10 Tips to Buying Your First Car

carNothing feels better than getting your first car, it is one of life’s most memorable moments. Being a first-time buyer in today’s world gives you countless options, all available at your fingertips. The roadmap below will help you navigate the process of purchasing your first car.

  1. Determine Your Budget
    When you decide to look for a car having a realistic budget is very important. The budget should be centered on what you can afford per month. When determining the amount that you can spend each month, consider all your expenses throughout the month.
  1. Know Your Affordability for Each Month
    Although this may seem similar to determining your budget, the matter of indebtedness is different than that of monthly commitments. Neither expenditure should be out of balance in regards to your other assets and will help in concluding what you can spend monthly.
  1. Narrow Your List to a Few Cars
    Many cars have probably caught your attention by now so you should start out by researching them to see if they will fit your needs and your budget. Take note of the suggested retail prices and the invoice prices of those cars you think would be a good fit for you. Keep in mind that by choosing a less expensive car you can have some leeway within your budget for other monthly expenses.
  1. The ‘Wants’ vs. The ‘Needs’
    When purchasing your first car you should take note of your wants as well as your needs. The extra attention you pay to these details will help you fulfill those needs and wants. Prioritizing your needs and wants will help you find a car that best fits you.
  1. Do Your Research
    Take the time to do your research. The internet is a great place to start to gain insightful information on everything ranging from the price, to consumer opinion regarding a particular model. This can help you narrow down your choices and single out exactly what you are looking for. Car dealerships can also be helpful when doing research, however, they are trying to sell their vehicles and they often lure customers into purchasing a car that does not fit all the requirements of the buyer.
  1. Finding A Dealership
    Dealing with a local dealership can be beneficial especially if they hold a good reputation and you can easily take advantage of the car care services they may have to offer.
  1. Test Drive
    Although you might think that you have found the perfect car, taking a test drive can change your perspective beyond what the reviews or comments have disclosed. You will want to take the car for a test drive in the conditions that are similar to your daily routine to determine whether or not to purchase the vehicle.
  1. Determine the Proper Price for Purchasing
    Once you have chosen the car that fits your criteria now is the time to negotiate the purchase price. Some lending institutions can help you in gaining perspective for an appropriate purchase price and may even have a contact at the dealership. If that is the case talk with the referral before talking to the salesperson. Also keep in mind, when negotiating the financials, not to reveal what you can pay each month but to stick to a total purchase price.
  1. Secure Financing
    It is wise to have financing lined up before you speak to a finance representative from a dealership. Talking with a financial institution or insurance provider before you go to the dealership and having your financing ready to go is in your best interest. This will allow you to have more control over the situation.
  1. Enjoy the Process
    Buying your first car is one of the largest investments you will make and it only happens once! Taking your time and understanding the process will make your first car buying experience an enjoyable one.

 

The Basics of Refinancing Your Mortgage

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moneyhouse2The terms of an existing mortgage can become unmanageable for borrowers for a number of reasons. When this occurs, they may want to seriously consider other options, such as refinancing. The refinancing of a mortgage is a rather convenient option for those looking to restructure their financial situation.

Every year there are a significant number of applications to refinance mortgages. The reason behind this is that many people tend to adjust their debt-payment strategies based on their current circumstances.

Refinancing refers to the attainment of a new loan to take the place of an older one. Refinancing is categorized as “rate and term” or “cash-out.”

Rate and Term Refinancing

Rate and term refinancing refers to paying off a previous loan and adopting a new one with specific conditions. It proves beneficial when the interest rate declines or the period for payment is reduced.

Cash-out Refinancing

Cash-out refinancing provides borrowers with a cash payment preceded by all mortgage-related costs. A person is free to use the money in any way they want.

There are a number of reasons people opt for a refinance, some of which are listed below:

A Lower Interest Rate

This is one of the main reasons people tend to refinance. A suitably reduced interest rate may allow a person to save a significant amount of money along with the reduction in monthly installments. Although it is not so easy to find a mortgage package to meet one’s exact preferences, refinancing may still reduce payments considerably.

The refinancing of a mortgage is accompanied with an upfront closing cost because it is a new loan a person takes out to replace an older one.

A Shorter Time Frame

Some people plan to get rid of their loan in a shorter time frame than the period they previously selected. Refinancing provides an option to do so conveniently. This is preferred by debtors when:

  • Interest rates drop
  • There is an improvement in the debtor’s financial condition

The immediate consequence is the increase in the monthly payback, but refinancing to switch to a shorter period proves to be beneficial in the long run. Monthly payments can be roughly estimated, but a direct consultation of a creditor can give accurate figures before the commencement of mortgage refinancing.

Fixed Rate Verses Adjustable Rate Mortgages

Trading a fixed mortgage for an adjustable mortgage, or vice versa, can provide a way out of an unmanageable situation. If someone intends to adjust monthly payments to a budget, then it is preferable to shift from the Adjustable-Rate Mortgage (ARM) to a fixed-rate mortgage. Fixed-rate mortgages can provide peace of mind by allowing borrowers to avoid unexpected shifts in interest rates.

On the other hand, if someone is determined to pay off their debt quickly while interest rates are low, then a switch from a fixed-rate mortgage to an ARM can be a worthwhile decision. A change in the interest rate is a suitable opportunity for switching between fixed and adjustable mortgages.

A Cash-out

A cash-out refinancing is preferred by mortgagors in a few situations. For instance:

  • A person wants to get into an investment beyond his financial resources, or the resources available are proving to be more expensive than the rate obtained when refinancing.
  • It is necessary if a person wants to pay off excessive debt or to save money for any other dealings in the future.

One needs to have sufficient equity (the difference between the value of real estate and payable debt) to get a cash-out.

The Bottom Line

The purpose of mortgage refinancing is to ease the burden of debts, but if the decision is not made carefully, there will be no improvement in the existing situation. Therefore, it is highly recommended to find all the information at one’s disposal to come up with the most appropriate plan for mortgage refinancing.

Mortgage calculators are available for an accurate estimate of the amount a person might save when refinancing. Also, doing detailed research of loan policies can be helpful. A mortgage-financing decision, if made wisely, can accelerate the process of eliminating debt, and can provide financial peace of mind.

 

What to Expect When You Close on a Home Loan

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coupleAs the name suggests, a closing is the last step in purchasing and financing a home. In the case of a home loan, a closing day concludes a home purchase and the closing of a loan on the same day. Closing day is deemed one of the most important days of the purchasing process. Everyone wishes it to be pleasant and hassle-free.

A buyer’s active participation is necessary to ensure everything goes according to plan. A few preliminary steps given below can provide help in this regard.

Preliminary Document Analysis

Documents such as contracts, evidence of mortgage and homeowners insurance, closing disclosures and inspection reports are usually available for buyers in advance. They should go through these documents in detail to ensure that there are no ambiguities.

An Ultimate Walk-through

Buyers are usually permitted to undertake a final walk-through examination of a home. This walk-through is provided at least 24 hours before the closing day and buyers are expected to point out anything that deviates from the contract that a buyer intends to sign. It also includes potential damages or repairs.

Closing Costs

Buyers are expected to pay an additional cost for closing a home loan. The particular closing cost may vary depending on lender’s policies and location. The closing costs include expenses such as notary, attorney and origination fees. Moreover, the explicit closing costs are mentioned in the closing disclosure.

The buyer should have money available for closing costs before the closing day of a home loan, which is typically when this payment is made.

Who Is Going to Be There?

The closing day procedure may differ depending on region and creditor, but the following people are generally present on a closing day:

  • A notary public
  • A closing agent
  • Buyer’s attorney
  • Seller’s attorney
  • Lender’s representative
  • The seller or seller’s representative
  • Real estate professionals (from buyer’s and seller’s side)

It is the responsibility of a closing agent to administer all of the procedures of a closing day and make sure that the process runs smoothly and transparently.

Which Documents Are Necessary?

The entitled organization’s official and the loaner’s representative provide the list of all the documents required on a closing day. These documents generally include the following:

Closing Disclosure: A document containing all details regarding the monthly payments, closing costs, mortgage loan, and loan terms. Buyers are expected to receive it a few days before the closing day.

Deed of Trust: A document that provides the lender with a claim against the title in case a buyer fails to fulfill commitments.

Certificate of Occupancy: A legal and official paper for buyers moving to a newly-built home.

Mortgage Note: Contains the terms and conditions of a loan in addition to the steps that lenders can take in case of failure of payment. It is the commitment of a mortgagor to repay the loan.

The buyer should be informed in advance whether the documents are to be signed personally or electronically.

Avoid Potential Difficulties
Buyers are expected to be attentive and particular about every aspect of the closing-day arrangements. A lack of attention to detail might result in last minute annoyances, disagreements, and delays which, of course, no one prefers. The prospective stumbling blocks faced by the buyers might include:

  • Inability of the buyer to make a full payment
  • Non-clearance of property lines by seller
  • Failure of buyer to complete walk-through
  • Last-moment withdrawal of lender financing

Such drawbacks can be avoided when all involved parties participate in a detailed conversation regarding the loan and its accompanying documentation.

Basics of Qualifying for a Mortgage

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money_houseThere is a lot of misconception out there when it comes to qualifying for a mortgage loan. For instance, the notion that from the lender’s perspective, loan eligibility is based only on a formula. Although mortgage underwriters look at a variety of different information when determining loan qualifications, it ultimately comes down to four things: credit, equity, income and assets.

Credit

The most important consideration, when qualifying for a home loan, is your credit. Unfortunately, it is also one of those areas in which people are unaware of how their credit history impacts the qualification process. Your credit history compels the lender to determine the likelihood that you can pay back the loan. The lender will take the time to carefully analyze your credit history, and establish your reliability profile. They consider how your current credit cards and loans are paid back, whether the payments were made on time and if the loan was re-paid in full. All of these factors play a part in determining your credit rating or credit score. Your credit score establishes your qualification for a mortgage, and helps in determining the interest rate that you receive.

Credit scores typically used for mortgages range between 350 and 850. A good credit score is considered above 740, whereas anything below 600 is considered to be a poor credit score. Typically, most lenders tend to regard 630 and above an appropriate credit score for qualifying for a mortgage. Also, the higher your credit score the better interest rate you can receive.

Lenders will also carefully examine the items on your credit report. They use these reports to look at whether your account has been open for at least a year, and that there are no outstanding collections or judgments against you. In addition, the lender may want to verify any rental history to help determine consistency with arranged payments.

Equity

When the housing market is down, many homeowners find themselves with less equity when selling their home. If the appraisal of your home comes in lower than expected, you may need to plan for having additional funds available to make up the difference.

Another thing to keep in mind when buying a home are the various settlement fees typically incurred at the loan closing. The settlement fees can vary, depending on the type of loan and the location of the property you are buying. However, it is a good idea to look into the various home loan programs that allow you to have the seller pay for these settlements, as well as for any of the additional costs incurred.

Income vs. Debt

An additional component in obtaining a mortgage loan is your Debt-to-Income ratio (DTI). Simply put, these are the fixed expenses, in addition to the new mortgage, which are assessed against your gross monthly income (before the taxes are deducted). This will help the lender to ascertain whether you are spending less than 50% of the gross monthly income on those fixed expenses. Variable expenses such as utilities, cable or phone are not included in the DTI ratio.

Assets

The lender may also specifically inquire about your liquid assets. They’ll want to verify that the disclosed amount you will be using for the down payment is accessible in a liquid cash account, such as a checking or savings account.

Also, depending on the type of financing you are seeking there could be a requirement to have a steady cash reserve. These reserve requirements are more common when you are trying to purchase a second home or investing in a property.

A Closer Look: 15 Year vs. 30 Year Mortgages

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paperworkMortgage packages that are available these days are diverse and formulated to facilitate all kinds of circumstances. A person can easily feel overwhelmed because of the number of options available.

Choosing between a 15-year versus a 30-year mortgage plan is one such situation. Although the structure of both mortgage strategies are the same, there are some considerations to keep in mind before selecting a mortgage plan.

The Effect of Time

With mortgages, time has a great impact on the final cost. A mortgage is merely a term loan secured by real estate. The debtor pays the interest which is calculated on an annual basis on the outstanding amount still to be paid. The interest rate along with the monthly payback amount remains fixed whereas the interest and principal deductions vary in each monthly installment. That is, the interest deducted in the beginning constitutes the major portion of monthly installments, but it declines gradually over the years with an increase in the deduction of the principal amount.

For a 30-year period, the payable balance reduces in a slow manner as compared to that of a 15-year period. This means that the principal balance declines at a faster pace in the 15-year period.

Fluctuating Interest Rates

The financial institutions offering mortgages have to spend comparatively more in the formulation of long-term loans. Moreover, there are additional payments associated with the long-term loans which render it even more expensive. This is the reason the short-term 15-year mortgage typically offers a lower interest rate to the borrowers as compared to the interest rate in the case of a 30-year period.

The interest rate might not seem to create much difference, but variations of just a few points can result in the savings of thousands of dollars. Mortgage calculators can provide an accurate assistance in this regard.

Saving Goals

The selection of a mortgage plan is also dependent upon the savings an individual might want to retain. With a 15-year mortgage, it might not be possible for a person to save a significant amount of money considering a higher monthly installment. However, it can be comparatively easier to have some savings with a 30-year mortgage because of lower monthly installments. Keeping a reserved savings can be an important determinant as far as the selection of a mortgage plan is concerned.

Financial Position

A concern with a 15-year loan may be that the payment could be too high if an unexpected financial situation was to occur.  There is another option to consider. A possible solution may be to select a 30-year term, but pay extra every month instead of spending that spare amount somewhere else. This can be good practice. Although the interest rate will be paid in accordance with the 30-year term, it would still be better to pay the term off earlier than to keep paying over a period of 30 years. With this strategy and a disciplined approach, the debt can be paid in full without getting concerned about unforeseen circumstances.

Tax Breaks Issue

Tax breaks should not be a significant factor when selecting a mortgage. Although people with a 30-year mortgage pay less tax, the interest rate is still higher than that of a 15-year mortgage. Despite a lower tax payment, it is not beneficial in the long run. Keep in mind that the 15-year debtors are initially facing the difficulty of a higher tax payment, but they are the ones that will enjoy the perks of a short term mortgage.

 

6 Tips for Buying Your First Home

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DMI_1045Buying a home may signify different things for many different people. However, the most common of those things is the dream of owning a home, a place where memories are made. Of course the financial implications are perhaps the most obvious concern, however, the emotional side of buying a home is often overlooked. These six tips can help you manage the financial and emotional sides of buying your first home.

  1. Don’t Rush Things

There are many different factors to consider when buying a home. Making a list of all your requirements before you go house hunting is a good place to start. Also take the time to broaden your research on the real estate property beforehand, as it can save you time and undue stress down the road. The more time you invest in the research phase, the better home you will end up owning.

  1. Check Your Credit

Most consumers tend to underestimate the financial stress of big purchases such as buying a home. After all, a mortgage can be a financial strain for many years.

Handling this type of expense is easier said than done. The current economic conditions and inflation rates play a big part in the decision to make such a big purchase. Begin this next phase by checking your credit report. You can check with your financial institution, or visit one of several websites that will provide you with a free credit report.

  1. Reserve Some Savings for “Extra” Expenses

Be prepared for the extra expenses that come with buying a home. Some expenses can increase sharply, including utility bills and home maintenance costs. Plan for the unplanned expenditures such as HOA fees, lawn maintenance and property taxes. While allocating monetary reserves towards your new home, allocate a sufficient amount to savings to cover those extra expenses.

  1. Do Adequate Research Before Choosing a Mortgage Firm

When shopping around for the best mortgage rates, make time to research various firms until you find the one that works for you. Find the firm that best fits your needs and gives you the rates and payments you can better manage in the future.

Every point in a mortgage percentage matters. Even a quarter percent lower rate can save you thousands of dollars over time. Also, be careful to read between the lines of the mortgage agreement. Some mortgage firms can twist the terms of agreement to hide the actual charges. Paying attention to the details before signing the agreement, could prevent unexpected expenses down the road.

  1. Be Attentive at The Time of Inspection

It is a smart decision to hire a professional home inspector, but also take the time to do a walk-through of the home yourself. Examine every nook and cranny of the house with keenness. If possible, inspect under the carpets and behind picture frames to look for anything out of the ordinary. This general inspection will provide you peace of mind at the time of closing the deal.

  1. Buy for Long Term

Buying for the long term is an investment strategy that will eventually build up equity on your initial investment. Carefully consider the options of renting vs. buying and what works best for your situation.

It would take hundreds of pages to cover all the areas of purchasing a home for the first time; however, these tips will help you get started on the right track.

Metro Credit Union is Heart Walking This Saturday

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IMG_8921Metro Credit Union is excited for this Saturday’s American Heart Association Nebraska (AHA) Omaha Heart Walk to benefit the AHA and their quest to reduce heart disease and stroke in America.  We are serving as a presenting sponsor with Metro management and staff participating in the Heart Walk. Metro President, Mike McDermott is serving as a Co-Chair of the event along with UNMC Chancellor, Dr. Jeffrey Gold and Honorary Co-Chair, Nebraska’s own, Dr. Tom Osborne.

This event, located at Miller’s Landing (151 Freedom Park Rd.), promotes healthy living as well as to raise funds for cardiovascular disease. The Heart Walk is family and pet-friendly, featuring a one and three-mile course with a half-mile Kids Heart Challenge obstacle course.

Heart disease affects all ages, both male and female. Congenital heart conditions in babies are the most common in the United States, occurring in 1 out of every 110 births.  Heart disease is still the #1 killer of Americans, and it is the #1 killer of women, causing 1 in 3 deaths a year. May is American Stroke Month, and stroke is Nebraska’s leading cause of death.

Thanks to the AHA, deaths due to heart disease and stroke have declined 35% in the past decade. So far, Metro Credit Union has raised over $14,000 with our company goal being $16,000. You can help by donating or registering to walk, and you will save lives by providing funds for education and life-saving research.

Gates will open at 7:00 a.m. with the kids walk to follow at 8:00 a.m. Opening ceremonies follow at 9:00 a.m. and the adults hit the pavement at 9:30 a.m.  At the walk, make sure to visit the Metro Credit Union tent to pick up snacks and enter for our drawings. You also may spot adorable Odie, Metro Credit Union’s honorary dog, who will be walking to fight heart disease.

Remember to take many pictures and share them on Metro Credit Union’s social media. If you’re on Snapchat, Metro Credit Union will have a special Heart Walk geofilter for you to use and share with your friends and family.

Thank you for doing your part to help fight cardiovascular disease and spreading awareness for this cause.

 

LStreet

Metro Credit Union 50th & L Street Staff Promoting the Omaha Heart Walk

 

Finance Tips for Newlyweds

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couple_laptopAll couples promise “for better or for worse… for richer or for poorer,” when they marry. However, it can be a challenge to actually survive being richer or poorer without financial management skills.

Money has become a top issue over which newlyweds end up fighting. Consider openly discussing your finances together, because it can be an essential ingredient to a long and happy marriage.

Sometimes in a marriage one person is determined to manage money only their way, and it may not mesh with their spouse’s methods. Others might take all the responsibility on themselves or just put it entirely on their spouse. Some spouses lie about their overspending habits, which causes trust issues among the couple. However, as a newlywed couple, you can avoid these problems and keep your marriage on the right track. However, the two of you will have to work a few things out, and you should do so by taking plenty of time to talk.

The following tips can help you and your spouse get accustomed to healthy financial habits:

Talk About Finances

Communicating your thoughts about spending is best to do before you get married. However, it’s never too late to talk about your finances with your spouse. In the event that you failed to discuss the topic before your marriage, you should discuss the matter as soon as possible with your significant other. You will have to go through the accounts you have open and the debts you owe. You should also be clear on how you would like future money to be handled, and then listen to your spouse for their suggestions.  Together, you will be better equipped to make any changes that you both agree on.

Determine the Goals

Once you come up with your baseline financial status, discuss the long-term financial goals that you might have, such as retiring at a certain age or paying off your debts completely. Make sure that you write down your goals and review them regularly. By doing so, you will have a better chance of success.

Bank Accounts

There are ups and downs of having a joint bank account as well as maintaining individual accounts after marriage. Some may even opt for both types of accounts. By combining your accounts, you can simplify your finances and develop trust in your marriage. It can also benefit you and your spouse if either one of you chooses to take on the extra household or child rearing duties. Having some independence may be preferred by the both of you.

Emergency Fund

Make saving for an emergency fund one of your top priorities. Aim for saving at least six months of your household expenses for emergencies. It should be a priority because an emergency fund can bring security and help protect your relationship if some disaster or mishap arises.

Budget

Make sure that you stay within a budget each month. Limit how much you can spend on a certain budget category in a month. You should do so by reviewing your joint expenses for a few months to understand how much you and your spouse have been spending, and whether you need to reduce the amount. Once you have done that, you can establish a limit on every category that you decide on. Don’t forget to allocate some funds for surprise events.

Keep Track of Your Budget

Making a budget is a great step, but it isn’t enough. You will also need to make sure that you are staying within your spending limits and adjust your spending accordingly. An effective way of sticking to your budget is by using an envelope budgeting system. This method is best suited for young couples who have lower incomes. Another way is to make a spreadsheet that will track all of your expenses, spending, and totals up at the end of the month. Also, make sure that you pay off your credit card charges every month on time. Constantly communicating with your spouse about the budget will help you both keep track of your budget and avoid overspending. Never assume the other person took care of it, or that the other person is staying within the budget. It is better to ask and confer with them so you both stay on the same page.

Get Out of Debt

Being in debt can be damaging even for a single person, but it becomes a double threat when two people have to pay it off. Work out a plan with your spouse for getting rid of your debt and making sure you do not get back into it.