Can I Buy A House When I’m Paying Off A Student Loan?

Q: I graduated college with a huge student loan debt. Since then, I’ve landed a decent jobfamily in front of home and I’ve been making steady payments toward paying down my loan. Is it possible for me to buy a house while I’m still paying off this debt?

A: Student loan debt that is managed responsibly should not hold you back from purchasing a house. There are several important factors to consider before making this choice and steps you’ll want to take before you start house-hunting.

Are you really ready to buy a house?

Before you take a look at your finances to determine if you can pull off this purchase, make sure this goal is in your best interest.

For starters, do you really know which city or neighborhood you’d like to live in at this point in your life? You are likely just starting out in your career and you might be better off with the flexibility that comes with renting. This way, if an excellent employment opportunity requiring a move arises, you’ll be free to accept it. You also may or may not have settled down in terms of a life partner. It generally does not pay to buy a home you’ll only live in for a few years before selling.

Next, think about the financial ramifications of this purchase. Are you really comfortable taking on another huge loan right now? Also, you will likely have to live with a bare-bones budget to meet your mortgage payments without neglecting your student loan debt. Do you really want to live with a no-frills spending plan in the foreseeable future?

Consider these questions carefully before making your decision.

Getting started: Boost your credit

Once you’ve determined if it would be beneficial for you to purchase a home right now, you’ll want to start improving your credit. Your credit wellness is the primary factor that home lenders consider when deciding if you’re eligible for a mortgage. It also figures into the rate they will offer you.

Here are some ways you can boost your credit score in the months leading up to your mortgage application:

  • Pay all your bills on time. Set up automatic payments to make it effortless.
  • Keep your credit utilization at less than 30 percent.
  • Pay your credit card bills in full, and before they’re due.
  • Don’t close old accounts or open new cards. You want your credit history to be lengthy, and both of these steps can significantly bring down your average.

How high is your DTI?

Lots of young college graduates think it’s impossible, or difficult, to obtain a mortgage when carrying student loan debt. In fact, a 2018 Student Loan Hero survey found that 43% of college-educated Americans with student loans postponed buying a home because of their student debt.

Lucky for you, there is very little truth to this concern. As mentioned above, a student loan that is handled well should not be a deterrent to getting a mortgage. To make sure you’re managing your student debt responsibly, set up automatic monthly payments on your loan so you never miss a payment or a due date.

In addition, make an effort to pay your student loan back as quickly as possible so it doesn’t reflect badly on your debt-to-income (DTI) ratio. Since taking out a mortgage means accepting more debt, lenders are careful to check that you aren’t carrying too much other debt. Ideally, your total debt payments, including your mortgage, should account for less than 36 percent of your income.

If your DTI is on the high side, you may not be eligible for a mortgage just yet. Consider refinancing your student loan to a loan with lower interest rates so you can pay it off sooner and then apply for a mortgage when your DTI improves. You can also look for ways to increase your income to tilt your debt ratio in your favor.

If you’re carrying any other debt, such as credit card debt, you’ll want to pay it down as quickly as possible as well.

Determine how much house you can afford

Before you start shopping for a home, find out how much house you can actually afford. The best way to obtain this information is by applying for a pre-approval from a home lender. This will tell you exactly how high you can go while showing sellers that you’re serious about buying.

If you won’t need your pre-approval just yet, but you’d like an idea of how much you’ll need to save for a down payment, you can use an online mortgage calculator to get your magic number.

Start saving for a down payment

Once you have your numbers worked out, you’ll need to save up for a down payment. Trim your budget in any way you can and look for side hustles to boost your income and make saving simple. Then, set up an automatic monthly transfer to your [credit_union] Savings Account so your money can grow while you sleep.

At this point, you may want to look into a local down-payment assistance program or a federal loan program, such as an FHA loan, which only requires a down payment of 3.5 percent. If you live in a rural area, you might qualify for a USDA loan, and if you’ve served in the military, you’re likely eligible for a VA loan.

When you’re ready to take this step forward, call, click, or stop by Destinations Credit Union to find out about our home loans. Our fantastic rates and hassle-free pre-approval process make a Destinations home loan an excellent choice!

Your Turn: Do you think it’s a good idea for college graduates to buy a house while they’re paying off a student loan? Share your thoughts with us in the comments.

SOURCES:
https://www.investopedia.com/personal-finance/save-down-payment-or-pay-student-loans/

https://www.cgsnet.org/ckfinder/userfiles/files/Denied-The-Impact-of-Student-Debt-on-the-Ability-to-Buy-a-House-8_14_12.pdf
https://studentloanhero.com/featured/student-loans-buying-house/
https://www.thebalance.com/rachel-morgan-cautero-4155623

How Long Does It Take To Become A Millionaire?

A million dollars. For many people, it’s the pinnacle of financial success. Fostacks of $100 bills forming stepsr others, it’s just the first stepping stone toward their outrageous dreams. But how long does it take to actually reach that goal? How much would you need to save on a monthly basis to net a cool million? And, most importantly, is achieving millionaire status even within the realm of possibility for most Americans?

If you’ve ever seriously considered these questions with the intention of implementing the answers in your own life, or you’re simply curious, we’ve got the inside scoop. We’ve crunched the numbers and worked out the math to help you find out exactly how long it takes to become a millionaire.

Who wants to be a millionaire?

Believe it or not, a million dollars is approximately four times the median net worth of retirement-aged people in the U.S. Even more incredible, a net worth of a million dollars is well within the reach of most Americans. You don’t need a six-digit salary to make it to the millionaires’ list; all you need is enough time and a sound investment strategy.

How long does it take?

There is no pat answer to this literal million-dollar question. The amount of time it will take you to become a millionaire depends on the following factors:

  1. The amount of money you invest
  2. The rate of return on your investment

The table provided here gives you an idea of how much you’d need to save, and how many years it would take you to reach $1 million, at various rates of return.

Monthly Savings Years to $1 million with 10% annual returns Years to $1 million with 8% annual returns Years to $1 million with 6% annual returns Years to $1 million with 4% annual returns
$100 44.5 52.9 65.7 88.6
$500 28.8 33.4 40.1 51
$1,000 22.4 25.5 29.9 36.7
$1,583 18.4 20.7 23.8 28.4
$2,083 16.2 18 20.4 23.9
$3,166 13 14.2 15.8 18
$4,166 11 12 13.2 16.8

The amounts used after the $1,000 mark in this table represent the numbers that single and married employees can contribute to their IRAs and 401(k) plans, with $4,166 representing the collective maximum monthly contributions for a married couple. Note: Maximum contributions, as of 2019, are set at $19,000 a year for 401(k)s and $6,000 a year for traditional IRAs.

If you already have a tidy sum saved up, and/or you’d like to see how long it would take you to reach a million by socking away a monthly amount that is different than any amounts shown on this table, you can input your own formula into this calculator to get the answers you need.

Getting started

Now that you’ve determined how long it will take you to reach your first million, don’t waste any time getting started. If you’ve made this your goal, the sooner you begin investing, the less money you’ll have to put away each month, and the sooner you’ll reach $1 million.

The easiest and most basic starting point for your million-dollar prize is to maximize your contributions to your employer’s 401(k) and your own IRAs and HSAs. Next, look into investing with a low-cost index fund, mutual fund or lifecycle fund.

If you can’t spare the money you’d need for investing enough funds to achieve your goal, take some time to review your budget and to plug up any expensive holes. Look for pricey habits you’d be better off giving up, subscriptions you can do without and entertainment costs you can trim without feeling the pinch. It might not be easy to make all those changes, but with a million-dollar finish line in sight, you should have all the motivation you need to start living a financially responsible life today.

Two neglected factors

One crucial factor most people forget about when trying to invest their way toward a million dollars is the rule of inflation. Simply put, a million dollars today does not have the same value as a million dollars 30 years from now. When you adjust for inflation at 3 percent a year, $1 million in 2020 would need to grow to $2,427,262 to have the same purchasing power in 2050. For this reason, you may want to tweak the amount you invest as a way of accounting for inflation. This way, you can be sure you have a true $1 million at the end of your investment timeline.

Another point that is often overlooked is the fact that no one can accurately predict the future. There’s no way to know what life events you’ll experience over the next three decades. Some of those can significantly affect your finances in either direction, such as windfalls, expensive medical emergencies, market crashes and the like. It may end up taking you a lot less time than you’d anticipated to reach $1 million, or you may never get there at all.

Are you ready to start investing your way toward one million dollars? Speak to a representative at [credit_union] today to discuss our investment and savings products, as well as get some beginner investment advice. You can be a millionaire!

Your Turn: Do you dream of being a millionaire or did that goal never make it on to your bucket list? Share your thoughts with us in the comments.

SOURCES:
https://www.fool.com/amp/retirement/2019/07/14/how-long-does-it-take-to-become-a-millionaire.aspx

https://www.moneyhelpcenter.com/how-close-are-you-to-being-a-millionaire/
https://www.daveramsey.com/blog/how-to-become-a-millionaire
https://www.financialsamurai.com/how-long-does-it-take-to-become-a-millionaire/
https://www.cnbc.com/amp/2017/05/19/how-long-it-will-take-you-to-become-a-millionaire.html

All You Need To Know About Applying For FEMA

Q: I live in a coastal area that can see massive amounts of damage from storms and man viewing damage to his houseflooding each summer and early fall. I’d love to get government assistance to help cover some of the repair costs, but I don’t know if I qualify for funding. How do I apply for FEMA?

A: With the summer storm season at its peak, homes across the country are standing up to hurricanes, tornadoes, flooding and more. Repairing the damages caused by these natural disasters can be expensive, but you don’t necessarily have to go it alone. The FEMA application, approval and fund-granting process may not be timely, but it’s not as complicated as you might think. Plus, the funds you may qualify for will be well worth the wait.

To help you out, we’ve broken down the process and answered some frequently asked questions about FEMA. Read on for all you need to know about federal disaster aid.

How can FEMA help me through a disaster?

FEMA assistance is intended to help make your damaged home safe, sanitary and secure for the residents who live there. Consequently, FEMA will not provide funding for any cosmetic repairs or for any non-essential living spaces, such as a family room, guest bedroom or rec room. The repair fund estimates are based on average material and labor costs.

You can apply for FEMA assistance with temporary housing costs, home repairs and other disaster-related expenses including medical bills, free meals or temporary SNAP benefits, funeral costs and assistance with reconnecting utilities and paying energy bills.

If you’re a small business owner and your business has sustained damage in the disaster, you may also want to apply for a long-term disaster loan from the U.S. Small Business Administration. If you can’t afford to repay this loan, you may be eligible for additional FEMA assistance, but you’ll only be approved after you’ve applied for the loan.

How do I apply for FEMA?

Before you get started on your FEMA application, you’ll need to file a claim with your homeowner’s insurance provider, as well as with any other relevant insurance policies you might have, such as flood insurance. You are required by law to file a claim even if you know the damage will not be covered by your policy. It’s important to note that FEMA is never intended to take the place of insurance or to restore damaged property to its prior condition. It is simply meant to help victims of natural disasters meet some critical expenses which are not covered elsewhere.

Once you’ve filed your insurance claim, you can register for FEMA online at DisasterAssistance.gov, through the FEMA mobile app, or by calling 800-621-3362.

When you register for FEMA, you’ll need to provide the following information:

  • Social Security number
  • Address of the location where damage occurred
  • Current address and phone number
  • Insurance information
  • Annual household income
  • Destination Credit Union‘s routing number and your checking or savings account number(s)
  • A description of all damages and losses to your property caused by the disaster

After you’ve completed your application, you will receive a FEMA claim number. Be sure to store this number in a safe place, as you will need it when you check your eligibility and your claim status.

What happens next?

As soon as 24 hours have passed since you’ve applied for assistance, you can check your application status on the FEMA website, using your claim number.

Within 10 days, you’ll be contacted by a FEMA-contracted housing inspector to schedule an appointment to assess the extent of damage. You’ll need to have an adult present for the inspection.. You’ll also have to show proof of household ownership, such as a deed or a title, as well as copies of your homeowner’s insurance policy. You don’t need to hold off on cleaning up the disaster, so long as you’ve snapped some pictures of what your house looked like before you started putting it back together. Show these photos to the inspector when they show up at your door.

How do I know if I qualify for assistance?

After the inspection is complete, it can take up to 10 days for your claim to be approved or denied. You can check your eligibility through any of these media:

  • Using the address lookup feature on DisasterAssistance.gov or through the FEMA mobile app
  • Visiting FEMA’s Individual Disaster Assistance page
  • Calling FEMA at 1-800-621-3362 (TTY:1-800-462-7585)

If your claim is approved and you qualify for a FEMA grant, you will receive the funding through a check or via direct deposit to your [credit_union] account. Be sure to only use the grant funds for eligible expenses. If you misuse the money, you may have to refund FEMA in the full amount and you may not be eligible for financial aid in the future. Hold onto your FEMA receipts for three years after a grant in case of an audit.

Your FEMA funds are tax-free and do not count as income.

If your claim was denied, you can appeal FEMA’s decision in writing. Be sure to include all relevant information, documents and photographs, as well as your original FEMA claim number.

Here’s wishing you a safe storm season from all of us here at Destinations Credit Union!

Your Turn: Have you ever received FEMA funding? Tell us about it in the comments.

SOURCES:
https://www.fema.gov/news-release/2018/05/08/4363/apply-now-federal-disaster-assistance

https://www.usa.gov/disaster-financial-help
https://cashmoneylife.com/how-to-file-a-fema-assistance-reimbursement-claim/

Should I Go Solar?

Q: My summertime electric bills are sky-high. For this reason, I’m really thinking aboutsolar panel installation on roof having solar panels installed on my roof. I figure it’s gotta help me save on energy costs, but I hear they can be super-expensive. Should I go solar?

A: Solar panels are popping up on roofs all across the country. This year, with a 30-percent federal tax credit on solar panels extended until the end of 2019, solar panel installation is especially popular. It’s also incredibly effective: A solar panel system can lower a three-digit energy bill to less than $10.

But, are they worth the price? Let’s take a closer look at the cost-effectiveness of solar panels and highlight some important questions that will help you determine whether a solar energy system is the right choice for your home.

The dollars and cents of going solar

Most residential homes will need a five-kilowatt solar panel system for meeting their energy needs. According to the Center for Sustainable Energy, this will cost homeowners between $15,000 to $25,000, or $10,500 to $17,500 after the federal tax credit.

That’s a whole lot of money! Let’s take a look at four ways you can pay for your solar panel system:

  1. Cash. If you can afford it, paying for your panels upfront will bring you the biggest return on your investment since, after the initial startup fees, your panels likely won’t cost you a penny. Depending on your system and your general energy consumption, your solar panels can reduce your electric bill by 70 to 100 percent. This means most systems will pay for themselves in five to seven years.
  2. Lease agreement. Solar leasing is available in about half of the country. Like a car lease agreement, you’ll pay a monthly rent instead of an upfront fee for your panels. The leasing company will then install your panels and collect the federal tax credit, as well as any government incentives available in your state, on your behalf.

    Leasing solar panels is generally not recommended for several reasons. For one, after the lease agreement is over, the company will either remove the panels or charge you full price for the privilege if you want to keep them. You also may end up saving less on your energy costs than you assumed since many leases contain an escalator clause, which increases lease payments by 3 percent a year. Finally, a leased solar panel system can scare off potential homebuyers should you decide to sell your house before the lease is up.

  3. Solar loan. If you’d rather not lease your panels but you don’t have the cash available to pay for them upfront, you can take out a loan created just for the purpose of funding this purchase. A secured solar loan will use your home as collateral and offer tax-deductible interest, while an unsecured solar loan will likely have higher interest rates. Prepare to pay high origination fees with any kind of solar loan as well.
  4. Home Equity Loan or Home Equity Line of Credit (HELOC). Excluding cash, the most financially responsible way to finance your solar panel purchase is through a loan or a line of credit taken out against your home’s value. Speak to a Loan Officer at Destinations Credit Union to learn about the low startup costs and interest rates on our home equity lines of credit. Interest is often tax-deductible (talk with your tax professional), and the funds you need can be available to you in very little time.

Are solar panels for you?

Ask yourself these questions before you make a decision:

  1. Which way does my roof slant? In the United States, south-facing roofs are the best recipients for solar energy. Next up is west-facing, and then east-facing roofs. North-facing roofs are the least desirable for solar.
  2. How much sunlight does my roof get each day? Are there obstructions, like neighboring homes, trees or hills that block the sun from reaching your roof? It’s best for sunlight to hit your panels for a minimum of five hours a day.
  3. How large is my roof? An average residential solar system will need 20 panels to receive sufficient sunlight, which comes to roughly 500 square feet of roof space.
  4. What type of roofing do I have? The cheapest and easiest solar panel installations work on roofs made of asphalt shingles or corrugated metal.
  5. How old is my roof? It only makes sense to install your panels on a roof that has many more years of life left. Otherwise, you’ll need to pay to have the panels removed and then reinstalled when you replace your roof. Similarly, it’s not worth installing panels if you plan on moving out of your home within the next decade or so.
  6. How expensive is my electricity? The higher your local electricity rates, the more cost-effective your solar panels will be. You can determine the rate you pay per kilowatt hour by looking at your most recent energy bill.
  7. Are there any government incentives in my state? Aside from the  federal tax credit mentioned above, many states offer their own incentives for going solar. You can check for any available state credits on the  database of state incentives for renewables and efficiency.

The bottom line

Should you go solar? At the end of the day, it’s your call. If you can afford to pay for the panels or take out a HELOC to help fund the purchase, and all other factors are in your favor, you may want to consider getting solar panels. Especially consider it while the federal tax credit is still active.

However, if you don’t think you can afford another monthly payment and you don’t believe solar panels would be in your best interest, you can find other ways to cut back on your energy costs without going solar.

Your Turn: Is your home solar-powered? Tell us what drove this decision and how your solar panels are working out for you in the comments.

SOURCES:
https://www.washingtonpost.com/lifestyle/home/considering-getting-solar-panels-here-are-the-right-questions-to-ask/2018/03/09/3190c71a-20c0-11e8-94da-ebf9d112159c_story.html%3FoutputType%3Damp

https://www.nerdwallet.com/blog/finance/save-money-putting-solar-panels-roof/
https://www.tdworld.com/commentaries/5-reasons-why-i-don-t-have-solar-panels-my-roofyet
https://www.consumerreports.org/energy-saving/real-cost-of-leasing-vs-buying-solar-panels

Beware Emergency Scams!

“Grandma? Is that you?”elderly woman with adult grandchildren

“What’s the matter, honey?”

“Grandma, you gotta help me! They’re going to arrest me if I don’t pay the fine – and I lost my wallet! I don’t have a penny on me or any ID. Can you wire me some money?”

Does this sound like a phone call that can really tug at your heartstrings? It’s actually more like a diabolical plot by devious scammers. There’s no emergency, no imminent arrest and no lost wallet. In fact, it isn’t even your grandchild on the line; you’re speaking to a criminal who wants to get their hands on your money.

Family emergency scams, often referred to as “grandparent scams,” are some of the most nefarious around. They prey on the elderly and take advantage of the natural affection a grandparent has for their grandchild. They’re usually pulled off in the guise of a frantic phone call, though they sometimes show up as an urgent email, text, or social media post using the same panicky message.

Don’t be the next victim of this ruse! Read on to learn how to identify an emergency scam and what to do if you’ve been victimized.

3 ways to spot an emergency scam:

  1. The caller will insist upon absolute secrecy

Once your “grandchild” has had their say, the scammer will then take the phone, impersonating an authority figure who is out to make the arrest and demanding that payment be made immediately. They’ll stress the importance of keeping the entire business hush-hush so nobody gets hurt. But, of course, the real reason behind their need for secrecy is to keep you from doing too much digging and identifying the scam for what it is. Any true law enforcement officer would have no request for such secrecy.

  1. The “authority figure” will only accept certain means of payment

If you ever receive a phone call insisting that you wire money, send a prepaid debit card, cashier’s check, or certified check in return for helping your grandchild from a distressing situation, you can be certain it’s a scam. Criminals love these payment methods because they provide the victim with very little recourse once they’ve discovered the scam.

  1. Your “grandchild” does not know basic information about themselves or family

It’s hard not to be duped into helping out your grandchild when they sound so stressed on the phone. It can also be hard to recognize your grandchild’s voice over a phone that has iffy reception, or from an overseas phone call if your grandchild is abroad. To make it even more complicated, scammers will use any information they can find about your grandchild’s life to appear legitimate. If the scam is carried out through email, they may even hack your grandchild’s email account so their missive appears to be coming directly from your grandchild.

If you ever receive a call or an email like the one described above, simply ask the caller about some personal details that a stranger would not be able to scrape off of your grandchild’s social media accounts. Ask about specific family memories or even jokes that will immediately let you know who you’re really dealing with.

If you’ve been scammed

If you’ve gotten a frantic phone call from your grandchild and you believe it to be true, don’t react just yet. You’ll be urged to act quickly, but take a minute to call your grandchild on your own to verify his or her whereabouts. You can also call the grandchild’s parents to ask where they might be at this time. You may be surprised to learn that your grandchild is safe at home!

If you’ve fallen for the scam and you’ve only recognized the ruse after you’ve sent your money, you may still be able to reclaim some or all of your funds by reporting the scam to the Federal Trade Commission at ftc.gov or by calling 1-877-FTC-HELP. Even if you can’t reclaim your lost funds, you’ll be doing your part to help the authorities put those crooks behind bars.

Grandparenting is a wonderful experience. Don’t let scammers abuse your relationship with your grandchild by pulling the wool over your eyes. Stay one step ahead of them by being alert and knowing how to spot these scams. Show them that no one messes with grandma!

Your Turn: Have you been targeted by an emergency scam? Tell us all about it in the comments.

SOURCES:
https://www.consumer.ftc.gov/blog/2018/07/scammers-create-fake-emergencies-get-your-money

https://www.consumer.ftc.gov/articles/0204-family-emergency-scams
https://money.usnews.com/money/personal-finance/family-finance/articles/most-common-phone-scams