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What is a Mortgage Pre-approval & What Are the Benefits?

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When shopping for a mortgage, you need to have any and all information that will expedite the process. Knowing what limits you are working with can also help you during the negotiation process; this is where mortgage pre-approval comes in.

Mortgage pre-approval is a certified letter from a lender indicating how much you can borrow. It also states the different kinds of loans that you may be eligible for and the interest rates that you should expect. The letter is valid for around 60-90 days, after which you need another pre-approval assessment for your mortgage shopping.

Mortgage Pre-Approval

Requirements for a Mortgage Pre-approval

Being a financial assessment of your mortgage eligibility, the pre-approval process involves looking at the health of your credit. Among the requirements that lenders will ask for include;

  • Social Security Number
  • Permission to access your credit report
  • Recent pay stubs
  • W-2s
  • Federal Tax Returns
  • 2 months bank statements (all accounts types)

It’s important to note that a pre-approval letter is not a contractual agreement between you and the lender. It’s just an assessment and not a commitment to give you the loan.

Benefits of Mortgage Pre-approval

  1. Saves on time

Pre-approval provides you with an overview of the amount of loan that you qualify for. It also helps you to narrow down the types of mortgage programs that are available to you. This comes in handy in shortening the time that you may have spent on mortgage shopping.

Think of it this way; without a shopping list, you waste time by going up and down the aisles in a supermarket trying to locate what you might need. With a list at hand, you pick specific things, and in a short while, you are done. Pre-approval works in basically the same way; you spend time rate-shopping only on the specific loan(s) that you qualify for.

  1. Lenders take you seriously

Real estate is a very competitive industry. Lenders don’t want to waste time on people who are not serious about homeownership. It’s easy for them to dismiss your application if they are not confident in your commitment.

A pre-approval letter goes a long way in adding weight to your loan application. It shows that you a prospective client and that your offer demands serious consideration.

When a lender takes you seriously, your approval gets a boost. They will speed up the process since you have already demonstrated the ability and serious intent of purchase. Yours becomes a done deal and your application gets a head-start in closing. The appraisal can begin immediately which can lead to a shortened closing period; by a week or two.

  1. Gives you negotiation power

When a lender is negotiating with you, he will offer rates depending on the seriousness of your application. This means that he may offer somewhat prohibitive rates because he is banking on someone else who might also be lined up for the home. This is a genius business move on his side since it’s all about making the sale.

Pre-approval is a sure way to avoid this kind of frustration. The letter gives you an edge on the negotiating table. Your application will be carrying more merit and the lender will be more inclined to offer you cheaper rates. Pre-approval may also allow you to negotiate the rates to the lowest allowable for your loan amount and credit score.

  1. Knowledge of other costs

Apart from the principal amount and the interest that a mortgage will attract, there are other additional costs to contend with. Knowledge of these costs allows you to plan better and shop for a loan that you are able to sustain. Pre-approval allows you to have an idea of what these costs entail.

You will be provided with a list of additional costs that are to be expected. These include closing costs, homeowner’s association fees, taxes, and other government fees. This is important especially to those in the market for the first time. It will come in handy when you have to make a decision on a home that might require restorations or upgrades once bought.

The Take-Away

Getting pre-approved for a loan is an important step when shopping for a mortgage. It allows you to only concentrate on the property that you can afford. Lenders also get to take you seriously when you are bargaining on the rates. Your mortgage application also gets to be hastened since the pre-approval letter shows your income’s ability to pay off the loan.

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How Bankruptcy Works & When it’s a Good Idea

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Bankruptcy offers a way out of debt by either eliminating it or repaying part of it. The decision on whether or not to file for bankruptcy is however not an easy one. You may end up losing most of your assets or none at all. At the same time, some debts are not covered by bankruptcy. To help you in making the right decision let’s look at how bankruptcy works and when it’s a good idea to file for one.

Which Debts are Discharged by Bankruptcy?

Filing for BankruptcyBefore filing you have to decide on the type of personal bankruptcy that is unique to your financial situation. The process covers consumer debts such as credit cards, personal loans, mortgages, and medical debts. Non-consumer debts cannot be forgiven through personal bankruptcy. These include alimony, taxes, child support, and criminal restitution.

It’s advisable to have a bankruptcy attorney go through your finances to ascertain which debts qualify as consumer debts and which ones do not. For example, a student loan can be either depending on how it was used.

Types of Personal Bankruptcies

In the United States a person can file for either one of the following personal bankruptcies;

Chapter 7 is also known as liquidation bankruptcy. It involves the sale of assets that are not protected by bankruptcy and the distribution of the proceeds to creditors. The proceeds can cover your debts in as little as 3 months. Chapter 7 bankruptcy will be ideal if you don’t have a lot of assets that need protection.

Chapter 13 is also referred to as debt repayment or reorganization. It’s ideal for debtors who have many or valuable assets and don’t want to lose them. Basically, the debtor tables a proposal that shows how he/she plans to clear amounts owed within a given time frame. One gets the chance to clear all debts either partially or in full. You can also have others dismissed entirely.

Your attorney does a “means test” to determine which bankruptcy you are eligible for. In a nutshell, you may not be eligible for Chapter 7 if it’s evident that your income can settle debts under Chapter 13. Similarly, a Chapter 13 bankruptcy may be denied if your debts are too high in comparison to your income.

When is Bankruptcy a Good Idea

When is Bankruptcy a Good IdeaBeing eligible for bankruptcy doesn’t necessarily mean that you need to file for one. It could be that all you need is a little professional advice on how to manage your finances.

You also have to contend with the fact that bankruptcy stays on your credit report for seven to ten years. That said, there are some circumstances that call for bankruptcy;

#1 When debt management programs don’t work

Credit counseling is a service offered by most financial advisors and organizations. You may be advised on how to reduce personal expenses in order to free more of your income to clear debts. Other measures include renegotiating terms with credit companies or other creditors.

When debt management fails, whether it’s due to non-commitment on your part or refusal by creditors, then bankruptcy could be your only way out.

#2 When you are being sued

A lawsuit filed by creditors can be tricky when you have no means of repaying and remaining liquid. The judgment could lead to the sale of assets or foreclosure on your properties. When faced with such eventualities, filing for bankruptcy could be the only way for you to remain afloat. The process offers you the chance to retain some of your property that would otherwise be auctioned.

#3 When faced with overwhelming medical bills

Most financial woes result from making wrong decisions on investments and credit lines. You may however find yourself faced with bills that are not of your own making. Such include medical bills that are not covered by insurance and are beyond your financial reach. In such circumstances, filing for bankruptcy is advisable; the bill will be discharged without over-tasking your income or your family’s finances.

#4 Insolvency Due to Industry Crisis

More often than not you will find yourself contemplating mortgage as an investment. When the industry is in a boom, then you are all set to make a profit on resale in the foreseeable future; that is however not always the case. Upward adjustments on mortgage repayments can leave you deep in debt. Filing for bankruptcy could be the only way of salvaging your property from mortgage lenders.

The takeaway

Bankruptcy is a federal court-protected financial tool that gives you a “fresh start” from the debt burden. The process becomes part of your credit report for 7-10 years. It can also lead to loss of assets hence should be done as a final result. If you are facing foreclosure, hefty medical bills or a creditor’s lawsuit then filing for bankruptcy could be your only way out. The above information gives you an overview of how to go about it.

Related Article: Life After Bankruptcy

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Tips for Recovering Financially After Divorce

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If life was a fairy tale, every marriage would last ‘until death’. Couples would spend their lives sharing not only love but co-depending on all matters including finances. Unfortunately, the reality is sometimes not kind and some marriages end up in divorce.

This new phase leaves some spouses unscathed while others are left with massive debts, new financial responsibilities, or a lack of enough know-how on how to manage personal finances. Finding your way back to financial freedom is not easy; it takes time and dedication. To put you on the right path, here are five tips for recovering financially after divorce. 

#1 Start by Dealing with Your Emotions

Repairing Finances After Divorce

Divorce comes with grief and anger from the lost love, emotional support, shared dreams, and so on. This has a draining effect on your quality of life and spiraling into depression is a common occurrence.

If the depression goes unchecked, you risk falling into irrational behavior like going off-budget leading to more financial ruin; to avert this, seek counseling. This could be from a therapist, joining a support group, or even opening up to a trusted family member or a religious leader.  

#2 Create a Plan

Now that your assets have been split, you have to take care of all financial obligations that come with your share. List every asset and debt to know exactly what you are dealing with. This will help you in coming up with a detailed expenditure plan that addresses your income against debt repayments and future goals.

Identifying your financial limits will also come in handy in ensuring that your expectations are realistic and achievable. Create a formal plan, complete with an investment program that takes current income into account and one that is tailored to help you meet your set goals.

#3 Check your Credit

During the marriage, your credit score may not have mattered, especially if your spouse was the sole breadwinner and paying off bills never concerned you. Being alone means your creditworthiness will now come into play; you have to know your credit score which will greatly affect this.

A low score may result in adjustments on mortgage payments, difficulty in getting a job, or even an apartment. Immediately after the divorce is finalized or better still during the proceedings, check and start improving your credit score.

#4 Increase your Savings and Income

Divorce may call for cutting back on your expenses or a complete lifestyle downgrade. That said, being divorced should not mean being miserable. If you are unemployed, start looking for a job to supplement your alimony check. You can also look for a second job, if you already have one, to increase your current earnings.

A successful financial rebound is pegged on the size of your savings. With meager savings, you may be forced to over-rely on credit cards and personal loans to maintain your lifestyle. This can be avoided by adopting a savings plan; stow away as much money as your income allows, this will shelter you during emergencies or unexpected expenditures.  

#5 Seek Expert Advice

Securing your finances is not an easy task even for the rich or staunch savers. This is where the services of financial advisors come in: They guide you in completely separating your finances from those of your ex and making sustainable plans for the future. 

You will receive expert advice on how to; close joint accounts, transfer house and other asset deeds to your name, update beneficiary information on your will and insurance, balance your accounts, prioritize savings, file taxes, and how to go about any other money-related task that your ex used to handle.

Bottom Line Divorce is stressful, but the pitfalls can be reduced by adopting ways to keep your finances healthy. These five steps will not change your financial situation overnight but are a good place to start. In a nutshell, you should start by accepting your situation and dealing with the emotional turmoil. Once your mind is in the right place, come up with a plan on how to increase savings and income, and improve your credit score. Lastly, don’t shy away from engaging an expert to help you in making divorce settlement less complicated and guiding you through your financial projections.    

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Spring Wedding? Tips on Saving Money on Your Destination Wedding

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Are you planning for a spring wedding? You are not alone; many love birds like planning their destination wedding for this time of the year. Spring is that unique season of the year where love is in the air, flowers are blooming as plants are blossoming.

Unfortunately, a wedding budget can kill your dream of a spring wedding before it sees the light of day. The question is; can you still enjoy an awesome wedding on a tight budget? Indeed you can. Our tips on saving money on your destination wedding have got you covered.

Spring Destination Wedding

Choose a Resort Offering an All-Inclusive Bundle

All-inclusive wedding bundles will enable you to get a flat rate on your whole wedding package. In fact, they can save you hundreds and even thousands on your wedding if done right.

These bundles may include food, sporting activities, drinks, makeup services, spa services as well as other guest events. As for drinks, you can have any of the three below:

  • Cash bar
  • Open bar
  • Consumption bar

A consumption bar can help you strike a balance between your guests getting some free drinks and paying for extra ones. You can make the bar open to your guests but set a spending threshold or a time limit with the owner. If the guests hit the limit or reach the set time, it can then be converted to a cash bar. This will save you money.

Another advantage of wedding bundles is that costs involving decoration, parking, photo sessions, and transport are reduced since your location is the same.

Combine Your Wedding and Honeymoon

Some resorts will offer you incentives and discounts if you combine your wedding with your honeymoon. Having your destination wedding and your honeymoon in the same location will help you save on traveling and other costs

You should, however, visit the place prior to the wedding to make sure it is diverse and interesting enough for both occasions. Another way to save would be to pack travel-sized items that you will need for your honeymoon to avoid buying from vendors.

Slash your Guests List

Naturally, a destination wedding doesn’t attract hundreds of guests; this ultimately reduces the financial pressure that comes with your wedding. Still, if there is a way you can further slash the guest list, do it by all means. 

Select an Offseason Date For Your Wedding.

Offseason wedding dates attract low rates and costs charged on weddings by resorts. Find out places which offer discounts for weddings on certain dates. As good as it sounds to your pocket, it is important to make sure that the dates you choose for your wedding won’t lead to a low turnout.

Additionally, for wedding festivities, you can choose a weekday to ensure even as guests come they won’t be overstaying as they also need to get back to their commitments.

You can also save your wedding costs by scheduling your wedding for a less traditional time of day. If for example the ceremony is planned for a weekday afternoon, the venues will charge less as compared to a Saturday afternoon event. Your guests might even drink less.

Consider Local Lenders for Your Wedding Supplies

Not everything you need for your destination wedding can be found where you are going to wed. You may need additional items and services. Consider local vendors who can offer reasonable prices from the wedding location rather than bringing vendors from home.

If you come with your vendors you have to cater for their travel and accommodation costs. Furthermore, if they are bringing items with them to a different country, you will have to cover the shipping cost directly or they will be indirectly included when you get priced.

Make sure you get recommendations from family and friends about the best vendors from where you are going to wed. You can also use Google and social media to find good vendors in advance.

The Take-Away

Destination weddings are the trend nowadays; this doesn’t mean you need to break the bank to have one. With proper planning, flexibility, and any of the above tips that suit you, you can whisk your love away to say ‘I Do’ in a destination of your dreams.

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