Money Management

It’s best to go into the home-buying process with a pre-approval for a loan. Keep reading to see what documents you should locate beforehand. 

Getting pre-approved for a mortgage loan is very important. If you are thinking about buying a house, you’ll need to know how much the bank is willing to lend you and what your mortgage might cost. You’ll also need to be ready to show your pre-approval letter to sellers when you make an offer. They’ll want to see it so they know you can actually get the financing you need to go through with the deal.

The process of getting pre-approved can be more complicated than just going online, submitting some basic information, and finding out your rate — this is also known as getting pre-qualified. Pre-approval requires you to actually submit some financial details to mortgage lenders. They’ll evaluate you, and, if everything looks good, you should be given a pre-approval letter and be able to lock in your rate. This doesn’t guarantee you a loan but it does mean that if the house is OK and your financial situation stays stable, you should be able to move forward with borrowing.

So, what exactly will you need to provide to your lender to get pre-approved? Here are three things most mortgage lenders are going to need.

1. Proof of income

Mortgage lenders are going to want to see proof of how much money you make. That’s because the amount you are allowed to borrow is based on your income (and your debt levels). Most lenders want you to keep your monthly mortgage payments below 28% of income and your total debt including your mortgage and other payments below 36% of your income. (This is called the 28/36 rule.) While there are exceptions, this ratio will give you the best chance of getting an affordable loan from a variety of lenders.

Lenders don’t just trust you when it comes to your income. They’ll want to see pay stubs and tax returns. And ideally, you will be able to show your earnings have been steady for the two years before you’re applying for the loan. So be sure to have these documents ready when you apply.

2. Proof of assets

In most cases, you’re going to need a down payment when you borrow money for a home. While some lenders allow you to get a loan with as little as 3% down (or even no down payment at all), most require around 10% to 20% down. And if you don’t want to have to pay an added cost for private mortgage insurance (a fee tacked onto your mortgage that protects the lender if you default on your payments), you’ll need 20% down.

Lenders want to see that you have this money, so they will most likely ask for bank statements as well as for statements for other accounts like those with a brokerage firm. Some mortgage loan providers also require you to have assets in reserve, which is basically a fancy way of showing you have enough to pay your mortgage for several months, in case of an income interruption.

Be ready with bank statements, brokerage account statements, and evidence of other assets such as statements for cash value life insurance and retirement accounts.

3. Your credit score

Finally, lenders want to see your credit score. You usually won’t provide this, but will instead give them permission to pull your credit report directly from one of the credit reporting agencies. Some loans, like those backed by the government, are available with scores as low as 500, but most lenders want a FICO® Score of 620 or higher for a conventional mortgage loan.

You should be ready with all of this information so you can get through the pre-approval process as quickly as possible. Start gathering your paperwork today so you can get your home loan application submitted and have a better shot at finding the home of your dreams.

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Airfare can be expensive, but flight deal subscriptions can help travelers save money. See why you may want to give this service to your favorite traveler. 

If you have a traveler on your holiday shopping list but know they already have every travel gadget and accessory they need, you may wonder what to buy. If you’re looking to get something other than an airline gift card, luckily, there are other options to consider.

Why not give your favorite traveler a flight deal subscription? A present like this could help them explore more of the world without overspending. Find out more about this unique gift idea.

A flight deal subscription can unlock significant savings

These days, flight prices are often sky high. Even if you buy a ticket in advance, you may spend more than you want on airfare costs. But a flight deal subscription can help travelers keep more money in their bank accounts as they explore new destinations around the globe.

While it’s possible to search around for the best airfare deals, that can take a lot of time and it’s easy to miss deals. With this kind of membership, airfare deals are regularly sent to subscribers’ inboxes. Travelers can save money by purchasing flight deals that interest them.

Services like this come with a yearly fee, but can offer travelers hundreds or thousands of dollars in savings yearly. Not paying full price for airfare can feel like a significant win. And for those who like to travel as much as possible, it can allow them to travel more frequently.

Flight deal subscription options

Several companies offer subscriptions like this, with multiple plan options available. If you’re getting a holiday gift for someone who loves to travel, you may want to purchase a subscription like this.

Consider their travel preferences before choosing a subscription. Some travelers prefer to explore domestic destinations, while others take every opportunity possible to explore a new international destination. There are different plans for various travelers.

Here are a few flight deal services to consider.

Going: Going has two paid subscriptions that send domestic and international flight deals. The $199-per-year Elite plan offers the most benefits, including business and first class deals and mistake fare alerts. This is one of the most costly services, though.Thrifty Traveler: The $89.99 per year Premium plan has domestic and international flight deals, economy and premium deals, points and miles sales, and error fare alerts.Jack’s Flight Club: The $49 annual Premium subscription provides members access to domestic and international airfare deals. Most deals are for economy tickets.Secret Flying: This $39 per year membership gives travelers access to international and domestic flight deals, including economy and domestic flights and error fares.

Three reasons why a flight deal subscription makes a great gift

For travel lovers, these kinds of memberships make for an ideal gift. Here are a few reasons why a flight deal subscription is the perfect gift idea.

It’s unique: A flight deal subscription service is a one-of-a-kind gift that will stand out. Your loved one will appreciate your thoughtfulness.It’ll save your loved one money: Everyone loves a good deal. Having access to the best flight deals can help your loved one stretch their vacation budget further. Since they’ll save money on travel costs, it may also help them travel more frequently.It won’t take up space: Many people feel they already own too many “things.” Consider an airfare deal subscription if you want to avoid gifting items that take up more space. You’ll also encourage your recipient to prioritize experiences over things.

Since some airfare deal services offer discounted prices during the holiday season, now is an excellent time to buy a present like this. If you don’t have any travelers on your shopping list but are an explorer, you may want to consider treating yourself to a membership. Getting the best deals when buying airfare can benefit your personal finances.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Searching for a great gift for your dad? Read on to see what Costco has in store. 

Goofy. Hard-working. Loving. These are just some of the words you might use to describe your dad. And as such, you may be eager to get him a holiday gift he’ll truly appreciate.

That’s not necessarily an easy thing if your dad is one of those people who seems to have everything and needs nothing. But you may be surprised at how well-received these Costco finds are.

1. Kirkland Signature Men’s Hooded Fleece Jacket

Your dad probably spent many afternoons outdoors teaching you to ride a bike, tossing a football, or simply playing tag. Now you can treat your dad to a more comfortable fall or winter afternoon with a new fleece jacket.

Costco is selling its signature Kirkland-branded jacket for just $27.99 online, and you might find an even lower price at your local warehouse club store. Choose from blue or black in a range of sizes.

2. Beats Flex Wireless Earphones

Maybe your dad works hard and often has to take meetings on the go. Or maybe he loves listening to music. Either way, a new pair of Beats wireless earphones could make a great gift.

He’ll get up to 12 hours of listening time so he won’t constantly have to run to the charger. These earphones are compatible with Apple and Android phones, and you can buy them online right now for only $39.99.

3. Kirkland Signature Leather Golf Gloves 4-Pack

Have a dad who loves to golf? Extra gloves make a great gift. Costco has a four-pack of golf gloves for just $29.99, made of leather with an easy velcro closure tab.

Choose from the right- or left-handed version, but make sure to get the correct one!

4. Denali Outdoors Spin 8×25 Snowshoe Kit

Your dad was probably the one who shoveled the driveway when the snow piled up. A good way to say thank you is to now make it possible for him to enjoy the snow at his leisure with a snowshoeing kit.

This set features a pair of snowshoes, trekking poles, and a neat bag to carry all that gear in. It’s a great way to help your dad get fresh air and get off the beaten path during the winter.

5. Citizen Eco-Drive Promaster Land Atomic Stainless Steel Quartz Mens Watch

Looking to splurge a bit on your dad this holiday season? If you’ve been saving up for a nice gift, consider a nice Citizens watch from Costco for $399.99. It features a stainless steel case and bracelet and is water-resistant. It’s also a great gift for someone who’s more old school and prefers a classic watch to one that constantly beeps and gets text messages.

Although you might end up spending a fair amount of money on a holiday gift for your dad this year, Costco also makes it more than possible to treat him to something nice without racking up a giant credit card tab. So if you’re struggling to come up with a great idea, check out Costco.com or head over to your local warehouse club store to see what items are on the shelves.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Apple and Citigroup. The Motley Fool has positions in and recommends Apple and Costco Wholesale. The Motley Fool has a disclosure policy.

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Gen Z is doing better with credit card debt than the average American. Here’s how to help get your finances back on track. 

Americans rely much more on their credit cards these days, and Gen Z is no expectation. According to McKinsey data, Gen Zers (aged 18 to 25) currently have an average of $2,282 in credit card debt.

But compared to the average American, Gen Z’s debt doesn’t look all that bad. According to Experian, Americans have an average of $6,365 in credit card debt, and the total amount is a record high of $1.08 trillion.

And while there’s a substantial difference between the average credit card debt for Gen Z and the average American, the reasons for their debt are likely the same.

Major costs are more expensive

Americans have struggled to keep up with the rising cost of nearly everything over the past few years, as inflation soared and housing costs rapidly increased. While the latest data shows that inflation is starting to cool, the damage has already been done to many people’s personal finances.

Consider how much these expenses have jumped recently:

Food costs jumped 9.9% in 2022 and were up 3.7% for most of 2023.The average price of a home has jumped 27.7% over the past three years.The average car payment is up 28.5% since 2020.

In addition to inflation, soaring interest rates have wreaked havoc on many Americans’ finances. Consider that the average credit card interest rate is 22% right now, compared to 15.5% five years ago and just 12.7% a decade ago.

There are 70 million more credit card accounts open right now than in 2019, indicating that Americans may rely on them more than before to cover everyday expenses.

How to start paying off credit debt

It can feel overwhelming when you first take a look at your debt. But creating a simple strategy for paying it off will help you get on the right track. Here’s how:

Create a debt payoff plan

Download a budgeting app to find expenses you can cut out, then put that extra money toward your credit card debt each month. Different payment strategies, including the debt snowball method, can help you stay focused on putting as much money as possible toward payments.

Consider a balance transfer

If you have a lot of credit card debt and are paying a high interest rate, you may want to consider applying for a balance transfer credit card. These cards often have low introductory interest rates, which help you make more progress toward your debt payoff by keeping your balance from growing thanks to interest. You will have to have a strong credit score to qualify for one of these.

Stop using your credit card

This may be an obvious suggestion, but it’s an important one. You can’t get out of credit card debt if you keep adding more to it. If you have monthly bills automatically tied to your credit card, switch them to be paid from your bank account or debit card instead.

Try to find additional sources of income

I’ve picked up additional freelancing work when I’ve needed extra cash, thanks to the plethora of gig work platforms. While it may not always be possible, finding an additional source of income can go a long way toward helping you pay off debt.

There’s no easy way to tackle credit card debt; paying down your balances takes financial discipline and time. But taking a few steps in the right direction — like budgeting and putting extra money toward debt — will help you make progress on reaching your goal.

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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.

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What’s in store for residential real estate in the new year? Read on to find out. 

Many people struggled to buy homes in 2023. If you were one of them, you may be wondering what the housing market has in store for 2024.

Without a crystal ball, we can’t be certain. But based on what we know about the real estate market as well as the economy, here’s what prospective buyers can expect in the new year.

1. Home prices are likely to stay high

In the third quarter of 2023, the median home sale price on a national level was $431,000, according to Federal Reserve data. That’s an increase from the second quarter of the year, when the median home sale price was $418,500.

Unfortunately, elevated home prices may be here to stay for a while. Despite the exorbitant cost of signing a mortgage today, buyers are clearly still willing to pay up for a home. And limited inventory is keeping prices strong despite higher mortgage rates.

2. Inventory will likely start off sluggish but potentially pick up later in the year

As of the end of October, there were 1.15 million housing units available for sale, as per the National Association of Realtors. That’s the equivalent of a 3.6-month supply of homes.

But it can take up to a six-month supply of available homes to meet buyer demand in full. So clearly, the market is short a lot of inventory. And things are likely to stay that way, at least in early 2024 due to high mortgage rates.

When mortgage lenders lowered their rates in 2020 and 2021, many current homeowners rushed to refinance. As such, a lot of people are sitting on much lower mortgage rates than the rates available today. Those higher rates are sapping homeowners’ motivation to sell — because who would want to swap a 3% mortgage for a loan at over 7%?

Housing inventory could pick up later in 2024 if mortgage rates start to fall to a notable degree. But because they’re not expected to fall drastically, buyers will likely struggle with inventory issues throughout 2024.

3. Mortgage rates could drop but will likely remain high

Many home buyers are hoping to see mortgage rates return to the 3% range. Unfortunately, that’s unlikely to happen.

As of Nov. 22, the average 30-year mortgage rate was 7.29%, according to Freddie Mac. And while we could see rates fall into the 6% range in 2024, whether they end up below that is questionable.

Much of that will depend on how inflation trends and what the Federal Reserve opts to do about it. Part of the reason mortgage rates are so high today is that the Fed has raised its federal funds rate numerous times since early 2022 to cool inflation. While the Fed doesn’t set mortgage rates, its actions tend to influence them, as well as borrowing rates for credit cards and personal loans.

Now, if inflation cools nicely in 2024, the Fed may opt to cut rates, potentially leading to lower borrowing costs for consumers. And that could extend to home buyers. But even so, no one should expect to see 3% mortgages in 2024.

Will 2024 be an easier year for home buyers than 2023?

It’s tough to say. But if you’re hoping to buy a home in 2024, you can take a few steps to increase your chances of success.

First, try to sock extra money away for a down payment on a home. That way, if prices remain high, you’ll potentially have more wiggle room.

Next, work on boosting your credit score if it could use a lift. The higher your score, the more likely you are to snag a more favorable rate on a mortgage. You can boost your credit score by paying all bills on time, whittling down credit card balances, and reviewing your credit report for errors.

All told, 2024 is shaping up to be yet another tough year for prospective home buyers. But that doesn’t mean you should give up on purchasing a home. Instead, do everything you can to put yourself in a stronger position to meet that goal.

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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.

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A home is much more than a monthly payment. Find out why some buyers regret buying homes at low rates. 

Everyone who’s not a starfish living under a rock is likely aware of recent mortgage rate hikes. The median monthly payment on a new mortgage has doubled from $1,500 to $3,000 since January 2021, according to data from The Kobeissi Letter.

In other words, home buyers who snagged homes during those days of low rates got good deals. Sometimes. Maybe. Actually, that’s up for debate. My friends bought a home at a 2.75% mortgage rate, a steal, and they totally regret it — for good reason.

Folks who snagged houses back when they were dropping like it’s hot might be stuck holding gift-wrapped bombshells. Between taxes and unpleasant neighbors, there are plenty of reasons to have buyer’s remorse. Here are four reasons my friends regret buying a house despite low rates.

1. Maintenance and property taxes

The average American household spends 29% of its income on housing. But it’s more than mortgage fees; it’s also maintenance. According to the Angi State of Home Spending report, the typical cost of maintaining a home is $2,467 per year, having jumped 162% from 2019 to 2022.

Another expense many new homeowners forget to consider is property taxes. The typical homeowner pays up to 2.23% of their home value in taxes (in most cases, property taxes are less than 2%). That’s thousands of dollars yearly in lifetime expenses — even when you pay off your mortgage, taxes remain.

My friends didn’t expect the maintenance costs — everything from roof repairs to gutter cleaning — to be so high. Nor do they enjoy property taxes, something every homeowner deals with.

2. Zero flexibility

Planting roots is a beautiful thing when you don’t want to wander. Otherwise, it’s a trap. A home is one of the deepest, hardiest roots of all. Once you buy one, you lock up thousands of dollars that can only be recouped once the home sells. In other words, you’re stuck fast.

Renting is better than owning for exploring new neighborhoods. My friends found that out the hard way. They’ve sacrificed flexibility for stability; like many, they regret it. I, too, have rented my whole life. It’s something to consider before I become a first-time home buyer.

3. Noisy neighbors

Day after Fourth of July. Three in the morning. BA-BOOM. Heart pounding, eyes snapping open, I check the window to see…what else but fireworks, launched by the noisiest neighbors this side of Los Angeles County? Bye-bye, sleep. Bye-bye, sweet silence, my dear old friend.

Neighbors can make or break a good living experience. Noisy ones can even impact the value of your home by becoming part of the landscape, like weeds. Can’t remove them; can’t escape them. My sympathy goes out to my friends, who are trapped with rude neighbors.

4. No way to sell

Buying a home at a low 2.75% rate is fantastic by today’s standards. But when you experience buyer’s regret and want to sell, you have to deal with current mortgage rates, which are closer to 7%. You might feel stuck if you can’t afford to cough up the cash for an outright purchase.

My friends sure do. They thought moving at low rates would be possible — but that ship may have sailed. From the first quarter of 2020 to the fourth quarter of 2022, the median home sales price rose 46% from $329,000 to $479,500, according to The Ascent’s housing research.

Do they sell and move to a better location at more than twice the rates? Do they stay where they are and tough out high costs, noisy neighbors, and buyer’s remorse? My friends aren’t sure what to do; if they sell, they might even return to renting for the foreseeable future.

How to handle feeling stuck with your home purchase

No two ways about it — getting stuck in a bad housing situation is brutal. It’s reasonable to regret buying a home, no matter the rates. Often, the solution to reducing costs is to refinance the home. But with rates so high, there are probably better alternatives.

Renting out property is a way to maintain homeownership, reduce net expenses, and regain some flexibility of living. There are pros and cons to renting part of your home. Not everyone can, and it takes work, but even so, some homeowners may find it worthwhile.

Selling your home and taking out a loan to buy a new one is an option, albeit not a great one. Even the best mortgage lenders are affected by economic conditions, so monthly payments are higher than you might expect.

I’d consider consulting with a financial advisor or home planner before deciding how to sell, buy, or refinish a home. It’s not cheap, but it’s better than losing thousands to subpar mortgage decisions I can’t take back. You can even find good financial advisors who charge by the hour.

Bottom line

The takeaway here is to consider more than mortgage payments when you buy a house. Factors like lifestyle changes and the cost of home maintenance can reduce your quality of life. My friends are just two of the many Americans who might feel stuck in a new home until mortgage rates fall.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

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