College Grads, Get Ready for Real World Finances

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The party’s over, you’ve graduated and it’s time to get ready for your financial future. Don’t wait. Start growing your financial future now. You’ll be glad you did. Here are some steps every graduate should take the first year out of college.

Establish credit.
A great credit score doesn’t just happen. You have to build it. Get in the habit of paying your bills on time every time and spending below your credit limit. When the time comes to finance a car or a house, your credit score can help you get a lower interest rate and save money.

Live with a little less luxury.
Your parents worked hard to finance their home, buy their cars and pay for some of life’s luxuries. You’re not there yet. Spend a little less on going out to dinner, fancy coffee, and expensive movies. Cut the cable cord and find other ways to save some cash. Luxury can come later.

Create a budget.
And stick to it. Determine how far your paycheck can go and find ways to put a little aside for emergencies. The more you earn, the more you can add to your savings. Every time you get a raise or earn a little extra cash, add some to your emergency fund.

Take advantage of employee benefits.
If your company has a retirement plan, take advantage of the tax-free savings option. At the very minimum put in the amount your employer will match. The employee match is part of your benefits and it’s a big one. If you can, contribute 10 percent each pay period. This money adds up quickly. And if your insurance program has a health savings account, add to that, too. This money builds up as savings but also is there for you if you have unforeseen medical expenses.

Set up a ROTH IRA or another savings plan.
If your company does not have a retirement plan, check into a ROTH IRA. You can contribute up to $5,500 a year, and it can serve as a great savings account, as well. Talk to a financial planner about your options.

Pay your student loans on time.
Student loans will come due six months after you graduate. Check out payment programs to see if there are any that can help you pay your loans off efficiently and effectively. Like other bills, do not miss a student loan payment.

Find a side gig.
Need more money, want to pay off bills faster, or want to save more faster? A job waiting on tables, bartending, working at a carwash on weekends, or walking dogs can help. Don’t let your new 9-5 job limit your financial aspirations.

Get a roommate or two.
Life’s expensive. Share living expenses with a roommate or two. Even if you can afford to pay the rent on your own, having a person to share costs with will help you to save for your future. Take the money you are saving in rent and put all or some of it into your savings account.

These are just a few ways to put yourself on the path to financial success after college. Have a goal in mind for what your future looks like. Do you want a house? A new car? To pay off your debts faster? To build your savings? Keep this in mind and you’ll be well on your way to reaching your success. Journey on, graduate!

Saving for a Down Payment: Save More and Save Faster!

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Whether you’re planning to buy a house in a few months or not for a few years, you’re probably thinking about how you’ll save for a down payment or you’re already saving. No matter where you are in the process – or even if you’re already a homeowner and just want to save more – some reminders on how to save money are always appreciated. The biggest thing to remember is that saving takes time and discipline – and it means re-thinking your budget and maybe even earning additional money.

Remember: You may not need to put 20 percent down for your home. In fact, you may only need to put down 5 percent or 3.5 percent. Saving that amount will be a breeze! Your mortgage loan officer can share information with you about loan options and down payment assistance programs.

Get started saving today:

Transfer a fixed amount of money to savings automatically. Set up a savings account that has money automatically transferred into it each month, every two weeks or every week. Every time you get a paycheck, some of that money should be automatically deposited into this account – no questions asked. Your bank can set this up for you, but you have to be disciplined enough to not withdraw from the account!

Bank any extra unexpected income. Get a tax refund? Put it into the savings account. Get a gift of cash? Put it in the savings account. Bonus or large commission? Savings. If this adds up to hundreds or even thousands of extra dollars a year, good for you!

Lower your expenses. Get an antenna and get rid of cable. Stop buying fancy coffees and reduce your trips to restaurants. Lower your data plan on your phone. If you pay your own gas or electric bills, lower your heat in the winter and raise the temperature on your air conditioner in the summer by three degrees in each direction. Wherever you can make a small change, make a small change.

Monitor your online spending. With online shopping at your fingertips and online sellers that generously store your credit card for you, it’s easy to click and spend without even thinking about how much you’re spending or if you really need what you’re buying. Track this spending with an app or keep an old-fashioned spending ledger.

Shop your insurance. If it’s been a while since you checked rates for your car insurance, renter’s insurance, health insurance, look into those costs. You may be able to save hundreds or even thousands of dollars by making a few small changes.

Save your change! Save your pennies, nickels, dimes and quarters. Never spend your change. Get glass jar and start saving. When the jar is full, put the money in your savings account. This will add up fast!

Skip vacations for a year or two. Check out what’s happening in your community, your state and your neighboring states. If you can’t stand the idea of not going away for a year, plan a camping trip and borrow your friends’ equipment. Take the money you would have spent on vacation and add it to your savings account.

Sell things. You’re probably going to purge before you buy your home anyway, so why not sell some things now. That bike you never ride? The extra set of pots and pans you never use? What do you have that has value to someone else? Sell it on Craigslist, Facebook Marketplace, Ebay… wherever there is a buyer for what you want to sell. Put anything you make into your savings account.

Lose the high interest credit card debts. If you’re not paying off your credit cards each month, you’re probably paying a lot in interest. Pay off your credit cards and either stop using them all together or use them minimally. Paying credit card interest will seriously cut into your savings. If you simply cannot pay them off, transfer your balances to a card with the lowest possible interest rate.

Get a second job. Earnings money working a second job can help you save money a lot faster. Even if you’re bartending or waiting tables 10 hours a week, driving for a car service, pet sitting or working in retail, if you take every dime of what you make working a second job and put it into savings, you’ll see your money add up quickly.

Refinance your student loans. Do some research and see if you can get a better interest rate on your student loans. You just might be surprised at what you can save. Whatever money you do save with the lower payment goes into your savings account.

Celebrate your savings successes. Create a savings graph and put it somewhere that you see it. Add to it regularly – at the end of every week. The more you see your savings grow, the faster you’ll get to your down payment. And we think you’ll want to continue making saving something you do regularly.

Do you have savings tips you want to share? Add them to the comments below!

Decisions, decisions – FHA or Conventional Loan?

Piggy Bank and Scales of Justice - 3D Rendering

It’s easy to feel overwhelmed when you’re considering a home loan. The last thing you want to feel is conflicted and confused! We’re here to help. One of the questions we hear most often is “What is the difference between a conventional loan and an FHA loan?” Let us tell you.

FHA stands for Federal Housing Administration, which means that FHA loans are backed by the government. Originally, they were created to help make homeownership more accessible to buyers with damaged credit or minimal savings. Over time, they became popular across all income levels and especially with first time buyers.

Conventional loans are your “basic loan.” They must conform to specific guidelines, but they are not backed by the government. They also are very popular.

Both loans offer you flexibility in type (fixed rate vs adjustable rate) and term length (30 years or 15 years).

There are some key differences between the two loan types.

FHA vs Conventional Credit Guidelines

FHA Credit Score Requirements
FHA has lower credit score requirements. A credit score of 580 or over allows you to make a down payment of just 3.5%. If your score is between 500-579, and you need to put down at least 10%. Buyers with credit scores under 500 likely won’t be able to qualify.

Conventional Credit Score Requirements
Exact credit score numbers needed vary from lender to lender and are impacted by other factors, but as a “rule of thumb,” 620 is generally the lower limit of conventional credit requirements.

Down Payment Requirements
One of the biggest myths about mortgage loans is that you need to put 20% down to buy a home. There are options available to put as little as 3% down.

FHA Loan 3.5% Down Payment
With an FHA loan, you can put as little as 3.5% down. For many, this is the same amount as you’d put down for a rental deposit.

Conventional Loan 3% Down Payment
With a conventional home loan, you can go as low as 3% with the program’s “conventional 97 loan.”

Private Mortgage Insurance for FHA and Conventional
If you put less than 20% down using any loan except a VA loan, you must have private mortgage insurance. Private mortgage insurance (PMI) protects lenders in the event that borrowers with low equity default on their loans.

FHA Loans
FHA loans insurance is an upfront amount paid at closing, with a monthly mortgage insurance premium. To remove this, borrowers must refinance when they have 20% equity in their homes. 

Conventional Loan PMI
PMI is simple with conventional loans. Once you have 20% equity in your home, PMI drops off. You can get there by putting 20% down on the house for your down payment, or by paying PMI until you hit 20% equity with your monthly mortgage payments. Your lender is legally required to drop your PMI automatically at 22%, or per your request at 20%.

Income Requirements
Debt to Income (DTI) is the percentage of your gross monthly income that will go toward paying off debt Lenders use the following formula to work out this number:
monthly expenses ÷ pre-tax monthly income = DTI %

FHA Debt to Income Requirements
With FHA home loans, some lenders may offer a bit more flexibility if the borrower’s finances and credit are good.  However, you want to choose a lender who has your best financial picture in mind, so working with someone who wants you to get your DTI more in line is a positive factor for your long-term financial security.

Interest Rates
FHA loans tend to come with lower interest rates than conventional loans, likely due to the fact that FHA borrowers have historically been less likely to pay off their mortgage early than conventional borrowers. However, if interest rates are your only factor, the difference is usually negligible, and you can easily pay more in PMI during the life of the loan.

Property Eligibility for FHA and Conventional Loans

FHA Property Guidelines
FHA home loans are backed by the government and are designed to help families, so they place more restrictions on the type of house that qualifies.
• Must be occupied by the buyer
• Must be your primary residence
• Must be occupied within 60 days of closing
• Must be assessed for safety with an additional home inspection
• Must be under the capped lending amount

Conventional Mortgage Property Guidelines
Conventional loans have fewer restrictions. Second homes and investment properties both qualify, and don’t require special inspections.

They have a capped loan amount called the conforming loan limit, which your lender can share with you.

Conventional 97 Property Qualifiers
However, if you use a conventional 97 loan and put just 3% down, there are additional requirements:
• The property must be a one-unit, single family home, co-op, PUD, or condo
• The property will be the buyer’s primary residence
• The buyer (or one of the buyers) can’t have owned a house in the last 3 years
• The loan amount is at or under the capped amount

Which Mortgage Loan is Right for You?
There’s no definitive answer here. Your lender will help you to review your finances to determine your best choice. You may want to consider the following:

An FHA loan may be best if:
• You have lower or no credit
• You have a lot of debt
• You already have an FHA loan and want to refinance
• You don’t plan on staying in the home long enough to hit 20% equity
• You have a bankruptcy or foreclosure in your past

A conventional loan may be best if:
• You have fair to excellent credit
• You have a reasonably low DTI ratio
• You need to be able to make the smallest possible down payment
• You want to be able to dump PMI without having to refinance
• You’re buying an investment property or second home

Remember, this is just a guideline to these two loan types. At Universal Lending we work to educate and inform our borrowers so they make the best financial decisions possible to keep themselves and their families financially secure while enjoying the benefits of homeownership.

College Grads: Hit the ground running on your path to excellent credit

Education savings. Piggy bank with graduation cap.

It’s a great time to get out of college and get into the job market. Unemployment has dropped and employers are hiring. So grads, get the job lined up and establish yourself with excellent credit. Tired of taking notes? We’ve done the work for you:

Get your credit score in order.
Start building your credit history. If you don’t have one, consider getting your first credit card, as credit bureaus consider the average age of your accounts when evaluating your credit score. When it’s time to buy a house, you’ll want to have a good score.

If  you struggle with impulse buying, you may want to consider another option: a secured credit card that is backed by a cash deposit. This limits your spending to what is in the card’s account.  If you have student loans, a credit card may not be necessary. Focus on paying down your student loans regularly – and always on time – to improve your rating.

Make more ways to save.
The financial rewards of a job are about more than just the salary. Does the company have a 401k match? Participate as much as you can with any employer contributions and put a little extra aside in an emergency fund of cash. Start today with $10 or $20 a week. Do not pull this money out of the account except in an emergency. Periodically check out how much money you have in the account. You’ll be surprised to see how fast it adds up and you’ll probably find you want to add more.

If your company does not offer a retirement savings program, contact a financial advisor about setting up an IRA or Roth IRA and get into the business of saving today.

Negotiate student loan repayment as part of your job benefits.
An increasing number of employers are contributing to employees’ student loan payments. Perhaps your employer doesn’t officially offer to help repay your student loans as part of your compensation, but you can always try your hand at negotiating this perk. It never hurts to ask.

Pay off debt.
The more debt you can pay down and the faster you can pay it down, the quicker you will find financial independence. This may mean living at home for a few months, a year or even more. Or it may mean fewer fancy coffees or nights out. You’ll be closer to financial freedom sooner and you’ll improve your credit score.

If your job is 9 a.m. – 5 p.m., Monday through Friday, consider finding weekend work or evening work at a home improvement store or restaurant. A little extra income goes a long way and you’ll have less time to spend the money you are earning.

Don’t make major lifestyle changes.
Just because you have a job and are making more money doesn’t mean you can start splurging on impulses. A big jump in income is a huge temptation to spend more on eating out or entertainment or weekly happy hours, especially if you’ve been living on a college student budget. Put raises and bonuses into savings.

Take advantage of student loan forgiveness programs.
The government offers federal borrowers who have worked for the government or a nonprofit for 10 years full student loan forgiveness. Another federal program partially forgives federal student loans for teachers who work in low-income public schools for five years. If you are in a position to take advantage of this type of forgiveness, check it out.

Once you are ready to consider homeownership…
Start small. A modest home is a good purchase. Consider getting a roommate to share expenses. You have years ahead of you to afford your dream home and not overextending your budget will make that possible.

You’ve accomplished so much already. Working toward financial independence today will help you to achieve even more tomorrow.

Why Work with an In-Person Lender

Black couple standing on residential street with agent

With a world of online options at your fingertips, why should you work with a lender in-person when you are buying your first home, moving again, or refinancing? Here are a few reasons it makes sense to work with someone local.

An in-person lender understands the rules of where you are buying your home.
Different states have different rules, when it comes to taking out a mortgage. When you work with lenders in-person, you know they are licensed in your state, they have passed state-specific tests and they are experts in your area.

In-house underwriting means easier transactions.
When you work with a lender in-person, you know that any questions you have are answered immediately, rather than being pushed through several channels. The lender also can keep you updated on where your loan is in the process and what may be coming up. This expedites the process and makes the experience smoother.

You know you are applying for a loan.
When you apply for a mortgage online, you may not be applying for a loan at all. You may be feeding your personal information into a database where it is sold to loan officers, mortgage brokers, and even insurance brokers and other sales people. Rather than receiving a phone call from one company, you may find yourself fielding phone call after phone call. If you do choose an online mortgage, make sure you are working with an actual mortgage company.

It is in your best interest to watch your interest rates.
Online lenders often approve people with lower credit scores than traditional lenders will. Taking out a mortgage that you cannot afford is never a good idea. Lower credit scores lead to higher interest rates. An honest and transparent in-person lender may help a borrower who should put off the purchase of a home stay financially secure.

Getting a loan is personal.
You want to work with someone who knows you and understands your needs, and who stays with you every step of the way. When you work online, you send an email and wait for a reply. Nothing about that suggests you have access to someone who understands your needs now and who understands your needs when they change. Having the ability to call your loan officer directly or sit down and meet face-to-face can help you understand that your loan isn’t just personal to you, it’s personal to the person with whom you are working. You are part of a team.

At Universal Lending, we keep things personal. Contact us to see why local is better.