Solid Advice From the Consumer Financial Protection Bureau For Minneapolis Home Buyers: including comments by Richard Cordray at FINRA Investor Education Conference in Washington, D.C., May 29, 2013.
A solid savings plan usually starts several years before the prospective home buyer is ready to make a home purchase offer.
Home Buyers Set Target Goals
Trulia posted an article by Real Estate Agent Michael Seaton titled How Much Do you have to save to buy a home? on March 7, 2013. After researching whether it is better to buy or rent a home, climbing rental home prices against the opportunity to buy a home at low monthly mortgage rates and payments, and adding on homeowners tax breaks - tips the scales towards becoming a home buyer. Homeownership is trending back upwards. After our housing turn around, more families are deciding to purchase a house as an investment. Planning to buy in the future, setting target goals, and choosing a skilled Realtor is a great way to begin on the upward path of positive financial capability.
Minneapolis Home Buyers Purchase Homes For Investments
Seaton concluded, "After our housing turn around, more families are deciding to purchase a house as an investment. I believe that all homeowners should have enough cash after putting a down payment on a home, to be able to pay home closing costs, and have enough money to make mortgage payments for 8 months. This gives you the security if something were to happen if someone lost their job. Think of this savings as your cushion 'just in case' money". Saving to buy a home in the future, setting target goals, and choosing a skilled Realtor is a great way to begin on the upward path of positive financial capability.
TIPS TO HELP POTENTIAL HOME BUYERS INCREASE THIER FINANCIAL CAPABILITY TO BECOME HOME BUYERS
Sound Advice Begins With Building A Great Credit Score
Unless buying a home with cash, most Minneapolis real estate buyers seeking to securing a loan at the best mortgage rate available will come to acknowledge that credit is king. One of the lead focuses a potential buyer must have in place should be improving their credit score. Minneapolis Realtors have witnessed too many a low credit score hinder a family from buying a home or at least from qualifying for at affordable home mortgage rate.
The Financial Industry Regulatory Authority (FINRA) press release highlighted concern that some people falsely assume they have good credit and do not; others are sure their credit is terrible and are pleasantly surprised that it is not that poor. Regardless, everyone should check their credit report for accuracy and fix any errors. Old accounts may have failed to formally close, spending sprees by someone with a similar or same name may be tangled in, a sent payment may have missed being recorded. It can take months to correct errors. However, Minneapolis home buyers who take on the due diligence to correct them will be glad they do so if they seek to gain a home mortgage some day.
The State-by-State Financial Capability Survey includes a wealth of data revealing how Americans make ends meet, plan ahead and manage financial products.
Understand Budgeting & Credit To Become A Home Buyer
To begin with, we can readily agree that all consumers need to understand basic information about budgets, savings, investments, and credit. The FDIC is building its MoneySmart curriculum to help buying a home with better informed decisions. We also are developing a library of consumer information at “Ask CFPB,” where we answer frequently asked questions from consumers about issues in the financial marketplace.
But consumers also need to be aware that there are a few big moments in their lives where they will confront specific decisions with potentially far-reaching consequences, such as buying a home with a quality loan or funding a college degree. Which house you buy, determining to attend college in state or out, how much debt is safe, or what type of debt, and other financial decisions in life will add up over time to shape your home purchasing ability. It is wise to be able to decipher which buying decisions are top priority so as not to treat them casually. Home Destination offers home buyer and seller resources so that you can get trusted help when needed.
Minneapolis Home Buyers Prepare For Possible Economic Shock
Today’s FINRA report highlights the significance of this material. As a starting point, it shows the need to educate homeowners to save in order to protect themselves from the effects of possible economic shocks when they may become reliant on savings to make their monthly mortgage payments. According to the report, "people aged 18 to 34 and for those in the peak earning years of 35 to 54, only one-third reported that they had set aside three months’ worth of emergency funds". Learning how to save early empowers planned spending and avoids unnecessary homeowner debt that could lead to a home foreclosure: saving is critically important to financial health and to reaching potential home buyers American dream of homeownership. Whether it is reliable transportation, a college degree, a house, or establishing a 401K, getting into a habit of saving money and planning ahead is vital to a family's independent financial stability.
Home Buyers Financial Education Should Start Early And Be Continuous
First, we recommend that financial education should start early and be continuous. When we do not teach children about personal finance – about managing household budgets, saving for the future, or making informed decisions about larger investments in an education or a home – we are failing them in a shameful and costly way. We also need to have integrated curricula in our schools – where the benefits of compound interest are understood in math class, where economic costs and risks are taught in social studies class, and where an essay in English class explains how we use money or how we protect our money or how we can take control of our financial lives to achieve our goals. And financial education concepts should be integrated into standardized tests, which would increase incentives for educators to teach them and present opportunities to measure and track student performance on financial education content. Standardized tests could easily be re-framed to include more consumer finance content – for example, a passage for testing reading comprehension could focus on topics like tips on saving money, developing good credit, or applying for student loans.
Pay Off Bills And Pay On Time
To boost an applicants credit scores, home buyers should pay up on any overdue bills, make payments on time and reduce credit card balances to less than 30 percent of the credit limit on each card. Talk to a financial planner to determine the best number of accounts, generally three to five. This may include a car loan, school loan or line of credit, for one year or longer. Think about it twice before frequently switching credit cards to get the best rate or in-the-door deal. A mortgage lender may frown on a lot of credit inquiries, several open accounts, or too many new accounts. Lenders are skilled at reading indicators that an applicant may be on the verge on taking on a heavier load debt that may mean a later struggle to make monthly home payments.
MINNESOTA CITIZENS FALL INTO ONE OF THREE CATEGORIES OF FINANCIAL CAPABILITY
Individuals who report spending more than their household income (not including the purchase of a new home, car or other big investment) are not saving.
Individuals whose spending equals their income are breaking even.
Minneapolis citizens who spend less than their household income and are thereby able to save.
SUMMARY: Individuals who are not balancing monthly income and expenses may find themselves struggling to make ends meet and may later find they are unable to buy a home.
Minnesota Citizens Manage Their Finances Better
Nationally, fewer than half, or 41 percent, of Americans surveyed reported spending less than their income. In Minnesota the number were slightly better at 39 percent. Nationally, over half of Americans, or 56 percent, have not set aside savings to use if they had to cover three months of unanticipated financial emergencies. Forty percent have set aside saving, where as Minnesotans have done slightly better than the national average again at 42 percent who have learned to set money aside.
How Well Citizens Manage Their Finances
The five measures of financial capability used to rank how U.S. states measure how effectively citizens are running their day-to-day finances and saving for the future ability to become responsible homeowners. The national averages drawn from survey respondents for these key measures are below.
Fewer than half (41 percent) of Americans surveyed reported spending less than their income.
Over a quarter (26 percent) of Americans reported having unpaid medical bills.
More than half of Americans (56 percent) do not have rainy-day savings to cover three months of unanticipated financial emergencies.
Over a third of Americans (34 percent) reported paying only the minimum credit card payment during the past year.
On a test of five basic financial literacy questions, the national average was 2.88 correct answers.
"If buying a home is your goal, then it needs to be your priority. Most people need to sacrifice a little and stick to a budget in order to save for a home." ~ Tim Kirchner, vice president of MetLife Bank in Irving, Texas
Download the Consumer Financial Protection Bureau document of How Minnesota Citizens Score On Saving Money To Buy A Home and Financial Capability
Home Destination specializes in helping traditional home buyers and sellers, and real estate residential investors gain and enjoy the home of their dreams. If you are wondering if you are financially capable to buy a home today, I would be glad to help you access your savings and goals and give your resources to make your best decisions. Call me at 612-396-7832 and I will work strong on your behalf.
Jenna Thuening, a Minneapolis residential Realtor bringing home buyers sound advice.
Eden Prairie MN 55334
Jenna's home page: homedestination.com
If I'm out in the field, you may quickly reach me by email: email@example.com and note how I can help you, or leave a message on my voicemail and I will return your call as quickly as possible.