Getting Your Financial House in Order After Purchasing a Home
Mar10

Getting Your Financial House in Order After Purchasing a Home

Part four of our “First-Time Homebuyers Series” continues today with another post from John Foxworthy. So you’ve found the perfect home, got an accepted offer, and made it to closing.  Here are a few steps you can take to make sure your dream home doesn’t turn into a financial nightmare. Build your liquid cash reserves We usually recommend keeping three to six months of your salary as a cash reserve.  This reserve can be used to keep you afloat in the event that your income is interrupted.  If you should lose a job or need to take a medical leave, this fund will be there to pay your mortgage, auto and home insurance, and utilities.  It can also be used for emergencies like a car repair or an unexpected medical expense.   Set money aside for future home repairs This fund should be kept separate from your liquid cash reserve, which is designed for income replacement.  As the homeowner, you will be responsible for any expenses associated with the home so it makes sense to have a fund in place.  At some point, a major repair like a furnace, water heater, or a roof will be needed.  You should set up an automatic transfer every pay period to a separate “home repairs” account in order to start building up some cash.   Adjust your budget Purchasing a home is one of the biggest financial transitions that a person will make in their lives.  It goes without saying that you will probably need to make a significant adjustment to your budget.  If you did your homework to make sure you were purchasing a home that was within your means, you shouldn’t need to change your lifestyle too much.  However, it is a great time to look at your spending patterns and see where you can be more efficient and effective with your income and saving plans.  You can use a financial software program like Mint.com or Quicken to do it yourself, or it might make sense to talk to a financial professional who can help you with a more customized cash flow plan.  Stick with an independent firm that offers fee-based financial planning and coaching.   Do your protection planning Whether we like it or not, sometimes things don’t go as planned.  Accidents happen, people get hurt or sick and can’t work, and sometimes they even die prematurely.   Before owning a home, these risks were important, but they become more important now that you have a significant liability associated with your mortgage.  Fortunately, there are tools that allow us to mitigate the risk of premature death or disability.  Life insurance...

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Five Smart Money Moves for First-Time Homebuyers
Feb10

Five Smart Money Moves for First-Time Homebuyers

This is the first in a series of posts for first-time homebuyers from Living Fort Wayne. So you’ve decided to take the plunge into the world of homeownership.  Congrats!  Purchasing a home is likely one of the biggest financial investments you will make in your lifetime, and it makes sense to do a little homework to make the process easier.  In my 13 years as a financial planner, I have worked with many clients to help them transition from renting to owning their home. Here are five things to do before you start looking at houses. 1 – Check your credit Your credit score will be one of the most important factors when you want to qualify for a mortgage loan. It not only affects your ability to get the loan, but your score has an effect on the overall cost as well.  In other words, the better your score, the lower your interest rate.  To get a sense of where you stand, you can go to annualcreditreport.com to get a free copy of your credit report from all three of the major credit bureaus (Experian, Equifax, and TransUnion).  Check for errors and file a dispute if there are any items on the report that are inaccurate. Just because you pay your bills on time does not mean you will have a great credit score.  Other factors like the amount of debt you have relative to your available credit limits and the age of your oldest open credit line will factor into your score as well.  Either way, you will need to have a score above 720 in order to get the best rates.  If you have any negative items, don’t worry!  You may still be able to qualify, but at a slightly higher interest rate.  Check with a mortgage officer to get the details.  They should be able to pull your actual credit score and let you know if there are any glaring issues that will prevent you from getting a mortgage.  You can also check for apps like Credit Karma that give you an estimate of your credit score, but be wary of entering sensitive information anywhere online and never enter your credit card info.  You should be able to get a score without paying for it, but there is no shortage of online vendors that will try to charge you or sign you up for some type of credit monitoring service in order to get your credit score. 2 – Evaluate your cash flow Before you get on the hook for tens or maybe hundreds of thousands of dollars, you should evaluate your income and liabilities...

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