Navy Fellas Realty Group

Real Estate, Residential sales and purchase

The Role of A Down Payment: How Much Should I Save?

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Buying a home, a car, or any significant investment often involves making a down payment. The down payment is a crucial part of the purchasing process, as it can impact your loan terms, interest rates, and monthly payments. But how much should you save for a down payment, and why is it so important?

Understanding Down Payments

A down payment is a portion of the purchase price that you pay upfront when buying a house, a car, or making a large investment. It’s a way to demonstrate your commitment to the purchase and reduce the risk for the lender or seller. Down payments are commonly associated with:

Homebuying: When purchasing a home, a down payment is typically required by mortgage lenders. The amount can vary but is often around 20% of the home’s purchase price.

Car purchases: Down payments for cars can also range, but they often hover around 10-20% of the vehicle’s price.

Large investments: In other scenarios, such as starting a business or investing in a big-ticket item, a down payment may be necessary to secure financing.

Importance of Down Payments

Lowering Monthly Payments: A larger down payment reduces the amount you need to finance, resulting in lower monthly payments. This can make your financial burden more manageable in the long run.

Qualifying for Loans: A substantial down payment can help you qualify for loans with more favorable terms and lower interest rates. Lenders often see a larger down payment as a sign of financial stability.

Building Equity: With a significant down payment, you’ll start building equity in your asset from day one. Equity is the portion of the property or asset you own, and it can grow over time, giving you more financial security.

How Much Should You Save for a Down Payment?

The ideal down payment amount can vary based on what you’re buying and your financial situation. Here are some general guidelines:

Homes: As mentioned earlier, a down payment of 20% is often recommended for purchasing a home. However, there are mortgage options that allow for lower down payments, such as FHA loans, which require as little as 3.5% down. The key is to balance a lower down payment with the added cost of private mortgage insurance (PMI) and potentially higher interest rates.

Cars: For buying a car, a down payment of 10-20% is a good range to aim for. This will help reduce the overall cost of the car loan and lower your monthly payments.

Large Investments: The down payment for investments can vary widely, so it’s essential to assess your specific financial goals and risks. In this case, consult with a financial advisor to determine the right amount.

How to Save for a Down Payment

Saving for a down payment may seem daunting, but with a clear plan, it’s achievable. Here are some steps to help you get started:

Create a Budget: Review your finances, set a budget, and identify areas where you can cut back on spending to save more.

Open a Dedicated Savings Account: Consider opening a separate savings account exclusively for your down payment fund. This will help you track your progress and keep the money out of sight and out of mind.

Automate Savings: Set up automatic transfers from your checking account to your down payment savings account. This ensures that you save consistently.

Increase Income: Explore opportunities to increase your income, such as taking on a part-time job or freelancing, to boost your savings rate.

Reduce Debt: Pay down high-interest debts like credit cards to free up more money for saving.

The role of down payments in major purchases cannot be overstated. They play a vital role in reducing the financial burden of loans, helping you secure better loan terms, and building equity in your assets. While the ideal down payment amount can vary, it’s essential to set a clear savings goal and follow a strategic plan to achieve it. With discipline and patience, you can save for a down payment and take a significant step toward achieving your financial goals.

Ways To Be Financially Prepared for an Emergency

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It’s important to be financially prepared for emergencies so that you can handle unexpected expenses or situations without having to worry about your financial stability. Here are some ways to financially prepare for emergencies:

Build an emergency fund: Start by building an emergency fund that can cover at least 3-6 months of your living expenses. This fund should be kept in a separate savings account and should only be used for emergencies.

Create a budget: Create a budget and stick to it. This will help you identify areas where you can cut back on expenses and save more money.

Reduce debt: Try to pay off high-interest debts such as credit cards, personal loans, and other loans as quickly as possible. This will help reduce your financial burden and free up money for other expenses.

Get insurance: Make sure you have adequate insurance coverage for your health, car, home, and other assets. This will help protect you financially in case of any unforeseen circumstances.

Plan for retirement: It’s important to plan for your retirement as early as possible so that you can have a secure financial future. Consider investing in retirement accounts such as 401(k)s, IRAs, or other similar retirement plans.

Keep track of your finances: Make sure you keep track of your finances regularly by checking your bank accounts, credit card statements, and other financial accounts. This will help you identify any unusual activity and prevent fraud or identity theft.

Prepare a contingency plan: It’s a good idea to prepare a contingency plan for emergencies, such as job loss, medical emergencies, or natural disasters. This plan should include steps you can take to reduce expenses, sources of income, and other financial resources that can help you stay afloat during tough times.

How to Create an Emergency Budget

Creating an emergency budget can help you quickly adjust your finances during unexpected situations such as job loss, medical emergencies, or other unforeseen circumstances. Here are some steps to create an emergency budget:

Assess your current situation: Take a look at your current income, expenses, and debts. This will help you understand where you stand financially and what changes you may need to make.

Identify essential expenses: Make a list of your essential expenses such as rent/mortgage, utilities, groceries, and transportation. These are expenses that you cannot cut back on and will need to be prioritized in your budget.

Cut back on non-essential expenses: Identify non-essential expenses such as dining out, entertainment, and subscriptions that you can cut back on or eliminate completely. This will free up money that you can use for your essential expenses.

Prioritize debt payments: If you have debt, prioritize your debt payments and focus on paying off high-interest debt first. This will help reduce your overall debt burden and free up money for other expenses.

Consider additional income sources: Look for additional income sources such as freelance work or part-time jobs that can help supplement your income during tough times.

Monitor and adjust: Monitor your budget regularly and adjust as needed. This will help you stay on track and ensure that you are able to cover your essential expenses.

Remember, creating an emergency budget requires discipline and sacrifice, but it can help you weather tough times and avoid financial hardship.

Planning Your Mortgage Budget for the Holiday Season

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The holiday season is a time of joy and celebration, but it can also be a challenging time for your finances, especially if you’re juggling the responsibilities of a mortgage. However, with some thoughtful planning and budgeting, you can ensure that you enjoy the festivities without putting your financial stability at risk.  I will provide you with essential tips and strategies to help you manage your mortgage budget during the holiday season.

Create a Holiday Budget
Set a specific budget for your holiday expenses. This budget should encompass everything from gifts and decorations to travel and entertainment. By creating a clear budget, you can ensure that you don’t overspend, keeping your mortgage payments on track.

Prioritize Needs Over Wants
It’s easy to get carried away during the holiday season, but it’s important to prioritize needs over wants. Make a list of your holiday expenses and identify which ones are essential and which ones are optional. Hint: Your mortgage payment should always be at the top of the list.

Set Realistic Expectations
The pressure to create the perfect holiday experience can lead to overspending. Set realistic expectations for your holiday celebrations and remember that meaningful moments don’t have to be expensive.

Take Advantage of Sales and Discounts
The holiday season is known for its numerous sales and discounts. Keep an eye out for deals on gifts and other holiday essentials. This can help you stretch your budget further and make the most of your money.

Consider DIY and Homemade Gifts
One of the best ways to save money during the holidays is by making homemade gifts. Not only do these gifts carry sentimental value, but they can also be more budget-friendly than store-bought items. Get creative and crafty to give your loved ones a meaningful and unique gift.

Monitor Your Spending
As the holiday season progresses, keep a close eye on your spending. Regularly review your budget and track your expenses to ensure you’re staying on track. This will help you make necessary adjustments if needed.

Plan for the Future
Once the holiday season is over, it’s essential to get back on track with your mortgage budget. Review your financial goals and create a plan for the coming year. Consider setting up a dedicated holiday savings fund for the next holiday season so you’re better prepared in advance.

The holiday season should be a time of joy and togetherness, not financial stress. By planning your mortgage budget for the holidays and implementing the strategies outlined, you can enjoy the festivities without jeopardizing your financial stability. Remember that moderation and mindful spending are key to a happy and financially responsible holiday season.

Enjoy it!

Is An Escrow Account Right For You?

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Is An Escrow Account Right For You?When someone is looking at purchasing a home, they usually focus on the purchase price of the home and the potential monthly payment. At the same time, there are other costs that need to be included as well. This includes home insurance and real estate taxes.

As a result, many homeowners find themselves asking if they should use an escrow account or not. What do homeowners need to think about and how can they make the right decision?

What Is An Escrow Account?

First, it is important to define an escrow account. An escrow account is an account that contains money for items such as insurance and taxes. That way, homeowners are not blindsided by a major bill at the end of the year. Some people may be required by the lender to have an escrow account, but those who are putting 20 percent down may have an option to use an escrow account or to handle this on their own. With an escrow account, the money that is required for real estate taxes and homeowners’ insurance is broken up into 12 months. That way, homeowners can pay a little bit every month instead of paying it all at once, when the money might get tight. When should homeowners use an escrow account?

Savings Habits And Risks

First, some homeowners would rather handle real estate taxes and home insurance on their own because they want to be in control of their finances. While this is fine, some lenders might see this as an increased risk. If they view that homeowner as a risk, then they could use this as an excuse to raise the rate on the loan. Homeowners need to make sure they do not have to pay more for the loan simply because they are not using an escrow account.

Next, homeowners also need to think about their individual saving habits. Because home insurance and real estate taxes are often paid as one lump sum, this could be a lot of money leaving the account at once. If homeowners do not have appropriate saving habits, they might not set this money aside when the payment is due. If they fall behind on their real estate taxes, they could place themselves at risk of losing the home.

Why An Emergency Fund Is Important

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Why An Emergency Fund Is Important

There’s almost a guarantee that at some point in the future you’re going to face an emergency. Like most things in life, that emergency is going to require money to solve. You can’t assume that you’ll have the funds to face the emergency when it happens. You can’t even assume that you’ll have enough on your credit cards to pay for it. The only safe way to plan is to have an emergency fund.

What Is An Emergency Fund?

An emergency fund is a reserve of cash set aside for emergencies only. It’s not a savings account, because you’re not saving up for anything in particular like a new sofa or a dining set. It’s strictly money on hand to be used in an emergency.

What Constitutes An Emergency

As a homeowner, you could face any number of emergencies regarding your property. An emergency is something unexpected and urgent. In other words, you couldn’t foresee it happening, yet it needs to be taken care of right away. Examples of homeownership emergencies are:

  • Basement floods and needs to be drained and contents cleaned
  • Tree falls on roof, and you can’t wait for insurance check
  • Furnace dies in the middle of winter
  • Central air system dies and there’s a high deductible on your insurance policy
  • Water tank gives out a week before your big family holiday

How To Manage an Emergency Fund

The key thing about an emergency fund is that it needs to be instantly accessible. Instantly accessible means you should only have to use your debit card or write a check to use it. You shouldn’t have to sell stock or transfer money out of your retirement IRA. It should also be kept separate from other funds, so it doesn’t get confused with the Christmas gift fund or the college fund.

Why Have An Emergency Fund?

Emergencies shouldn’t cause catastrophic damage to your finances. With consistent, small saving habits, you can build up an emergency fund so you can easily and readily take care of maintaining and repairing your home. This is part of good homeownership. When you have an emergency fund, you know that you can always keep your home in tip-top shape.

Do You Have Enough Of A Down Payment Saved Up?

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Do You Have Enough Of A Down Payment Saved Up?If you are planning on purchasing a home in the near future, you need to make sure you have enough money saved up. While there are a lot of expenses that go along with purchasing a home, the biggest expense is the down payment.

The common belief is that people have to put 20 percent down; however, even if you don’t have 20 percent saved up, you might still be able to purchase a home. It will depend on whether you can get a lender to provide a loan that is greater than 80 percent of the purchase price of a home. If you have a strong credit history, you may be able to get one.

Getting A Loan With Less Than 20 Percent Down

First, many lenders realize that many people do not have enough money saved up to put down 20 percent. After all, this could be tens of thousands of dollars.  Although some people might be able to get a loan with only 10 percent down, those with outstanding credit might even qualify for a larger loan. There are certain people, such as veterans, who might have other options outside of conventional loans that might open other doors. If you are looking to get a home loan for less than 20 percent down, you will want to check all of your options.

How To Get A Loan For Less Than 20 Percent Down

Particularly if you are a first-time homebuyer, you might not know how to get a loan for less than 20 percent down. First, you need to have a strong credit score. If the lender is giving you a larger loan, they will want to make sure you can pay it back. Having a strong credit score can prove this to them. You may want to check your credit report ahead of time to correct any inaccuracies.

Second, you need to take a look at your debt to income ratio. If you have a lot of debt, consider paying this down before applying for a home loan.

Finally, trust an experienced lender to guide you through the process. You might be able to get a home loan for less than 20 percent down.

Tips For Getting A Mortgage Application Approved

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Tips For Getting A Mortgage Application ApprovedRight now, mortgage rates have fallen to rates that haven’t been seen in years. This opens the door for many people to apply for a mortgage that they previously may not have been able to afford. Sadly, not everyone who applies for a mortgage is going to be approved. There are a few steps that applicants can take to increase their chances of getting their mortgage application approved.

Increase The Credit Score

Applicants need to make sure that their credit scores are as high as possible when they apply for a mortgage. The greater the credit score is, the more trustworthy they look to lenders. In general, applicants are going to need a credit score of 620 or higher to qualify for a home loan; however, those who want to get the best interest rates possible need to make sure their credit score is as high as possible. Try to ask for a free copy of the credit report from one of the major credit bureaus and correct any inaccuracies that might be present. Then, pay down as much debt as possible before applying for a mortgage.

Add More To Savings

Those who want to qualify for the best interest rates will need to be willing to put more money down. The only way to make this happen is to increase the amount of money in the savings account. Lenders are more willing to provide people with a home loan if they know the potential homeowner is supplying some of the capital as well. Delaying the home search by a month or two to collect more money in a savings account can dramatically improve someone’s chances of getting approved.

Increase Employment History

The longer someone has been employed, the better the chances of the application being approved. Lenders want to make sure that the potential homeowner is going to be able to pay back the loan. The longer the applicant has been employed, the greater the chances that he or she is going to remain in that position. A longer employment history could help someone qualify for lower interest rates.

Get A Mortgage Application Approved

These are a few steps applicants can take to improve the strength of their application. That way, they can get the home of their dreams.

A Few Creative and Effective Ways to Save Money for a Down Payment

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A Few Creative and Effective Ways to Save Money for a Down PaymentFor those who are looking to buy a home, they know that this is one of the most exciting experiences in the world. There is something special that comes with looking at a bunch of homes and envisioning a life there.

On the other hand, the prospect of saving 20 percent of the home’s value to put down might seem overwhelming. Fortunately, there are a few creative ways that people can save up enough money to purchase their starter dream home.

Talk To The Seller

One of the first tips that people need to keep in mind involves talking to the seller. There are a bunch of items that need to be negotiated between the buyer and the seller. One of the most important is the closing costs. Ask the real estate agent to speak with the seller. Even if the seller is able to take half of the closing costs, this could amount to a few thousand extra dollars that could be put toward the down payment.

Crowdsource The Down Payment

Another creative option involves asking the crowd to help with the down payment. It is not unusual to see people try to go the crowdfunding route for everything from medical bills to student loans. Why not give it a shot with a down payment as well? First, anyone who has a wedding coming up should add “money for a down payment” to their wish list, as this is becoming more common. Second, think about exploring platforms like Feather the Nest to try to raise money for a down payment.

Check With The Employer

Finally, it is also critical to look at your Employer Assisted Housing Program (EAH). While not everyone is going to qualify, those who work for an employer who falls under this category might qualify for a substantial loan for the down payment and closing costs. The best part is that this loan comes without interest. 

Save For A Down Payment

These are a few of the top ways to save money for a down payment. Using these tips, everyone can get over that last hurdle and buy their home.

Building An Emergency Fund During An Emergency

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Building An Emergency Fund During An EmergencyBy now, it should be apparent that this COVID-19 (Corona-virus) pandemic is going to be here for several months. It is already causing the market to plummet and is disrupting jobs all over the country. Many people who work as hourly employees (or are independent contractors) are starting to suffer. As people’s budgets start to feel the squeeze, this is exactly the time that people should be relying on an emergency fund; however, for those who don’t have one, it is time to start saving.

How To Create An Emergency Fund

Even though cash assistance from the government might be coming soon, this is not going to be enough to get people through the crisis. To start building an emergency fund, it is important to take a look at the regular income first. Try to figure out how many shifts are going to cut and estimate what money is left (unless you are a salaried employee).

After this, take a look at other possible sources of credit. Know the limits on the card and figure out to what extent these cards can be drawn out. If there is an income tax refund coming, plan for this; however, remember that the government might be behind.

Finally, try to cut spending where possible. Remember that vacations should be postponed, given travel restrictions. Most restaurants are going to close, so try to shop at the grocery store instead. Finally, consider asking the bank to put a stop on mortgage payments. These are all great ways to save immediate money.

Save What Is Left

Finally, after figuring out all of the expenses, subtract this from the expected monthly income over the next few months. Whatever is left should be socked away into an emergency fund. It is critical to have this fund put away in case a repair is needed on the house or if someone gets laid off. 

Other Ideas To Consider

Finally, while this is not advisable, people might be able to cut retirement contributions to help with the emergency fund. It is better to save for the future when possible, but this can help people save money in a pinch, if needed. Take these tips to heart over the next few months and build an emergency fund.

3 Signs You’re Not Ready To Buy A Home

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3 Signs You're Not Ready To Buy A HomeThose who are looking at buying a home need to think about whether or not they are truly ready for this responsibility. When someone takes out a mortgage, this is frequently the largest loan someone will ever apply for in their life. Furthermore, owning a home also means homeowners insurance, real estate taxes, home maintenance, and home repairs.

There are a few signs that signal someone is not ready to buy a home. Identifying and rectifying these situations ahead of time will ensure that someone is the right position to take on the responsibility of homeownership.

Too Much Debt

One of the biggest signs that someone is not ready is own a home is too much personal debt. A mortgage is another (albeit different) form of debt. It someone already has a large amount of debt, they might not be able to handle an additional loan.

Some forms of debt that people might have include student loans, credit card debt, and car loans. Cutting down this debt before applying for a mortgage will make someone more competitive when applying for a mortgage.

Not Enough Savings

In addition to reducing debt, it is important to build up savings as well. First, people need to have enough money for the down payment. It is highly unlikely that a lender is going to hand out a loan to someone who is not able (or willing) to put up any of their own capital.

In addition, savings are important for potential home maintenance or home repair costs. Owning a house is a major financial investment. People should be able to put up some of their own money when buying a home.

Location Is Not Determined

People move from place to place. It is a reality of school, employment, relationships, and more. At the same time, it is hard for someone to buy a house they don’t know where they want to live.

While this might seem obvious, this factor is frequently overlooked. Think about where “home” is going to be before deciding to buy a home. Consider the overall cost of living in that location, the potential commute, and the potential HOA.

Buying A Home

It is important for everyone to think about whether or not they are truly ready to buy a home before applying for a mortgage. This is a significant responsibility that should not be taken lightly.

Talk with a home mortgage professional to discuss the options that will get you on the path to homeownership. Although it may take time and planning, buying a home is absolutely possible for everyone. When you are ready, your trusted real estate professional can help you find your new home.