Build Your Budget in 2020

Creating and utilizing a budget is an integral part of everyone’s financial stability and growth. The term “budget” can sometimes get a bad wrap, but it’s not about harsh restrictions. Building a budget just means knowing how much money you have, where it’s at, and where it’s going. If you don’t currently use a budget, here are some tips from experts on how to get started!

Step 1: Write down a full list of your finances.

  • This includes assets you currently have in checking, savings, and other accounts (including retirement, college funds etc.)
  • All current debt. (Including car and mortgage loans, student loans, credit card balances, etc.)
  • Your current monthly income from all sources.
  • Your current monthly expenses, both fixed and variable. Fixed expenses are bills that are the same amount each month. Variable expenses are bills that can vary, such as utilities, and your living expenses outside of bills, such as gas and groceries.

This will give you a good overall grasp of your current financial situation, so that you can build a budgeting plan that works best for you.

Step 2: Track your spending

Many experts recommending tracking all your spending for at least one month before developing your budget. This will provide an accurate look at how much you spend on variable expenses each month, so you can create a budget that accommodates your lifestyle.

Step 3: Pick a budgeting style that works for you!

There are several popular budgeting styles out there, and even the pros admit to some trial and error. It’s perfectly okay to try out a few different plans before you settle on one you love! Some popular plans are:

50/30/20 Plan: This plan involves spending 50% of your net income on needs, 30% on wants, and 20% towards debt reduction and/or savings. Your “needs” category is anything you can’t live without, such as a place to live, a car to drive, affordable food and clothing. Everything else you want to spend money on falls into the “wants” category, such as cable, dining out, and shopping. Many have found this to be a highly effective plan for them! For more about the 50/30/20 plan, check out: https://www.thebalance.com/the-50-30-20-rule-of-thumb-453922

Cash Envelope Plan: With this plan, you divide your spending after bills and savings/debt reduction into categories. Examples of these categories would be groceries, gas, fun, shopping, and beauty. You then would determine a set maximum amount you can spend for each category and put that amount of cash into labeled envelopes for each category. You can use the cash from the appropriate envelope for all of your spending throughout the month. The concept behind using cash envelopes is to encourage you to carefully track of all of your spending in different categories, and also promote mindfulness about your purchases. The thought of physically handing over cash has a bigger impact mentally than just swiping a card. For more details on setting up a Cash Envelope Plan, check out https://www.thebudgetmom.com/the-ultimate-guide-to-the-cash-envelope-system/

Reverse Budgeting Plan: This simplifies budgeting as much as possible. You set a firm (preferable aggressive) amount for monthly savings and/or debt reduction. Many people have this amount automatically paid and/or transferred to help enforce the monthly goal. After that, and paying the rest of your necessary bills, money will be free to be spent as you choose. This plan is considered ideal for those who want the best results with the least amount of time and thought spent on budgeting. For more information on Reverse Budgeting, check out:  https://www.forbes.com/sites/peterlazaroff/2016/02/29/creating-a-budget-that-works/#63af655b7bcc

Step 4: Review your plan and make adjustments as necessary!

Budgeting is a continual and rewarding process, and since it’s your own lifestyle and finances your impacting, all the freedom to choose is entirely in your hands.

If your goal in boosting your savings and reducing your debt is purchasing or refinancing a home, our loan officers can offer additional insight on mortgage qualifications and mortgage program offerings. Contact us today! https://firsthome.com/find-a-loan-officer/

New Year, New Goals! Tips for Improving your Credit Score in 2020.

If you’re considering purchasing or refinancing a home, it’s a good idea to look at your credit score first. Your credit score will directly impact your interest rate, and the loan programs that you qualify for. When it comes to a home loan, improving your score can save you money and give you a larger variety of options. The higher your score, the more you can save. Here are some tips to boost those numbers in 2020!

  1. Avoid Late Payments. Paying bills on time is the single most important factor in your credit score. If you have a late payment on your report that you believe is in error – you can contact the credit bureaus to dispute it and have your score corrected.

 

  1. Decrease Your Overall Credit Utilization. Credit bureaus calculate your overall credit limit versus how much credit you’re currently using, and it’s best to have a ratio below 30%. One quick way to decrease your utilization is to call your credit card issuers and request a higher limit on your existing cards. This higher limit will lower your ratio without adding any hard inquiries to your report. Paying down your existing balances will also reduce your ratio.

 

  1. Limit New Accounts. Hard Inquiries show up on your report whenever you apply for new credit. Too many hard inquiries can lower your score, but their impact does fade over time. Be cautious of opening too many new accounts at once and try to avoid hard inquiries 6-12 months before applying for a mortgage loan. Opening new accounts can also reduce your average length of credit, which can further impact your score.

 

  1. Don’t Close Inactive Accounts. Surprisingly, closing old credit accounts will directly affect your credit score. This is because closing old accounts can shorten your length of credit and raise your credit utilization. If you do have credit cards you no longer use, you are better off holding on to them or renegotiating for a better interest rate to start using them again. If you feel you still want to close some accounts, wait it out until after the home buying process, as it may deduct points each time you close an account.

 

  1. Dispute Errors. Review your credit report regularly and dispute any errors that might be bringing down your score. Simply send a letter directly to the credit bureau with your explanation of what the errors were. The credit bureau will review your case and respond back in around 30 days. If it is found to be an error, it should be removed directly from your credit report. According to the Federal Trade Commission, as of 2012, 5% of consumers had errors on their credit reports which could have resulted in less favorable terms for loans.

Let’s wrap up with a few fun credit score facts:

 

  • Credit scores range from 300 – 850

  • Any score over 810 is considered “perfect”, because raising your score beyond that point doesn’t offer any real increase in benefits from creditors.

  • The average 2019 FICO credit score was 706, and the average 2019 Vantage score was 682!

 

Interested in learning more about First Home Mortgage? Feel free to reach out to one of our loan officers today!

Tips for Preparing for Tax Season

2019 has come to an end which means tax season is right around the corner. Soon it will be time to prepare your 2019 tax returns and it pays to be ready! Getting prepared early can not only save you time and stress but potentially money.  It’s especially important if you have experienced major changes throughout the year such as getting married or buying a home. The IRS encourages early preparation and has recently shared a few tips that can give you a head start.

Always make sure you’re paid up on your taxes is important. The IRS expects that you will have paid most of your tax bill by the time you file your return. If your taxes are being withheld from your pay, chances are that’s enough to cover your total bill and even leaves you with extra for a refund. But keep in mind life events can happen which affect your tax withholding.  You will want to make sure your withholding will also take care of any other income you receive from other sources such as a business or investments.

Of course, you won’t start receiving your W-2s or 1099s until January at the earliest, but there are a few things you can do while you wait. Gathering important records and documents ahead of time will allow for a quicker return. Making sure your address is up to date with your employer and investment providers will ensure you receive these forms in a timely manner. Creating a checklist is also very helpful and can be used every year. Look at your old tax records to compile of list of what materials you were sent. Use that list to create a checklist so you know what to expect throughout the tax season. If you have recently purchased a home, there are some additional documents you may need to gather such as the settlement statement, property tax statement, and if you’re a first-time homebuyer, your Mortgage Credit Certificate.

When you’re all set to file, consider doing so electronically! Every year the IRS is encouraging tax payers to file electronically for many reasons. Not only is filing electronically quicker and secure, it’s easier and is highly accurate. Anyone with a bank account is eligible for direct deposit. Meaning your refund will be automatically sent to you bank account, so you won’t have to wait to receive the check in the mail.

Now that the holiday season is over, preparing for tax season should be on the forefront of your mind. Taking steps to ready yourself will prove to be beneficial in the future.

 

Source: https://www.msn.com/en-us/money/taxes/4-ways-to-get-ready-for-tax-season/ar-BBWsZss?ocid=spartanntp

Calculating Your Home Equity

What is home equity?

Equity is the portion of the home that you truly own and does not need to be repaid to any lender.

How is home equity calculated?

Current Appraised Value – Mortgage Loan Balance = Home Equity

Subtract the amount you owe on your home loan/s from its appraised value to get how much equity you have in your home.

Example:

Appraised Value is $500,000 – $230,000 Loan Balance = $270,000 in Home Equity

How do you use your homes equity to make renovations?

A home equity loan (second mortgage) allows you to borrow a certain amount for your renovation. The equity in your home is used as collateral, giving you free access to spend the money on your home project.

A home equity line of credit, or HELOC, is typically a variable-rate line of credit based on your equity, that allows you to borrow and repay repeatedly.

You may also have the ability to refinance, which allows you to turn your equity into cash –  referred to as “cash-out” refinancing.  This gives you access to the equity without selling your home.

Talk to a Loan Officer to learn more about your options.

Which Renovations Have the Highest Impact on Your Home’s Value?

Remodeling your home is a wonderful way to make it your own when you first move in, or to update the space as your needs and styles change over time. Since home renovations can be pricey, balancing your budget and wish list can be tricky. Fortunately, there are lots of projects that can make you love your home even more, while also boosting its value. Increasing your home’s overall value increases your equity! This means that not only will you see a return on your investment when you sell your home, you’ll also have a lower loan to value ratio while you live in it, which can impact your options when refinancing, and even potentially eliminate the need for mortgage insurance.

The “2019 Cost Vs Value Report” (www.remodeling.hw.net), revealed which home renovations will give you the highest percentage of return on investment, and what they cost on average. According to the study, the top five renovations that provide the biggest bang for your buck are:

1. Garage door replacement

• Average out-of-pocket: $3,611
• Average return on investment: $3,520
• Percentage of cost recouped: 97.5%

2. Manufactured stone veneer

• Average out-of-pocket: $8,907
• Average return on investment: $8,449
• Percentage of cost recouped: 94.9%

3. Minor Kitchen Remodel

• Average out-of-pocket: $22.507
• Average return on investment: $18,123
• Percentage of cost recouped: 80.5%

4. Deck addition (wood)

• Average out-of-pocket: $13,333
• Average return on investment: $10,083
• Percentage of cost recouped: 75.6%

5. Siding Replacement

• Average out-of-pocket: $16,036
• Average return on investment: $12,119
• Percentage of cost recouped: $75.6%

Renovating your home can be a wonderful way to boost your enjoyment and your equity! Find more information from this study, including how project costs and values were calculated, at www.remodeling.hw.net/cost-vs-value/2019/.

Thinking about purchasing a fixer-upper, or refinancing to free up funds for your home renovation? Contact one of our Loan Officers today!

New Loan Limits!

Loan limits for Fannie Mae and Freddie Mac increase to $510,400 in 2020, an increase from $484,350 in 2019!

The Federal Housing Finance Agency has announced the Fannie Mae and Freddie Mac conforming loan limits for mortgages for 2020.

Each year, the baseline conforming loan limit is adjusted accordingly with the change in the average U.S. home price. House prices during the third quarters of 2018 and 2019 have increased by 5.38 percent on average, therefore, The Federal Housing Finance Agency is increasing 2020’s maximum conforming loan limit by the same percentage.

The maximum loan limit will be higher than the $510,400 baseline loan limit in certain areas where median home values were higher.

There are different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. The baseline loan limit in these areas will be $765,600.

Click here for a map of 2020 loan limits by area!

Contact one of our loan officers for information today!

 

 

PreScreen Opt-Out

Under the Fair Credit Reporting Act, Consumer Credit Reporting Agencies can share lists that contain the information of people who had recent credit inquiries, such as with mortgage applications. Companies, and sometimes individuals, purchase those lists with the intention of soliciting and selling additional credit and loan services, known as “Firm Offers”, to the unsuspecting borrower.

These solicitations start quickly and continue even after the loan has closed. Many borrowers would prefer not to receive the extra “junk” mail or sales calls, and fortunately there is an easy fix!

  • Visit www.OptOutPrescreen.com to opt-out. This prevents the Consumer Credit Reporting Companies from providing your credit file information for Firm Offers.
  • You can choose to opt-out for five years, or permanently.
  • If you ever change your mind, you can also visit this site to opt-in and receive eligible offers again.

You should be able to choose whether you want your information shared with potential solicitors as a result of your mortgage application. That’s why at First Home Mortgage, we know the importance of sharing this information with all our clients, to ensure you know your rights under the Fair Credit Reporting Act.

Please reach out to one of our loan officers if you have any questions!

 

 

 

FHA Revises Condominium Requirements

After a long-awaited update, the FHA is finally issuing a change to condominium guidelines. It was announced Wednesday that spot approvals are back, and steps are being taken in order to loosen eligibility requirements. With these revised guidelines, FHA is expecting the update to qualify an additional 20,000-60,000 condo units per year.

Changes that will come with the new guidelines include extending the re-certification deadline for approved condo projects from two years to three and loosening restrictions on owner occupancy rules allowing projects to just be 50% owner-occupied. Department of Housing and Urban Development Secretary, Ben Carson, is hopeful the updated guidelines will open doors and allow more opportunity for home ownership. “FHA is publishing a new rule in the Federal Register that we believe will offer significantly more options for individuals and families to buy a home, specifically the kind of home more and more people are looking for in order to achieve home ownership, and of course that is a condominium.” Carson stated. Out of the 150,000 condo projects across the country, just 6.5% have approved financing through FHA.

The National Associations of Realtors has been advocating for change in FHA requirements for over a decade and stated they are thrilled with the change and the opportunities that will now be available to prospect homebuyers. NAR President John Smaby stated, “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The updated guidelines will take effect on October 15, 2019.

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