Archive for Mortgage

Why Do I Need To Get Preapproved For A Loan?

 
Q: I’m in the market for a new home, and everyone I talk to, from friends to financial advisors, suggests I get preapproved for a mortgage before I start house hunting. Why is this so important?
house with sold sign

Photo Credit: http://ow.ly/MP2m30gxTCA

 

A: You’re actually on the receiving end of great advice. When looking to take out a large loan, whether it’s for purchasing a home or buying a car, having that preapproval in hand before you start your search is crucial.

Depending upon the type of loan, the process of getting preapproved for a loan can take time. The lender will begin by asking for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well.
 
You’ll be asked to provide your Social Security Number (SSN) and for permission to allow the lender to access your credit report. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan. When they have determined how large of a loan you will be eligible for, they will grant you a preapproval letter. The letter will also detail your estimated interest rate on the loan, though that will sometimes also depend upon the specifics of your purchase, such as the year and condition of a car or appraisal on a home.
 
Having your preapproval letter will shorten the loan process significantly when you’re actually ready to take out the loan. However, that is only a small benefit of getting preapproved before you start “shopping.”
Here are some other advantages of getting preapproved for a loan:

1.) You’ll know what you can afford

Your preapproval will tell you exactly what you can afford. This way, you’ll avoid being disappointed later when you have your heart set on a certain home only to be told you can’t swing it financially. Knowing how large a loan you’ll qualify for will simplify your search and get you into your new home or car sooner.
Be sure to calculate other monthly costs, such as property taxes, home insurance and increased auto insurance rates when determining the actual amount of money you’ll need to shell out each month.

2.) Don’t get taken for a ride

Picture this scene at a car dealership:
 
Salesperson: So, you’re here to buy a new car! What are you looking for?
You: Well, I want something with a smooth ride and –
Salesperson: Got it. And how much of a monthly payment can you afford?
You: Weeelll, I think I can swing up to $200 a month, but I’d rather something closer to $150 if you —
Salesperson: Step right this way please! Let me show our new line of Camrys at just $205 a month! They have the most luxurious feel and the ride is smooth as butter!
 
What happened here is, quite simply, a salesperson looking to make the most money out of a customer. When you’re unsure about how much you can spend, the dealer will capitalize on your uncertainty and try to sell you a car that just barely skims the maximum amount you’ve decided you can afford.
 
Also, when you name a monthly payment you can manage, the dealer will work with that number instead of talking about the price of the car. They may try to inflate the payment with charges and fees just because they fit within your named payment amount.
 
In contrast, when you show up at the dealer with a preapproval in hand, the salesman will have to show you cars with price tags that fit within your loan amount.
 
Don’t get taken for a ride; get your preapproval before you set foot in the dealer shop!

3.) Be taken seriously

A car dealer will take you a lot more seriously when you wave that preapproval in their face, since having that information in hand shows you’re ready to buy.
 
When purchasing a home, the same rule holds true. A realtor will be able to assist you more efficiently when you know exactly how much house you can afford. They may also give you better service since you’re showing that you’re serious about buying a home. In fact, many realtors refuse to show homes to buyers who don’t have a preapproval in hand.

4.) Know you have financing you can trust

When you show up at the car dealership with a preapproval from your credit union, you know the deal is in your best interest. Many auto shops have access to several financing options and they’re almost always going to put customers into financing options that are in their own wallet’s best interests.

5.) Purchase your dream home

A preapproval makes you a valuable customer. It also helps you stand out from the pack. If you’re looking to buy a home in a competitive market, you may be competing with several other buyers for the same house. Having your preapproval will give you a leg up on bidding wars. A seller will be more eager to work with someone who’s already started the mortgage process. You can end your search sooner with a preapproval!
 
In the market for a new home or car? Don’t forget to call, click, or stop by Section 705 Federal Credit Union to hear about our fantastic rates on mortgage and auto loans!

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How Boomers Can Retire The Way Millennials Work

Retire Smarter, Not Harder!beach

You may have noticed a surge in the number of ponytails and slightly exposed tattoos around the workplace water cooler. Or perhaps you find you now need to get to the office earlier if you plan to land a space for locking up your bike. Maybe you’ve had to make peace with the fact that the kid in your meetings who doesn’t look old enough to ride solo on a roller coaster is not an intern, but an actual employee!  Face it, millennials are a force in the American labor force. In fact, by 2020, they’ll represent more than half of all workers in the country.  In spite of what you’ve read, those pesky youths can actually teach us experienced folks some important lessons about money, some of which might make you rethink part of your retirement planning.  Here are some of the things they’ve figured out that the rest of us might want to consider:

1.)  Don’t be afraid to move.  USA Today recently reported that one-third of all employees in America are freelance, by-the-job workers.  In many cases, these jobs are being handled by young people, many of whom commute over Wi-Fi from home or a coffee shop, instead of 45 minutes of bumper-to-bumper on I-10.  In fact, many of those young people would need an airplane ticket to come into the office.  An increasing number of young people live a “digital nomad” lifestyle, living in the cheapest cities and working wherever they feel most inclined.  It’s easier to make ends meet living in San Antonio, where the median home price is $150,000, than it is in San Francisco, with a median home price six times as high.

The same logic works for retirement.  There’s no reason to keep living in a pricey neighborhood just because it’s a convenient drive to the office you’re not visiting any longer.  In fact, many retirees are following the digital nomads abroad, retiring to Asia and Central America, where the cost of living is pennies on the dollar.  In Belize, for example, a couple can retire with a budget of around $13,000 per year.  That’s below the poverty line in the United States!  How many flights could you buy for the grand-kids with that kind of savings?  Would they love to visit you on the beach?  You bet they would!

If you think you might want to move, check out our mortgage here, because even a fraction of your home value here could buy you property abroad.

2.) Know what to rent … know what to buy.   It used to be that every young person’s living room looked the same:  futon from the curb, coffee table from Ikea and an enormous corner bookshelf filled to the brim with DVDs.  Before that, the DVDs were LPs, the coffee table was a spool table and that futon was probably the same futon from the same curb, just 20 years earlier.  But if you ask millennials how many DVDs or albums they own, they’ll respond with a confused look.  Why would anyone own movies or music?  Paying $20 for one movie or album doesn’t make sense when you can get all of Netflix for $8 per month or Spotify for free.

The same is true for a lot of the things you might want in retirement.  Is it time to replace that car?  Why not lease it?  Do you want to own that house forever?  Why not create a leaseback arrangement?  Do you own a timeshare?  Sell it and put the proceeds into a high-yield money market account.  It’ll go a long way toward paying for your vacations, wherever you choose to go.

Check our vehicle lease rates. Or drop us a line, and let us walk you through your budget to see what you may consider selling or renting, instead of owning for the sake of ownership.

3.)  Get connected.  Young people can do just about everything through social media, even when they’re otherwise not technologically inclined.  I recently had a millennial ask me what use anyone could possibly have for Excel, which was stunning by itself, but then she proceeded to arrange a meeting over Instagram on her phone at the drop of a hat and on a Saturday afternoon, which was even more shocking.

Make your social media work for you.  Go through the social media apps on your phone, see what you use them for and why you have so many.  Then ask young people why they have apps you don’t.  Do those apps sound useful?  If so, get them.  If not, try them out anyway.  While you’re at it, follow the businesses you use most often, so you can find news and deals.  It’s better than email, faster and easier to interact.

Most importantly, if you’re not following us on Twitter and Facebook, now’s the time.  We put out a lot of great info to help you with your finances, and you can shoot us a question. With just a couple of clicks, you can see the questions other people have.  You might even learn the answer to a question you didn’t even know you needed to ask!

Sources:

http://www.forbes.com/sites/kenrapoza/2013/02/18/one-in-five-americans-work-from-home-numbers-seen-rising-over-60/
http://money.cnn.com/2015/08/13/retirement/retirement-income-plan/index.html
http://money.cnn.com/2015/09/03/pf/gig-economy-free-agents/index.html
http://www.usatoday.com/story/money/personalfinance/2015/09/04/credit-dotcom-financial-checklist/32349553/
http://www.bestplaces.net/city/texas/san_antonio
http://money.usnews.com/money/blogs/on-retirement/2014/04/16/the-worlds-9-most-affordable-places-to-retire

This Guy Paid Off His Mortgage In Three Years. So, Why Does He Regret It And Why Is Everyone Angry At Him?

an image of the combination of a house and calculator

Paying Off Your Mortgage Too Soon?

There’s not much in life that is more freeing than finally paying off a large bill. Suddenly, our checking accounts are flush, the future feels more open, and even our favorite jeans seem to fit better. When it comes to a mortgage, of course, that seems so far down the road it’s difficult to imagine, particularly for those just starting out. If you’ve always paid rent or a mortgage, it just kind of feels like that bill is always there, the background noise of your life.

So, when 30-year-old Canadian resident Sean Cooper paid off his mortgage in three years, he celebrated by burning his mortgage papers and found a news crew to film it. But, here’s the twist: He isn’t happy about it, and judging from social media posts and comments on the news coverage, no one else is, either. In fact, Cooper seems full of regret and everyone else is full of scorn or pity. What’s going on?

Cooper sacrificed a lot to pay off his mortgage, and even he admits he focused too much on his financial goals. He worked three jobs, including as a full-time CAD technician $75,000 (about USD $56,000) white-collar job, a customer service job at a local grocer, and writing freelance articles. In addition, he supplemented his income by living in the basement of his home while he rented the house to others. As many commenters note, that’s not a healthy way to live and it’s unsustainable.

Often, we lose sight of what’s around us when we focus on our financial goals. That moment when the bill is paid seems so sweet that we don’t really think about everything it’ll take to get us there. If you’d like to make financial headway on your mortgage without making yourself crazy, we’ve collected some tips below. The key idea among them is finding a balance, so you’ll need to adjust them for your own personal situation. If you’d like a more personal meeting to discuss your financial goals and finding balance, let us know. Cassie is a certified Financial Counselor who can help you make a plan. Also, follow us on Facebook and Twitter to let us know: What do you think about paying off a mortgage in less time than it takes to earn a college degree? What would you do differently from Sean Cooper?

Take gigs, not jobs. It’s easy to see why renting out one’s home and securing extra employment are so appealing. Regular income feels safe and makes it easy to plan ahead. But extra employment can also be confining; It’s difficult to work full-time and still find time for your hobbies, your family, or the occasional afternoon spent binge-watching Netflix (something everyone needs occasionally). If you don’t find time for your hobbies, you’ll find that your job has become your hobby. If you don’t spend time with your family, you just won’t have the bonds that families need.

Instead, look at gig-based jobs like Uber and Air-BNB. While they might not offer the steady income of a regular-hours job, you can scale your work up or down depending on need and availability. Plus, if you don’t feel like working on a given day, you don’t have to. With Air-BNB, the owners of a rental property can cancel for any reason with as little as 24 hours notice. That’s the kind of fantastic option that’s not available if you have renters who are playing their music a little too loud above you.

Turn your hobby into a gig. If you want another way to generate income, one that doesn’t require you to do mindless tasks, and you want to keep enjoying your hobby, then it might be time to turn that hobby into a gig. Do you scrapbook or make crafts? Open a store on Etsy. Are you an avid collector? Start investing and re-selling collectibles on eBay. Do you build or tinker? Time for a workshop. Have a design? Put together a working prototype and take to Kickstarter. Want to write a novel? Fifty Shades of Grey and The Martian both started life as fan-made, self-published ebooks. It’s never been easier to find an audience or customer base.

If you’re looking to make the move from weekend warrior to someone who can make money with your passion, get some start-up capital. You’ll need workshop space, supplies or a new laptop. We’ve got a lot of ways for you to invest in yourself. Who knows, that investment could be the start of a new path to leaving the rat race behind. But the first step is checking out our loans.

The goal is financial security, not paying off a single bill. There’s no prize in paying off your mortgage. It’s just one less bill to pay. Your goal is overall financial security. That could mean refinancing your mortgage to have cash in hand when interest rates are low, or investing significantly when interest rates are high. So, don’t pay off your mortgage while racking up credit card debt or neglecting your student loans. Instead, take a look at all of your debt. Work from the highest interest rate to the lowest, paying off each in turn, so you can pay as little interest as possible every month.

Whatever you do, you’ve got to be happy. It’s difficult to find balance, particularly with debt and obligations hanging over our heads. The solution isn’t to take on more obligations and retreat from humanity. The solution needs to be understanding that money exists as a means to an end, not an end itself.

Sources:

http://nypost.com/2015/12/03/no-one-is-happy-for-the-man-who-paid-off-his-mortgage-in-3-years/
http://www.dailymail.co.uk/news/article-3345476/Frugal-man-30-pays-255-000-mortgage-THREE-years-thanks-Kraft-dinners-bike-riding-100-hour-work-weeks-no-one-admires-it.html
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/meet-the-mortgage-free-30-year-old-whose-frugality-riled-the-internet/article27539357/