Making the down payment without losing focus on that new home
With the down payment on FHFA regulated fresh mortgages climbing down from 5% to 3%, the real estate scenario has taken a turn for the better. The move also highlights the urgent need to save for meeting closing costs and for creating ample reserves for meeting much needed repairs and related expenses that become unavoidable when the individual shifts to new ownership.
The savings conundrum
It is a disturbing statistic that the level of saving has seen a drastic reduction over the years from a healthier 15% to a weaker 5%. Loss of income and erosion of money value due to inflation have not made things easier for individuals looking out to augment savings. Nowadays it takes $150 to purchase the same categories of household items that could be earlier purchased for $100. This also explains why the average population considering new mortgages has slid from 40% to just around 30%.
Though the savings scenario is much bleaker than before, it is not altogether impossible to boost savings.
How to strategize to boost one’s saving potential
Unless you fall in the category of the rich and famous it is certainly an uphill task to cobble up savings for meeting inevitable housing expenses. Here we detail the steps that you can initiate to ensure you fulfill your savings goals so that you can keep your date with your down payment.
Opening a bank savings account
If you already have a checking account in a bank or credit union, ensure you open a savings bank account as well. Maintaining accounts in the same institution ensures that you get the full benefit of transferring money both manually and electronically.
Create a structured budget
If companies run on tight budgets there is no reason why the canny saver can’t create a well-structured budget to efficiently handle finances. Using a spreadsheet is helpful as you get to analyze and manipulate gross earnings and deduct taxes and other costs. You also get a bird’s eye view of monthly expenses and zero in on items that are exceeding anticipated limits. Keeping proper record of bills, invoices and receipts also helps in getting a good grip on finances. It is the easiest way of first monitoring and thereafter controlling what comes in and goes out of your financial system.
Gradually, as you get accustomed to budgeting you realize what it takes to control runaway expenditure. You know instantly which category deserves a spending cut and how it pays to find ways to boost your income to help meet unforeseen calamities. It should be a sobering thought that people with lower income than you are efficiently managing their needs, and there is a valuable lesson there that you need to imbibe. Controlling and curtailing expenditure is the surest way of growing savings and it also helps to find new sources of income that can boost your savings potential.
Give a thought to climbing interest rates
Get a grip on what you are losing out by way of interest on credit card balances and loans and what you are gaining from savings accounts and certificates of deposit. Minimize the interest outflow and maximize the interest that you stand to gain from. If you have been religiously paying your dues without default it is high time you asked the credit card provider for an interest rate cut or shift balances to a lower interest facility.
Companies readily comply for fear of losing a good customer. Take a closer look at your auto loan and if you see a simple interest calculation it would be wiser to prepay the loan if the calculation favors you. In this connection we can share an open secret that mortgage lenders are better regulated to prevent malpractices whereas auto financiers are an open book and do whatever that pleases them.
Check your ability to borrow (your credit status)
The credit score to a large extent determines what the lender charges you. If you have stronger credit, getting a lower down payment is a cinch, and you get favorable interest rates too that impact your loan outstanding favorably. The credit report is a compendium of statistics and observations highlighting how you well or how inefficiently have conducted your credit portfolio. It reflects missed payments, bankruptcies and problematic loan accounts and how much you have borrowed and can borrow further against established limits. This is not to say that the system is error free – in fact it is error prone and constant alertness is required to ensure the report reflects your true credit standing. A marginal shift in credit points could mean the difference between an approved mortgage on borrower friendly terms and an expensive loan that could set you back financially.
Capitalizing on windfalls
It should not be forgotten that birthday gifts, cash prizes, gifts from grandparents, employee bonuses, income tax refunds, weddings and windfalls can boost savings when you least expect them to. Whenever you chance upon a windfall ensure the amount goes straight into the savings kitty without hesitating for a second.
Boosting cash savings by all means possible
The FHA places a high premium on cash resources that you bring in directly to make your down payment as opposed to payments that are sourced from elsewhere like the seller contribution for specific purposes like closing costs. This is so because the FHA is more interested in establishing proof of your financial strength. To this effect, gifts that you receive from friends, relatives and parents are generally classified as acceptable personal contributions as they do not involve interest earnings or repayments. The same also holds true of grants in special programs encouraging first time home buyers that may involve tax exemptions and interest concessions.
When you don the role of shopping for a brand new home you instantly transport yourself into a world of generously endowed kitchens, spacious bathrooms, designer drawing rooms and landscaped gardens, but it also casts the awesome responsibility of not forgetting the rudiments of planning your finances so that you don’t emerge poorer from the home buy. Following the tips that we have underlined will not only boost savings but create a backup that will smoothen the home buy in positive ways you will be very thankful for. Car Title Loans San Jose 1430 Koll Cir, San Jose, CA 95112 (408) 550-6992