The home buying process isn’t always easy, and without preparation, homebuyers can experience more difficulty than necessary. When you need a home loan, the hope is that your lender approves your loan application, but if you want the best possible outcome, it is equally important for you to both understand how certain factors can affect your ability to secure a home loan and what you can do to ensure your odds of approval are high.
If you are planning to purchase a home, here are a few things you should consider when applying for a home loan.
Your Credit Score
When it comes time to apply for a home loan, one of the many factors that will affect your eligibility is your credit score. It is likely that your mortgage lender will have a minimum credit score requirement, and if you don’t meet it, your loan application may be denied. It would be wise to review the minimum credit score requirement before you apply for a mortgage to ensure you have a good chance of getting approved.
If there is a lender that you prefer, but your credit score does not meet the credit score requirement, you can take the necessary steps to improve your score before you apply for a loan. Paying down a small debt, getting derogatory information removed from your report, or ensuring your bills are paid on time can all improve your credit score.
Homebuyers are often expected to put money down on their new home. This amount will vary, but people should keep in mind how their down payment can affect them. For example, how much you put down on your home will factor into the total cost of your home loan. The home may cost $200,000, but if you are putting down 10%, or $20,000, you won’t need to take out a loan for $200,000 to cover the total cost of the home.
Additionally, when you put down a larger down payment and decrease the amount of the home loan, a lender may be more open to approving your application and offering a lower interest rate, which will ultimately affect the total cost of the loan and your monthly payment amount.
In addition to reviewing your credit score, lenders will likely review your debt-to-income ratio. This number is important because it allows lenders to compare how much money you owe with how much money you make. You can calculate your debt-to-income ratio by dividing your total of their monthly bills by your total monthly income. For example, $2,000(monthly bills)/$3,500(monthly income)= 57%.
Type of Loan
Lenders offer different types of home loans, so you’ll want to determine what type of loan you will apply for when the time arrives. Depending on the lender, you may have access to loans designed for first-time homebuyers, veterans, and other buyers fitting of certain criteria. Along with these different types of loans may come different types of requirements, including the location of the home, credit score, and down payment amount.
With various types of loans existing, you can also speak to your mortgage lender to determine which is the best option for you.
Owning a home is a huge accomplishment. And as difficult as the home buying process may be for some, it doesn’t have to be. If you know where you stand, you may find fewer obstacles in your way and get approved for your dream home.
How Bankruptcy Works & When it’s a Good Idea
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?
Before 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
Being 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.
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
Tips for Recovering Financially After Divorce
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
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.
Spring Wedding? Tips on Saving Money on Your Destination Wedding
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.
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.
- 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.
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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