

Article Source: John Pettit for CUInsight.com

 

7 Signs You Can’t Afford to Buy a Home

House made of woman hands isolated on dollars background

Making the leap from renting to buying is thrilling and liberating — for many, it signifies the realization of “the American Dream.” Buying a home is also a long-term commitment, and one that requires strong financial standing. If any of these signs strike a chord, you may want to delay taking on a mortgage in the near future.

1. You have a low credit score.

Before considering home ownership, you’ll want to check your credit score, which you can do through free sites like Credit Karma, Credit.com, or Credit Sesame.

“The higher your score, the better the interest rate on your mortgage will be,” writes personal finance expert Ramit Sethi in “I Will Teach You to Be Rich.” Good credit can mean significantly lower monthly payments, so if your score is not great, consider delaying this big purchase until you’ve built up your credit.

2. You have to direct more than 30% of your income toward monthly payments.

Personal finance experts say a good rule of thumb is to make sure the total monthly payment doesn’t consume more than 30% of your take home pay.

“Any more than that, and your finances are going to be tight, leaving you financially vulnerable when something inevitably goes wrong,” write Harold Pollack and Helaine Olen in their book, The Index Card. To be fair, this isn’t always possible. While there are a few exceptions, aim to spend no more than 1/3 of your take home pay on housing.

3. You don’t have a fully funded emergency savings account.

And no, your emergency fund is not your down payment.

As Pollack and Olen write, “We all receive unexpected financial setbacks. Someone gets sick. The insurance company denies a medical claim. A job is suddenly lost. However life intrudes, the bank still expects to receive their monthly mortgage payments. Finance your emergency fund. Then think about purchasing a home. If you don’t have an emergency fund and do own a house, chances are good you will someday find yourself in financial turmoil.”

Certified financial planner Jonathan Meaney recommends having the equivalent of a few years’ worth of living expenses set aside in case there is a job loss or other surprise. “Unlike a rental arrangement with a one or two year contract and known termination clauses, defaulting on a mortgage can do major damage to your credit report,” he tells Business Insider. “In addition, a quick sale is not always possible or equitable for a seller.”

4. You can’t afford a 10% down payment.

Technically, you don’t always have to put any money down when financing a home today, but if you can’t afford to put at least 10% down, you may want to reconsider buying, says Sethi.

Ideally, you’ll be able to put 20% down — anything lower and you will have to pay for private mortgage insurance (PMI), which is a safety net for the bank in case you fail to make your payments. PMI can cost between 0.5% and 1.50% of the mortgage, depending on the size of your down payment and your credit score — that’s an additional $1,000 a year on a $200,000 home.

“The more money you can put down toward the initial purchase of a home, the lower your monthly mortgage payment,” Pollack and Olen explain. “That’s because you will need to borrow less money to finance the home. This can save you tens of thousands of dollars over the life of the loan.”

Need help calculating if you can afford to buy a home or what your monthly payments will be based on what you put down? Check out our free mortgage calculators at firstffcu.com!

5. You plan on moving within the next five years.

“Home ownership, like stock investing, works best as a long term proposition,” Pollack and Olen explain. “It takes at least five years to have a reasonable chance of breaking even on a housing purchase. For the first few years, your mortgage payments mostly pay off the interest and not the principal.”

Sethi recommends staying put for at least 10 years. “The longer you stay in your house, the more you save,” he writes. “If you sell through a traditional realtor, you pay that person a fee — usually 6% of the selling price. Divide that by just a few years, and it hits you a lot harder than if you had held the house for ten or twenty years.” Not to mention, moving costs can be high as well.

6. You’re deep in debt.

“If your debt is high, home ownership is going to be a stretch,” Pollack and Olen write. When you apply for a mortgage, you’ll be asked about everything you owe — from car and student loans to credit card debt. “If the combination of that debt with the amount you want to borrow exceeds 43% of your income, you will have a hard time getting a mortgage,” they explain. “Your debt-to-income ratio will be deemed too high, and mortgage issuers will consider you at high risk for a future default.”

7. You’ve only considered the sticker price.

You have to look at much more than just the sticker price of the home. There are a mountain of hidden costs — from closing fees to taxes, that can add up to more than $9,000 each year, real estate marketplace Zillow estimates. And that number will only jump if you live in a major US city.

You’ll have to consider things such as property tax, insurance, utilities, moving costs, renovations, and perhaps the most overlooked expense: maintenance. “The actual purchase price is not the most important cost,” says Alison Bernstein, founder and president of Suburban Jungle Realty Group, an agency that assists suburb-bound movers. “What’s important is how much it’s going to cost to maintain that house,” she tells Business Insider.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500 option 4.* 

To receive updates on our low mortgage rates straight to your mobile phone, text FIRSTRATE to 69302 and each time our mortgage rates change, we’ll send you a text message with the new rates.** We’re here to help you achieve your financial dreams!

*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. Subject to credit approval. Credit worthiness determines your APR. **Standard text messaging and data rates may apply.

Article Source: Kathleen Elkins for Business Insider, http://www.businessinsider.com/signs-you-cant-afford-to-buy-a-home-2016-4