financial planning Archives

March 1, 2024April 25, 2024

Core of the American Dream? Three-Fourths Call Buying a Home Goal #1

The U.S. population has all sorts of goals. But of all that we strive for in our lives, seems we place the highest priority on owning a home. In recent surveys, three-fourths of respondents said owning a home is “the leading component of the American dream.”

And yet, just about the same percentage of people say housing is too expensive to buy. With each year, it feels like fewer can afford to buy a home. It’s almost like buying a home is a wealthy person’s thing.

Homeownership is still the centerpiece of the American dream, but affordability issues such as high home prices, income that is too low or not being able to afford the down payment and closing costs are holding back nearly 3-in-4 aspiring homeowners.

—Greg McBride, chief financial analyst at Bankrate LLC

You said it, Greg.

February 23, 2024April 25, 2024

Do I Have to Pay Off My Student Loans Before Buying a Home?

This month, 150,000+ people received emails that say some of their student loan debt will be forgiven. The latest $1.2 billion worth of debt forgiveness is a ray of sunshine for many potential first-time homebuyers. It impacts a person’s access to mortgage loans, and therefore the ability to acquire property deeds.

But what about the student debt that the borrowers still have to pay? Some graduates pay off their loans, and must (or choose to) delay home buying to do that.

Others say: Forget waiting. If it’s possible, let’s buy a home today. Yes, having the student loan done and gone would be great — but there’s a lot to be said for putting a foot on the homeownership ladder now.

Each person has to do what’s best in their circumstances. But looking at some specific parts of this question can help readers come to their own sound decisions.

February 13, 2024April 25, 2024

All About DTI: How Much Debt Is Too Much If I Want to Buy a Home?

Receiving the deed to a home is a major milestone. Typically, it depends on an earlier milestone: the mortgage approval.

Apply for a mortgage, and lenders will consider your debt-to-income ratio (DTI). Why the DTI? Essentially, the lender wants to know how much of your earnings you spend, using credit. A low DTI suggests that you can comfortably make payments.

If your existing debt load is light, you’ll be able to borrow more and spend more on a home. But even if you’re not getting ready to buy a home right now, a lower debt-to-income ratio can unlock financial opportunities. This matters to every one of us.

Let’s see what goes into the ratio, and how to optimize your DTI.

January 29, 2024April 25, 2024

Multigenerational Homeownership: How the Deed Is Vested

Millions of U.S. households have multiple adult generations. How do they divide up the worth of their home and the upkeep that goes into it? Who pays the mortgage, insurance, and property taxes? What happens if an owner leaves the home, or passes away?

A lot comes down to good deed planning.

In this discussion of vesting a multigenerational home, we check out the intersections of people’s lives and deeds.

January 17, 2024April 26, 2024

You Can Quitclaim Your Home to a Loved One to Skip Probate Costs. Is It Worth It?

A quitclaim deed easily, quickly transfers your home’s title. You can use a quitclaim to give a home to someone else, with no expectation of a payment from the recipient. Some people use quitclaims to pass homes to their family members.

So, is this a good way to carry out your wishes yourself — a sort of early estate planning? Who needs their home going under a probate court’s supervision after they die, right? And who wants to pay huge fees to the county for the trouble?

Fair questions. But…

January 15, 2024April 25, 2024

Capital Gains: Were Profits on Your 2023 Home Sale EXEMPT? Head Form 1099-S Off at the Pass.

People who sold their homes in 2023, after living in them for a while and enjoying their low mortgage rates, have seen big gains in their property values. Fortunately, most of these gains won’t be taxed.

If you sold a home in 2023, your lender or broker may give you Form 1099-S. Federal law requires the party responsible for closing your deal (this could be an escrow agent or title company) to send these forms out, filled in with the closing date and proceeds of the sale.

Form 1099-S only needs to be sent to sellers who have taxable gains to report on their 2023 returns. Read on to find out why most home sellers won’t have to report their home sale to the IRS! (You still may choose to report the sale on your return, even if not required.)

December 18, 2023April 25, 2024

What Is “Subject-To” Home Buying? AKA: Taking Over the Mortgage Payments

Ever heard someone say they got a “subject-to” offer on their home? Or maybe you or someone you know is contacted with a subject-to offer. Maybe you saw a sign saying “We buy homes!” and wondered what’s going on.

Subject-to is a little-known strategy in the world of deed transactions. It comes in many forms. But the gist of it is this. If the seller does a “subject-to” sale, a buyer agrees to take ownership without having to sign mortgage documents. The purchase is “subject to” the current loan terms. And the buyer takes over the monthly payments.

So, now you’re wondering: Is this offer a good deal or a bad deal?

Let’s take a closer look.

December 8, 2023April 25, 2024

Get in Early, Make a High Down Payment: The Case for Assertive Home Buying

Have you noticed the big home finance companies desperately touting their low-down-payment deals?

You’d think no one wants to put 20% down anymore!

But interest rates are high, so keeping your debt high is a pricey thing to do. Therefore, it can make sense, for those who can swing it, to:

Put as much money down as comfortably possible, and…

Jump into the market, and get busy paying that monthly mortgage down, for an easier time in your retirement years.

Let’s explore the case for getting aggressive with an investment in a home.

November 27, 2023April 25, 2024

Does the TikTok Mortgage Hack Work?

Unless they’re lucky enough to assume someone else’s mortgage, current buyers are paying interest rates near 8%.

The media will report on this in all kinds of ways, because people want information and they want workarounds. But sometimes, in this click-driven media world, what’s packaged as news is really a distraction.

Let’s take a look at one of the latest things reporters have jumped on. It’s a TikTok account that posted a “hack” by which home buyers could cut their high mortgage rates for items they’ve wanted — like new cars or vacations.

Don’t believe it.

September 27, 2023April 25, 2024

Latest in House Hacking: The Influencer Edition

Back in 2020, it seemed to be everywhere. But we wondered just how persistent “house hacking” would be. Turns out the trend has stayed popular on real estate investment websites, in spite of (or maybe because of) a hard-to-crack housing market.

House hacking is really just about buying and renting out real estate. Yet it carries a special meaning for today’s hopeful home buyers. House hacking is boosted by online influencers whose followers are looking for creative ways to make money. Many of these followers hope to own real estate, too. In a digital world, reliable, concrete assets still matter.