Money Management

Want to become a homeowner? Your credit is of the utmost importance if you’re getting a mortgage. Keep reading to find out the consequences of ignoring it. [[{“value”:”

Buying a home has many unglamorous parts that you never see on HGTV. Those attractive people with a suspiciously high budget you see on House Hunters aren’t shown making on-time bill payments, working overtime to pay off debt, or hunting for errors in their credit reports. But these moves are all excellent ways to get your credit in good shape before applying for a mortgage.

Keep reading to learn why it’s worth digging into your credit and improving it as much as you can before trying to buy a home.

1. You won’t have as many lender options

With a higher credit score, you’ll have the chance to work with nearly any lender you want — borrowers like you are what mortgage lenders dream of. A solid credit history shows a lender you’re a lower risk and can be counted upon to make your payments on time and eventually pay off your home loan.

If your credit score is on the lower side, however, you may struggle to find a lender that is offering competitive rates for a borrower like you (more on rates below). It might be a good idea to target the best FHA lenders in your search.

FHA loans are a good option for people whose credit scores are on the lower side — you can buy with a 500 credit score if you can make a 10% down payment. But they are likely to be more expensive than other loan types due to the mortgage insurance requirement. On an FHA loan with less than 10% down, you’ll pay an upfront mortgage insurance premium (MIP), as well as an additional payment every month for the life of the loan.

2. You’ll pay more in interest

Ultimately, getting a home loan of any kind with a lower credit score and more black marks on your credit history is likely to result in paying more for that loan. There’s often a stark difference between the rate you’ll be offered with a credit score of, say, 620 (commonly regarded to be the minimum score for a conventional loan) vs. a credit score of 800.

FICO maintains a mortgage calculator that uses a consumer’s FICO® Score — this is the credit score most commonly used by lenders of all kinds. As of this writing, a credit score of 800 might entitle you to a mortgage rate of 6.567% — on a 30-year home loan totaling $250,000, that’ll come in with a monthly payment (principal and interest) of $1,591.

But if your credit score is 620, your rate could be 8.156% — giving you a monthly payment of $1,862. Over the 30-year term, you’ll pay an extra $97,369 in interest thanks to this higher rate. No matter how you slice it, having a higher credit score will save you money on a home purchase.

How can you avoid these fates?

I hope I’ve proven the case that repairing your credit before attempting to become a homeowner is your best bet. But how do you do that? Consider making these moves:

Check your credit score: Some credit card companies and banks offer free access to your FICO® Score, and since this is the one used by most lenders, checking yours out is a good window into what a mortgage lender will see.Get your credit report, too: You can get your credit report for free at AnnualCreditReport.com. Is the information on it accurate? If you spot any errors, you can have the credit bureau remove them, which should help boost your score.Pay down existing debt: This is a fast way to improve your credit score ahead of applying for a mortgage, but isn’t feasible for everyone. If you can pay off a chunk of existing debt (especially of the high-interest variety, like that on a credit card), it’ll improve your credit utilization ratio.Keep making on-time payments: Payment history is the most significant piece of your credit score, so ideally this is something you’re already doing. If not, put a special focus on it now. A history of on-time payments shows a lender you’re a responsible borrower.

If buying a home is in your future, take the time to dig into your credit profile and improve it before applying with a lender. Otherwise, you’ll be making the process harder and more expensive.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

Summer is only a few months away. Find out how travel credit cards could help you take an amazing summer vacation at a much lower cost. [[{“value”:”

Summer is always a popular time to travel. Since there’s more demand, that also means it’s usually more expensive to travel during the summer than in the offseason.

If you’re hoping to take a summer vacation this year, the cost is probably an important factor. For 78% of Americans, traveling affordably is the top priority, according to a survey by RetailMeNot.

I always recommend travel credit cards to people who want to travel for less. My credit cards save me thousands of dollars every year. Here are a few ways you could save money on your summer vacation with a travel card.

1. Earn a welcome offer and use it to cover your biggest travel expenses

Travel cards often have welcome offers that you can earn as a new cardholder. For example, a card may offer 60,000 bonus points if you spend $4,000 in the first three months.

These can be extremely valuable, so they’re a great way to pay for major travel costs. If you get an airline credit card with a welcome offer of 70,000 bonus miles, that could be enough to cover a round-trip flight to Europe. Or you could get a hotel credit card and use the welcome offer to pay for a stay at that hotel.

There are also credit cards with transferable points. These let you send your points to any airlines and hotels the card issuer is partnered with. They’re worth checking out if you want flexibility about how you use your travel rewards. For example, you could transfer your points to one airline for a trip to Europe, and another for a trip to Asia.

2. Get an airline credit card so you can check a bag free of charge

Checking a bag was already expensive, and several of the biggest airlines raised their bag fees earlier this year. On most airlines, your first checked bag will cost $35 to $40, and that’s per flight. On a round-trip flight, you’re looking at $70 to $80. If everyone in your party needs to check a bag, it could end up costing $200 to $300 or more.

There are a few ways to avoid baggage fees. You could stick to a carry-on and a personal item. You could fly with Southwest, which lets you check two bags free of charge. Or you could open a credit card with your favorite airline. Many airline credit cards include a free checked bag for you, and often for others on your reservation, as well.

3. Open a hotel card that offers a free night certificate

If you have any hotel chains you like, hotel credit cards can be useful for a few reasons. They’ll earn points you can redeem for hotel stays. And as mentioned earlier, they usually have welcome offers, enabling you to earn lots of bonus points as a new cardholder.

They also include other hotel-specific benefits, often including a yearly free night certificate. Depending on the card, you may receive one starting the first year or after your first cardmember anniversary.

Try to save your free night certificate for an expensive stay. If you’re staying at a $100-per-night hotel on a business trip next month and a $300-per-night hotel on your summer vacation, it’d make more sense to use your certificate on the latter. Just make sure to check the rules on where you can use it — many certificates can only be used at hotels within specific price ranges.

4. Get free food and drinks at the airport with lounge access

Every airport is unique, but there’s one thing they all have in common: the prices are terrible. Whatever something costs outside the airport, expect to pay about double that inside the airport. That makes grabbing a bite to eat an expensive proposition, especially for families.

Some travel cards solve that by including membership to one or more airport lounge programs. This allows cardholders, and often their guests, to access lounges free of charge. You’ll have a more comfortable place to relax, with free food and drinks.

Airport lounge access is primarily available through travel cards with high annual fees. Still, these cards tend to have plenty of travel benefits that can make their fees worth it. And if you’re a frequent flyer, being able to get into airport lounges makes the experience much more enjoyable.

If you like to travel, a travel credit card is worth getting. Check out the best options and you should be able to find one that helps you save this summer.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

There’s no such thing as a truly free mortgage refinance. Take a look at what you need to know about no-closing-cost options. [[{“value”:”

Refinancing a mortgage involves getting a new home loan. You’ll use the money from your new lender to pay off your existing mortgage loan provider. The purpose of doing this is usually to get a better rate and terms from the new lender. For example, you might decide to refinance if you can reduce the interest rate you’re paying or if you want to convert an adjustable rate mortgage (ARM) into a fixed rate mortgage.

The big question, though, is whether there is a cost to refinancing or whether you can do it for free. Here’s what you need to know to answer that question and make an informed choice about whether to refinance.

There are always closing expenses when you refinance a mortgage

The first thing that you need to know is that there are upfront expenses that are associated with a mortgage refinance. Mortgage closing costs for a refinance loan include:

Loan application feesLoan origination feesCredit checksAppraisal costs for a professional appraiser to determine the value of the homeA survey required for your lender to ensure there are no boundary disputes or encroachmentsTitle insurance to protect against competing ownership claimsFlood certification

These costs typically add up to around 2% to 6% of the loan amount.

You’ll either pay these expenses upfront or over time in one of two ways

Often, paying closing costs for a refinance loan out of your checking account can get really expensive. In fact, having to pay these costs could make it difficult to afford to refinance. That’s why a lot of lenders offer so-called “no-closing-cost” refinance loans.

Here’s the problem, though: All those costs mentioned above — they don’t just disappear. You still have to pay them somehow. And usually, this happens in one of two ways:

Your lender raises your interest rate a little bitYour lender adds the amount of the closing costs onto the refinance loan. So if you were borrowing $200,000 to repay your mortgage and owed $6,000 in closing costs, your lender would give you a $206,000 loan.

While this makes it seem cheaper upfront, or even free, to refinance, it’s really not. It can cost you more in the end.

Say, for example, you financed $6,000 over 30 years at 7.00% (which is effectively what you’re doing if your lender takes $6,000 onto your 30-year refinance loan that you get at a 7% mortgage rate.) Over time, that $6,000 would end up costing you $14,370.53, including $8,370.53 in total interest costs. The extra borrowing could also add $39.92 to your monthly loan payments. That means not only was your refinance loan not “free,” but the closing costs of the loan would end up being almost $15,000!

Now, to be clear, there’s nothing wrong with refinancing. If you can lower your mortgage rate by a good amount (around 1.00% or more) and you plan to keep your house for a while, you can end up paying less in total over time. But you should be aware that refinancing isn’t free and it’s often better to try to pay closing costs upfront if at all possible to maximize the savings your refinance can provide you.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

A $1 million nest egg is impressive in its own right. But read on to see why you may want to aim higher. [[{“value”:”

Northwestern Mutual reports that the average person in their 60s has $112,500 saved for retirement. So if you’re nearing retirement with an IRA or 401(k) balance of $1 million, you’re way ahead of the game.

But are you set for life with $1 million in retirement savings? Not necessarily.

It’s more complicated than a single number

Savers often aim for $1 million in retirement funds because it’s a number that, at least in theory, seems to equate to financial stability. After all, it’s $1 million. That’s a lot of money.

But while $1 million is a sum you should be proud of accumulating through the years, it may not buy you the retirement you want. And it’s a sum you might still end up depleting in your lifetime.

For many years, financial experts promoted the 4% rule, which had you withdrawing 4% of your nest egg your first year of retirement and adjusting subsequent withdrawals for inflation. If you were to apply that rule to a nest egg with a $1 million value, you’d have about $40,000 of annual income.

But is that enough?

The answer: Maybe, or maybe not

It may be enough if you own your home outright and live in a relatively low-cost part of the country. It may not be enough if you live in an expensive city and want to spend a lot of your time in retirement traveling.

Of course, it’s worth noting that funds you withdraw from your savings will likely be in addition to Social Security. But even so, let’s say you’re eligible for $40,000 a year in benefits. If you add $40,000 a year from your savings, that’s $80,000 in total, which isn’t negligible. But again, it still may not be enough for you if you lead a costlier lifestyle.

It’s also important to note that the 4% rule assumes two things:

Your savings are pretty evenly distributed between stocks and bondsYou need your savings to last 30 years

If your retirement savings are invested conservatively with mostly bonds and few stocks in your portfolio, you may need to lower your annual withdrawal rate. That’s because the absence of stocks in your portfolio might limit your savings’ growth during retirement.

What’s more, perhaps you’re retiring early and think you might need your savings to last for 40 years, not 30. In that case, you may need to apply a lower withdrawal rate to your nest egg. And if so, $1 million may not be enough.

Think about what you want and need

Many people are wired to assume that $1 million in retirement savings is THE goal. But in some cases, that might leave you short.

So rather than fixate on that single number, think about what your expenses might look like in retirement and what your goals entail. Also, think about the age at which you want to retire and how you intend to invest during that period of life.

Once you run the numbers, you may come to the conclusion that $1 million isn’t the target you should be aiming for. But you’re better off finding that out sooner rather than later.

So don’t wait until your 50s to start seriously thinking about retirement and planning for it. Instead, start early so that if you need to ramp up your savings efforts, you’ll have ample time to do so before your career comes to a close.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

You may need the help of a real estate agent to sell your home. But that doesn’t mean you have to overpay. Read on to learn more. [[{“value”:”

Selling a home can be an expensive prospect. Sure, you may be looking at a nice profit at the end of the day if you’ve been in your home for many years and its value now exceeds the amount you paid when you bought it. But you might also lose a large chunk of your home sale profit to the commission you have to pay your real estate agent.

It’s common for real estate agents to charge a 6% commission on home sales. So if your home sells for $500,000, that could mean losing $30,000 off the bat. And you might need that $30,000 — or at least some of it — to put toward your next mortgage.

But now more so than ever, you may have a prime opportunity to talk your real estate agent down on their fee. Here’s why.

The days of the 6% commission may be over

The National Association of Realtors (NAR) has more than 1 million Realtors under its umbrella. And rules established by the NAR effectively left home sellers paying a 6% commission for many years.

To be clear, not all real estate agents are Realtors. And agents who could operate outside of the NAR’s rules had the option to set their own fees. It was Realtors alone who were bound to the NAR’s standard 6% commission.

But recently, the NAR settled a massive lawsuit and is looking to eliminate the commission-related rules it had previously established. The result is that going forward, there may be more room for fee negotiation when hiring a real estate agent. So that’s something you may want to take advantage of.

What’s more, you may be in a good position to negotiate your real estate agent fees because right now, there’s a shortage of available homes on the market. As such, local agents may be eager to drum up business. And they may be willing to cut their fees if it means getting hired.

Make sure you’re getting good value for your money

You may or may not be able to get a real estate agent to lower their commission for selling your home. But if not, at least make certain you’re getting good value in exchange for paying that fee.

For one thing, make sure you’re hiring someone experienced who knows the local market. Also, see what services your fee entails. If your agent is going to not only market your home, but stage it as well, that alone might make their fee worth it, since hiring a separate home staging service could cost you extra.

The recent NAR settlement may or may not result in you saving money on the sale of your home. But either way, before signing that contract, try negotiating with your real estate agent to see if you can pay a smaller fee.

Remember, any home you buy after selling yours may be more costly because home prices are up these days. The more money you can take with you from the sale of your home, the better.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More