Money Management

Wondering how a person with perfect credit and a great income could be turned down for a home loan? Read on to find out how that could happen. [[{“value”:”

If you have great credit and a solid income, you may assume you’ll definitely be able to get the mortgage you need to buy a home. After all, most mortgage lenders look carefully at your financial credentials to make sure you don’t present a major borrowing risk.

But even if you’ve been pre-approved and meet the lender’s criteria when it comes to your finances, you might still be unable to get approved for a loan. Here’s how that could happen.

Lenders don’t just consider your personal finances

There’s a very simple reason why your perfect financial credentials may not necessarily guarantee you a mortgage loan. It’s because lenders don’t just look at you when they’re deciding if a loan is too risky to approve. They also look at the house.

See, mortgages are secured loans. Unlike, say, credit cards where you borrow and the lender just has your word that you’ll repay, mortgage lenders have an ownership interest in your house. The house acts as collateral or security for the loan, and if you don’t pay back the mortgage, the lender can foreclose and take your house.

As a result, if the home does not meet the lender’s criteria, then no matter how qualified of a borrower you are, the mortgage loan provider is simply not going to move forward with giving you the money to buy it.

When would a problem with a home get you turned down for a loan?

There are a few situations when a problem with a house could result in a mortgage lender saying you can’t borrow.

The house might appraise for too little

Most mortgage lenders won’t loan more than around 90% of the fair market value of a home (although there are some exceptions). If your lender follows this rule and your house appraises for less than you’re paying, you could be turned down to borrow unless you come up with extra money.

Say, for example, you’re looking to borrow $290,000 to pay for a $300,000 house — but the house appraises for $270,000. The lender might only be willing to lend you 90% of $270,000, or $243,000. If you couldn’t get the seller to drop their price or couldn’t come up with the other $27,000 you’d need, the lender would turn down your loan.

The house might be uninsurable

Lenders require insurance to protect their investment. If you’re looking to buy a house in a very high-risk area and can’t find a homeowners insurance company to cover it, the lender probably won’t give you a loan to buy it.

The house could have serious problems that make it unmortgageable

Lenders won’t lend you money to buy a property that is uninhabitable in its current condition or that has serious health and safety issues. As a result, a bad roof, an active pest infestation, structural issues, problems with plumbing or electric, mold and water damage, HVAC issues, and other major defects could make it impossible to borrow to buy that home.

If you happen to fall in love with a home that has these issues, you may be out of luck entirely with finding a mortgage lender — at least not without bringing a lot of extra money to the table in case of a low appraisal. You’ll need to think seriously about whether you should move forward anyway — and whether it’s feasible to do so if you’d have to be a cash buyer.

For most people, when problems with a house prevent a loan from going through, it’s best to just walk away and find a new place. Just be sure to include a financing contingency in your offer when you’re trying to buy, as that gives you the right to walk away without losing your deposit if it turns out you can’t get a loan for the home in the end.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

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 

Average monthly expenses come in at around $6,081 per household. Learn more about how to optimize your spending to meet your goals. [[{“value”:”

Americans are spending a lot of money, on the whole. But just how much, and where is the cash going? It can be helpful to look at how other people are using their money so you can get a better idea of where you stand relative to your peers — and get some insight into some areas where you might be spending too much.

Here’s what Americans are spending money on

According to recent data from Ramsey Solutions, the average American household spends $6,081 per month or $72,967 annually. But there are big variations in spending depending on household composition. Specifically:

Families of four spend an average of $7,875 to $9,168 monthly depending on how old their children are.Single people average $4,337 per month.Married couples without children have average monthly expenses of $7,111.

Housing and transportation account for the biggest chunk of that spending, eating up 33.3% and 16.8% of the average American’s household budget respectively. Food costs take up another 12%, as do personal insurance and pensions, while healthcare comes in at 8%. Finally, entertainment and other expenses account for 4.7% and 3.1% of each household’s spending, while the rest of the money is eaten up by clothes, services, education, and cash contributions.

How does your spending compare to the average American’s?

Taking a look at these numbers can give you a good idea of how your own spending habits fare relative to your peers.

While it’s interesting to see how much money people spend in terms of the dollar amounts going out of their checking accounts every month, the information about where the money is going may be even more helpful. For example, most people are spending a little over a third of their income on housing. That’s just above the recommended level of 30% of household income going toward this spending category.

If you’re devoting a much bigger chunk of your budget to things like housing, food, or entertainment, that may be something that you’d want to take a look at. It’s not necessarily a problem as long as you’re also saving plenty of money and accomplishing your financial goals. But it could give you a starting point for where to look if you’re struggling and need to make some budget cuts.

How can your spending help you meet your goals?

The most important thing, though, is how your spending affects your own personal finances. You may have different financial goals than your fellow Americans, and you may not want to do what the average person does. For example, if you’re hoping to retire early and travel the world, keeping your housing costs well below the average most people spend might give you the ability to save enough to do that.

Ultimately, the goal is to make sure you are easily covering your expenses with your income and have plenty left over to save for the things that matter to you. The best way to do that is to:

Define your financial goals, being very specific: You should calculate exactly how much you need to save each month for retirement, big purchases, a house down payment, an emergency fund, and whatever your other goals are.Automate your savings: Once you know what your goals are, prioritize accomplishing them by paying yourself first. Transfer the necessary amount of money into your savings account so you can be assured you stay on track.Keep your fixed expenses low: Aim to keep your fixed monthly expenses below 50% of your income so you have ample funds left over to save and spend.Spend on the things that matter. You can make a detailed budget to do that or, if it works for you, you can spend whatever’s left in your bank account after you’ve paid fixed expenses and hit your savings target. Focus on doing the things with your money that bring you the most joy.

If your expenses are below the amount you need to accomplish your goals, then it doesn’t really matter how they compare to that of your peers. You’re doing the right thing for you, and that’s what will count the most in the end.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

“}]] Read More 

If your tax refund isn’t what you imagined, your side gig may be to blame. Read on to learn why else your refund may be lower and what to do about it. [[{“value”:”

If you’ve already filed your taxes for 2023, you may have done it because you were expecting a refund. After all, you may be relying on it to pay an important bill. But there are many reasons that you might not have seen the refund you were expecting. And if it feels like a trend, it’s not difficult to understand why.

According to the IRS, the average tax refund for the 2022 tax year was $1,963, which represents a 10.8% decrease compared to the previous year. This may have been due to the reduction of certain pandemic-era tax credits, like the Child Tax Credit and the Earned Income Tax Credit.

Here are some of the reasons why your 2023 tax refund may not be what you thought it would be, as well as a way you can still decrease your taxable income.

Contract work

It’s no secret that contract work has seen immense growth over the past few years (in fact, according to a recent survey from MBO Partners, occasional independent work increased by 132% from 2020 to 2023, and independent work as a whole increased 89% during that time.) If you fall into that “occasional independent worker” category, and especially if 2023 was your first year trying out contract work, you may not have known that you either needed to:

Make estimated quarterly tax payments to make sure you were covering the taxes that aren’t withheld for that type of workUpdate your W-4 withholding to make sure your job was withholding enough taxes to cover both your day job and your contract work

This is especially problematic if your extra income pushes you into a higher tax bracket, which could lead to a lower refund or even owed taxes.

Changes in your circumstances

Adding a side hustle to your schedule certainly isn’t the only thing that can impact your taxes. If your life circumstances changed during 2023, you could also see a reduced refund. Here are a few situations that can reduce your tax refund:

Getting a raise at workHaving a change in your filing status (by getting married or divorced, for example)Selling investments, like stocks or crypto (which could mean incurring capital gains tax)

If you’re a parent, you should also note that if your kid turned 17 in 2023, that means you’re no longer eligible to claim the Child Tax Credit, which is worth up to $2,000 per qualifying child. Instead, you may be able to qualify for the credit for other dependents, but that’s only worth up to $500 per dependent.

The silver lining

The good news is that, despite potential issues in a W-4, there is something that can work in your favor if you haven’t filed your taxes yet or you’re looking ahead to next year’s taxes: inflation adjustments to the 2023 tax brackets. In fact, the IRS raised the standard deduction for 2023 to the following:

$13,850 (single filers — up $900)$20,800 (head of household — up $1,400)$27,700 (married, filing jointly — up $1,800)

So for those who don’t itemize, there is hope for a bigger refund.

For example, let’s say you earn $100,000 per year. If you took the standard deduction as a single filer, your taxable income would be $86,150. That would mean you’d be in the 22% tax bracket, meaning your federal taxes due would come to about $14,260 (assuming you don’t have any other deductions). Plus, you still have until April 15th, 2024, to reduce your 2023 taxable income even further by contributing to a traditional IRA. So that could be a solid option to decrease your 2023 tax burden.

Navigating tax software can be difficult. There are many opportunities to forget to claim a tax deduction or credit, or not realize that a decision you’ve made will impact your tax burden. So hiring a tax professional can help you make sure you’re getting the most out of your hard-earned money.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

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 are so many streaming and music platforms to choose from, but signing up for all of them at once is expensive. Learn a way to enjoy them for less. [[{“value”:”

It’s no small expense trying to stay entertained these days. How many streaming media platforms are there to choose from now? And it’s probably not a great move for your personal finances to sign up for every one just so you can stay on top of the hit new shows. Even if you choose the lowest-priced membership with each platform, you could be paying $10 or $20 per month for each one if you choose a higher-tier plan. But if you have a little patience, there’s a way to get these memberships for a lot less.

Wait for a free or discounted trial offer

The other day, I was looking up something on Amazon that I wanted to buy and placed the item in my cart to see when the delivery estimate would be. As I did, I noticed a big banner at the top of the page offering me 30 days of Amazon Prime for free. When paid monthly, an Amazon Prime membership normally costs $14.99, so that was a nice little savings Amazon was offering me to try to lure me back into being a long-term Prime member.

I’ve had a Prime membership in the past, though I’ve found myself using the site less often lately, and I can’t justify the cost for how much I shop on the site anymore. But I’ve noticed that every once in a while, Amazon will share an offer like this with me to try out Amazon Prime again for free for a month. Usually I get the offer around the holidays, which is an especially convenient time to take advantage since I have quite a few gift recipients who live out of state.

Amazon isn’t the only platform that sends me these offers. I’m currently using a three-month trial of Spotify Premium for $10.99. The normal cost of one month of this membership is $10.99, so that’s a savings of $21.98 on top of the $14.99 I saved from Amazon. And ad-free tunes sure make the workday go by more smoothly.

I’m also about two months into a 12-month, $0.99-per-month Hulu membership that I snagged during a Black Friday promotion. Sure, it’s the membership level with ads, but did you hear me when I said $0.99 a month? For a year. That’s a lot of entertainment for under $12, and it would normally cost $7.99 per month.

I’ve even taken advantage of retention offers from Sirius XM radio in the past that ended up costing $1 per month for three months, a savings of $22.99 off the regular price. All this to say, these giant corporations want your business, and they’re willing to sacrifice a little money in the short term to hopefully lure you back in as a long-term customer.

Cycle through memberships

The best way to ease the strain on your bank account when it comes to entertainment options is to sign up under a promotional deal. But make sure to mark your calendar with a reminder to cancel your membership when the promotional period ends. That way, you won’t start getting automatically charged for the service when the full-price bill comes due.

Of course, things aren’t always going to line up where one promotional offer is waiting in line when the previous one runs out. But you can still cycle through memberships, rather than signing up for a bunch of them at the same time, as a way to save money. While it’s nice being able to watch or listen to whatever you want, when you want, it’s unlikely you really need to. Instead, try signing up for one platform on a monthly basis, then rotating to a different platform when the new season of your favorite show is back. Once you’re caught up over there, you can jump to another platform to check out the new series everyone is talking about.

While it’s true that many platforms offer a lower per-month cost when you pay annually on your credit card rather than monthly, you’re not going to see any savings if you sign up for all of them on an annual contract and only use each of them here and there. A better bet is to subscribe one at a time — and even better if you can score a free or discounted few months in the process.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

“}]] Read More 

Shopping for a new account can give you access to new opportunities to earn money for very little effort. Read on to learn how. [[{“value”:”

Banking can be about forging long-term relationships to help smooth out future credit needs. But that doesn’t mean you have to miss out on the opportunity to earn more from your money. In fact, if you aren’t shopping around for new banking accounts regularly, you could be missing out on some excellent opportunities.

Here are three reasons why you should shop around for new accounts every three months.

1. Higher APYs

Some bank accounts are just places to stash cash — and in that way, they’re no better than socking away cash under the mattress (apart from the security benefits banks offer, which are nothing to scoff at). But from an interest-rate perspective, you could be losing out on easy money. And if you factor in inflation, which has notably reached astronomical levels over the past year, your money could actually be losing purchasing power.

But even if you’re the type of person to seek out a high-yield savings account or checking account, that doesn’t mean you’re always getting the best deal. After all, a lot can happen over the course of three months, impacting the interest rates available on these products. And banks want your business. So it pays to shop around to see what kinds of APYs are available outside of your usual bank.

For example, if you have cash in a high-yield savings account that offers a 4% APY (annual percentage yield), you could earn $200 in interest per year on a $5,000 balance. But if you were to move that to an account with a 5% APY, you’d earn $250 in interest. The caveat here, however, is that these rates can change over time, meaning your returns will change, too. That’s why it’s so important to regularly shop around for better rates.

2. Sign-up bonuses

Speaking of banks wanting your business: Some will offer sign-up bonuses for new customers, amounting to hundreds of dollars for moving your account to that bank. There may be certain requirements, like receiving a certain amount in direct deposits over a specific time period. So you’ll want to make sure that you can stick to that requirement to make this sort of move worth your time.

If you can, though, these bonuses can translate to the same rewards of a relatively high APY. The only difference is that you’d get that cash up front, plus the actual APY associated with that account. For example, let’s say a bank is offering a $300 signup bonus if you can maintain a $5,000 balance for three months on an account with a 2% APY. That’s like getting a 6% APY up front, plus you’d earn $100 over the course of the year, assuming the balance and interest rate stays the same. Bonus points if you can find a bank that also offers a competitive APY.

3. Guaranteed interest

Checking and savings accounts aren’t the only accounts available from most banks — you may also be able to open certificates of deposit, which allow you to secure a specific APY as long as you don’t touch that money for a specific amount of time. CD terms can range anywhere from one month to several years, so you’ll need to make sure you can part with that cash for that time. Otherwise you’ll forfeit the future interest and have to pay an early withdrawal penalty.

Still, CDs can help you ensure you’re getting the most out of your bank accounts, especially as rates fall in the future. For instance, if you get a 3-month, $10,000 CD with a 5% APY, you’d earn $125 in interest. Meanwhile, if you left that cash in a checking or savings account, the interest rate could fluctuate, meaning you could earn less for the same amount of money.

Of course, if rates increase after you open the CD, you could be losing out on money. So be sure to look at the average rates for checking and savings accounts, too, to make sure you’re moving your money to the best possible place.

Shopping for new bank accounts can feel like a waste of time. But if you’re willing to do a bit of leg work every quarter, you can open yourself up to significant earnings opportunities. And that’s well worth the effort.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

See the 10 stocks

*Stock Advisor returns as of February 12, 2024

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