Connect with us

Bad Credit

14 Tips First-Time Home Buyers Must Follow

Published

on

14 Tips First-Time Home Buyers Must FollowPhoto by Tierra Mallorca

Originally Posted On: https://wealthgrowthwisdom.com/14-tips-first-time-home-buyers-must-follow/

 

When buying a home for your first time you’re bound to be very excited. Why wouldn’t you be? Buying your first home is a big deal and it’s perfectly reasonable for you to have butterflies in your stomach. Those butterflies aren’t just caused by the exhilaration of buying your first home, they’re also caused by the fear of doing something wrong or making a mistake. When you’re searching for first-time home buyers programs you’re going to lack the confidence that experienced buyers have and you’re going to want to do everything you can to avoid buyer’s remorse.

There are so many things that you need to be aware of when you’re buying a home. Not knowing what questions to ask your real estate agent, the seller of the home and your home inspectors means that it’s possible to miss something. In the following article, we’ll go over some tips that have been compiled together by professionals in the home buying industry and make sure that you go into your first home buying experience confident so that you can be 100% happy with your decision when you choose the house you want to place an offer on.

Don’t look at homes prior to talking to a mortgage lender

When you’re first-time home buying it can be tempting to power up your computer for a home search or pop into open houses in your area. It’s important to rein in your enthusiasm and visit a lender before you fall in love with a home that you can never afford. In the current housing market, the number of buyers outweighs the number of homes available to purchase. This means that bidding wars are quite possible and if you don’t have your financing lined up you could lose your dream home to someone who talked to a mortgage lender and received mortgage pre-approval.

In order to avoid this make sure you have your finances ready to go so that when your dream house appears you can confidently approach the buyers with an offer. Sellers often only consider offers from buyers who have the backing of a mortgage pre-approval. Going into the buying process with your eyes open to the amount of mortgage funding lenders are willing to give you takes the guesswork out of how much of a home you can afford. You might surprise yourself and find out that you’re able to afford a far nicer home than you originally thought after you talk to a lender!

Talk to multiple lenders

It’s possible that the first mortgage lender you have a meeting with gives you the pre-approval letter you need to buy your home. So why should you shop around? Even though you might get instant approval from one lender, this doesn’t mean that they’re offering you the best interest rate on your mortgage loan or even the highest mortgage that you can get. Make sure to have meetings with at least three mortgage lenders and compare their interest rates and the amount of a mortgage that they’re willing to offer you. Don’t just look at the numbers though.

There is a lot of stress involved in purchasing a home and working with a lender that treats you fairly and communicates well can be just as important as the interest rate they offer. The home buying process is long and you want to ensure that you have the best team assembled around you to make the process go as smoothly as possible.

More: Best Online Mortgage Lenders: Everything You Need to Know

Only buy homes that you can honestly afford

Just because you are approved for a higher mortgage than you originally thought, it doesn’t mean that you should buy a house at the far end of your affordability spectrum. You know best what added payment you can afford and you need to keep in mind that the higher your mortgage is, the higher your monthly payment will be as well.

After you’re pre-approved for a set amount, sit down and figure out what your monthly expenses already are and think about what you can afford to add to them monthly. It also helps to consider how hard it would be for you to continue making those payments if you were away from work for a period of time due to illness or injury. You don’t want to buy your dream house only to lose it down the road because you can’t afford the mortgage payment.

More: First-Time Homebuyer Grants: Here’s What to Know

Take the time to plan for your purchase

When you decide you’re ready to buy a home, especially if it’s your first home, it can be tempting to dive right in. However, you should wait and plan out this purchase at least 12 months in advance. One of the main reasons for this is that you might have areas of your credit report that need fixing and this can take time. It’s worth the wait because a better credit score means a better interest rate which can save you thousands of dollars over the course of your loan.

In addition, the longer you wait the more you’re able to save up for closing costs, home inspector fees, and your down payment. The more you can save for your down payment the less you’ll have to borrow from a lender which can also save you on the amount your home will cost you. Taking the time to prepare is worth it in the long run.

More: 30-Year Fixed Mortgage Rates: The Truths You Have to Know

Spending every cent you’ve saved up

When you can gather together 20% of your home price to put towards a down payment it can pay off in the long run because you often don’t need to purchase mortgage insurance. However, if you can’t afford to put 20% down then it’s better off paying a little more every month for private mortgage insurance and putting down a smaller down payment.

Financial experts agree that you should have 3-6 months worth of expenses saved up for and tucked away in an emergency savings account. You should never drain this account in order to make a larger down payment. Buying a home is more reason then ever to ensure that you have some money tucked away to cover expenses if something were to happen. A home is just one more expense and you need to make sure you have it covered in case of an emergency.

More:

Making changes to your credit report

When applying for a mortgage your lender is going to comb through your credit report. It can be tempting to make large purchases such as a new living room set to go in your new house, but don’t do it! Any large purchases can negatively affect your credit. You should try to keep things as stable as possible. Make sure your bills are paid on time every month and ensure that your credit cards don’t carry a high balance in order to keep your credit report looking good.

You also shouldn’t apply for any credit, especially in the month between when you apply for your mortgage and when you close on the house. Your home purchase is the only large purchase that should be made. You can’t afford for anything else to negatively impact your credit score.

More: How to Improve Your Credit Score: 12 Tips & Tricks

Not searching out the right neighborhood

Buying your dream home isn’t going to have the same effect if you’re dream home is right beside a garbage dump or backs onto an airport. Before you even begin looking for your ideal home invest some time into looking for your ideal neighborhood. Your real estate agent can help with this. You should consider the school district, and not only if you have kids. Buying real estate in a neighborhood with a good school district will make it easier to re-sell your home if you need to move in the future.

You should also look at crime statistics and the time it will take to commute to work every day. Try going to neighborhoods that pique your interest and talking to people on the streets. Ask them how they like living in the neighborhood and get a sense of how friendly they are. Most people are more than happy to give you their honest opinion on what the neighborhood is like and you get a feel for the community that you can’t get through your computer research of the area. Only after you’ve narrowed your search down to a few choice neighborhoods should you begin to look for individual houses.

Letting your emotions get you in over your head

First-time home buyers are usually very excited! Those excited emotions can lead you astray when you’re trying to make a good financial decision. Buying a home is one of the biggest financial investments you’re ever going to make. So it’s important to let your brain be guided by your heart, but not overrun by it. One of the easiest ways to avoid your emotions hijacking the buying process and getting you to make an offer on a home that you just can’t afford is to avoid looking at homes out of your price range.

It can be tempting to see what’s out there, but doing so can lead you to fall in love with features in a home that your home just can’t afford like that backyard tennis court or the jacuzzi in the master bathroom. When this happens the homes that you can afford feel stale and they fall short in comparison, so do yourself a big favor and stick to your budget.

More: How You Can Compare Mortgage Rates To Ensure You Get The Best Deal

Focusing too much on a large downpayment

It’s true that putting 20% down on a home can help you avoid private mortgage insurance; however, it’s not the be-all and the end-all. Most people just can’t afford to save up that much money. It’s typical to see down payments closer to the 10-15% range in most home purchases. If you’re stuck on saving up 20% you can miss out on a great home because saving that amount can take you years to do. Instead, you should consider putting less down upfront and using any extra savings for other large expenses, emergency savings or even retirement savings.

Private mortgage insurance usually isn’t that expensive and you’re far better off paying the little extra every month if you end up with the house of your dreams. If you can only put a little down then consider looking at home buying programs that are offered through the government for first-time homebuyers. Don’t put your life on hold to save up for a big down payment. It’s not worth it in the long run and your money can be better put to use in other areas of your life.

Only accepting the perfect house

As in all areas of life, perfection in houses just doesn’t exist. You’re never going to find a home that checks all of the boxes on your wishlist. There will always be sacrifices in one area or the other. It’s important to make sure that you find a house that checks off a large number of items on your wishlist. When deciding what’s important to you in a home come up with a wishlist. Then try to put it in order of most important to least important. For example, the number of bedrooms or the size of your kitchen might be very important to you while having an extra bathroom might be nice, but not necessary.

Figure out what your top three necessities are and prioritize these features over all the others. Taking the time to determine which items on your wish list are make or break will help you pick out the best house for you. This way if you find one that checks all of your “must-have” boxes, but it falls short on some of your “nice to have” boxes you’ll know that this is still a good fit for you and you won’t rule out an amazing home for no reason.

Properly research FHA, VA or USDA loans

It’s a seller’s market right now which means that there’s stiff competition to buy a house. A way of helping home buyers finance their homes in this tough market is to consider loans such as the ones you can get from the FHA, VA or USDA. These loans help buyers purchase a home with a lower down payment (as low as 3%) and they also help buyers that some banks won’t finance due to bad credit history. These three loans are all backed by a section of the government.

VA loans are backed by the Department of Veterans Affairs and are offered to any member of the military service and their families. For a VA loan, you can go to a private lender and you won’t have to pay a downpayment. You might have to pay a funding fee but the VA puts a limit on what fees a lender can charge so that you don’t have to pay too much.

FHA loans are backed by the Federal Housing Administration. For a borrower to get an FHA loan they need a credit score of 580 but they don’t require a deposit any greater than 3.5% which is attainable for most buyers. The catch to an FHA loan is that mortgage insurance is mandatory. You don’t have a choice, you have to pay the insurance when you close and once every year. For 3.5% down it’s worth paying the insurance if you’re eligible.

USDA loans are backed by the U.S. Department of Agriculture. These loans are geared towards homebuyers who live in rural areas as opposed to cities. If you live in such an area and you are in a lower income range than you might be eligible for this loan. Their guidelines mostly involve where you live, but you might have to meet some income levels as well. Whether or not you pay a down payment also depends on your individual financial situation.

Take into account all the hidden costs

The monthly cost of your mortgage isn’t the only fee that you have to take into account. You also are going to have to pay other monthly costs associated with owning your own home. For example, you need to estimate your home insurance fees, your property taxes and your new utility costs. You’ll also have to consider fluctuating fees like home maintenance and repairs.

These fluctuating costs can add up quickly so look at some estimates in the area that you’re thinking of moving to so that you can estimate how much savings you should have in case of something going wrong that needs repair on your home. For example, if the home you’re looking at has an older roof and it’s not enough to prevent you from buying the property in the first place but it’s something you think will need to be repaired or replaced in the next few weeks consider putting aside savings to cover that cost so you’re not left without a roof over your head. A good rule of thumb is to have at least 1% of the purchase price of your home available to you for these repairs every year.

Relying on gift money that falls through

It’s fantastic when your family, friends or a charity decide to pitch in towards the down payment on your house by offering you a gift. It’s not as fantastic however when that money falls through, is delayed or there’s miscommunication between you and the generous person offering the gift. Miscommunication over money can lead to a purchase on a house falling through and your relationship with the gifter being negatively affected. In order to prevent this from happening you should sit down with anyone who offers you a gift and you should put on paper how much they’re offering you and when you’ll receive this money. That way there’s no miscommunication.

In order to help out your real estate agents and mortgage lenders, you should keep a paper trail of every time money changes hands in relation to your home purchase. You’ll need this paper trail and a signed gift letter from the person who’s giving you the gift in order for your mortgage lender to verify that the funds are there and that they came from where you said they did.

Look into Homebuyer Rebates

After your home has been purchased, your real estate agent, the buyer’s agent can provide you with a homebuyers rebate that comes out of their commission. This rebate is usually around 1% of the purchase price of your home. There are 10 states that don’t allow homebuyers rebates, so where you live will impact whether or not you can receive one.

Not every agent will provide one, and most won’t freely offer this option, but it doesn’t hurt to ask and you might end up with a bit of money coming back to you at the closing of the house which is when you’ll need it the most. Above all please make sure you continue to educate yourself on the topic. Reading articles like this show that you are on the right path.

If you liked these 14 tips please let us know in the comments below. Please be aware of these Hidden Fees that can affect your numbers when buying a house.

Information contained on this page is provided by an independent third-party content provider. Frankly and this Site make no warranties or representations in connection therewith. If you are affiliated with this page and would like it removed please contact pressreleases@franklymedia.com

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Are There Mileage Limits on Rent to Own Cars?

Published

on

Rent to own cars, also called lease to own vehicles, don’t come with mileage restrictions. They can be a good option for bad credit borrowers who need a car fast. We cover how these agreements work, and how they’re different from other vehicle buying options.

Rent to Own Cars and Mileage Limits

Are There Mileage Limits on Rent to Own Cars?Traditional leased cars come with mileage limits, but rent to own vehicles don’t come with this restriction. Traditional leasing companies place mileage limits on their cars to preserve their value, typically so that they can be sold at a later date as pre-owned vehicles.

Many people think that leasing and rent to own cars are similar, but the truth is that they’re very different. Leasing involves making payments on a vehicle for around two to three years, and then returning it at the end of the lease. With rent to own cars, the main goal once you make all the payments is ownership.

Another large difference between leasing and rent to own vehicles is that leased cars are almost always brand-new vehicles. Rent to own cars are always used.

How Rent to Own Vehicles Work

To get into a rent to own vehicle, you need to find a dealership that offers in-house financing, also called buy here pay here (BHPH) used car lots. These dealers are also lenders, so they don’t rely on third-party lenders for financing. This also means that you usually get to skip the credit check.

Since there typically isn’t a credit pull, borrowers with poor credit may have a better chance of qualifying for a rent to own vehicle than a traditional auto loan or lease. The biggest factor that determines your eligibility for these agreements is your income. Some rent to own cars don’t require a down payment, but the payments are likely to be higher than an auto loan in the long run.

You also don’t have to worry about interest charges because rent to own agreements aren’t loans. You’re not borrowing an amount from a lender to pay for a vehicle – you’re making payments on the car to the dealership until you’ve paid what you owe.

Bad Credit Auto Loans vs. Rent to Own Cars

A big downside to rent to own vehicles is that there sometimes isn’t a chance for credit repair. If the dealer didn’t check your credit reports to determine your eligibility for the car, then they may not report your on-time payments. Anything that isn’t reported on your credit reports doesn’t impact your credit score, so it doesn’t help improve it.

Bad credit auto loans from subprime lenders, however, are always reported. These lenders do check your credit reports, but they consider more than that. Sometimes, credit reports can’t tell the whole story, so subprime lenders use other facets of your situation to determine your ability to repay a car loan. They examine your income and residence history, require a down payment, ask for personal references, and more.

Subprime auto loans are crafted for bad credit borrowers who want to get on the road to credit repair. While rent to own vehicles are a good short-term solution, it doesn’t usually solve the bigger issue: bad credit.

Repair the Root of the Problem With a Car Loan

When you’re struggling with poor credit, it’s tempting to go for a quick solution like a rent to own car. But if you want to repair your bad credit, consider subprime financing. These lenders are signed up with special finance dealerships, and we can help you find one in your local area.

Here at Auto Credit Express, we have a network of special finance dealers all over the country. Get matched to one near you by filling out our auto loan request form. There’s never an obligation, and we’ll get right to work!

(function(d, s, id){ var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) {return;} js = d.createElement(s); js.id = id; js.src = "http://connect.facebook.net/en_US/sdk/debug.js"; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk'));

Source link

Continue Reading

Bad Credit

Pawn and loan stores aren’t doing great in the Covid-19 economy

Published

on

Perry Lewin has been in the pawn industry for 28 years, but he’s never quite seen a year like this one. Sales have skyrocketed at his store, Decatur Jewelry and Antiques, in central Illinois. Early on in the pandemic, people were scooping up TVs, guitars, gaming systems, laptops, whatever they could to stay occupied and educated at home.

“We couldn’t keep a bicycle in the stock to save our life,” Lewin said. Tools were flying off the shelves, as many households decided it was the “perfect time for a honey-do list.” He estimates his gun and ammunition sales are up by 500 percent. “You know what it was like back in March and April, scared as hell,” he said.

But that doesn’t mean the pawn business has been good in 2020. Even the Pawn Stars pawn stars are struggling. This, at its core, is a money business, not a stuff business. The bread and butter is in loans.

“What happened is our inventory started depleting rapidly, and that was the result of consumers not needing the services of a pawnshop,” Lewin said, explaining that his central loan operation has been way down for much of 2020. “They were not bringing items in to us either to sell or get a loan on, but they were mining everything from us.”

Pawnshops are a longtime fixture in the capitalist economy — one pawnbroker told me pawning is the second-oldest industry in the world. (He asked me if I knew what the oldest was; I assured him I did.) But they remain relatively misunderstood by much of the public, especially those who don’t use their services.

I spoke with pawnbrokers across the country about what the business has been like in this unprecedented year, and the picture that emerged was a microcosm of the economy that flies under the radar for many. Pawnshops, which were deemed essential during the pandemic, experienced panic-buying trends — guitars, guns, and gold — in real time. They also felt the impact the CARES Act had in getting money into people’s pockets and small businesses’ cash registers because it meant people didn’t need their loans.

“We have loans where customers who have been with us for a very long time — 10 years, 20 years even — are now redeeming stuff completely, which they’ve never done before,” said Eric Modell, president of Modell Financial, which owns a chain of jewelry stores and pawnshops in New York. “And they don’t say, ‘I have money from the government, here I am,’ but 20 years you’ve been paying interest.”

But now that much of that support has ended, loans are ticking up again. People are heading back to the pawnshop.

Guitars, gold, and guns

When the pandemic hit, a lot of people had similar ideas on how to pass the time at home and what they needed to buy to do it. They turned to Amazon, sure, but also pawnshops. Brokers say they couldn’t keep at-home entertainment items, musical instruments, laptops, and tablets on the shelves.

But people haven’t just been making their purchases to stay entertained and educated. They’re also buying to ease their panic.

Gun sales have been through the roof in 2020, and some of the pawnbrokers I spoke to said they’ve truly never seen such a sustained boom in gun and ammunition sales as they have now, especially among first-time buyers.

Troy Farr, who owns Texas Pawn & Jewelry outside of Austin, recalled going to one of his stores on a Saturday during the spring to see how things were going and discovered 42 guns had been sold, “which is a lot for a pawnshop.” Forty-one of them had been to new gun owners. “I don’t know why they wanted a gun for a virus that was spreading, but I didn’t ask them,” he said.

Supply chain problems in the pandemic have complicated what gun sellers would otherwise see as a pretty positive increase in firearms sales, especially when it comes to ammunition.

Rob Barnett worked at his family’s pawn operation in Huntsville, Alabama, before starting up his own shop in Fayetteville, Tennessee, and he has spent decades in the firearms business. He says he’s never seen supply in worse shape, and perceived hoarding has only made the situation worse. “Once people start perceiving there’s a shortage in the industry, people start to worry and start buying things they don’t want,” he said.

Guns aren’t the only thing people buy when they’re nervous — they’re also buying gold, the price of which has increased fairly steadily for much of the year.

“Even though the prices of gold had gone up on account of Covid, people still felt the stability of gold and were investing in gold,” said Jordan Tabach-Bank, the owner and CEO of the Loans Companies, a high-end pawn brand that operates in New York, California, and Chicago. When people think the world might be going to hell — and 2020 has given them plenty of reasons to think that — they buy gold.

“That is a trend that has happened since the beginning of time,” he said.

Loans are a much bigger part of the pawnshop business than you probably realize

Everybody knows the Hollywood pawnshop tropes — the creepy guy smoking behind the counter in a seedy corner store, taking a stolen television off someone’s hands, probably so they can go buy drugs. But that’s not the reality. For one thing, it’s easier to sell stolen items online because pawnshops are pretty heavily regulated. But in recent decades, the industry has also made an effort to remake its image.

Pawnshops are a collateral, non-recourse lender, which basically means loans are made not on someone’s credit history but on the value of an item — a TV, a ring, a hammer, whatever. The length of a loan and the interest rate on it often depends on the state.

For example, in New York, shops have to hold on to pawned items for four months and can’t charge more than 4 percent interest per month; in Texas, it’s one month at a 15 to 20 percent rate for most items. People can sell their items to pawnbrokers directly as well, but that’s generally not the business model and not what most people do.

Basically, you bring in your watch, get a loan on it, get a ticket for it, and come back to redeem your watch at some point in the future, paying off the loan plus interest. If you don’t come back to pay off your loan — or at least keep paying the interest payments (some people leave items with the pawnshop for years) — the pawnbroker gets to keep your watch and can sell it.

“Absolute worst-case scenario with us, you lose your ring, you lose your watch. We do not garnish your wages, we do not ding your credit, we don’t prevent you from owning a home,” Tabach-Bank said.

According to the National Pawnbrokers Association, there are about 10,000 pawn stores nationwide that employ about 35,000 people and serve about 30 million customers annually. The stores run the gamut from publicly traded pawn companies, such as EZCorp and FirstCash, to small mom-and-pop operations. Many pawn businesses are multigenerational not only in ownership but in customers.

Pawn loans are “like clockwork for a lot of our customers,” Modell said. “There are people who live and breathe with the pawnshop.”

The NPA estimates that pawn loans average $150 for 30 days and that about 85 percent of loans are redeemed. That can vary, depending on the item — people are likelier to retrieve a family heirloom than they are a buzzsaw.

Pawnshops generally serve people without credit or with bad credit, though there are exceptions. They get compared to payday lenders, which are often predatory and suck people into cycles of debt. Are the interest rates pawnshops charge great? No. But on the scale of options for people without a lot of options, they’re not the worst, either.

“Pawn loans are, of course, one of the more expensive forms of credit, but they are often less costly than a payday or car title loan and are far less likely to trap consumers in long cycles of debt,” said Charla Rios, a researcher at the Center for Responsible Lending. “You do have instances where people are bringing in items, and they’re on loan for quite some time.”

She also noted the industry hasn’t really been growing. “Prior to Covid-19, the revenues for pawn loans were kind of flat,” she said.

Financially underserved consumers spent an estimated $189 billion in fees and interest on financial products in America in 2018, $9.2 billion of which went to pawnshops. By comparison, $25.4 billion went to overdraft fees.

“It’s a mixed story,” said John Caskey, an economist at Swarthmore College and the author of Fringe Banking: Check-Cashing Outlets, Pawnshops, and the Poor. “It’s not a complicated transaction where people are being swindled.”

Covid-19 has not been great for pawnshops

Whenever Tabach-Bank, the high-end pawnbroker, runs into people lately, they ask him about what they assume must be a boom in business this year. “People are like, ‘Business must be amazing, you must be crushing.’ But for most pawnbrokers across the nation, it’s been quite the contrary,” he said.

According to Cyndee Harrison, director of marketing and public relations at the National Pawnbrokers Association, members have reported loans falling by as much as 40 percent this year, and some shops have been forced to close down altogether. “When you have a 40 percent decrease in the core area of your business, that’s going to pinch,” she said.

There’s no single answer for what’s going on, but most pawnbrokers and experts have a two-pronged explanation. One is that people are staying home and spending less — they’re not going out to restaurants and bars, they’re skipping vacation, etc. The other is that the CARES Act, the $2.2 trillion stimulus package signed into law in March, got money to a lot of people by way of stimulus checks, expanded unemployment benefits, and Paycheck Protection Program loans to small businesses. Eviction moratoriums and forbearance on mortgages and student loan payments are also factored in.

In other words, people and businesses had more money, and they didn’t need to resort to the pawnshop to pay rent, float their payrolls, or even just go to the bar on Friday night. And it’s not just that they weren’t taking out new loans; they were also able to pay off their existing loans and redeem their stuff.

Kerry Rainey, board president of the NPA and owner of Bayou Pawn and Jewelry in Louisiana, described the situation as “complete madness and a complete change of our business structure.”

“Our pawns went way down, our redemptions went way up,” he said. And with all the extra cash, pawners turned into buying customers. “Now we’re having a hard time restocking the store and getting our inventory back up because of all of the sales that we’ve done.”

It’s an experience shared across the industry, among high-end shops and more typical operations, in blue states and red states.

“The way it’s turned out has been quite different than what we had anticipated, not only for us, but from some of the discussions we’ve had in other pawn stores in Las Vegas,” said Andy Zimmerman, the general manager of Gold and Silver Pawn in Las Vegas, made famous by the television show Pawn Stars.

Zimmerman said in their case, it’s not just about the stimulus and savings; it’s also the decline in casino traffic, especially earlier on in the pandemic. In Las Vegas, it’s not uncommon for gamblers to pawn items for money to bet with.

“When we’re at normal times … especially when big events happen in town and people are well-to-do, they have expensive jewelry, and they’re not very lucky at the tables. Because we have a pretty decent-sized bandwidth to take in expensive items, during those times, the loans would typically pick up,” he said.

Many of the measures from the CARES Act have ended or are about to. The extra $600 in weekly federal unemployment ended in July, PPP loans have been used up, and rent and mortgage payments put off are coming due. Pawnbrokers say that’s started to show up in their business now, too, as customers old and new are again in need of their services.

The publicly traded pawn company FirstCash reported that loans fell by 60 percent in the month of April, and while they began to improve, pawn balances were still down 30 percent at the end of September from the prior year, meaning people are still pawning things less and able to pay off existing loans more. In its third-quarter earnings report, the company indicated it expects the rebound to accelerate.

“We are starting to see people who are in need of short-term cash,” Hyde said. “The big question, of course, is what happens next, and none of us has a crystal ball.”

The negative effects on lower-end financial services aren’t limited to the pawn industry. The payday loan industry has seen a steep decline in business, too.

Pawnshops are an outgrowth of capitalism. If people had more money, they wouldn’t need them.

When asked, most pawnshop owners acknowledged that they were in an awkward position: Many people have been better off financially, at least when government stimulus was flowing, and that’s been bad for business. But shop owners countered that business overall is generally better when the economy is doing better than it is when it’s doing poorly, an assertion that experts backed up.

While the impression of pawnshops is that they are only there for people in moments of desperation, that’s not always the case. People will also pawn an item to buy a concert ticket or get that last bit of money they need for a vacation. And in good times, they tend to feel more optimistic they can pay it off.

“A pawnshop tends to do best when the economy is good and rolling and people feel safe and secure with pawning their extra item — a laptop, jewelry, television, a watch — something like that so they can just get the temporary loan because they know they’ve got their next payroll check coming,” Barnett said. A one-time government loan doesn’t provide the same kind of future assurances.

For many people, the pawnshop is just a part of their financial lives, and some of their possessions are just a part of their budget. They build up relationships with brokers and will come in to get a loan time and time again.

Lewin, the Illinois pawnbroker, told me about a widow in her 70s who has been coming to him every month for years, getting a $200 or $300 loan on a nice piece of jewelry to tide her over before her next Social Security check comes in. When she comes to pick up her jewelry, they clean it for her, give her a cup of coffee, and catch up.

Yes, pawnshops charge high interest rates that more traditional financial institutions don’t. But they are also a lifeline for people who often don’t have access to more traditional financial institutions or just need to figure out a way to get by.

Wendy Woloson, a historian at Rutgers University and the author of In Hock: Pawning in America From Independence Through the Great Depression, noted that throughout history pawnshops have been vilified in an effort to downplay the broader flaws their existence exposes. “The exploitative practices that capitalism relies on would not have worked if it were not for the pawnbroker to help people get by week-to-week,” she said.

If people had more money in their pockets, if the capitalist system worked better, then they wouldn’t need pawnbrokers as much in the first place. 2020 has been a case study showing just that. But while more help is not on the way from the federal government, it’s still going to be there from the pawnshop.

“There would be a lot of people in a world of hurt if pawnshops didn’t exist,” Farr said.

Source link

Continue Reading

Bad Credit

Third of Brits feel depressed following mortgage rejection

Published

on

Of those who have experienced rejection when applying for a new mortgage, a third claim they were left feeling depressed according to a survey by new specialist mortgage broker platform Haysto.

More than half (53%) felt marginalised, unfairly treated and with a sense of injustice as a result, whilst 21% said the process had left a long-term negative effect on their mental health.

Haysto has recently launched to make mortgages possible for those who may have previously been told they won’t be able to get one.

They specialise in bad credit, self-employed and complex mortgages.

Haysto’s research also showed that over a third of Brits (35%) feel they couldn’t get a good mortgage deal for themselves, wouldn’t want to go through the stress of applying or are unlikely to apply at all for fear of being rejected.

Furthermore, 90% incorrectly assumed taking a COVID-19 mortgage payment holiday could negatively affect their credit score, despite the Financial Conduct Authority (FCA) and lenders ensuring that credit reports won’t be affected.

More than 50% of mortgages for people who are self-employed or have bad credit aren’t available directly from lenders and are only accessible through specialist brokers.

Haysto is working to raise awareness among those in complex situations that they could still qualify for a mortgage, even if they have been previously rejected, and that the process needn’t be as daunting and negative as they may assume.

Over half of Haysto’s customers have been rejected for a mortgage elsewhere.

The company is also working to tackle the psychological impact of applying for and being rejected for a mortgage.

Because of this, they’ve pledged that for every mortgage they help complete for someone, they’ll donate a percentage of their profits to the mental health charity Mind, so they can continue to support people struggling with financial worries.

Paul Coss, co-founder of Haysto, said: “It’s disappointing that the entire mortgage process remains shrouded in misconceptions and confusion as this is having a significant and often unnecessary impact on mental health.

“Self-employment and poor credit histories are on the rise in the UK so a growing number of people applying for mortgages simply don’t fit the traditional eligibility mould.

“Many are rejected by traditional lenders and online platforms that can’t see past their situation, while others are put off from applying at all.

“Haysto doesn’t rely on automation.

“We believe strongly in: no more computer says “No”.

“Our platform provides the market’s most personalised mortgage experience by matching customers to specialist mortgage brokers based on their unique situation.

“We want to help everyone access their dream home.

“Even if they have been rejected before, there are specialist lenders and brokers specifically for self-employed and bad credit mortgages who can help.”




Source link

Continue Reading

Trending