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 to Avoid Racking Up Debt During the Holidays
The holidays bring a lot of excitement and cheer. But is also a time characterized by a lot of spending. Statistics show that holiday spending goes up every year in the last few years. Unfortunately, holiday expenditure can take a big chunk out of your credit card.
It may feel great while the holidays last but the feeling may not last when you find yourself up to your neck in debt accrued during the holidays. Debt can mess up your life and interfere with your plans especially at the beginning of the year. The question is; can you still enjoy the holidays and still manage to keep off unnecessary debt? Yes indeed! Here are proven ways on how to avoid racking up debt during the holidays.
Work with a Budget
A budget helps you to plan for the available resources and keeps you from doing spontaneous shopping. In your budget, categorize your spending and set money allocation for each item. This can help you have a general figure of the amount that you want to spend and also help you to know where to give more weight. A budget would be worthless if you don’t stick to it; be sure to strictly adhere to it and you will be grateful.
Use Cash to Pay for Expenses
Holiday debts result from credit cards and other loans. Research shows that people who use credit cards for shopping are likely to use many times more money than those that pay cash. There are different ways in which you can put aside some cash for the holiday:
- Sell stuff that you don’t need in the house. This can be furniture, play gear for kids, electronics, kitchen gadgets, etc. As long as they are in good condition and someone can put them into good use, they are better off bringing you some cash.
- Set up a holiday account early in advance
- Use your Christmas bonus to boost your expenditure.
- Cut cost on your normal expenditure to save for the holidays
Adopt Cost-Effective Holiday Events
Taking your family for a cruise around the Caribbean Islands and lodging in 5-star hotels is a great idea. However, if you will still be struggling to pay the debt come next year; it is time to re-evaluate your options. You can still have a memorable holiday with your family and friends without necessarily breaking the bank. Here are some cost-effective options:
- Spend time with your family and friends at home and in the process share meals and gifts
- Plan for traveling at a time when it is likely to be less expensive and save towards it
- Consider Picnics and Parties
Save on gifts
Buying gifts for all your family, friends and other important people in your life can turn out to be one big expensive affair and especially if you don’t have enough cash set aside to cater for this. However, you can also make the gifts genuine, thoughtful, and memorable at a relatively low cost using the following tips:
- If you are in the service industry, offer a free session of your services as a gift
- Get creative and make gifts such as cards for your children’s teachers, boss, workmates etc.
- Instead of buying a gift for each of your friends, bring them together and cast lots where each buys a gift for one and gets one from another
- When coming up with a list of gifts to buy, include other options of about the same cost to avoid spending more in case the first choice goes out of stock or is unavailable
Shopping early helps to spread out your spending and also gives you time to shop for great deals. Since holidays are already fixed, come up with a list of everything you need to buy and start buying. Be on the lookout for discounts and offers such as the end of summer sales and stock up on items with the best deals.
The Bottom Line
The Holidays don’t have to leave you with the bitter after taste of racked up debts. With proper planning, a few adjustments, and being flexible enough to accommodate cost-effective ideas, you can still enjoy your holiday without disrupting your future financial plans.
How to Get the Most Out of Credit Cards During the Holidays
Is it too soon to start planning your end-of-year holiday events? That may be debatable but we all know how quick retailers are to taking advantage of increased sales brought on by holiday shoppers. With Thanksgiving just around the corner most retailers are already advertising for their big shopping events and Black Friday deals. If you, like many others, choose to take advantage of these great deals then you’ll also want to plan ahead.
The biggest temptation during the holiday sales events is to break out the credit cards in order to take advantage of the great deals while they’re available. You might be saving a lot of money on the special deals but if you’re not careful, your credit card costs could end up making those purchases cost much more than they’re worth. That’s why you need to take precautions when using credit cards for holiday purchases. Here are six ways to make the most of your credit cards during the holiday season:
1. Sign Up for a Cash Back Card
For those of you who are not already heavily invested in a specific travel rewards program, you may be better off using a cash back rewards card. For new cardholders you may be able to get a bonus cash back offer when you sign up. If you do plan on signing up for a new card with a cash back deal, look for an offer that gives you a higher cash back percentage (as much as 5 percent) on popular retailers such as Walmart, Target, or even Amazon.
Just keep in mind that you should only choose a cash back or rewards card over a zero or low-interest card if you are able to pay your monthly statements in full. Otherwise it would be better to find a card with a zero-interest introductory rate or low-interest card as it would save you the most in the long run.
2. Activate Your Bonus Purchase Opportunities
Many rewards cards will feature rotating bonus categories which you may need to activate or choose each quarter. If your card does have rotating bonus opportunities, make sure that you log in each quarter to activate. Also bear in mind that many of these rewards may have a limit on how much you can earn so keep track of your purchases and switch cards once you’ve reached the limit.
3. Learn About Shopping Portals
Unknown to many rewards cardholder is the opportunities available from shopping portals. Many loyalty programs and credit cards now offer online shopping portals which will allow you to earn extra points, miles, or cash back from your purchases.
These online shopping portals often feature some of the top national retailers and can usually pad your purchase rewards with extra points per dollar spent. With most airline and hotel loyalty programs, they will likely have their own portals as well. Using these websites can help you stack your rewards earning potential.
4. Examine Your Cardholder Benefits
Holiday shopping often features large purchases on items you wouldn’t normally buy unless they are heavily discounted – which is often the case during Black Friday sales events. For those bigger purchases, you may want to consider your cardholder benefits. May credit cards include benefits such as accidental damage and theft protection, extended warranties, price and return protections. These benefits can come in handy when making a large purchase, such as a new TV or computer.
5. Decide if it’s Worth Getting a Store Credit Card
If you don’t already have a great rewards or low-interest card, you may want to consider getting a store credit card. It is likely that any of the major stores that you plan to shop at during the holiday season will offer their own branded credit card. These cards should never be an impulse sign up though. You should always find out in advance if it’s worth considering.
Most of the retail credit cards will feature a very high interest rate so it is important that you consider their terms and conditions and quality of rewards programs before deciding.
6. Consider an Interest-Free Promotional Financing Offer
It is not uncommon for American shoppers to spend “too much” during the holiday season in order to take advantage of special savings and offers. That is all well and good if you are able to pay off your credit cards in a timely manner but if not, you could end up pay more in interest than the savings you earned from the discounts.
If you are unsure whether you’ll be able to pay off your credit card balances within a few months, you may want to consider opening a card with a 0 percent APR offer for new purchases. These offers allow you to avoid interest charges for six to 18 months. Just make sure you don’t keep a high balance on your card for too long as it can negatively affect your credit score.
For more financial advice and credit repair assistance, contact Credit Absolute.
Increasing Your Savings on a Low-Income Salary
A low-income salary can create challenges when it comes to reaching your financial goals. You may want to take a vacation, buy a new car, or just put some cash away for a rainy day, but how can you do that with a limited income?
Although you may struggle to add to your savings, there are ways to gain control of your finances and ensure you have extra cash stashed away even when you don’t think you’re making enough money.
It is common for people to have debt. Between student loans, credit cards, and monthly expenses, managing your debt on a low-income salary can be challenging. Debt consolidation is an option that many people consider when debt becomes overwhelming and they are looking for a way out. When you consolidate your debt, you are combining all of your debts into one and paying them off with a loan.
Benefits of consolidating your debt include:
- One fixed monthly payment
- Pay off debt sooner
- Improve/increase credit score
Track your spending
Do you know what you spend your money every month? When you want to save, you may consider cutting out certain expenses, but you need to understand what you are spending your money on before you can make any changes. By tracking your spending, you can get a better idea of where your money is going and decide if it needs to continue to be spent in the same way. You’ll likely find one or two expenses to eliminate.
Consider affordable alternatives
When you shop online or in-person at your favorite retailers and merchants, the choices that you make can be costly. As you examine how much money you spend monthly, you should note that you could be spending less by considering affordable alternatives. For example, rather than opt for a name brand cereal, reach for the generic cereal. There can be concern about sacrificing taste or quality for the price, but you may learn to appreciate how much money you save.
Seek opportunities for supplemental income
When you have a low-income salary, you don’t have to only work with the income from one job. Seeking an opportunity for supplemental income, such as a part-time job, will allow you to have money that you can put into your savings account. In fact, you can use the income from one job to cover your monthly expenses, and the supplemental income can go straight to the bank.
Consider applying for a part-time position that may offer you a flexible schedule to accommodate your full-time job such as:
- Grocery store
- Convenience store
- Gas station
- Clothing store
- Ride-share company
People can save a lot of money on life’s necessities when they use coupons. If you need personal care items, clothes, groceries, or other items, you can easily find a coupon. There are a number of websites that offer consumers coupons and discount codes that can be used in person and online as well as sales papers that may be delivered in the mail. Additionally, many merchants and retailers have mobile apps and programs available to customers who want to save a bit of money on their purchases and get rewarded every time they spend. Depending on the retailer, you may get cashback.
There is no need to feel defeated when you have a low-income salary. True, it may be harder to manage your finances, especially when you compare yourself to someone who is making more money, but improving your situation is possible. With a few changes, you can start to put more money away and watch as your savings grows.
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