Getting Ready: Buying a Home
1. Is My Credit in Good Shape?
Before lenders approve a home loan, they will analyze your ability to repay it. To make this determination, lenders will obtain your credit report from one or more credit reporting agencies. The credit report shows how much you owe, to whom, if you make payments on time and how much credit you have applied for.
In addition, the credit report may contain a credit score, sometimes called a FICO® score, which is a number the credit reporting agency calculates based on an assessment of your credit history and current credit situation. Think of the number as a snapshot of your credit risk at a particular point in time.
What Credit Scores Mean
If you have poor credit and a low credit score, lenders may evaluate you as a higher risk for not repaying the loan. As a result, they may charge you a higher interest rate or possibly turn down your loan application altogether.
You can avoid surprises by getting a copy of your credit report from the three main credit reporting agencies before you apply for a home loan. If there are mistakes on the reports, get them corrected immediately. The three agencies are:
1. Equifax, 800.685.1111
2. Experian, 888.397.3742
3. TransUnion, 800.916.8800
Or go to Annual Credit Report's Web site. By law, consumers are entitled to one free credit report from each agency every 12 months.
If you have less than perfect credit, be prepared to explain to the lender why. If you have no credit accounts, show the lender your cancelled checks and other documents to prove that you pay your rent, phone bills or utility bills on time. You also might decide to delay buying a house until you've improved your credit or established a credit history. Take the following four steps to improve your credit:
1. Pay your bills on time
2. Reduce your debt by paying off your credit cards
3. Only apply for the credit you really need
4. Read all credit applications carefully
2. Do I Have a Steady Job History?
A steady job gives lenders more confidence that you can repay a home loan. If you have been working continuously for two years or more, even if not in the same job, you are considered to have steady employment. Be prepared to explain to the lender if there are reasons why you have not been employed continuously, such as an illness or just finishing school or military service.
3. Can I Afford to Make Monthly Mortgage Payments?
The answer to this question depends on how much you earn and how much other debt you have. As a general rule of thumb, a lender will want your monthly mortgage payment to total no more than 29 percent of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out).
Add other long-term debt, such as car and student loans, and most experts say that the total should take no more than 36 to 41 percent of your monthly gross income. The U.S. Department of Housing and Urban Development (HUD) has a free calculator for determining how much home you can afford.
4. Have I Saved Enough for a Down Payment?
In the past, down payments that equaled 20 percent of the purchase price were typical. Today, however, qualified borrowers who have good credit, but limited savings, can purchase homes with five, three, or even zero percent down-but the less you put down, the higher your mortgage payment.
You also will need money for closing costs to cover items like appraisals, loan origination fees, processing fees and so on. In addition, in return for an interest rate below prevailing rates, you may be charged "points" by the lender. One point equals one percent of your loan, and that amount is due at the time of closing. Online calculators can help you estimate your closing costs. Also know that you may be able to negotiate with the seller to pay certain closing costs.
"Grading" Your Answers
If you can't answer "yes" to each of these four questions, don't get discouraged. Simply give yourself a little more time to get ready financially to buy your home. In addition, check into federal and local home buying programs that specialize in working with people with limited financial resources.
Financial Planning Association (FPA) ©2014
How to Map Out a Fun and Safe Vacation
If you're going on vacation -- whether to cruise the Greek islands or visit your grandchildren in Maine -- a little planning goes a long way. By thinking ahead and planning for your vacation before you go, the only surprises you'll encounter are the nice ones, such as finding a deserted beach or hearing your grandchild's first words.
Below are tips to help plan for a fun and safe vacation:
• Check with your health plan about out-of-area coverage. Know what to do if you need urgent or emergency care while you're away.
• If you take prescription medications, make sure you have enough to last your entire trip. Keep drugs in their original, labeled bottles.
• Make sure you are properly immunized, including tetanus and flu shots. If you travel abroad, you may need additional vaccinations. Check with your doctor to see what you might need or check with the official travelers guide provided by the Centers for disease control at: http://www.cdc.gov/travel/.
• Carry a cell phone and pack a cell phone charger.
• If you are traveling by car, make sure your car has had a recent tune-up. You should also carry a spare tire, a jack, a flashlight, a fire extinguisher, motor oil, extra fan belts and jumper cables.
• If you are going out of the country, take a photocopy of your passport and return tickets. Keep the copies in a safe place, such as the hotel's safe-deposit box. If your passport or tickets are lost or stolen, having copies will make it easier to replace them.
• Keep some money and traveler's checks in a place other than your wallet, such as a money belt.
• Once you've made it to where you're going, relax. Give yourself time to unwind after traveling. Try not to make plans for the day you arrive or the day you return home.
• Don't attempt any activity you wouldn't normally do at home. For example, if you don't get a lot of exercise, don't take a long walk or bike ride.
• Try to have activities planned before you arrive. Make a list of things you want to do, and get information about directions, operating hours and costs before you go.
• To get the most from your vacation, take some time to plan ahead. You'll spend less time dealing with unexpected problems and more time seeing the sights.
Three Bean and Grilled Corn Salad
1 cup halved heirloom grape or cherry tomatoes
1 teaspoon salt, divided 3 ears shucked corn
1 medium white onion, cut into 1/4-inch-thick slices
1 jalapeño pepper
1 tablespoon olive oil
1/3 cup chopped fresh cilantro
1/3 cup fresh lime juice
1 (15-ounce) can no-salt- added pinto beans, rinsed and drained
1 (15-ounce) can no-salt- added black beans, rinsed and drained
1 (15-ounce) can no-salt- added kidney beans, rinsed and drained
2 diced peeled avocado
Place the tomatoes in a large bowl, and sprinkle with 1/2 teaspoon salt. Let stand 10 minutes. Brush corn, onion, and jalapeño evenly with oil. Place vegetables on grill rack coated with cooking spray. Grill corn for 12 minutes or until lightly charred, turning after 6 minutes. Grill onion slices and jalapeño 8 minutes or until lightly charred, turning after 4 minutes. Let vegetables stand 5 minutes. Cut kernels from cobs. Coarsely chop onion. Finely chop jalapeño; discard stem. Add corn, onion, and jalapeño to tomato mixture; toss well. Add remaining 1/2 teaspoon salt, cilantro, and next 4 ingredients (through kidney beans) to corn mixture; toss well. Top with avocado.