Money Management

When you are getting a mortgage, you don’t want to jeopardize your loan by saying the wrong thing. Don’t give your lender reason to worry by saying these things. 

When you are buying a house and getting a mortgage, lenders want to be confident in your ability to pay for the property.

As a result, during the process of securing your home loan, there are a few key things you don’t ever want to say to your mortgage lender as they could raise concerns that could undermine your ability to get a loan.

Here are three things to avoid saying so you don’t raise red flags.

1. “The house is in bad shape.”

When you get a mortgage, the home is collateral for the loan. As a result, there can’t be any major issues with the property. Although the rules can vary slightly depending on lender and type of loan, typically, you won’t be able to get a mortgage loan on a property with any of the following issues:

MoldBroken handrailsExposed wiringPlumbing issuesHVAC issuesA roof with less than two years of lifeAn unstable foundationAn active pest infestation

Lenders would generally require anything that could be a health or safety issue to be repaired before you can close. You definitely don’t want to indicate to a lender that a home is in bad shape, as this could create questions about whether the home can act as collateral at all.

Of course, even if you don’t point these issues out, the appraiser might as it is the appraiser’s job to take note of problems that could affect the value of the home. Just be aware that if the house you’re buying does have major problems, you may not be able to move forward with borrowing to buy it.

2. “I’m still figuring out where my down payment money is coming from.”

Lenders need proof that you have the money for a down payment. Sometimes, a certain amount of this money must be supplied from your own funds rather than coming from a gift or other loan.

If you indicate to a lender that you do not yet have the money for a down payment — or if you can’t provide bank statements showing that you do in fact have the cash — you’re typically not going to be approved for a home loan. To avoid this problem, make sure you can meet the lender’s minimum down payment requirements.

Some lenders allow you to borrow with as little as 3% down, so if you’re having trouble coming up with the funds, you can consider whether a low down payment loan might be right for you. Putting a small amount does mean your mortgage will be more expensive, though. You may be charged a higher rate, you’ll be borrowing more, and you’ll likely have to pay for private mortgage insurance (PMI) to protect the lender in case of default.

It can be better to save up a sufficient amount of money to put at least 10%, and ideally 20%, down before you move forward with a home loan.

3. “I sure hope I can afford the payments after I quit my job next year.”

Finally, lenders want to ensure that your income is stable. Typically, most require two years of work history in order to give you a loan. If you suggest to your lender that you’re soon going to be dramatically reducing the income you have coming in, this could raise concerns of default.

The bottom line: You want to come across as a well-qualified borrower. You should both watch what you say to avoid suggesting you aren’t and should take steps like saving a generous down payment to ensure that you are someone a lender will feel confident working with. This will make your mortgage approval process a lot easier in the end.

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An IRA is a retirement account that has tax benefits. But how much can you actually contribute to it each month? Find out here. 

Investing money in an IRA can be a great way to save for retirement. You want to max out your 401(k) match from an employer first if you have access to one, as this is free money you get when you sign up with HR to contribute to your workplace plan. But once you’ve done that, an IRA opened with a brokerage firm can give you access to a broader choice of investments than a 401(k) would offer.

If you’re thinking about putting some money into an IRA, you may be wondering how much you’re actually allowed to invest in it each month. Here’s what you need to know.

The annual IRA contribution limit

There are two types of IRAs most people have access to:

A traditional IRA that allows you to take a tax deduction for contributions in the year they are madeA Roth IRA that doesn’t offer this upfront deduction but allows you to withdraw from your account tax-free as a retiree.

Since there are tax benefits to these accounts, there is an annual limit on how much you are allowed to put into them. And, whether you want to invest in a traditional or a Roth IRA, there is one annual contribution limit that applies to both accounts.

In 2023, the total amount of combined contributions you can make to a traditional IRA and a Roth IRA is $6,500. If you are aged 50 or older, you can make an additional $1,000 contribution for a total of $7,500. These limits apply to most people, although higher earners have smaller limits or may not be allowed to contribute to these tax-advantaged accounts at all. This limit can also change annually, so check the IRS website each year to see what the current maximum is.

You can divide up your contributions any way you want during the year

Since the annual contribution limit is either $6,500 or $7,500 depending on your age, you are allowed to contribute as much as you want to a traditional or Roth IRA each month as long as you do not exceed the total allowable annual limit.

If you want to split up your contributions evenly over the year, you can do so. You could divide $6,500 or $7,500 by 12 and find that you can contribute $541.67 or $625 each month respectively. You could put all of that money into a traditional IRA, all of it into a Roth, or choose to do a mix and invest in a Roth one month and a traditional IRA the next.

You also have plenty of other options for how much to invest each month though. You could:

Invest the entire $6,500 or $7,500 at the start of the year, the end of it, or any point in between.Invest a big lump sum one, two, three, four, or more times a year.Invest a little bit each month and then invest the rest of the amount needed to max out your account at the end of the year.

There’s no real set rule for how much monthly contributions can be as long as you keep to the annual caps. So if you want to use either a Roth or a traditional IRA to help you save for retirement, you get to choose how to break up your contributions during the year. You don’t have to max out either account — you can contribute as much as you can afford up to the $6,500 or $7,500 limit.

This flexibility will hopefully help make it easier for you to put a traditional IRA, Roth IRA, or both to work to help you build a more secure future.

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Mold can be expensive to treat. Unfortunately, home insurance typically will not cover it. Find out more. 

Mold can be a very expensive problem to treat. The cost varies depending on the extent of the mold damage as well as the location. According to The Old House, mold in an attic typically costs around $1,000 to $9,000 to resolve, while a moldy HVAC system could cost anywhere from $3,000 to $10,000 to resolve. If the entire house is moldy, remediating the issue could come at a cost of $10,000 to $30,000 on average.

Most people don’t have this kind of money in their checking account. As a result, homeowners with a mold problem may wonder if their homeowners insurance will cover their expenses. Here’s what homeowners need to know.

When does home insurance cover mold?

Home insurance will not pay for mold remediation in the vast majority of circumstances. That’s because insurance is intended to provide coverage against unexpected disasters or events outside of a homeowner’s control, not to cover against any possible problem with the house — especially those caused by neglecting maintenance or repair issues.

In many cases, mold develops over time because of a homeowner not addressing a problem. For example, a leaky sink or a door or window that is not properly sealed could result in the type of moisture build-up that leads to mold growth. Home insurance definitely would not pay in these situations, since homeowners don’t just get to defer maintenance on their property and ask insurers to pick up the bill.

Sadly, sometimes homeowners may not know that a window has gaps or a sink or shower has a slow leak. Even in these circumstances, home insurance typically will not provide any coverage if mold happens as a result, since policies generally wouldn’t consider this undisclosed problem to be a covered cause.

Homeowners insurance could potentially cover mold only if it happened as a result of a problem the policy does pay for. For example, if firefighters use a hose to put out a fire that the policy covers and mold occurs because of that water, then the insurer might cover remediation of the mold in that particular instance.

But, unless there’s an immediate and direct link between the covered cause of the mold and the development of the mold, homeowners should assume their insurer will do nothing to offer financial support when mold strikes.

Be sure to understand the limits of homeowners insurance

Mold is just one of many things home insurance won’t cover. A homeowners insurance policy also generally will not pay for:

Pest damageFloodsWildfires in fire prone areasEarthquakesRustGeneral wear and tear

To find out exactly what a home insurance policy does and does not cover, look at the policy document. If it’s a “named-peril” policy, it covers only the disasters listed. If it’s an open peril policy, it will cover anything that isn’t excluded so check the list of exclusions to find out what the insurer won’t pay for.

Homeowners should also save for problems that could come up that insurance isn’t designed to provide protection against. Having a home repair emergency fund could make it possible to pay for mold remediation, old appliances that fail, or the many other things that home insurance simply won’t pay to fix. As a homeowner, it’s a good idea to put money aside in a savings account to pay for these problems as they arise.

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One study estimates that caregivers provide $600 billion worth of time each year. Find out how paid caregiving leave can make their lives easier. 

There are all kinds of scenarios in which you might need to take time off work to care for a family member. It might be a sick child or spouse. It might be an elderly parent or other relative who needs help. Whatever the reason, you are not alone.

Around 38 million Americans are currently caring for loved ones, according to research by AARP. Moreover, around 60% of the people caring for people with serious health conditions or disabilities are also holding down jobs.

The good news is that many employees are entitled to take time off work to care for relatives with serious health conditions under the Family and Medical Leave Act (FMLA). Depending on your job and the amount of time you’ve been there, you could take up to 12 weeks of caregiving leave each year. The downside? In most parts of the country, that leave isn’t paid.

The real cost of caregiving

In addition to the strain of looking after a loved one, caregivers also face a financial strain. Reduced hours can mean less cash in your bank account. Plus, if you miss a lot of hours at work throughout your career, whether that’s because you are a parent or caring for an elderly relative, you won’t contribute as much to your Social Security or employer retirement plan. That can mean less money for your old age. Finally, it can make it harder to climb the career ladder, which also limits your earning potential.

One way to calculate the actual cost of caregiving is to look at the total number of hours of care provided and multiply it by an hourly rate. This is how AARP reached its 2021 estimate of $600 billion worth of family care. It estimated caregivers provide 36 billion hours of care each year, which it valued at an average of $16.59 per hour.

The Urban Institute takes a different approach. It estimated the financial impact of family care on women — who are often the caregivers — across a lifetime. It says, “The employment-related costs for mothers of providing unpaid care to minor children and parents, parents-in-law, and spouses (including unmarried partners) with care needs average $295,000 over a lifetime.”

Why paid caregiving leave matters

Caring for elderly relatives is becoming an all-too-familiar scenario as we grapple with an aging population. It might be that a parent or grandparent needs help with daily tasks, from making doctors’ appointments to shopping, preparing meals, or handling their finances. It can also take the form of medical and nursing tasks such as managing medications or caring for injuries.

If you are a caregiver, it can be overwhelming to try to keep all the plates spinning in terms of your job, your finances, and your family. Taking unpaid leave can help in terms of time, but there’s only so long households can get by on a reduced income. As a result, for a lot of Americans, providing long-term care for elderly relatives means dipping into their savings or their own investments.

Paid caregiving leave can go some way to reducing the financial stress of looking after a seriously ill family member. It wouldn’t magically fix all the problems, but it might ease some of the pressure. Put simply, people shouldn’t have to choose between caring for a sick child or parent and earning money. And yet many Americans have to do just that.

The states that offer paid caregiving leave

According to advocacy group, A Better Balance, the following states (technically 13, plus D.C.) have some form of paid family leave legislation in place. The specifics, including what percentage of your income you might get and how long the payments last, vary depending on the state.

CaliforniaColoradoConnecticutDelawareDistrict of ColumbiaMaineMarylandMassachusettsMinnesotaNew JerseyNew YorkOregonRhode IslandWashington

If you don’t live in one of these states, don’t despair. One step you can take is to talk to your employer. You may be able to use some of your paid time off, sick days, or vacation time to keep money coming in. Make sure you understand your rights around FMLA — it is something many workers are entitled to and your employer cannot fire you for taking it.

Many states offer other forms of caregiving support and you may be able to claim tax credits, medical assistance, or other financial help. Reach out to nonprofits and local authorities to see what you might be entitled to.

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A 15-year mortgage comes with higher monthly payments. Here’s what to consider before springing for a shorter mortgage term. 

When you buy a house, you have to decide what kind of mortgage you want. For most people, the only two choices it makes sense to consider are a 15-year fixed-rate loan or a 30-year fixed-rate loan. With both types of mortgages, your rate and monthly payment can’t change over time so you have the certainty you need to ensure your home is affordable.

But which of these two options is right for you? If you’re thinking about taking out a 15-year mortgage, there are three questions you should ask yourself first.

1. How much more will the monthly payments be?

A 15-year mortgage comes with much higher monthly payments, despite the fact that this type of loan usually has a lower rate than a 30-year mortgage. The reason for the higher monthly payments is obvious: You’re paying off your debt in half the time.

You need to make sure you know just how much higher your payments will be, though. Here’s an example to help you see the difference:

Your interest savings is substantial. But you would be committing an extra $179.68 per month every month to your payment. That’s a lot of extra cash that you won’t have available for other things.

2. Will you be house poor if you opt for a 15-year mortgage?

The next question you need to ask yourself is whether you would end up house poor if you opted for a 15-year loan instead of a 30-year loan.

You want to try to keep total housing costs to around 25% of your take-home pay or less in order to avoid being house poor. This means you should have plenty of money left to do things like save for retirement, rather than send all your extra funds to your mortgage lender.

You also need to remember that if you choose a 30-year loan, you can always opt to pay off your mortgage early by making extra payments if you want to. But if you opt for a 15-year loan, you’re stuck with those high payments unless you refinance.

If you lose your job, the extra per month could become a huge burden. Or if you want to switch to a different career with a lower salary, cut back your hours, or just devote money to other goals, you won’t have the option to do that if you’ve made a commitment to pay a ton of money to your lender each month.

You should take the time to seriously think about whether it makes sense for you to commit to a substantially higher mortgage payment that could leave you struggling, rather than to opt for a 30-year loan and just pay more when you can.

3. What is the opportunity cost of opting for a 15-year versus a 30-year loan?

Finally, you need to think about the opportunity cost of choosing a 15-year loan versus a 30-year loan. The money you’re putting toward your mortgage earns a return equal to the saved interest. But you can often invest and earn higher returns. If you can put your extra monthly money into an investment earning 10%, instead of earning an 8% annual return or less by paying off your mortgage early, you’re usually better off doing that.

Ultimately, you need to think about whether you’re willing to give up the freedom, flexibility, and affordable monthly payments of a 30-year loan to get the interest savings that comes with a 15-year mortgage. For many people, this move simply doesn’t make sense and a 30-year loan is a better option.

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If you invest $100 a month, compound growth can help you build a substantial amount of wealth. See how much a $100 monthly investment can end up becoming. 

Finding extra money to put into a brokerage account and invest can be really challenging — especially if you have pressing expenses to take care of today.

It may seem really intimidating to try to transfer a ton of money out of your checking account to a brokerage firm to buy stocks. But what if you don’t have to invest a fortune? If you invest just $100 a month, will that contribution really make a big difference in your net worth in the end?

How $100 a month can help make you wealthy

Investing just $100 a month can actually do a whole lot to help you grow rich over time. In fact, the table below shows how much your $100 monthly investment could turn into over time, assuming you earn a 10% average annual return.

That’s a substantial amount of money to end up with, especially given that the median 401(k) balance for individuals ages 65 or over is just $87,725. You could end up with well over double what the typical American has saved for retirement, just from your $100 a month investment alone.

How investing $100 a month helps your wealth grow

A $100 monthly investment doesn’t seem like a lot, but when you put this money into the market, it earns returns. If you earn 10%, in a year, your $100 initial investment would be worth $110.00. Next year, you would earn 10% not on $100, but instead on $110, so you’d end up with $121.00. This happens with each investment that you make and with each year that passes, and it has a snowball effect.

The more you’re able to invest and the more time you have for compound growth to work, the more powerful the impact is. But even if you don’t have more than $100 a month to invest right now, you’re better off getting the money into the stock market and getting it working for you so your snowball can start to build.

If you’re not sure where to come up with an extra $100 a month, some possible options for you could include:

Do a few hours of overtime or extra work. If you can earn $15 an hour, you’d only need to work for about seven hours during the course of the entire month to make $100 extra to invest. Many people can find seven hours.Go through your budget carefully. You can probably find one or more expenses to cut that add up to $100. Switching to a cheaper cellphone plan, canceling a streaming service you don’t use much, and giving up one meal out would probably get you there.

Over time, if you can increase the amount you invest, that would be ideal as you can build even more wealth. But you don’t have to worry about that when you’re just getting started. Just begin with that first $100. As you see how your money grows, you may get excited about investing and find new ways to increase your contributions — and thus the power of compound growth in your wealth-building efforts.

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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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