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How To Become A Homeowner in 2021



The homeownership rate ticked up more than 2 percentage points in the last year, to 67.4 percent. And there are many renters eager to join the club, especially since mortgage interest rates dropped to all-time lows during the coronavirus pandemic.

For first-time homebuyers, the process of becoming a homeowner can be intimidating. It’s a big purchase that comes with a host of responsibilities and costs. But, it’s also a long-term investment that can help secure your financial future.

For some, it might take longer to achieve the American dream — especially if you have existing debt, live in an expensive area or are just starting your career — whereas others may have all the pieces in place to buy a home already. Regardless of how much you earn or what you have in the bank, it’s always a good time to start thinking about buying a home.

Here we break down what you need to do to achieve homeownership in 2021 or beyond.

How to budget for homeownership

  • How much can you afford?
  • Create a need vs. want list
  • Where can you afford a house?

Every major purchase should begin with a carefully-constructed budget,  which should include your debt, income and assets. You’ll also want to realistically assess costs associated with homeownership. How much will you be able to afford altogether for monthly mortgage payments, property insurance, taxes and homeowners association fees (if applicable). Make sure you leave some breathing room for unexpected expenses, too.

This will give you a clearer picture of what you can afford and how much you have available for a down payment. Our online calculator can help you determine how much house you can afford.

Would-be buyers who live in expensive areas might need to think creatively when it comes to buying a home.

“One option might be to find a seller that is willing to do a ‘rent to own.’ In this situation, you start off by renting, and at some point, exercise an option to buy,” says Chuck Czajka, founder at Macro Money Concepts. “You might also be able to find a seller that would be willing to give a private mortgage. Looking for an affordable home might mean a smaller home or even a condominium.”

Getting your credit in shape

Get your credit in order, because it has a direct effect on your interest rate.

Whether you have no credit, average credit or bad credit, getting your FICO score in the best shape possible is a crucial step in buying a home. To qualify for a conventional mortgage you have to have a minimum 620 FICO score to work with most lenders. There are other loans, such as FHA and VA loans, with looser or no credit-score requirements, so you may still be able to buy a home with a lower score.

However, the second reason for improving your credit score is that you’ll qualify for a better interest rate with a higher credit score. The lower your interest rate, the less interest you’ll pay each month and over the life of your loan.

If you need help managing your money or figuring out how to improve your credit, meet with a financial adviser.

“Find someone that not only has a good reputation, but also someone you feel connected with,” says Peter Boomer, executive vice president at PNC Bank. “Someone who is willing to build a relationship with you, not only help you with figuring out how much you can afford but one that will help you figure out how much you want to afford.”

Saving for a down payment

A down payment is one of the major barriers to homeownership for most first-time buyers. As home prices continue to rise, so does the cost of a down payment — especially if you want to avoid private mortgage insurance (PMI). PMI is an additional charge on top of your regular monthly mortgage payment, usually — about 0.58 to 1.86 percent of your loan payment. Homeowners who put less than 20 percent down must pay PMI if they have a conventional or FHA loan (VA loans don’t have this requirement). The charge goes away once you’ve built up 20 percent equity in your property.

If you have less than 20 percent saved for a down payment, you should add PMI to the list of housing costs when you’re figuring your budget.

Most first-time buyers have to dip into savings or investments to have enough for a down payment. Family members can also chip in for your down payment, which usually requires a gift letter. A real estate agent can help you write up this document, just be sure to include all of the necessary information such as the amount of money that’s being given to you, a statement that the money is a gift and not a loan and where the money is coming from (checking account, etc.).

Once you know how much you can put down, you might decide to postpone homeownership until you have more saved. For people with less than 20 percent who want to minimize their long-term costs, another option is to pay off your loan faster by making larger-than-required monthly payments. And, if your home appreciates in value quickly, you can get a new appraisal to show that the balance has dropped below 80 percent of the home’s value, which can also eliminate the PMI requirement.

If you plan to buy in the next year or two, the safest place for your down payment money is a high-yield savings account.

Identify the best mortgage type for you

It’s important to determine the kind of mortgage you want as well as what you qualify for. A real estate agent can help you identify loans and lenders that fit with your goals and financial situation. This is a good time to get recommendations from friends and colleagues.

If you have a  FICO score lower than 620, you might not be able to get a conventional mortgage. But other options, such as FHA, VA and USDA loans may be available.  However, these loans come with certain restrictions conventional mortgages don’t have.

For instance, it’s harder to get a fixer-upper with an FHA loan. Here’s where you have to go back to your balance sheet and compare what you have with what you need and want. Different loans offer their own set of advantages and drawbacks, so it’s important to research them carefully.

Those who want to pay off their loans early and get a lower interest rate can opt for a 15-year mortgage rather than the traditional 30-year mortgage. A shorter term means higher monthly payments, but an overall lower loan cost, because you pay less interest over the life of the mortgage.

Homebuyers on a fixed budget are usually better off with a longer loan, and they can still make extra payments toward their principal as their budget allows,) without the ongoing obligation of larger monthly payments. If someone loses their job or an emergency expense arises, they can stop making extra payments and pay only the minimum required, until they can afford to increase their spending again down the road.

“I advocate for taking a 30-year mortgage as opposed to a 15-year mortgage, simply because the monthly payments will be lower,” Czajka says. “This way, buyers can grow into their home. Should they decide to pay the home off early, they can pay a little more to the principal as they get used to the new budget.”

Get preapproved for a mortgage

Before you start shopping for a house, find out how much mortgage you qualify for. The best way to do that is by getting preapproved.

To do so, you’ll provide lenders with detailed information about your work history, income, debt, assets and credit profile. The lender will verify the information you provide, including running a hard credit check.

If you’re preapproved, you’ll receive a loan estimate with how much you can borrow. A preapproval letter is a great asset when you’re shopping for a home, because it lets sellers know you’re a serious and qualified buyer.

Before you sign a home purchase contract

With your preapproval letter in hand, you can start shopping. This is the exciting part of buying a house. You might imagine the parties you’ll host by your new pool or the long baths you’ll take in your oversized master bathroom.

But, avoid being guided solely by your emotions, Boomer warns. It’s important to take time and research everything from the neighborhood to the schools, particularly if you have a family or plan on starting one — even if it’s down the road. As more homeowners are staying in their houses longer, it’s wise to think of what you might want a few years from now.

“Don’t be in such a rush to make a buying decision. Start by investigating the area that you want to live in. If starting a family is in the cards, check out the schools in the area. Look at other nearby homes to see if the neighborhood is growing and if prices will be increasing,” Boomer says. “The last thing you want to do is purchase the biggest and best home in the neighborhood. Starting out with a house that needs a little attention can pay dividends later when it’s time to upgrade. Purchase a house for a lower price, fix it up and sell it at a higher price later.”

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Bad Credit

If You Want Consumers to Lose, Network Regulation is a Must – Digital Transactions



After the current U.S. Congress was sworn in, a predictable chorus of merchants, lobbyists, and lawmakers demanded new interchange price caps and other government mandates to decrease credit card interchange fees for merchants. The tired attacks on credit cards are an easy narrative that focuses almost exclusively on the cost side of the ledger, while completely ignoring the cards’ important role in the economy and the regressive effects of interchange regulation. 

To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents. For decades, they have promised these interventions would eventually benefit consumers. But the lessons from the Durbin Amendment in the United States and price cap regulation in Australia is clear. Although some policymakers bemoan the current economic model, arbitrarily “cutting” rates for the sake of cuts completely ignores the economic reality that as billions of dollars move to merchants, billions are lost by consumers. 

For the uninitiated, let’s break down what credit interchange funds: 1) the cost of fraud; 2) more than $40 billion in consumers rewards; 3) the cost of nonpayment by consumers, which is typically 4% of revolving credit; 4) more than $300 billion in credit floats to U.S. consumers; and 5) drastically higher “ticket lift” for merchants. 

Johnson: “To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents.”

These are just some of the benefits. If costs were all that mattered, American Express wouldn’t exist. Until recently, it was by far the most expensive U.S. network. Yet, merchants still took AmEx because they knew the average AmEx “swipe” was around $140, far more than Visa and Mastercard. 

Put simply, for a few basis points, interchange functions as a small insurance policy to safeguard retailers from the threat of fraud and nonpayment by consumers. Consider the amount of ink spilled on interchange when no one mentions that the chargeoff rate for issuing banks on bad credit card debt exceeds credit interchange.

Looking abroad, interchange opponents cite Australia, which halved interchange fees nearly 20 years ago, as a glowing example of how to regulate credit cards. In truth, Australia’s regulations have harmed consumers, reduced their options, and forced Australians to pay more for less appealing credit card products. 

First, the cost of a basic credit card is $60 USD in many Australian banks. How many millions of Americans would lose access to credit if the annual cost went from $0 to $60? Can you imagine the consumer outrage? 

In a two-sided market like credit cards, any regulated shift to one side acts a massive tax on the other. For Australians, the new tax fell on cardholders. There, annual fees for standard cards rose by nearly 25%, according to an analysis by global consulting firm CRA International. Fees for rewards cards skyrocketed by as much as 77%.

Many no-fee credit cards were no longer financially viable. As a result, they were pulled from the market, leaving lower income Australians, as well as young people working to establish credit, with few viable options in the credit card market.

Even the benefits that lead many people to sign up for credit cards in the first place have been substantially diluted in Australia because of the reduction of interchange fees. In fact, the value of rewards points fell by approximately 23% after the country cut interchange fees.

Efforts to add interchange price caps would have a similar effect here in the U.S. A 50% cut would amount to a $40 billion to $50 billion wealth transfer from consumers and issuers to merchants. For the 20 million or so financially marginalized Americans, what will their access to credit be when issuers find a $50 billion hole in their balance sheets? 

The average American generates $167 per year in rewards, according to the Consumer Financial Protection Bureau. Perks like airline miles, hotel points, and cashback rewards would be decimated and would likely be just the province of the rich after regulation. Many middle-class consumers could say goodbye to family vacations booked at almost no cost thanks to credit card rewards.

As the travel industry and retailers fight to bounce back from the impact of the pandemic, slashing consumer rewards and reducing the attractiveness of already-fragile businesses is the last thing lawmakers and regulators in Washington should undertake.

Proposals to follow Australia’s misguided lead in capping interchange may allow retailers to snatch a few extra basis points, but the consequences would be disastrous for consumers. Cards would simply be less valuable and more expensive for Americans, and millions of consumers would lose access to credit. University of Pennsylvania Professor Natasha Sarin estimates debit price caps alone cost consumers $3 billion. How much more would consumers have to pay under Durbin 2.0?

Members of Congress and other leaders should learn from Australia and Durbin 1.0 to avoid making the same mistake twice.

—Drew Johnson is a senior fellow at the National Center for Public Policy Research, Washington, D.C.

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Increase Your Credit Score With Michael Carrington



More than ever before, your debt and credit records can negatively impact you or your family’s life if left unmanaged. Sadly, many Americans feel entirely helpless about their credit score’s present state and the steps they need to take to fix a less-than-perfect score. This is where Michael Carrington, founder of Tier 1 Credit Specialist, comes in. Michael is determined to offer thousands of Americans an educated, informed approach towards credit restoration.

Michael understands the plight that having a bad credit score can bring into your life. His first financial industry job was working as a home mortgage loan analyst for one of the nation’s largest lenders. Early on, he had to work a grueling schedule which included several jobs seven days a week while putting in almost 12-hour days to make $5,000 monthly to get by barely.

“I was tired of living a mediocre life and was determined to increase the value that I can offer others through my knowledge of the finance industry – I started reading all of the necessary books, networking with industry professionals, and investing in mentorship,” shares Michael Carrington. “I got my break when I was able to grow a seven-figure credit repair and funding organization that is flexible enough to address the financial needs of thousands of Americans.”

With his vast experience in the business world, establishing himself as a well-respected business leader, Michael Carrington felt he had the power to help millions of Americas in restoring their credit. Michael learned the FICO system, stayed up to date on the Fair Credit Reporting Act (FCRA), found ways to improve his credit score, and started showing others.

The Tier 1 Credit Specialist uses a tested and proven approach to educate their clients on everything credit scores. Michael is leveraging his experience as a home mortgage professional, marketing executive, and global business coach to inform his clients. He and his team take their time to carefully go through their client’s credit records as they try to find the root of their problem and find suitable financial solutions.

The company is changing lives all over America as it helps families and individuals to repair their credit scores, gain access to lower interest rates on loans and get better jobs. What Tier 1 Credit Specialists is offering many Americans is a chance at financial freedom.

Michael Carrington has repaired over $8 million in debt write-ups and has helped fund American’s with over $4 million through thousands of fixed reports. “I credit our success to being people-focused,” he often says. “The amount of success that we create is going to be in direct proportion to the amount of value that we provide people – not just our customers – people.”

Because of its ‘people-focused goals, the Tier 1 Credit Specialist is determined to help millions of Americans achieve financial literacy. It is currently receiving raving reviews from clients who are completely happy with the credit repair solutions that the company has provided them.

Today, Michael Carrington is continuing with a new initiative to serve more Americans who suffer from bad credit due to little or no access to affordable resources for repair.

The Tier 1 Credit Socialist brand is changing the outlook of many families across America. To do this, the company has created an affiliate system that will provide more people with ways of earning during these tough economic times.

As a well-respected international business leader and entrepreneur with numerous achievements to his name Michael Carrington aims to help millions of Americans achieve the financial freedom, he is experiencing today. Tier 1 Credit Socialist is one of the most effective credit repair brands on the market right now, and they have no plans for slowing down in 2021!

Learn more about Michael Carrington by visiting his Instagram account or checking out the Tier 1 Credit Specialist website.

Published April 17th, 2021

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Does Having a Bank Account With an Issuer Make Credit Card Approval Easier?



Better the risk you know than the one you don’t.

When it comes to personal finance, nothing is guaranteed. That goes double for credit. That’s why, no matter how perfect your credit or how many times you’ve applied for a new credit card, there’s always that moment of doubt while you wait for a decision.

Issuing banks look at a wide range of factors when making a decision — and your credit score is only one of them. They look at your entire credit history, and consider things like your income and even your history with the bank itself.

For example, if you defaulted on a credit card with a given bank 15 years ago, that mistake is likely long gone from your credit reports. To you and the three major credit bureaus, it is ancient history. But banks are like elephants — they never forget. And that mistake could be enough to stop your approval.

But does it go the other way, too? Does having a bank account that’s in good standing with an issuer make you more likely to get approved? While there’s no clear-cut answer, there are a few cases when it could help.

A good relationship may weigh in your favor

Credit card issuers rarely come right out and say much about their approval processes, so we often have to rely on anecdotal evidence to get an idea of what works. That said, you can find a number of stories of folks who have been approved for a credit card they were previously denied for after they opened a savings or checking account with the issuer.

These types of stories are more common at the extreme ends of the card range. If you have a borderline bad credit score, for instance, having a long, positive banking history with the issuer — like no overdrafts or other problems — may weigh in your favor when applying for a credit card. That’s because the bank is able to see that you have regular income and don’t overspend.

Similarly, a healthy savings or investment account with a bank could be a helpful factor when applying for a high-end rewards credit card. This allows the bank to see that you can afford its product and that you have the type of funds required to put some serious spend on it.

Having a good banking relationship with an issuer can be particularly helpful when the economy is questionable and banks are tightening their proverbial pursestrings. When trying to minimize risk, going with applicants you’ve known for years simply makes more sense than starting fresh with a stranger.

Some banks provide targeted offers

Another way having a previous banking relationship with an issuer can help is when you can receive targeted credit card offers. These are sort of like invitations to apply for a card that the bank thinks will be a good fit for you. While approval for targeted offers is still not guaranteed, some types of targeted offers can be almost as good.

For example, the only confirmed way to get around Chase’s 5/24 rule (which is that any card application will be automatically denied if you’ve opened five or more cards in the last 24 months) is to receive a special “just for you” offer through your online Chase account. When these offers show up — they’re marked with a special black star — they will generally lead to an approval, no matter what your current 5/24 status.

Credit unions require membership

For the most part, you aren’t usually required to have a bank account with a particular issuer to get a credit card with that bank. However, there is one big exception: credit unions. Due to the different structure of a credit union vs. a bank, credit unions only offer their products to current members of the credit union.

To become a member, you need to actually have a stake in that credit union. In most cases, this is done by opening a savings account and maintaining a small balance — $5 is a common minimum.

You can only apply for a credit union credit card once you’ve joined, so a bank account is an actual requirement in this case. That said, your chances of being approved once you’re a member aren’t necessarily impacted by how much money you have in the account.

In general, while having a bank account with an issuer may be helpful in some cases, it’s not a cure-all for bad credit. Your credit history will always have more impact than your banking history when it comes to getting approved for a credit card.

For more information on bad credit, check out our guide to learn how to rebuild your credit.

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