Tag Archives: First Financial

6 Reasons to Take Out a Smaller Mortgage Than You Qualify For

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Money house on white background

Whether you’re buying your first home or your fifth, being approved for a larger-than-expected mortgage can be intoxicating. But qualifying for a big loan isn’t the same as being able to afford it — and you don’t want your biggest asset to ruin your finances.

Look at what happened during the Great Recession: Believing their homes would appreciate in value, many people borrowed more than they could handle. When their homes lost value instead, those homeowners were stuck with underwater mortgages — loans that exceeded their home’s worth. This made it impossible for many to refinance or sell their homes for a profit, and led to a flood of foreclosures.

Before you sign up for a mortgage, ask yourself “How much house can I afford?” Many financial advisors and consumer advocates recommend that you borrow less than you qualify for. These are a few of the reasons why.

1. You’ll lower your risk of missing a payment. If your housing costs are on the edge of what you can afford, “the odds of not being able to make payments in the event of an economic emergency or a job loss is much too high,” says Casey Fleming, a mortgage advisor with C2 Financial Corporation and author of “The Loan Guide: How to Get the Best Possible Mortgage.”

Missing a mortgage payment can have a domino effect on your finances. “If you are at risk of missing a payment,” Fleming says, “you are at risk of being in default, risk of ruining your credit, and risk of foreclosure, which would wipe out your investment in the home.”

To ensure that the home you’re considering is within your budget, take all housing costs into account, including your mortgage payments, property tax payments, insurance premiums, maintenance costs and, if applicable – homeowners association fees.

2. You’ll be prepared for emergencies. Life can be rough – you might lose your job or face a medical emergency that drains thousands from your savings. You might have to move before you’re able to build significant equity in your home.

“Many people are on the razor’s edge when it comes to being able to tolerate any kind of economic disruption in their life,” says Brian Sullivan, a supervisory public affairs specialist with the U.S. Department of Housing and Urban Development.

Close to half of all American households don’t have enough savings to stay above the poverty line for three months if they lost their income, according to recent findings from the Corporation for Enterprise Development.

Getting a smaller mortgage than you qualify for will allow you to stash away extra money so you can handle hardships. Experts advise keeping enough money in your savings to cover six months of living expenses. You should also be saving for life after retirement.

“If all of your money is going to your monthly housing costs, then you aren’t able to invest in your retirement accounts or other savings,” Fleming says. “The closer you are to the maximum qualifying mortgage, the closer you are to having too little disposable income and inadequate reserves.”

3. You can more easily afford other costs. Part of the fun of owning a home is filling it with things you want and need. If you have children, you might need to set aside money for college. Let’s also not forget the costs of fixing a leaking roof or a busted water heater.

If you have to make other debt payments on credit cards, auto or student loans — it’s in your best interest to opt for a smaller monthly mortgage payment, and put your savings toward these expenses.

4. You can avoid using your home like an ATM. When less of your monthly budget is taken up by the mortgage, you’ll have more disposable income and be less tempted to use a cash-out refinance— the process of replacing your current mortgage with a larger one and pocketing the difference to buy a new car or pay off credit card debt.

A cash-out refinance can be risky because you’re putting your home on the line. If you miss a few credit card payments, you won’t lose your home. It’s another story when you can’t make higher mortgage payments after a cash-out refinance. “A home is shelter first and foremost, as opposed to an ATM for wealth creation,” HUD’s Sullivan says.

5. You’ll be prepared if property taxes rise. “You don’t know what will happen to property taxes in the future, which affect your mortgage payment,” says Lorraine Griscavage-Frisbee, deputy director of the Office of Outreach and Capacity Building at HUD. Depending on where you live, property tax rates may increase annually.

“Many municipalities tie taxes on their properties to the current value of the home. If someone is maxed out on their mortgage payment, they may not have any wiggle room if next year the tax bill goes up because of appreciating property values,” Griscavage-Frisbee says.

6. You can decrease your risk of having an underwater mortgage. Your home’s value isn’t guaranteed to increase over time. If it drops and you don’t have enough equity built up, you could end up owing more than the house’s market value, which is sometimes called having negative equity.

Over 4 million homes were in negative equity positions at the end of 2015, according to a report by real estate industry research firm CoreLogic. That’s an improvement compared with conditions immediately after the last housing bust, but Fleming says it’s still dangerous to count on home appreciation.

“If real estate values rise dramatically, it may work out well in the end anyway, but it seems very dicey to put all your eggs in one basket. If it doesn’t work out, you could end up with no assets at all,” he says.

A borrowing rule of thumb:
So how much should you borrow? Your debt-to-income ratio — the percentage of your pre-tax income that goes toward mortgage and other debt payments — is one way to figure out how large your loan should be. Professionals say 28% is a safe target.

You can also use a mortgage calculator, like our free mortgage payment calculator at firstffcu.com – to see what you might pay and be able to afford each month. In some cases, it does make sense to borrow what you qualify for. We also have a mortgage qualifier calculator at firstffcu.com. If you have a high income, plan on staying in your home for at least seven years, are buying in a competitive market, or have sky-high rent payments, there is some flexibility in the 28% rule. But if you can go lower than 28%, you should. That way, you’ll be more likely to feel comfortable — financially and otherwise, living in your home.

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: Michael Burge for Nerd Wallet, http://www.huffingtonpost.com/nerdwallet/6-reasons-to-take-out-a-s_b_11077442.html

9 Hacks for a Perfect Monthly Budget

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Pencil on the statement of payroll details

While the word “budget” may want to send some of us screaming in the other direction, creating a successful budget is actually one of the biggest gifts we can give ourselves. It not only helps you out financially, but it does a ton to reduce the day-to-day anxiety so many of us feel when it comes to our finances.

If you’re losing sleep over your monthly finances but don’t know where to begin, here are eleven helpful tips for getting started with a monthly budget.

Grab Your Calculator and Block Out Some Time

Grab your calculator, a pen and paper, and open that Excel doc — and most importantly, block out some time for this. Really figuring out what you spend can take a few hours, and one of the most important parts of this process is simply scheduling some time to do it.

Record Your Take-Home Pay

The first step in any budgeting process is to figure out how much you take home each month. Don’t include anything that automatically gets subtracted, like a 401k or taxes — you just want to know what you actually have in your pocket each month.

Subtract The Essential Expenses

Subtract all of the “essential” expenses you absolutely have to pay each month, like student loans, rent, car payments, cell phone, etc. Take time to really think about every bill that comes in.

Allocate For Savings

You now have the amount of money you can use for personal choices — as in you can literally do whatever you want with it. Things like groceries, clothes, and take out all fit into this category. And in a piece for Nerd Wallet, financial writer Anika Sekar says this is now when you allocate for savings (or “paying yourself first” as some retirement planners put it). She recommended saving at least 20 percent after taxes, which comes to about 12-16 percent pre-tax. If you already accounted for a retirement fund in a previous step, you can factor it into this assessment.

Assess The Numbers

Now is the time when you assess the balance of your numbers. In a piece for the financial site Learnvest, financial writer Laura Shin recommended the 50/20/30 rule of thumb. This system says that no more than half your income should go to necessary expenses, no more than 20 percent should go to savings, and no more than 30 percent should go to everything else. If your ratio is coming off far from this, think about re-balancing.

Get Into The Nitty-Gritty

Now it’s time to break down that 30 percent, “personal choice,” portion of your budget. Figure out all the little things you spend on each month — from coffee, to manicures, to ordering in. It’s important to be realistic during this process.

Make Some Cuts

It’s entirely possible that after completing the above step you realize that you spend way more than your allocated 30 percent on random stuff. This is the stage where you might need to figure out where you can cut some expenses. Maybe it’s making coffee at home, or limiting yourself to a take out order just once a week, or maybe it’s not letting yourself “just pop in” to a store after work because you know you always end up buying something.

Consider A Money Tracking App

If all of this seems overwhelming, consider a money-tracking app on your phone. DailyWorth.com recommended Mint.com, Goodbudget, and Mvelopes as a few of their top choices for personal budget helpers, but you can definitely research around to see which one best suits your needs.

Remember — Treat Yourself Sometimes!

Budgeting doesn’t mean restriction. It just means knowing where your money is actually going. Don’t get overwhelmed at the thought of a monthly budget or think a solid budget is out of reach. Just remember it’s about informed choices so you can enjoy the money you make!

Article Source: Toria Sheffield for Bustle.com, http://www.bustle.com/articles/159271-9-hacks-for-a-perfect-monthly-budget

How Much Should You Have in Your Emergency Reserve?

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emergency-savings29% of Americans admit they keep no emergency savings and only 22% are prepared with at least six months in reserve, according to a survey by Bankrate. However, a few simple steps could help you avoid severe financial risk.

According to CBS News business analyst Jill Schlesinger, a reserve should total six to 12 months of one’s living expenses for those with jobs.

For retirees, Schlesinger said the equivalent of 12 to 24 months of living expenses in reserve is ideal to avoid dipping into savings.

A reserve should be liquid cash because “it has to be safe,” Schlesinger says.

While some Americans struggle living paycheck to paycheck, Schlesinger recommends starting early and small.

“There was a great survey out recently about retirement savings. And it’s had the same result, which is a lot of people are unprepared. It also asked: ‘Do you think, even though you have no money saved today, that you could save $25 a week?’ And a majority of people said ‘Yes, I could,’ ” Schlesinger said.

The least painful way to do this is by automating your savings.

Acorns for one, rounds up the price of purchases, takes the spare change, and invests it in exchange traded funds (ETF).

Spending habits also change with age.

“When you’re young, you’ve got student debt and you’ve graduated, you really have to address paying down that debt, saving for your emergency reserves, and then starting to invest long term,” Schlesinger said. “As you get older and you’ve gone through all these responsibilities – raised your kids, put money away for their college – then you really start to accelerate.”

Establishing your habits early will make it easier to save as you grow older.

With First Financial’s Online Banking, you have the ease of managing your finances right from home (even in your pajamas and slippers if you’d like)! You have the ability to check your accounts, sign up for eStatements, enroll in Bill Pay, transfer funds, set up email and account alerts, schedule future transfers (a great tool to use to help you save), order checks, and more. We even provide you with useful documents to help you get set-up with Online Banking.
Even when you’re on-the-go, you can take First Financial along with our mobile app. As a convenient tool, you’ll have 24/7 instant access to your accounts, plus Bill Pay, make transfers easily, check balances, branch & ATM locations, account alerts, and 1 Click remote deposit capture.* Click here to learn how to download the app to your iPhone or Android/Samsung smartphone.
*You must have an account at First Financial Federal Credit Union (serving Monmouth and Ocean Counties in NJ), and be enrolled in online banking, to use Online Banking or First Financial’s Mobile App. Members must meet certain criteria to be eligible for Remote Deposit Capture. Standard data rates and charges may apply.

Article Source: Courtesy of CBS News

First Financial’s Freehold/Howell Service Center is Open!

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Press Release

First Financial Federal Credit Union’s newest branch is now open for business at 389 Route 9 North (next to the Howell Park & Ride) in Freehold, NJ 07728.

New Branch and Drive Thru

Pictured above: First Financial’s new Freehold/Howell Service Center – now open!

The credit union’s newest branch will be a primary banking location for approximately a quarter of the credit union’s 20,000 members.  First Financial’s newest branch features many important banking conveniences such as a drive thru, drive up and walk up ATMs, and more.

In regard to the credit union’s latest branch location, Issa Stephan, First Financial’s President/CEO stated, “We look forward to bringing the Howell and Freehold community a high-tech banking facility featuring modern convenience. Member experience is extremely important to us, and our first priority is achieving our members’ financial dreams by defining their financial goals and lifestyle, empowering them with financial education, helping them to plan their retirement, and more – and our newest branch will be a key vehicle in helping us to fulfill this promise with our membership.”

A ribbon cutting ceremony and grand opening week featuring outdoor activities is planned for warmer weather.

Feb 2 Soft Opening Teller Line

Pictured above: The teller line inside the new Freehold/Howell Service Center.

How to Plan for Your Child’s Financial Future

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Piggybank family isolatedIn this economy and time period, every parent shares a mutual fear. You think to yourself, “What if my son or daughter isn’t financially stable in their lifetime?” You may be nervous that your child will not be able to pay off college loans or purchase a home when they are older. You might also be worried that your child will struggle to meet car payments, or that they won’t be able to save up money in case of emergencies or for when they grow older.

Read the tips below to learn how you can relieve your fears and help prepare your children for their financial future.

  • Teach financial responsibility. It’s natural to fear that your children will take on too much debt or be unprepared for financial emergencies when they reach adulthood. But you don’t have to wait until they make a mistake to prepare them to be financially responsible. It’s important to remember that it’s never too early to start talking to kids about money and saving. When your kids are young, you’ll want to start with simple conversations about money (sharing tips about your purchase decisions with them when you shop), and as they get older introducing more complex money matters (such as the value of having an emergency fund and saving for unexpected events).
  • Use an allowance as an educational tool. An allowance is an ideal way to teach about responsible spending and saving. Provide your children with the opportunity to save and spend their allowance as they please (with some guidance). This flexibility will allow them to learn early on that spending money as fast as they earn it can have consequences. Depending on the age and maturity of your child, you may choose to share with them a financial mistake you made in the past and how you recovered from it.
  • Plan for college. As college tuition increases, many parents worry about how their children will afford to attend, or how you as a parent can possibly save enough to pay for your child’s college education. As parents, consider beginning to save into a 529 Plan early in your child’s life. When it comes time to make college decisions, help your child evaluate the tuition and other college expenses (travel home, club dues, entertainment costs, etc.) for each college he or she is considering. Make sure to educate yourself on current student loan lending practices and options and help your child determine a realistic amount of student loan debt he or she can take on if necessary.
  • Prepare for life’s big purchases. Even for young adults with a responsible mindset, a lack of financial knowledge can be detrimental for large purchases like a car or home. As a parent, you can offset this concern by being open to discuss these things as your child grows older and begins managing their own money.
  • Reframe your money mindset. Changing the way you think about money can go a long way to alleviating your financial fears for your children and, at the same time, help your children learn to make smart financial decisions. The real question you should ask isn’t, “Can we afford this?” but rather, “Do we need this, and if so, is this the best deal we can get on it, and should we wait and buy it when we have saved the money for it?” These may seem like small differences, but they aren’t. How our children think about money will make a huge difference in their ability to wisely manage it and consequentially will have a huge impact on their quality of life.

Visit First Financial’s website resources tab to view a list of free financial calculators and resources that you and your children can utilize to help save for college and future big ticket purchases like a car, home, and how to save money.

Join us on Thursday, August 7th, for First Financial’s free seminar on this very subject – teaching your children about finances. The seminar will be held at the credit union’s Wall Office on Route 34 at 6pm. Space is limited so we recommend that you register beforehand.

For more information and to register online, click here.

 Article courtesy of Daily Finance Online, by Michele Lerner