Tag Archives: mortgage

The 3 Biggest Mistakes First Time HomeBuyers Make

mortgage

Shopping for a home the first time can be scary: Scouring the market, negotiating the best deal and navigating the fine print is enough to overwhelm any new homebuyer.

If you’re in the market for a new home, check out the results of LendingTree.com‘s poll of major lenders. They’ve identified the three biggest mistakes first-time homebuyers make – along with some essential tips on overcoming them. Happy house hunting!

Mistake # 1: Shopping for a home without a pre-approved loan

Without a pre-approved home loan, most sellers won’t give you the time of day. Many experienced real estate agents will ask you to get pre-approved (or at the very least, get pre-qualified) with a mortgage lender before they’ll take you shopping. It saves time and helps them weed out the dreamers  from real prospective buyers.

But there’s something in it for you, too: It helps you avoid the experience of falling in love with a home, opening escrow, only to then find out you can’t get financing.

Finally, a pre-approved mortgage is almost like paying cash. Bbeing able to say, “I have loan approval and can close in 30 days” puts you in a stronger bargaining position.

o   TIP: You probably don’t want to advertise to home sellers exactly how much your lender will let you spend. When making an offer, ask your loan officer for a custom letter. If you’re approved for a $400,000 purchase and a $320,000 mortgage, but you’re offering $300,000, your letter should probably say that you’re approved for a $300,000 purchase with a $240,000 mortgage.

Mistake #2: Ignoring first-time buyer programs

Home ownership is such a big deal in the US, that there are tons of organizations and programs designed to help you buy. Ignoring these opportunities can cost you a lot of money. Here is just some of what you might be missing:

o   Down payment assistance (low-interest loans or outright gifts of cash to buy a home).

o   Mortgage Credit Certificates (mortgage interest subsidies through local governments).

o   Revitalization programs (grants for buying homes in areas under redevelopment).

o   HUD homes ($100 down and 50% discounts for first responders, nurses and teachers).

TIP: Most first-time home buyer programs define “first-timer” as someone who has not had an ownership interest in real property in at least three years.

Mistake #3: Only considering 30-year “fixed” rate mortgages

With mortgage rates currently near historic lows, it’s understandable that many want to lock in the low rates via a fixed mortgage. But 30-year fixed rate mortgages aren’t the only home loans to consider. For many first-time home buyers, hybrid adjustable-rate mortgages providing a fixed rate for only a specified number of years may actually be a better choice.

According to the National Association of Realtors, younger home buyers and first-time owners tend to sell and move much sooner than older or repeat buyers. Chances are you’ll pay probably pay more money for a 30-year mortgage, but only get five or seven years out of it.

o   TIP: If you’re considering a larger mortgage (a jumbo or super-jumbo), it makes even more sense to test drive the hybrids. The difference between the hybrid rates and the 30-year rates can be even more than it is with smaller conforming loans.

 

 

DOMA’s Gone! Here’s What it Means for Gay Couples’ Finances

flagAfter the Supreme Court’s historic 5-4 decision today striking down the constitutionality of The Defense of Marriage Act (DOMA), married gay couples can enjoy many of the same benefits and legal recognitions of their heterosexual counterparts. This is news worth celebrating, since it’s not only a historic step toward equality, but also of great benefit to gays’ financial futures.

Some of the immediate benefits include the ability for married couples to file taxes jointly and an elimination or reduction of the estate and gift taxes — all of which can result in thousands in savings.

It’s worth keeping in mind, however, that DOMA’s repeal currently only benefits same-sex couples in states that already legally recognize such marriages. Still, because more states are likely to approve gay unions in the coming months and years — and further Supreme Court decisions may emerge — non-married gay couples should take action to protect joint finances.

Here’s what gay couples should do to take advantage of their new protections:

Create a Will

It sounds simple (and perhaps a little morbid), but many gay couples haven’t yet contemplated what will happen to their estate upon their passing. That’s a shame, because it was at the heart of the issue that brought the landmark DOMA case before the Supreme Court: The spouse of a deceased gay person was required to pay hundreds of thousands of dollars in additional taxes because they weren’t an officially recognized spouse.

If you don’t have a will, get one – and make sure your spouse or domestic partner is listed as you wish. A living will is also useful if you intend for your spouse or partner to make decisions for you in the event of catastrophic illness, or if you wish to have them serve as executors of your estate/power of attorney.

Though the laws regarding domestic partner benefits are more nebulous, there is reason to believe benefits will soon (or eventually, anyway) be extended. Plus, even states that don’t yet recognize gay marriage may do so in the future. Consult with an attorney about the legal nuances here; you’ll want your will to have the best odds of treating your spouse or partner as the recipient of your inheritance (or whatever portion thereof you intend).

Notify Your Employer 401K  and/or Insurers

Notifying your employer and/or insurers of your same-sex marriage or domestic partnership is important if you intend on sharing insurance benefits or listing a spouse or domestic partner as beneficiary.

The same applies for your 401K and IRA — make sure your loved one is listed as beneficiary, and update their status if you marry or enter a civil union. Inquire with your individual plans about their same-sex policies.

Get Married

If you were already planning on doing so, getting married makes more sense than ever now, since you will receive the full protections under the law. Domestic partnership recognition offers weaker protections in some jurisdictions, so it’s to your advantage to marry, if possible. Even if you don’t live in a state that recognizes same-sex unions yet, it may be to your advantage to get married in one that does. That marriage may be recognized in your home state sooner rather than later, and the benefits of DOMA may even apply to you. (Such legal nuances have yet to be worked out. Stay tuned to the news and consult with an attorney, as needed.)

Create Joint Accounts

Creating or updating joint financial accounts — such as credit cards, brokerage accounts, and so forth — can establish a pattern of financial “legitimacy” that can be of benefit if you live in a state without strong same-sex union protections. If you already have such accounts, be certain to list your significant other as beneficiary. If you choose to marry out-of-state, it may be to your benefit to open joint accounts there, since those states may afford your account greater protections.

Update Your Mortgage or Lease

Ditto here for updating your mortgage or lease with your spouse’s or partner’s name and legal status, should you wish to share their associated priviliges and responsibiilities.

Tell Your Friends and Family

Make sure your immediate circle knows of your relationship status; in case anything happens to you, they can be aware of and support your wishes by corroborating your relationship’s significance.

Stay Informed

Laws, right and responsibilities regarding gay unions are evolving rapidly, so stay informed. Most states’ ACLU websites can be of help, as can local gay rights organizations. Keep up to date on the important changes that impact your life together — and your pocketbook.

From the Five Ten Twenty Club, congrats on this historic win!

 

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