Money Management

When I buy a house, I will not put down less than 20%. Learn why I make sure I’m putting at least that much money down. 

I’m buying a house soon. I’ve purchased properties several times over the past few years as I’ve moved into different neighborhoods that are a better fit and also added a vacation home to my assets.

This time when I get a mortgage and purchase a new house, I have committed to putting a set amount down on the property. This is the same rule I set for myself when it comes to the down payment on every house I’ve bought except my first one. Here’s how much I will be putting down.

This is the minimum down payment I’m willing to make

When I buy my house, the rule I have set for myself is that I will make a 20% down payment. I will not purchase a home until I am able to put that amount of money down on the property.

I’m the minority in making such a large down payment. The National Association of Realtors reports that the typical repeat buyer puts about 17% down on a home. While this is higher than the typical down payment made by first-time buyers (which has been hovering as low as 6% to 7% since 2018), it’s still below the amount I’m putting down on my property.

It’s also more than most mortgage lenders require, as lenders will usually give you a loan with just 10% down and sometimes with as little as 3%.

Why putting down less than 20% isn’t an option for me

Although lenders may not require a 20% down payment, and most people put less down, I’ve made this rule for myself for a few simple reasons.

The biggest reason why I am unwilling to make a smaller down payment is that I don’t want to pay for private mortgage insurance, or PMI. PMI is a cost lenders impose on borrowers who make down payments of 20% or less. It can cost as much as 2% of the loan amount annually, which is a huge amount of money. And, it only protects the lender from losses in case of foreclosure.

With my first house, I put less than 20% down and I paid PMI every single month. I was annoyed each time I wrote a check for my mortgage payment that I was “wasting” money buying protection for the lender. This was money I couldn’t use for other things.

When we bought our first home and had only a 10% down payment, we also ended up having to pay an interest rate that was a bit higher than it would have been had we put more down. So I felt like this was even more “wasted’ money.

When it came time to sell our house, we made a profit on it but since we didn’t have a ton of equity in the home due to our low down payment, we didn’t walk away with a whole lot after paying the closing costs.

I don’t want to get stuck with higher mortgage costs again — especially since rates are a lot higher now than when I got a loan for my first home. So, for all of these reasons, putting 20% down is non-negotiable when I buy my new home.

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.

 Read More 

Thinking of getting a personal loan? Read on for ways to make sure that’s the right decision. 

The fact that U.S. personal loan balances reached $225 billion in the first quarter of 2023, as per TransUnion, indicates they’re a popular means of borrowing money. And it’s easy to see why.

With a personal loan, you can borrow money for any purpose. You’re not restricted the same way you are with a mortgage loan, for example, which only allows you to use your loan proceeds toward the purchase of a home.

But these days, it’s more expensive to sign a personal loan than it was in the past. That’s because borrowing rates are up across the board right now in the wake of a string of rate hikes by the Federal Reserve. So before you sign a personal loan, make sure to run through these key questions.

1. Am I borrowing money for a good reason?

Because personal loans are more expensive today, you’ll want to make sure you’re signing one for a good reason. If your car needs repairs and you can’t get to work without it, that most certainly counts. Similarly, if a few appliances in your home need to be replaced and you can’t really function well without them, go ahead and borrow.

But now’s really not a good time to take out a personal loan to do something like go on vacation or tackle home improvements that can wait, like replacing your perfectly functional kitchen countertops with a nicer stone. If you’re going to pay a fair amount of interest on a loan, it should be to address an actual need or do something that significantly improves your life.

2. Can the purchase I’m borrowing money for wait?

Maybe you’re eager to upgrade your furniture because your kids are a little older and you’re finally less worried about nicer pieces getting destroyed. But if your existing furniture is in good enough shape and you’ve had it for years, why rush to take out a personal loan at a time when doing so is apt to be expensive? Instead, you may want to wait a year or so and see if rates come down.

This, of course, is one example. The point is that if you’re looking to borrow money for an expense that can wait, holding off could work to your benefit.

3. Is my credit score in good shape?

It’s important to make sure your credit score is in good shape before signing any sort of loan, personal loans included. The higher that number, the more competitive an interest rate you’re likely to snag.

Experian, one of the three major credit bureaus, defines a good credit score as a 670 through 739, while a score of 740 to 899 is very good and a score of 800 or above is excellent. If your credit score is 650, you may want to hold off on applying for a personal loan until it rises a bit. Otherwise, you might get stuck with an interest rate that makes your loan difficult to pay off.

The fact that interest rates are high doesn’t automatically mean you shouldn’t sign a personal loan today. Just address these questions first so you don’t end up regretting your decision.

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.

 Read More 

More than 40% of drivers say they’re paying more for auto insurance now than they did last year. Read on to find out how you can lower your car insurance premiums. 

I’ll be the first to admit it; keeping tabs on my car insurance policy is low on my to-do list. And it’s probably not the first thing you think about in the morning, either. But the latest data shows this set-it-and-forget-it approach to car insurance may not be the best for our finances.

A recent Policygenius survey found that 43% of car owners pay more for their auto insurance than last year. Even more shocking is that nearly half of the insured drivers between the ages of 18 and 34 considered driving without car insurance because it’s become so expensive.

Since ditching your car insurance isn’t a smart move and is illegal in nearly every state, it’s worth taking a closer look at why car insurance costs are rising and how you may be able to lower your premiums.

Why car insurance costs are rising

One of the biggest culprits for rising insurance is inflation. As the cost of goods and services has increased, car insurance prices have also increased. But rising inflation isn’t the only factor pushing premiums higher.

A New York Times article published in March stated that auto insurance prices had increased 15% compared to the previous year, while inflation had only risen 5% over the same period.

Part of the reason car insurance costs have gone up is because the price of vehicles and the cost to service them has increased. Progressive Insurance says that labor shortages and the disruption of auto parts supply chains have increased the price of repairing vehicles, pushing insurance premiums higher.

And finally, there’s been an increase in vehicle crashes and their severity over the past few years. A LexisNexis survey found that automotive bodily injury and property damage severity increased 35% between 2019 and 2022. And the severity of collisions has increased by 40% over the same period. With those costs rising, insurance companies pass those increases on to customers.

How you can lower your car insurance premiums

One quick way to reduce car insurance costs is to reduce coverage on older cars. The Insurance Information Institute, an industry association, says that if your vehicle is worth less than 10 times the insurance premium, paying for collision and comprehensive coverage may not be worth the price.

You can also increase your deductible, which is the out-of-pocket expense you have to pay before your insurer begins paying for things like an accident repair. The higher your deductible is, the more you could save on your insurance costs. Just make sure you set aside money in an emergency fund to cover the expense if needed.

In some cases, you can lower your insurance premiums if you boost your credit score. This year, a Consumer Federation Report found that New York drivers with fair credit paid 57% more for their car insurance than drivers with excellent credit.

And finally, you can shop around for a new car insurance company. Getting a few quotes from competing insurers will help you determine which offers the right type of coverage for you at a price you can afford. You should take a quick look at your current coverage to accurately compare what you’re paying now with what another insurer charges.

Finding cheap car insurance is possible, but you may need to shop around a bit before finding the best deal for your situation. And now that I’m thinking about it, I’m making a note for myself to spend some time looking for the best deal too.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

 Read More 

Searching for a new home can be really annoying when you’ve seen everything on the market. Here’s how it’s impacting my home-buying process. 

I’m currently trying to buy a new home. I’ve sold my old house already, I have the money for a down payment in my checking account. And I am pre-approved for a mortgage. But, I’ve been unable to move forward with a purchase for a few months. And I am getting really frustrated with that fact.

Here’s the issue that’s preventing me from buying — which has turned into absolutely the most annoying part of the home purchase process.

This major obstacle is seriously interfering with my ability to buy a new house

The big problem that I have run into in my home search is that there is not a single property that I like that is currently on the market, and within my price range, that I actually want to buy.

I have multiple notifications set up on real estate apps when a new house is listed in my desired neighborhood. I have been checking daily to see what properties come up for sale, just in case the notification doesn’t come through. And, sadly, there is not one single house that meets my (relatively minimal) criteria in the neighborhood I want to live in.

I’m most likely not the only person who is dealing with this problem either. Because mortgage rates are high, people are staying put in their homes. They are not listing them for sale. As a result, new home listings were down 27% compared to a year prior in the four weeks leading up to June 25, which is the biggest drop in new listings since the pandemic began. There was also an 11% decline in houses on the market during that same four-week period.

But, while I know I’m not alone, that doesn’t make it any less annoying that I’ve been stuck sitting for weeks without so much as a property to look at.

What to do if you find yourself with no houses you like on the market

If you find yourself in the same situation that I am, there are few good options available to you.

One solution is to expand your search. You may decide you need to be more flexible in where you live or in what your criteria are for purchasing a home. You could also alter your budget.

None of these are good solutions. Location is a crucial factor in determining how happy you are with your home. If you expand your search radius and end up with a long commute or living far from family or your kids’ school, you could come to regret it. Expanding your budget could also be a big problem, as you don’t want to overpay and find yourself house poor because you’ve committed too much of your monthly income to a mortgage loan payment.

The other option you have is to wait. That’s what I’m doing, and it’s not ideal. But, if you have a place to live right now and no houses are listed that you like, you could try to stick it out until something good comes along.

Just be sure that you’re ready to act when a house is listed, which means working on improving your credit, getting your down payment in place, and securing mortgage pre-approval so you’re ready to submit an offer. Chances are good, you’ll be competing with other buyers when you do find a place — and one of them might even be me.

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.

 Read More