My home buying story: How VA loans helped this service member buy a home

    Name: Chris V. Year: 2004 City: Kapolei Occupation: Army Age: 21 Salary: $20,000 + $1,300 a month housing allowance Home Price: $160,000 Chris and his wife, Nichole, had only been married for a couple of years when they bought their first home in 2004. Like most young couples, they didn’t have enough income for a giant mortgage or […]

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Popular Housing Markets During the Pandemic

There’s something weird happening with the real estate markets today. Normally in a recession, demand for rentals goes up while demand for houses goes down. But if there’s anything 2020 has taught us, it’s that everything is turned on its head right now.  Instead, we’re seeing an interesting trend: despite the ongoing pandemic, home-buying is […]

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How to Get Approved for Credit in a Financial Downturn

In a recession it’s common for many people to rely on credit cards and loans to balance their finances. It’s the ultimate catch-22 since, during a recession, these financial products can be even harder to qualify for. This holds true, according to historical data from the Federal Reserve Bank of St. Louis. It found that […]

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Best Advice on Buying or Selling a Home During the Coronavirus Crisis

The coronavirus pandemic has made the logistics of buying and selling a home and moving more complicated, especially in hard-hit cities and communities. According to the National Association of Realtors, the number of homes for sale across the US continues to decline. Additionally, fewer potential buyers can or want to tour properties and risk contracting COVID-19.

The economic downturn—due to coronavirus stay-at-home mandates and social distancing—has resulted in pros and cons for both home buyers and sellers. I’ll cover advice to help both parties make wise real estate decisions during this uncertain time.

4 tips for home buyers during the coronavirus crisis

Since the coronavirus crisis began, more than 26 million Americans have filed for federal and state unemployment benefits. If you’ve lost part or all of your job or business income, and you’re unsure when your finances will return to normal, buying a home may not be the best idea.

But if your income is stable, you have cash in the bank, and you’re confident that you can stay in a home for at least five years, buying a home now might be a smart move. Here are four tips if you’re in the market to upsize, downsize, or become a first-time homeowner.

1. Evaluate your current and future budget

Buying a home is a significant financial commitment, so understanding how much you can afford is essential. If you’re at all worried about getting laid off or the future of your business, buying a home that’s under your budget is wise.

In addition to your mortgage payment, homeowners must cover many other expenses, including property taxes, home insurance, applicable association fees, and ongoing maintenance. Take a hard look at your income, expenses, and savings to make sure you have enough cash for closing and to keep a healthy emergency fund.

Take a hard look at your income, expenses, and savings to make sure you have enough cash for closing and to keep a healthy emergency fund.

Here are some ways to crunch your budget numbers:

  • Down payment: Depending on a home’s purchase price, your credit, and your lender, the required mortgage down payment could range from 3% to 10% of the purchase price.
  • Closing cash: At the closing table, you’ll need to pay the down payment plus additional expenses, which vary depending on location. They typically include fees for a home inspector, surveyor, property appraiser, credit check, loan underwriting, and homeowners insurance. The total could add up to around 2% to 5% of a home’s purchase price.
  • Monthly housing payment: Unless you have a high amount of debt, consider spending a maximum of 20% to 25% of your after-tax income for a home. It includes the mortgage principal, interest, taxes, and insurance—known as PITI.
  • Emergency savings: Keep a minimum of six months’ worth of living expenses on hand. This safety net will keep you safe from unexpected expenses or the loss of job or business income.
  • Maintenance reserve: Have cash ready for ongoing repairs, such as fixing a roof leak, replacing a heating or cooling system, or needing a new refrigerator. A good rule of thumb is to save 1% to 3% of your home’s value for annual maintenance.

2. Get preapproved for a mortgage

Before spending too much time or mental energy searching for a home, make sure you qualify for a desirable mortgage. The amount you can borrow, the interest rate, and your downpayment depend on a variety of factors, including your credit and income stability.  

Due to the economic crisis, lenders are expecting delinquencies from existing customers who are facing hardships. To offset those risks, they’re tightening lending standards for new borrowers making it more challenging to qualify. You may need better credit and more down payment money than was typical before the pandemic.

Due to the economic crisis, lenders are tightening lending standards for new borrowers making it more challenging to qualify.

A mortgage preapproval is a document that outlines how much a lender will allow you to borrow, at what rate, and for how long. It’s a critical tool to know the price range of homes you should be shopping for. Additionally, a preapproval can carry a lot of weight with a potential seller who may be evaluating multiple offers and needs to close quickly.

Remember that you still need emergency money in the bank after buying a home. The fact is, you need even higher amounts of cash on hand for a maintenance reserve. Also, consider other expenses such as moving and furnishing a new place, which can really add up.

3. Use technology to research and tour homes virtually

Many digital tools allow you to research potential homes and stay safe. Here are some ways you can find a new home from the safety and comfort of your existing one:

  • Video calls: Have a Zoom or Facetime call with potential real estate professionals or sellers. They can give you a virtual tour of the home and neighborhood and chat about other points of interest like schools, shopping, and public transportation.
  • Google Maps: Google’s street view allows you to see the features of a neighborhood and even walk it virtually. You can time your commute to work based on the time of day.
  • Neighborhood review sites: Check out the walkability, crime statistics, and school rankings using sites such as Walk Score, SpotCrime, Family Watchdog, AreaVibes, and GreatSchools.org.

Using a variety of resources, you should be able to narrow down your potential home choices significantly. If you can drive by properties, that will also help you know which ones you want to tour.

Once you have a mortgage preapproval and feel sure that you’re interested in buying a specific home or homes, inquire about getting physical access. If it’s vacant, an owner or real estate agent may be able to open it up and let you roam around with plenty of social distancing.

Home tour safety guidelines during social distancing may vary from state to state. Check with your real estate agent to get a better understanding of any requirements or limitations.

However, if the seller still lives in the property, they’ll likely want to make arrangements to be away or to stay outside while buyers tour their home. Be respectful of everyone’s desire to avoid the coronavirus by wearing masks, gloves, shoe coverings, and using hand sanitizer before going into a listing. Find out if anyone in the home has been sick or spent time with someone diagnosed with COVID-19. Likewise, disclose if you’ve been ill or exposed to the coronavirus.

4. Save money with a historically low mortgage rate

The rate for a 30-year fixed-rate mortgage is at a historic low and keeps going lower. According to mortgage rates on Bankrate.com, they fell to 3.55% from last week’s rate of 3.58%. If you want a 15-year fixed-rate loan, it could be as low as 3%. In many parts of the country, owning a home costs less per month than renting a similar property.

However, don’t wait too long to get a mortgage commitment if you’re a serious home buyer. Lenders are under enormous pressure due to a wave of potential defaults, forbearance requests, refinancing applications, and federal stimulus programs they may be processing and funding. As I mentioned, it’s only going to get more challenging to get a mortgage application through underwriting and approved.

Lower rates and monthly mortgage payments may allow you to afford a higher-priced home if your finances are in good shape.

But if you can lock in a low mortgage rate and get a property under contract, it can undoubtedly allow you to save money over the long run. Lower rates and monthly mortgage payments may allow you to afford a higher-priced home if your finances are in good shape.

In addition to low-rate mortgages, there may be bargains on the market, depending on where you want to live. If a seller is uncertain about their financial future, they may be willing to unload their property for a low price. Although many banks are offering forbearance programs, some homeowners may be feeling pressure to sell, giving buyers an advantage right now.

4 tips for home sellers during the coronavirus crisis

Selling a home anytime can be a hassle. But selling a property during a pandemic is probably something you’ve never thought about.

However, real estate closings are happening, so don’t think you can’t find a qualified buyer. Getting a deal may depend on creative marketing and finding a real estate agent who can help you find solutions to new challenges. Here are four tips to make your home attractive and safe for potential buyers.

1. Use technology to market your home

Creating virtual tours is critical to pique a buyer’s interest and reduce the number of strangers in your home. It’s never been easier to use a camera or smartphone to create videos of your home’s interior, exterior, amenities, and neighborhood. However, make sure the lighting is good and presents your home favorably.

You can upload videos to a variety of sites that buyers can access, such as a YouTube channel, Zillow, or Dropbox. If you have a real estate agent, they can include your video files in the multiple listing service (MLS) database and their company website. They may offer professional photographers and videographers as part of their listing services.

 

2. Vacate your home if possible

If you can move out of your home while it’s for sale, you may get more interest from buyers. Touring a vacant property may seem less risky to buyers and real estate agents. Plus, you won’t have to worry about people coming into your space that could be carrying the coronavirus.

If your mortgage lender offers forbearance, consider suspending your payments and using the money for a short-term rental.

If your mortgage lender offers forbearance, consider suspending your payments and using the money for a short-term rental. Getting distance between you and home buyers might be critical if you, or someone in your household, are elderly or have health conditions that make you vulnerable to COVID-19.

3. Be clear about how you’ll interact with buyers

If you can’t move out of your home, be clear about how you will protect yourself, agents, and potential buyers who want a tour. As the seller, you dictate the protocol, such as everyone must wear masks and sanitize their hands before entering.

Include information about measures you're willing to take, such as disinfecting high-touch surfaces and leaving doors and cabinets opens, so visitors don't need to touch anything. If you have hand sanitizer or personal protective gear to offer, that's a goodwill gesture that should make everyone feel more at ease.

Once you have a purchase agreement signed, you or your real estate agent will need to coordinate with other professionals, such as inspectors, appraisers, contractors, and surveyors. Depending on the buyer's lender, you should be able to complete a remote closing by mailing the original documents.

4. Be prepared for longer than normal marketing times

Since there are fewer buyers and many overwhelmed lenders, the average marketing time for homes across the country may be longer than usual. Being as creative and flexible as possible will increase the likelihood of signing a deal.

No one is sure what market value is right now, so buyers may be aggressive to find out how low you'll go.

If a buyer throws out a lowball offer, don't let it offend you. Carefully consider what your bottom line is and make an appropriate counteroffer. No one is sure what market value is right now, so buyers may be aggressive to find out how low you'll go.

While the fear of the coronavirus and a looming recession may make it more challenging to sell your home, remember that the lending environment is favorable. For buyers who aren't worried about losing a job or business income, getting a historically low home loan is a huge incentive to invest in a home sooner rather than later.

Pay Off Debt Or Save Money – Is One Better For You?

Should you pay off debt or save money? I wish this was a super easy article where I could just give you a clear answer about whether you should pay off debt or save money, but that’s just not how personal finance works. Every situation is different, and today, I’d like to go over different […]

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Easy Guide to Cheap Business Currency Transfers

There might be many reasons why your small business isn’t thriving. One of them is the global economic crisis caused by the COVID-19 pandemic. However, for all that this recession is hitting all businesses hard, it also kicked e-commerce into high gear. Also, going global has become a necessity for businesses. After all, this gives you an opportunity to both cut costs and grow your customer pools.

But doing any kind of business internationally means you will need to send and receive money transfers from abroad. This itself is a costly endeavor. It’s costly enough that the cost of the transfer might eat up all your profit margin.

While you are developing a strategy for going global, you need to find a way to cut your currency costs. The good news is that today there are companies that allow you to reduce the cost of both the transfer and foreign currency exchange (FX or forex). But you’ll need to think carefully to pick the one that will benefit your business most in the long term.

How expensive are international money transfers?

The costs of foreign currency exchange and international money transfer fees are not the only issues you need to consider if you want to avoid being ripped off while traveling. As a business, making payments to suppliers or accepting them from customers also come with an FX price tag. And that price might be over 10 percent of the transfer volume.

Any small business trying to go global will know that the profit margin for this venture might be so small that 10 percent makes it unviable. But of course, the actual cost of international money transfers depends on many factors. The foremost is what financial institution you are using to make the transfer.

The traditional way to go is to use a bank wire transfer. That’s the safest method of international money transfers. However, it’s also one of the most expensive. For example, in the US the average outgoing international transfer fee is $45. Add to that the money lost during foreign currency exchange. Banks always use an unfavorable FX rate due to their high FX margins. Also, the fees (meaning your losses) might increase with the transfer volume.

Also, remember that some currency corridors to developing countries are far more expensive. There are still some African countries where a transfer can cost up to 20 percent!

Western Union and MoneyGram are hardly better in terms of fees—these services are sometimes more expensive than banks. PayPal is better. However, it will cost you about 5 percent of the transfer and it also doesn’t use the best FX rates.

All in all, the most common international transfer methods are expensive. But now there are FX companies created to solve this specific problem.

How to cut the cost of global business money transfers

While outrageous, transfer fees from banks and popular money transfer services don’t seem that bad for small transactions. However, as these losses grow with the transfer volume, a payment to a supplier or some international investment might end up costing you thousands. You need a specialized and affordable solution for large business transfers. Today such a solution comes from FX companies, also called online money transfer companies. These are companies like Moneycorp, WorldFirst, or OFX.

FX companies specialize in offering cheap and fast currency transfer services. Top providers among them have multiple offices in different parts of the world. The platforms are online-based, which means you can manage your account fully using nothing but a smartphone app.

The number of supported currencies varies depending on the provider. However, all these companies operate using the same principles. They all offer:

  • Low or no fees. In the majority of cases, FX companies don’t charge transfer fees at all. If they do, the cost of the transfer rarely rises over 1-3%.
  • Low FX margins. Foreign currency exchange rate margins are where banks make a lot of money. However, as FX companies run off the volume of transferred funds, they strive to keep the margins low. At the moment, WorldFirst has the lowest margins in the industry (0.25-0.15 percent for large business transfers).

FX companies can be used not only to help cut the costs of regular business payments, but they are also a great help to everyone who wants to invest overseas (in property, for example). They can also be used to pay salaries to remote workers.

But bear in mind that not all online money transfer companies are suited for businesses. Only the ones that offer corporate services are capable of handling the paperwork and other requirements that businesses might have.

FX companies: benefits beyond affordability

FX companies not only help you cut the costs of international money transfers, but they can also be used to mitigate currency exposure risk that every international business faces. This type of risk is unavoidable because currency exchange rates are fluid.

However, sometimes this fluidity turns into outright volatility. The COVID-19 pandemic caused a great surge of FX volatility. Tthis volatility will likely last for a while due to the global economic recession. Therefore, FX risks are now extremely high.

FX companies offer their business customers access to hedging tools. This means that you get a chance to minimize these risks with little effort. For example, you can use forward contracts, which allow you to get the FX rate fixed at a certain point for up to a year. So, even if the exchange rate changes unfavorably during this time, you will be protected.

For international business, currency hedging is essential for budgeting. In fact, without hedging against the currency risks in some manner planning a budget becomes almost impossible.

But, of course, one needs to be a financial expert with ample forex experience to use hedging effectively. Otherwise, you will not know exactly when to use which tool to achieve maximum long-term benefits for your company.

FX companies solve this problem as well because they offer not only a wide range of currency services but also guidance. Simply put, they can provide you with advice and information necessary to make good currency decisions. This means that your business won’t have to pay extra to outsource a specialist for this.

How to choose the right FX company for your business

The first thing you should consider when looking for an FX company for your business is its accreditation. These businesses operate within multiple jurisdictions and the industry itself is poorly regulated, so you need to choose companies that are audited by trustworthy authorities. For example, WorldFirst is monitored by the Financial Conduct Authority of the UK.

You should only work with companies that are transparent and certified to work in your country. This will limit your choices somewhat as these companies aren't yet found around the globe.

Another important factor is currency selection on offer. You need to be sure that the company you choose will be able to meet all your needs. However, as you can have more than one account, you can work with several companies simultaneously. But in this case, you will need to exercise extra caution when choosing these services.

Finally, be sure to study detailed reviews of every FX company you consider. Read both customer testimonials and professional reviews that highlight both the strengths and weaknesses of the company. This way, you will be able to make a choice that will help your own business prosper.