5 Things to Do Before Applying for a Mortgage

April 7, 2022 by James Hendrickson Leave a Comment

Buying a home of your own is a huge milestone. Many people work towards buying a home for years, renting while they save up money for a downpayment. However, with home prices rising and a nationwide debt crisis, qualifying for the mortgage you need is only getting harder.

Before you go out looking for your dream home, you should try getting preapproved for a mortgage. This will help you determine whether you will be able to get a mortgage and what you will be able to afford.

There are steps you should take before applying for preapproval. Do the following 5 things before applying for a mortgage.

1. Check your credit score

Checking your credit score is the most significant step to take when you want to apply for a mortgage. Your credit score essentially provides an overview of your credit history. If you have struggled to pay back debt in the past or have outstanding debts, your credit score will be low. If you have never had credit before, you will not have a credit score. But if you have had credit, whether credit cards or loans, and paid it back without trouble, you will have a high credit score.

This is definitely a flawed way of looking at someone’s reliability. But it is the biggest factor that banks and other mortgage providers look at when determining whether to give you a mortgage. If your credit score is below 580, you are unlikely to get a mortgage from any provider and will have to work on improving it.

Checking your own credit score before applying is ideal, as hard credit checks carried out by financial institutions can lower your credit score. If your credit score is already low, you can avoid making it worse this way.

What do you do if your credit score is poor? The next step will help you begin to improve it.

2. Pay outstanding debts

Unfortunately, your credit score is not going to improve if you still have not paid the debts that caused it to drop in the first place. As such, you will need to pay for each debt that is on your credit record. If you don’t have the funds to do so, you will need to save up before beginning to rebuild your credit score.

There are options such as debt consolidation, which is when you take out a single new loan to pay off old loans. However, do your research before agreeing to a debt consolidation loan. If you do find a loan with a reasonable interest rate and you have no other way of paying your debts, it may give you a fresh start which helps you rebuild your credit score.

3. Don’t apply for credit for a full year

Once you have taken care of your outstanding debts, you will need to be very careful with your credit. In order to get your credit score to a better place, you should avoid applying for any credit for at least a year. This may be difficult if you are finding money tight, but it is necessary if you want to qualify for a mortgage.

Taking this time also gives you the opportunity to save more towards a downpayment. The bigger your downpayment is, the better rates and terms you will get on a mortgage.

4. Compare mortgage lenders

Once you have the credit score necessary to get a mortgage, you should compare the different lenders. These may include banks and private lenders, each of which provide various options. The most common mortgage is a thirty-year term, and that is what you will most likely be approved for.

Choose the 3 options with the best reviews and which will accept your credit score.

5. Apply for preapproval

Now it is time to apply to be preapproved for a mortgage. Applying to too many mortgage providers is not a good idea as it can have an impact on your credit score. However, you should get more quotes than just the one. Apply to your 3 top providers and wait for their quotes.

They will each offer you a specific amount with a specific annual percentage rate (APR). If one is lower than the others, use their offer to negotiate. Many banks and providers will lower their rates to get your business. It is important that you have a good idea of the current average rate for 30-year mortgages, so that you know what you are aiming for.

Getting preapproved for a mortgage is a big step towards owning your new home. The next step is looking within your price range and going to see different homes to choose the perfect one for you and your family.

Getting Ready to Buy Your First Home

August 22, 2017 by James Hendrickson Leave a Comment

Getting financially prepared to buy your first home can be complex and potentially confusing to the uninitiated. But take a little time to familiarize yourself with the process and get some timely and targeted free advice from mortgage consulting groups like On Q Financial, and you can successfully navigate your way to home ownership.

Here are some key factors to take into consideration as you move to prepare yourself financially for your first home purchase:

1. Time Things Right

Don’t try to buy your first home until you are financially ready to do so. Having a defaulted mortgage on your record can be a hindrance for the second time you attempt to buy a home. Make sure you have the monthly income and enough savings to proceed. And it’s generally best to only buy a home if you think you will live there 5 years or longer (otherwise you may want to rent.)

2. Don’t Become “House Poor!”

It’s one thing to buy a home as an investment so you can quickly turn around and sell it. But if you are planning on living there for any length of time, make sure you house payment is less than 30% of your monthly income. There are exceptions on the exact number, but the point is you don’t want to scrimp on food, gas, bills, and other necessities in order to make your house payments.

3. Plan for Your Down Payment

It’s possible to get a mortgage without a down payment or with a very low one. It’s even possible to get financial assistance for your down payment. Usually, however, you need from 3.5% to 20% down. That’s a substantial chunk of change, with most house prices, but it can be worth it. It will lower what you owe and the total interest you pay on it over the years. And if you put less than 20% down, you will likely have to make PMI (private mortgage insurance) payments to the lending bank along with your house payment.

4. Get Pre-approved When House Shopping

You’ll want to find out your credit score and find ways of improving it quickly, if possible. You’ll need to collect pay stubs, W2 forms, checking and savings account statements, tax returns, and other documentation. This and other information will be used to get you pre-approved for a mortgage within a specific price range, which will put you in a much better position to buy the right home when you come across it (and to show the seller you are serious and good for it).

5. Get Sound Mortgage Advice

There is a plethora of mortgage options these days, and you can often “customize” a mortgage that fits your exact situation. But it can be very confusing to those not familiar with the process. Should I take out a 30 or a 20 year mortgage? Should I opt for fixed or adjustable rate? Where will I get the financing for my mortgage at the best possible interest rate? Talk to a mortgage consulting firm that will “simplify” the process for you and help you make the right decision.

What Are the Various Colors of Diamonds?

August 22, 2017 by James Hendrickson Leave a Comment

Some people realize that diamonds are made up of different colors, while other people do not pay close enough attention to the various shades and hues the diamond colors have to offer. If you feel that a diamond is only a diamond and color doesn’t matter, you’re about to learn an important lesson today.

No one said that all diamonds are created equally. They’d certainly vary in shapes and sizes. And they definitely vary in color as well. The diamond color scale existing should be reason enough for anyone to realize that diamonds have multiple colors. We’ll discuss the scale in greater detail right now.

Colorless: Diamond Scale Grade D-F

If a diamond fails to have any type of tint within it, it is known as a colorless diamond. Most people would be ecstatic if they were to have a colorless diamond since it is the rarest type of diamond out of them all. As you can imagine, they are very popular yet they are also very expensive.

Diamonds in this color scale range will vary in price. A diamond graded D will cost about $1500 more than a diamond graded E. And a diamond graded E will cost about $1500 more than a diamond graded F.

Near Colorless: Diamond Scale Grade G-J

At this stage of the grading scale, you’re still looking at diamonds that technically appear colorless to the naked eye, but if you look at them under magnification you will see that these diamonds do have a slight tint to them. The tint is very subtle and very difficult to notice, which is why it’s definitely good to buy diamonds on this section of the grade scale. They are cheaper than colorless diamonds yet still nearly perfect.

Faint Color: Diamond Scale Grade K-M

The diamonds that are known as part of this color scale consist of grades K, L, and M. This is a very popular point on the color grade scale because the diamonds definitely have color them and it’s certainly noticeable, but it’s not that noticeable. So people can purchase these diamonds for a fraction of the cost of colorless and near colorless diamonds, but still have a diamond that looks incredibly beautiful.

Very Light Color: Diamond Scale Grade N-R

On this point of the color grading scale, the diamonds in this range do have color, it is noticeable, and the colors are typically either a light brown or a light yellow. Since many people do not want to purchase these particular diamonds, they are very cheap. It’s good they aren’t expensive because it gives people with little money an option to buy a diamond without spending a small fortune.

Light Color: Diamond Grade Scale S-Z

Believe it or not, diamonds light in color are more popular than very light color diamonds at the moment. The fact that the color is so prominent is the reason why people are buying them. They appreciate yellow gemstones, like the way they look, and buy them because they are inexpensive. It’s definitely a good option if you don’t mind the color.

How To Save Money Financing Your Business

August 17, 2017 by James Hendrickson Leave a Comment

Working capital is something every business needs in order to maintain growth and remain profitable. When a company’s cash flow starts to become unreliable however, they are forced to go to great lengths to reach a comfortable margin for operating, at prices that are difficult to justify. Most commonly, they apply for a bank loan but even if they should be approved, there are high interest rates to contend with. Eventually, some enterprises find that financing their business through loans does them more harm than good, and ends up costing more in the long term. There are ways to run a lucrative business and save money by avoiding money borrowing altogether, so long as there is consistent work. Invoice factoring helps you meet all of your payroll, tax, raw material, and supply costs and helps you cover critical expenses in order to keep your business functioning in a number of key ways, without the hurdles that come with costly loans.

Improved cash flow

Instead of waiting for your customers to pay their outstanding invoices, freight factoring allows you to access immediate cash that you can use to achieve your business objectives instead of waiting 30, 60 or even 90 days to get paid on your outstanding invoices.

Freedom to seize new opportunities

Because cash flow is directly tied to your invoices, factoring allows a third-party company like Accutrac Capital to worry about collecting invoices on your behalf, while you take advantage of new opportunities for growth. Whether it’s new sales and marketing initiatives, new equipment for expansion, or the ability to secure new accounts, factoring frees up your time and labor to focus on growing your business.

A better alternative to bank loans

Many lenders and banks avoid lending to invoice-reliant companies, and often place unrealistic hurdles between you and the money you need to operate. Freight bill factoring offers you the ability to maintain working capital for your business while a third party takes care of the outstanding invoices you are owed. Relying on a factoring company for trucking industry needs is now a commonplace practice, and makes up part of many businesses’ financing strategies.

Additionally, factoring companies offer discounted rates on fuel and currency exchange for clients who take on jobs across the border. They even offer equipment financing for those who wants to grow their fleets but who do not have sufficient enough collateral to be approved by the bank. Partnering with a factoring company allows businesses, and especially start ups, to create positive cash flow when first getting themselves off the ground. They also provide funding for clients where they would not otherwise be eligible, as qualification is based on the credit worthiness of the client’s customers.

The best way to improve cash flow is to choose invoice financing or factoring as an alternative to a commercial line of credit. Paying a small percentage to have outstanding invoices taken care of is worth the opportunities that acquiring your sums upfront can give you. Finally, it alleviates the frustration of dealing with tardy customers, or waiting to get paid (or paying your workers!) and having that be out of your control.

The Failure of Retirement Plans in the USA

September 7, 2016 by James Hendrickson Leave a Comment

face-774839_640 It is difficult to believe but some surveys recently have suggested that the average couple has just $5,000 in a retirement savings account. The Economic Policy Institute has analyzed Federal Reserve data and has stated that the top 10% have at least $275,000 which in itself is not fantastic bearing in mind that life expectancy is increasing and many people can expect to live well beyond 80.

There was a dramatic change in retirement saving in the 1980s. Previously companies guaranteed pensions to their employees. The introduction of the 401(k) changed the emphasis. Workers were given control of their retirement rather than having to rely on their employers’ generosity or the Social Security System. Instead companies made contributions up to a certain level into their employees’ individual plans but has no responsibility for their success or failure. Hindsight is a wonderful thing but it has been little short of a disaster with the vast majority well short of what they will need to fund a comfortable retirement.

The figures are so poor because it appears that nearly have of couples of working age have no savings at all and almost 40% of those within 10 years of retirement are in the same position. The problem is compounded by the fact that the Social Security System is fragile at best. Without a significant injection of funds existing benefits will fall by as much as 25% early in the 2030s. That significant injection can only come from taxation and that is a very unpopular topic, especially among Republicans.

Even now the average benefit is little over $1,000 a month which can hardly provide any real source of comfort.

401(k) Policy Hasn’t Worked

The theory that the introduction of the 401(k) would ensure that everyone would have the retirements they wanted has been thoroughly misguided. Their reliance on Social Security has risen dramatically rather than fallen. Those in the low tax bracket have little financial benefit in saving and this is the band of people who are in the greatest need. Tax breaks are therefore fairly irrelevant for the majority. Tax breaks are great for higher earners but they are not in as great need. All those with that $275,000 mentioned above come in the middle to top wage bracket. They would have probably saved anyway without the need for a tax incentive policy.

The Impact of the Recession

The question is whether the plans are wrong or whether people have simply found themselves unable to make proper provisions for themselves? The recession certainly caused widespread misery especially for those tempted to take on too much credit. The real estate market had been buoyant and everyone had expected to make money from investing before the Collateralized Debt Obligation crisis hit their plans. Plenty of people took out multiple credit cards and spent money they simply did not have. Their logic, if they had any, was that there were other cards offering 0% balance transfers where they could move their debt to avoid paying interest. Those deals were temporary and the escape routes soon closed.

“The mistakes made in pension strategy decades ago have been compounded by people’s reluctance or inability to save anyway. Everyone needs to look at their finances and take whatever action needed to improve their future.”

Defaults, unemployment and utter misery followed. Many were unable to meet their liabilities and although debt has been written off and the economy has recovered it seems that personal finances in the Country have barely improved. The figures of what retirement savings the average working family have are proof enough. If you add the average credit card debt in the USA exceeding $5.000, dividing the debt by the number of cards in circulation, the picture gets worse. When you take away the number of cards whose owners pay in full at the end of each statement period, the debt goes up to over $15,000.

It is what it is. Every family will know how they stand or at least they should. There is no point in ignoring financial problems because they will not disappear as if by magic. Everyone should take time to write down their income and regular expenditure as well as their debts and assets. If the figures are to be believed there is only a small minority that can feel satisfied with what they see.

Courses of Action

The rest will need to take one or more of the following courses of action:

Credit Card Debt. If you have significant debt and you cannot afford to pay off your balances you will be paying a high rate of interest as well as having core debt. You should look at taking out a consolidation loan to pay those balances off in full. The rate of interest you will be paying on the nation 21 cash loans are much lower than credit card companies charge.
A budget. You must start to discipline yourself when it comes to spending. There is no point in paying off those balances simply to build them up again.
Look at whether you can make savings on some of your regular bills. They can include utilities and insurance for example. There are comparative websites that will do much of the initial research for you.
After you have created a surplus don’t suddenly think you can begin to spend. This surplus should be put towards retirement or an emergency fund. Both are important and ideally you will create an emergency fund worth about 3 months of your regular expenditure.

If your financial situation is poor you have to act. Retirement can be a cold and lonely place if you have not got the money to make it comfortable.

How Much Should I Save for Retirement?

August 9, 2016 by James Hendrickson Leave a Comment

This is a guest post from Pauline from InvestmentZen.

Retirement, if you are in your 20s or 30s, can seem pretty far away. Three or four decades, longer than you have even been alive. Yet, if you want to make sure you have a comfortable retirement, and are financially independent in old age, you need to start thinking about it today.

If you look at the average amount people have in their 401k, if is pretty appalling. The average American only has around $100,000 in their 401k. Considering the safe withdrawal rate of 4%, so your money doesn’t run out while you are still alive, that means you would only have $4,000 per year to live on in retirement. I really hope you never have a medical emergency and your house is paid for! While $100,000 might sound like a lot to save, you need much, much more, to prepare for a decent retirement.

Using 4% as your nest egg withdrawal rate, you need 25x your yearly expenses in order to retire. For example, say you are currently living on $40,000 a year. You need to save $1,000,000 to retire. And yet, you could still argue that while some expenses decrease in retirement (such as housing if your house is paid for), you might need a lot more to cover healthcare and terminal care.

With an average market return rate of 8%, the numbers are as follow:

If you save $1,000 a month, you will have one million in 26 years
If you save $500 a month, you will have one million in 34 years
If you save $250 a month, you will have one million in 42 years.

The $250 option is feasible if you are 18 and have a first job already, so you can retire when you are 60. But what these calculations show us, is that the longer you wait, the more you will have to save for retirement. Which is unfortunate, because if you are in your 30s or 40s already, you probably have a family to take care of, a house to pay down, colleges to save for, and a lot more expenses than when you were young. Finding $1,000 to save each month gets more complicated than finding $500 had you started 8 years earlier.

Everything is not lost though. The best time to start saving is now. And if you get started early, with compound interest on your side, financial independence might be just a few years away.

So how do you even start saving that much money? well, by doing just that, getting started. The longer you wait, the more disastrous the effect on your nest egg.

Pick a low cost broker or robo-advisor and invest in index funds, then forget about it until retirement.
Try to max it out every year, since the amount invested is tax free, giving you an instant return on investment.
Take advantage of your employer match for free money!
Be great at your job so you get a promotion every year. If your work is not rewarded, change companies. Try to save your raise for a year and keep living on last year’s income. That will boost your savings.
Every year, review your expenses for waste and things you don’t need.
Negotiate your bills, refinance your mortgage, and always look for value in things you need.

Your nest egg won’t build itself in a day, it takes patience and dedication. The earlier you start, the better you will be in retirement.