Recently, I received my new mortgage payment coupon booklet that contained an analysis of my past year's escrow. This escrow is collected each month with my mortgage and is used to cover the yearly property tax bill and annual homeowner's insurance premium. There was a statement I read, but did not pay much attention to that said if the remaining money from the 2008 escrow account totaled more than $50, I would receive a refund check.
A couple weeks later, I received a check in the mail from the company that holds my mortgage for $60.11, the amount that was listed as remaining in my escrow account. Aside from being an annoying way to eliminate the excess money (and wasting paper and money to send to me), I had no qualms figuring out how to use the money: add it to my mortgage payment.
Why do I consider this an annoying answer to the solution of excess escrow funds? Why not have the mortgage company automatically add the money to my principle and just send me a statement? You see, I do not have immediate access to my credit union where I live and there is not a branch near my work. This means I have to take extra time and go to the bank to deposit the check. I really like electronic deposits and transfers to get my money to where I want without difficulty, and ATMs are ubiquitious enough I can easily find one to withdraw cash quickly. So an extra trip to my credit union to deposit the check so I can send the money back to the mortgage company seems quite silly. Efficiency at its best!
Still, I am grateful for paying more to my principle (I am only in the third year of a 30-year mortgage), and this was the best use of the money I consider part of my mortgage anyway. Since I used all my tax refund money for my Roth IRA, I was not able to give my mortgage a little boost earlier this year and am not willing to commit more money to such an illiquid account.
Showing posts with label mortgage. Show all posts
Showing posts with label mortgage. Show all posts
Monday, March 30, 2009
Sunday, June 1, 2008
Analyzing my net worth for May 2008
Yes, it is the beginning of a new month and thus, I reflect on the finances of the previous one. When I did my final calculation, I was surprised at the gain during May. I had a net worth gain of 2.61%, the highest I had seen since February 2008. How did I fare so much better than the last few months?
Economic stimulus e-check
As a single person with my AGI, I received $600 as an electronic deposit. Most of it ($500) was used to open a T. Rowe Price international index fund as part of my Roth IRA. Another $50 was deposited in my car savings fund and the remainder is available for spending. This was unexpected money I used to further my retirement fund and future car purchase. Both of these allocations and the currently unspent $50 all add to the amount of money on hand that are part of my assets.
Quarterly or annual statements
Since some of my retirement funds are in a rollover IRA or a pension plan, I receive the statements either quarterly or yearly. This means the change affects my net worth calculation only occasionally. Since I received my statements for the IRA and pension plan last month, the greatest effect is when the number changes. For the next few months, the IRA numbers will be unchanged and minimize any negative effect on my bottom line. The pension plan, while a positive increase, will only be reported once a year.
This is also true for my home assessment. This changes only once a year and is the number I use as the value of my home. The decrease had the greatest effect last month and will not change in my calculations until April 2009.
Cash reserves
The money I have in checking, savings, and CDs did decrease as I paid for some replacement windows and other house-related items. However, despite this decrease in available money, I did come out with an overall increase in my assets (0.11%). A greater share of my savings is in higher yielding savings accounts and CDs so I receive 2.5-3% APY versus 0.5% APY. I have a one-year CD at a 5.25% rate that is due in June, the last of the good rates we enjoyed such a short time ago.
Retirement accounts
Excluding the assessed worth of my house, my retirement funds have the most money in my portfolio. With my increased contributions to my Roth IRA, the extra $500 contribution from my stimulus check and the continued 10% contribution to my 401(k) plus modest market gains, I was able to counteract the decrease in my cash position.
I had a net worth gain of ~$2,400 from the month before, surprising despite my small increase in asset value. I continue to plug away at my mortgage with a small $42 additional payment to principle, and this will make incremental decreases to my mortgage. If these gains and contributions keep up, I will likely meet my $100,000 net worth goal before December 31, 2008.
Economic stimulus e-check
As a single person with my AGI, I received $600 as an electronic deposit. Most of it ($500) was used to open a T. Rowe Price international index fund as part of my Roth IRA. Another $50 was deposited in my car savings fund and the remainder is available for spending. This was unexpected money I used to further my retirement fund and future car purchase. Both of these allocations and the currently unspent $50 all add to the amount of money on hand that are part of my assets.
Quarterly or annual statements
Since some of my retirement funds are in a rollover IRA or a pension plan, I receive the statements either quarterly or yearly. This means the change affects my net worth calculation only occasionally. Since I received my statements for the IRA and pension plan last month, the greatest effect is when the number changes. For the next few months, the IRA numbers will be unchanged and minimize any negative effect on my bottom line. The pension plan, while a positive increase, will only be reported once a year.
This is also true for my home assessment. This changes only once a year and is the number I use as the value of my home. The decrease had the greatest effect last month and will not change in my calculations until April 2009.
Cash reserves
The money I have in checking, savings, and CDs did decrease as I paid for some replacement windows and other house-related items. However, despite this decrease in available money, I did come out with an overall increase in my assets (0.11%). A greater share of my savings is in higher yielding savings accounts and CDs so I receive 2.5-3% APY versus 0.5% APY. I have a one-year CD at a 5.25% rate that is due in June, the last of the good rates we enjoyed such a short time ago.
Retirement accounts
Excluding the assessed worth of my house, my retirement funds have the most money in my portfolio. With my increased contributions to my Roth IRA, the extra $500 contribution from my stimulus check and the continued 10% contribution to my 401(k) plus modest market gains, I was able to counteract the decrease in my cash position.
I had a net worth gain of ~$2,400 from the month before, surprising despite my small increase in asset value. I continue to plug away at my mortgage with a small $42 additional payment to principle, and this will make incremental decreases to my mortgage. If these gains and contributions keep up, I will likely meet my $100,000 net worth goal before December 31, 2008.
Saturday, April 5, 2008
Analysis of my net worth for March 2008
I was surprised at my numbers in March. The volatility of the stock market made me fear I would have a losing month overall since a good portion of my net worth is determined by the mutual funds in which I have my retirement invested. In the end, my net worth increased 1.16%. This is not a dramatic increase and certainly not as good as February, but a few factors helped me stay positive in March.
Cashed out term life insurance
I have term life insurance through work for three times my salary so I thought having a separate policy was unnecessary. Other than my cats, I have no dependents so the need for this insurance is reduced. The future may show this was a poor choice, but I think investing in my Roth IRA was important. As a result, the cash value allowed me to fully fund my Roth IRA for 2007 and still had money to contribute in 2008. My purchases in the index fund that comprises my Roth IRA were also made when the market had some of its worst days in March. I did not time the market at all, but knew that I would get good value over the long term with the mostly downward volatility the stock market has been experiencing.
Gained some value in the stock market by the end of the month
My 401(k) has not been performing very well and while March was not an exception, I did come out higher than I started the month. A gain of $800 does not seem much, but since it is more than my contribution for that month, I will take it. This is where I hope the dollar-cost averaging will show its strength in a few years when I imagine the market will have gained value relative to my purchase price.
Added a few extra dollars toward my mortgage principle
My escrow fell from the year before so more of the money I allocated for paying my mortgage goes to principle. I doubt I will contribute a whole extra payment over the year, but I am happy another $7 that will decrease my principle. Again, I am starting my third year of a 30-year mortgage so interest is quite a bit of my payment, but every dollar counts, working to decrease my debt. I will take an extra 0.01% more of my mortgage paid!
Received interest income
Despite the lower rates even on the high-yield savings accounts, I still have interest compounding on top of interest and the additional contributions. This interest is money I did not have before and I will take it! It is a small bit of passive income and at today's inflation and interest rates, not keeping me above inflation, but is slowing my money's erosion.
April will be an interesting month. I have a large car repair bill and the purchase of replacement windows that will draw down my cash reserves. While the windows will add value to my home, it is no longer liquid and involves a long-term investment that I may not fully realize. Since the no-spending vow is a bit iffy right now, I do not know if the extra saved money will be exist or not. Stay tuned for next month's analysis!
Cashed out term life insurance
I have term life insurance through work for three times my salary so I thought having a separate policy was unnecessary. Other than my cats, I have no dependents so the need for this insurance is reduced. The future may show this was a poor choice, but I think investing in my Roth IRA was important. As a result, the cash value allowed me to fully fund my Roth IRA for 2007 and still had money to contribute in 2008. My purchases in the index fund that comprises my Roth IRA were also made when the market had some of its worst days in March. I did not time the market at all, but knew that I would get good value over the long term with the mostly downward volatility the stock market has been experiencing.
Gained some value in the stock market by the end of the month
My 401(k) has not been performing very well and while March was not an exception, I did come out higher than I started the month. A gain of $800 does not seem much, but since it is more than my contribution for that month, I will take it. This is where I hope the dollar-cost averaging will show its strength in a few years when I imagine the market will have gained value relative to my purchase price.
Added a few extra dollars toward my mortgage principle
My escrow fell from the year before so more of the money I allocated for paying my mortgage goes to principle. I doubt I will contribute a whole extra payment over the year, but I am happy another $7 that will decrease my principle. Again, I am starting my third year of a 30-year mortgage so interest is quite a bit of my payment, but every dollar counts, working to decrease my debt. I will take an extra 0.01% more of my mortgage paid!
Received interest income
Despite the lower rates even on the high-yield savings accounts, I still have interest compounding on top of interest and the additional contributions. This interest is money I did not have before and I will take it! It is a small bit of passive income and at today's inflation and interest rates, not keeping me above inflation, but is slowing my money's erosion.
April will be an interesting month. I have a large car repair bill and the purchase of replacement windows that will draw down my cash reserves. While the windows will add value to my home, it is no longer liquid and involves a long-term investment that I may not fully realize. Since the no-spending vow is a bit iffy right now, I do not know if the extra saved money will be exist or not. Stay tuned for next month's analysis!
Thursday, March 6, 2008
Considering a roommate
I sat down during my convalescence and considered my financial situation. I am good financial shape with a decent total of liquid assets, nearly maxing my Roth IRA, keeping up with my mortgage, paying off my credit card bill immediately and keeping within my spending plan. However, there does not seem to be a lot of room to save more money. I could eat out even less, not spend money on clothing, not spend any money on entertainment and end my nearly nine-year relationship with my stylist, but these moves would make me feel deprived. I like having lunch with a friend once a week. I like having the option of saying "Damnit! I am tired of this lunch!" and buying something else. I could give up some entertainment funding, but to let my wonderful stylist go? I do not think so!
So, with a vow to try not spending for one month on items other than necessities, I looked for other ways to save. I could cancel my cell phone contract but I would get charged a fee. I would have to explore this topic more deeply, but I do not use my phone that often so I am considering when my contract is up to get a prepaid cell phone plan. That would save me about $20 month and that is decent money.
I also decided to look at going to basic coverage on my car. It does not save me a lot to drop comprehensive coverage, but it is a modest savings. I did look around a bit but should more aggressively pursue alternative insurance providers. The one company I queried had no savings for me at all.
So then I came to getting a roommate. There is so much wrong with this idea aside from the possible monetary gain. I like my privacy, running from the bathroom to my bedroom without clothing, getting up when I want, going to bed when I want, silence when I want it and my space arranged how I want it. This is my home and I should be able to do what I want! How would I feel sharing my space? I worry that I would consider my roommate an invader. I would have to give up kitchen cabinet space, refrigerator space, bathroom space, closet space, items all at a premium. The room I would rent out is quite small and I am uncertain if anyone would want to share a two-bedroom, one bath half duplex.
In addition, how quiet would he or she be? Would they snore? Would they keep the TV after I go to bed? Would our schedules clash? Would I need to go to the bathroom while he or she is in it? What to do then? Is this hassle worthwhile? I would miss my freedom, my default sloppiness and the privacy that goes with living alone. However, weighing additional money and potential labor saving (I would give him or her a break on rent for lawn mowing or snow shoveling), I still come down on keeping my living situation as is. If the basement was refinished, I think I could deal with having someone in my home easier. I really need to change my mindset before having a roommate is possible.
Still, I am keeping it in the back of my mind because if I do get into a financial bind, I think a roommate would be quite useful to have. I am likely to revisit this topic again and may have more roommate-favorable results.
So, with a vow to try not spending for one month on items other than necessities, I looked for other ways to save. I could cancel my cell phone contract but I would get charged a fee. I would have to explore this topic more deeply, but I do not use my phone that often so I am considering when my contract is up to get a prepaid cell phone plan. That would save me about $20 month and that is decent money.
I also decided to look at going to basic coverage on my car. It does not save me a lot to drop comprehensive coverage, but it is a modest savings. I did look around a bit but should more aggressively pursue alternative insurance providers. The one company I queried had no savings for me at all.
So then I came to getting a roommate. There is so much wrong with this idea aside from the possible monetary gain. I like my privacy, running from the bathroom to my bedroom without clothing, getting up when I want, going to bed when I want, silence when I want it and my space arranged how I want it. This is my home and I should be able to do what I want! How would I feel sharing my space? I worry that I would consider my roommate an invader. I would have to give up kitchen cabinet space, refrigerator space, bathroom space, closet space, items all at a premium. The room I would rent out is quite small and I am uncertain if anyone would want to share a two-bedroom, one bath half duplex.
In addition, how quiet would he or she be? Would they snore? Would they keep the TV after I go to bed? Would our schedules clash? Would I need to go to the bathroom while he or she is in it? What to do then? Is this hassle worthwhile? I would miss my freedom, my default sloppiness and the privacy that goes with living alone. However, weighing additional money and potential labor saving (I would give him or her a break on rent for lawn mowing or snow shoveling), I still come down on keeping my living situation as is. If the basement was refinished, I think I could deal with having someone in my home easier. I really need to change my mindset before having a roommate is possible.
Still, I am keeping it in the back of my mind because if I do get into a financial bind, I think a roommate would be quite useful to have. I am likely to revisit this topic again and may have more roommate-favorable results.
Sunday, February 10, 2008
Reevaluating my fiscal policies
My mind has been preoccupied with fiscal matters. My recent health diagnosis has been a shock to my system and is motivation for getting my finances in order. In addition, I need to consider the next steps. That is, not only have a list of my savings, checking and retirement accounts, but ensure my beneficiaries are named and everything is organized in one location. Right now, a divided accordian file is my collection tool.
However, I am also thinking of more than the immediate future and this affects some of the fiscal choices I have made. What exactly has my mind been churning over?
My Roth IRA
While I indicated for my financial goals for 2008 that I would add $3,000 to the account this year, I may be able to add more. I plan to do my taxes today and therefore, will learn exactly how much I may have to pay to the feds and what I will get back from the state. Generally I do get a state refund and that was intended for my Roth IRA plus my monthly contributions. In addition, most of my tax rebate, slated to arrive May 2008, will also fund my Roth IRA.
However, as a single person, I do not need life insurance other than the policy through my workplace. My parents took out a term life insurance policy when I was young and I have been contributing to it for the last few years. I have decided to cash it out and will receive $1,800 from it. Depending on when I am mailed the check, I intend on adding this money as a 2007 Roth IRA contribution. I can do this as long as the money is added to my Roth IRA before taxes are due in 2008. This means more money in my account and I will consider either a more aggressive mutual fund or moving my money to Vanguard since it will meet the $3,000 threshold. I need to explore the returns and the fees between Vanguard and T. Rowe Price, my current Roth IRA custodian.
My found money account
I noted in my goals post that I wanted to keep adding money to this fund to open a nonretirement Vanguard account. Since my financial advisor encouraged me to max out my Roth IRA before considering such an account, I will continue to add to this account but not earmark it for risky stock investments. I have no specific goal for the Vanguard investment other than I wanted to create an account where I could potentially have greater returns than my online savings accounts. However, I am considering that this money might go toward the purchase of my next computer. My technology is more than adequate right now, but I might feel differently in a year or two. Since it is an irregular savings account, I will also have to consider when would be the right time for me to buy and if it is important enough to use standard savings for the purchase
My mortgage
An earlier post about the Fed rate cuts had me musing that I would consider refinancing if the rate dropped to 5% for a 30-year mortgage. I have been reconsidering that position as I am not sure how long I would stay in my home. If I would be staying another four to five years, a refinance would likely make sense. I could not only recoup the cost of refinancing but also make a bit of headway into my mortgage. However, if I consider selling my house in two or three years, this would not be fiscally prudent. I am reconsidering for a number of reasons including this record-snowfall winter, wanting to be in the country, owning only half of a duplex and where my thoughts on what I want to do in my career take me. This will require additional thought on my part and I may end up refinancing regardless.
Early retirement
This is a thought I have considered and dismissed many times. I do not have the savings or investment portfolio for this. However, there is a part of me that is drawn to this idea, to being able to explore as I want without a 8-5 job pulling at me. The feasability study still has to be done and I would need to really bulk up my savings, but I am attracted to the idea and am more willing to explore what I might need to do to get to this point. This goal may be incompatible with my previous items but I will have to examine this more closely.
Alternative income streams
Right now, this income stream is only a few droplets. I have sold a few items I no longer need, but then I purchased a bike and that took away the gain. I have posted a few items to craigslist and if they do not sell there, they may only be charitable writeoffs. I have other items that I intend to sell on eBay, but am uncertain how much money I will make on those transactions. I have not sold anything on eBay for years so this will be interesting. I have another idea in the back of my mind, but this is the wrong time of year to consider offering my services. Other than selling my clutter, I am not sure how to generate additional income so this may be a difficult goal.
This is where my mind has been for the last week. A busy little place and I still need to explore and make some decisions.
However, I am also thinking of more than the immediate future and this affects some of the fiscal choices I have made. What exactly has my mind been churning over?
My Roth IRA
While I indicated for my financial goals for 2008 that I would add $3,000 to the account this year, I may be able to add more. I plan to do my taxes today and therefore, will learn exactly how much I may have to pay to the feds and what I will get back from the state. Generally I do get a state refund and that was intended for my Roth IRA plus my monthly contributions. In addition, most of my tax rebate, slated to arrive May 2008, will also fund my Roth IRA.
However, as a single person, I do not need life insurance other than the policy through my workplace. My parents took out a term life insurance policy when I was young and I have been contributing to it for the last few years. I have decided to cash it out and will receive $1,800 from it. Depending on when I am mailed the check, I intend on adding this money as a 2007 Roth IRA contribution. I can do this as long as the money is added to my Roth IRA before taxes are due in 2008. This means more money in my account and I will consider either a more aggressive mutual fund or moving my money to Vanguard since it will meet the $3,000 threshold. I need to explore the returns and the fees between Vanguard and T. Rowe Price, my current Roth IRA custodian.
My found money account
I noted in my goals post that I wanted to keep adding money to this fund to open a nonretirement Vanguard account. Since my financial advisor encouraged me to max out my Roth IRA before considering such an account, I will continue to add to this account but not earmark it for risky stock investments. I have no specific goal for the Vanguard investment other than I wanted to create an account where I could potentially have greater returns than my online savings accounts. However, I am considering that this money might go toward the purchase of my next computer. My technology is more than adequate right now, but I might feel differently in a year or two. Since it is an irregular savings account, I will also have to consider when would be the right time for me to buy and if it is important enough to use standard savings for the purchase
My mortgage
An earlier post about the Fed rate cuts had me musing that I would consider refinancing if the rate dropped to 5% for a 30-year mortgage. I have been reconsidering that position as I am not sure how long I would stay in my home. If I would be staying another four to five years, a refinance would likely make sense. I could not only recoup the cost of refinancing but also make a bit of headway into my mortgage. However, if I consider selling my house in two or three years, this would not be fiscally prudent. I am reconsidering for a number of reasons including this record-snowfall winter, wanting to be in the country, owning only half of a duplex and where my thoughts on what I want to do in my career take me. This will require additional thought on my part and I may end up refinancing regardless.
Early retirement
This is a thought I have considered and dismissed many times. I do not have the savings or investment portfolio for this. However, there is a part of me that is drawn to this idea, to being able to explore as I want without a 8-5 job pulling at me. The feasability study still has to be done and I would need to really bulk up my savings, but I am attracted to the idea and am more willing to explore what I might need to do to get to this point. This goal may be incompatible with my previous items but I will have to examine this more closely.
Alternative income streams
Right now, this income stream is only a few droplets. I have sold a few items I no longer need, but then I purchased a bike and that took away the gain. I have posted a few items to craigslist and if they do not sell there, they may only be charitable writeoffs. I have other items that I intend to sell on eBay, but am uncertain how much money I will make on those transactions. I have not sold anything on eBay for years so this will be interesting. I have another idea in the back of my mind, but this is the wrong time of year to consider offering my services. Other than selling my clutter, I am not sure how to generate additional income so this may be a difficult goal.
This is where my mind has been for the last week. A busy little place and I still need to explore and make some decisions.
Tuesday, January 29, 2008
The Fed rate cuts and my future fiscal policy
I am a saver and proud of it. However, with the Federal Reserve cutting rates by 0.75% and a projected 0.5% at the end of January when they meet, it has really dinged the savings rate in my accounts. My emergency savings are in high-yield savings accounts and CDs, rates that get dropped when the Fed cuts the overnight lending rate. I have some immediately liquid cash in a low-yield credit union savings and checking accounts (0.75% and 0.5% respectively, last time I looked but I am sure lower now) but that is it. I was happy to see my interest earnings from 2007 but 2008 does not look as promising.
However, mortgage rates have been on the decrease as well. My mortgage was locked in January 2006 and I ended up with a 6% interest rate for 30 years. I have been seeing rates around 5.5% for a 30 year mortgage and even lower if I want to consider a 20 or 15 year mortgage. Refinancing is a strong possibility for me this year. While there are closing costs, I am strongly leaning toward refinancing my home when 30 year mortgages fall to 5% APR. That may be a while or may never come.
I have been looking at 15 and 20 year mortgages but I do not think I will apply for one when I refinance. Why? The payments will increase enough that I will feel the pinch. Right not, I pay enough to feel comfortable and afford an extra $35 toward principle. Being in the start of the third year of my mortgage, this amount will not go far, but it is a balance between paying more on my mortgage and putting money in savings. I think increasing my mortgage payment (which does include PMI, property taxes and escrow) even by $100 will be uncomfortable. I could list lots of reasons for it and maybe looking more closely at my budget, I could fit it in with less difficulty than I anticipate. However, this means more of my income is locked into a fixed expense and although I have a savings cushion, the necessity to fix a furnace and replace a water heater plus several vet bills and that cushion would be diminished. If I had to get a new car on top of the increased mortgage and decreased savings account, I could not afford the auto loan payments.
Granted, the above is a worst case scenario, but as a single woman, I need to consider what the effect of my actions would be. Therefore, I need to carefully weigh a shorter-term mortgage and long-term savings against the possibilities of more immediate emergencies and the funds I would need to cover such instances. I was planning to refinance into another 30 year mortgage, but these other considerations did need to be measured to figure out what is my best path. A 25 year mortgage, if one can be found, might be a compromise between fewer years to pay and lower monthly payments. I will have to see what the future brings and how my plans for refinancing fit into it.
However, mortgage rates have been on the decrease as well. My mortgage was locked in January 2006 and I ended up with a 6% interest rate for 30 years. I have been seeing rates around 5.5% for a 30 year mortgage and even lower if I want to consider a 20 or 15 year mortgage. Refinancing is a strong possibility for me this year. While there are closing costs, I am strongly leaning toward refinancing my home when 30 year mortgages fall to 5% APR. That may be a while or may never come.
I have been looking at 15 and 20 year mortgages but I do not think I will apply for one when I refinance. Why? The payments will increase enough that I will feel the pinch. Right not, I pay enough to feel comfortable and afford an extra $35 toward principle. Being in the start of the third year of my mortgage, this amount will not go far, but it is a balance between paying more on my mortgage and putting money in savings. I think increasing my mortgage payment (which does include PMI, property taxes and escrow) even by $100 will be uncomfortable. I could list lots of reasons for it and maybe looking more closely at my budget, I could fit it in with less difficulty than I anticipate. However, this means more of my income is locked into a fixed expense and although I have a savings cushion, the necessity to fix a furnace and replace a water heater plus several vet bills and that cushion would be diminished. If I had to get a new car on top of the increased mortgage and decreased savings account, I could not afford the auto loan payments.
Granted, the above is a worst case scenario, but as a single woman, I need to consider what the effect of my actions would be. Therefore, I need to carefully weigh a shorter-term mortgage and long-term savings against the possibilities of more immediate emergencies and the funds I would need to cover such instances. I was planning to refinance into another 30 year mortgage, but these other considerations did need to be measured to figure out what is my best path. A 25 year mortgage, if one can be found, might be a compromise between fewer years to pay and lower monthly payments. I will have to see what the future brings and how my plans for refinancing fit into it.
Saturday, December 29, 2007
Finding the right house for you--part one
There are many lists on how to hunt for a house and how much house you can afford. I will take you through my experience that although atypical, helped land me a home that satisfied my budget, my requirements and my priorites.
I first attempted to look for a place to own in 2003, thinking that condos were the best fit for my budget. To learn more about the homebuying process, I attended a first-time homebuyers seminar hosted by my credit union. Using the information from the seminar, I meet with a credit union representative and received a prequalification for $135,000, a lot more than I imagined. I was looking at places around $100,000, contacting a realtor via e-mail and asking about condos in my price range. Then I just realized how overwhelming the amount of debt was and decided homeownership was not for me.
My second attempt at house hunting was driven by my untenable apartment situation. My downstairs neighbor had been replaced by a family that was up until the late hours of the night (usually past 11PM and many times even later) talking loudly, letting their small child run around (sometimes screaming) and just being insensitive to their neighbors. One time, I went downstairs to tell him to turn his television down and he had to turn it down before answering the door! The resident manager sent these insensitive neighbors letters notifying them of the complaints but I never noticed any behavioral changes.
Before my frustration boiled over, I did want to refresh my memory about the homebuying process. So I attended a free first-time homebuyers seminar hosted by my credit union. The seminar included presentations from a realtor, a home inspector and a credit union representative. The importance of a home inspection, the usefulness of a realtor and the variety of programs available for mortgages were among the topics covered. I attended this seminar in November 2005 and was struck by the graph the realtor showed. She said the market was switching to a buyer's market with more homes available, the graph reflecting the greater number of homes available versus buyers compared to even a year before. She also mentioned that November to January were off-season months for house buying. That piqued my interest because I knew I had a limited budget and wanted to minimize competition.
My next step was to learn if the purchase price I was considering was affordable and my financial situation healthy enough for a mortgage. Therefore, I met with one of my credit union's mortgage specialists and went through the mortgage preapproval process. The difference between a preapproval and a prequalification--a preapproval says the financial institution will lend the individual money; the prequalification says the individual is a good prospect for a mortgage. Your buying position is stronger if you are preapproved for a mortgage so I highly recommend having this in hand before looking at houses. The preapproval is good for at least three months so no need to get it renewed immediately. However, if you are just looking into the possibility of buy a home, a prequalification will give you some idea what a financial institution may lend you.
I had a particular payment in mind including taxes, escrow and PMI as I did not have a 20% downpayment. My purchase price and my monthly payment matched up well and there was a first-time home buyers program that would allow me to buy a home with a 3% downpayment. With my preapproval in hand, I approached my next step: finding a buyer's agent.
Part two of finding the right house for you covers how I chose my buyer's agent, what I wanted in a home and how the search started.
I first attempted to look for a place to own in 2003, thinking that condos were the best fit for my budget. To learn more about the homebuying process, I attended a first-time homebuyers seminar hosted by my credit union. Using the information from the seminar, I meet with a credit union representative and received a prequalification for $135,000, a lot more than I imagined. I was looking at places around $100,000, contacting a realtor via e-mail and asking about condos in my price range. Then I just realized how overwhelming the amount of debt was and decided homeownership was not for me.
My second attempt at house hunting was driven by my untenable apartment situation. My downstairs neighbor had been replaced by a family that was up until the late hours of the night (usually past 11PM and many times even later) talking loudly, letting their small child run around (sometimes screaming) and just being insensitive to their neighbors. One time, I went downstairs to tell him to turn his television down and he had to turn it down before answering the door! The resident manager sent these insensitive neighbors letters notifying them of the complaints but I never noticed any behavioral changes.
Before my frustration boiled over, I did want to refresh my memory about the homebuying process. So I attended a free first-time homebuyers seminar hosted by my credit union. The seminar included presentations from a realtor, a home inspector and a credit union representative. The importance of a home inspection, the usefulness of a realtor and the variety of programs available for mortgages were among the topics covered. I attended this seminar in November 2005 and was struck by the graph the realtor showed. She said the market was switching to a buyer's market with more homes available, the graph reflecting the greater number of homes available versus buyers compared to even a year before. She also mentioned that November to January were off-season months for house buying. That piqued my interest because I knew I had a limited budget and wanted to minimize competition.
My next step was to learn if the purchase price I was considering was affordable and my financial situation healthy enough for a mortgage. Therefore, I met with one of my credit union's mortgage specialists and went through the mortgage preapproval process. The difference between a preapproval and a prequalification--a preapproval says the financial institution will lend the individual money; the prequalification says the individual is a good prospect for a mortgage. Your buying position is stronger if you are preapproved for a mortgage so I highly recommend having this in hand before looking at houses. The preapproval is good for at least three months so no need to get it renewed immediately. However, if you are just looking into the possibility of buy a home, a prequalification will give you some idea what a financial institution may lend you.
I had a particular payment in mind including taxes, escrow and PMI as I did not have a 20% downpayment. My purchase price and my monthly payment matched up well and there was a first-time home buyers program that would allow me to buy a home with a 3% downpayment. With my preapproval in hand, I approached my next step: finding a buyer's agent.
Part two of finding the right house for you covers how I chose my buyer's agent, what I wanted in a home and how the search started.
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