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Budgeting to Buy a House
No matter how good the credit rating, today's homebuyer no longer has the luxury of buying with little or zero down. Unless you are low-income with good credit, or a veteran, no-down loans are also a thing of the past.
Most lenders today want at least 20 percent of the loan amount as a down payment on a house. For a home priced between $168,300 and $287,500, a homebuyer would need to come up with between $33,660 and $57,500 just for a down payment. Then, there are closing costs to consider. These vary by state, but figure you'll pay over $2,000 on a $200,000 loan.
Saving up this money takes time and careful planning. The best way to start is by coming up with a budget that is realistic enough for you to stick with and by using other tips to help you get ahead financially.
 The Budget
The only thing more challenging than setting up the budget is sticking with it over the long run. Using personal finance software will help you set it up, but only self-discipline and the desire for a new house will motivate you to stick with it.
First, you need to determine your total income from all sources. The second step is to list all the money that goes out every month, beginning with your fixed expenses. These include anything that has a fixed payment due every month, including:
Rent or mortgage (if you have a fixed rate).
Car payment.
Insurance.
Child support and alimony.
Installment loan payments.
Next, list your variable expenses. These may be a little more difficult to track, so you may want to document them over the course of a week or two on a chart such as the spreadsheet offered for free by a Canadian credit counseling service. Common variable expenses include:
Utilities.
Telephone.
Cable or satellite TV.
Anything you purchase on a daily basis (morning coffee, etc.).
Amy Fontinelle, writing at Investopedia, suggests that you track and update your budget daily so that nothing falls through the cracks.
Make Changes
Once you've used the budget for a month or two you'll be able to see where your money goes every week. This snapshot shows you where it's being wasted and, thus, where to make cuts. Any items cut from the budget mean more money to set aside for your house.
Some of these cutbacks might include bringing a lunch from home rather than hitting the café every day, riding your bike to work instead of driving or taking a cab, and using coupons to save money.
Make More Money
Cutting your budget expenditures and paying down debt aren't the only ways to move more quickly down the road toward homeownership. Finding ways to bring in more money gives your plan a turbo boost.
If you can take on overtime hours at work, do it. Consider holding a garage sale or selling unused items online. Sock away that extra cash for your down payment.
Savings
If you're like a lot of us, you may be tempted to use the money you're saving for something else that comes along. To avoid the temptation, put it in an online savings account that makes it difficult to withdraw. If you have to wait a few days for the money, you may think twice about withdrawing it.
As you build your savings, avoid the urge to add to your debt. There will be plenty of time after you buy the house to buy furniture, a car or whatever else you might be thinking of purchasing. Keep that house you want top-of-mind to motivate yourself to stay out of debt and continue saving.
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Thursday, February 13, 2014
Budgeting to Buy a House
4 Common Roofing Choices for Your Home
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4 Common Roofing Choices for Your Home
Although often overlooked, a roof is one of the most critical elements of your home. If you're in the market to replace an old roof, or planning to build a new one, you have several common roofing types to choose from. Here's what you need to consider when comparing four popular roofing choices.
 Asphalt Shingles
Easy to work with, modern asphalt shingles come in a wide variety of colors and styles. The traditional three-tab asphalt shingle – a form of strip asphalt shingles – still outsells newer architectural asphalt shingles, a thicker, heavier shingling that provides a rich, sculptured look to your roof. Premium asphalt shingles, sometimes referred to as laminated shingles, are distinctive in appearance. These shingles may look like "old world" shingles such as shake or slate. Premium shingles are generally more energy efficient and offer longer warranties (typically anywhere from 5 to 50 years depending on the asphalt shingle style).
Benefits: The advantages of asphalt shingles as a group include low initial cost, ease of installation and repair, fire resistance and the fact that they are DIY friendly. Additionally, if only one shingle is damaged or missing, you can generally perform a spot repair rather than replacing the entire roof. Some asphalt shingles offer mold, moss and algae resistance, and you can coat asphalt with treatments to seal and protect it.
Drawbacks: Asphalt is generally a short-lived roofing material. It also requires a lot of maintenance and is environmentally unfriendly, with premium asphalt shingles more efficient than the others.
Conclusion: While a good value, if you don't want to repair or replace shingles torn in storms or replace the roofing in the coming years, asphalt may not be the choice for you.
Metal Roofing
Benefits: With a typical life expectancy of at least 50 to 100 years, chances are good your metal roof will outlive most any other roof around. Metal is also fire retardant, so you'll never have to worry about any fire spreading to your home via the roof. Lightweight, with a variety of colors and styles, metal roofing is also environmentally friendly since it's energy efficient and recyclable. You can also install metal roofing over existing roofs, eliminating the need to tear off the existing material.
Drawbacks: Metal roofing is expensive. A low-end metal roofing product is at least twice as expensive as asphalt and most other roofing choices, and at the top end it may be four times as much – generally more expensive than any other selection but slate stone. Metal is also more difficult to install, which may discourage DIY homeowners. Some metal roofs may require periodic painting.
Conclusion: Because it is wind, storm and damage resistant, metal roofing is superior to most roofing products in terms of protection and energy savings. While more expensive initially, it will save money over time.
Wood Roofing
Typically made of cedar, wood roofing includes both wood shakes and wood shingles. What's the difference? A shake is rougher, thicker, and generally lasts longer. A shingle, on the other hand, is smoother, thinner, and more vulnerable to damage.
Benefits: In addition to a fairly good life expectancy, wood roofing is generally considered easy to maintain and repair. Wood roofing also allows you to choose nontraditional patterns such as V-cut and fish-scale patterns.
Drawbacks: Wood roofing costs more than asphalt, although less than some other choices. Wood shakes and shingles can also be time-consuming. Plan to inspect your roof at least once a year and to apply a preservative every few years to maintain your roof in the best condition. Wood is not fire resistant and it's vulnerable to storm damage.
Conclusion: Nothing beats wood in appearance, and a wood roof will age beautifully. If you live in a very humid area where mold is likely to grow on the wood or in an area vulnerable to fires, wood may not be the best choice. Some areas even ban wood roofs.
Concrete Tile
You may have seen a concrete tile roof and never even realized it. With a variety of colors and styles, a concrete tile roof (sometimes called cement tile) may even look like it was made from slate or clay, without the weight those choices entail.
Benefits: No doubt about it, concrete roofs are tough. Hail won't dent it, and winds won't blow the concrete away. Concrete tile also helps insulate the roof and may last longer than 30 years. During its life you can expect little to no maintenance.
Drawbacks: Concrete tiles are expensive – at least three times greater than the cost of asphalt and comparable to the more expensive metal choices – and difficult to install. Professional installation is recommended.
Conclusion: If the cost isn't prohibitive, a concrete tile roof may be the best choice for you.
When comparing roofing options, balance the cost, vulnerabilities and desirable features of each in order to select the roofing material that best suits your situation.
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Understanding FHA-Insured Loans
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Understanding FHA-Insured Loans
One of the few blessings to come out of the Great Depression was the FHA-insured loan. Although, contrary to what many think, it wasn't created to help low-income buyers get into homeownership. Just as during our recent Great Recession, during the Depression foreclosure rates skyrocketed, leaving lenders in the lurch. The FHA-insured loan was created to protect lenders from losses should the economy once again tank.
That said, the borrower does receive benefits from the loan. First, she benefits from the meticulous appraisal of the home, and second, from the low down payment requirements and attractive interest rates offered by lenders.
 Eligibility Requirements
Although the Federal Housing Administration won't be loaning the money to you directly (you'll see a conventional lender for that), they'll take a look at your credit profile to determine whether they want to offer insurance on your loan.
Recent FHA changes call for a manual review of applicants with credit scores below 620 and debt-to-income ratios of 42 percent or higher. While these conditions don't automatically disqualify a borrower, it does decrease the number of applicants who qualify.
Statistics show that successful FHA applicants in August of 2013 had an average FICO score of 691, according to FoxBusiness.com. Unsuccessful applicants had an average FICO score of 667.
Remember, the lender may have stricter requirements, so it's always a good idea to take a look at your credit reports, fix any errors, and pay down some of your debt before applying for a mortgage.
The Down Payment
American homebuyers love the low down payment aspect of the FHA loan. Although lending criteria has tightened since the economic downturn, down payment requirements are still low – as low as 3.5 percent of the purchase price of the home.
An applicant with a FICO score lower than 579 may have to pay a 10 percent down payment, while those with higher scores – assuming they have adequate income and meet other loan requirements – typically qualify for the lower down payment.
Mortgage Insurance
Most homeowners know what PMI is – Private Mortgage Insurance. It's that policy they pay for but derive no benefit from. PMI protects the lender in case the borrower defaults.
FHA-insured loans also mandate mortgage insurance, but it's known as the Mortgage Insurance Premium (MIP) instead of PMI. As with PMI, FHA at one time allowed borrowers with a 78 percent loan balance to cancel their mortgage insurance premium. As of June of this year, however, that changed.
New FHA borrowers (since June 3, 2013) with low down payments (a starting loan balance of more than 90 percent of the value of the home) must pay for MIP as long as they have the loan. Borrowers with balances lower than 90 percent can choose to stop paying for MIP after 11 years.
To top it off, in April of this year FHA announced that they would be raising MIP premiums by 10 basis points, making the FHA-insured loan far less attractive than it once was.
Before settling on an FHA-backed loan, ask your mortgage broker to run scenarios comparing it with conventional loans as well as Fannie Mae's "My Community" loan program and Freddie Mac's "Home Possible" mortgage. You may find a better deal than FHA.
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Decorating the Modern-Day Laundry Room
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Decorating the Modern-Day Laundry Room
Gone are the days when sterile white was an unspoken mainstay. In the modern laundry room, anything goes! From color selections to wall décor, go bold to show off individuality and personality. Cover the basics in terms of appliances, organization and functionality, and then let creativity rule to help build a workable space that's also enjoyable to be in.
Cover the Basics
There are a few obvious features that should be included in every laundry room. A washer and dryer, ironing board and utility sink are obvious "musts." Consider functional placement of these items to ensure ease of work. Washer and dryer units can be stacked or placed on pedestals for added under-unit storage when space is limited. Ironing boards can be built into or attached to the wall (only being lowered when in use) to again preserve valuable space. If possible, cabinetry and shelving should be included for storage of laundry soaps or additional cleaning supplies. Adequate counter space should also be considered to allow for folding clothes or sorting laundry, and closet space is handy for additional storage or air-drying delicates.
 Building Off of Bold, Beautiful Color
Think of this room as your blank canvas to do with what you'd like. Classic laundry room color selections typically include clean, crisp whites or shades of pale blue. This color palette pairs perfectly with the feel and smell of warm, clean sheets and freshly folded towels.
Don't be afraid to choose bold wall colors such as red, green, yellow and even pink to liven up your space and make it more playful and fun. Add throw rugs and accessorize with complimentary colors. Have a utility sink skirt designed with a color or pattern that pairs well to add more flair and conceal added storage space underneath. Consider covering an accent wall with a patterned wallpaper and add a jeweled chandelier to create a shabby chic look. If your home has an overall established theme such as Tuscan, rustic or maybe even Southwest, consider maintaining this consistency in your laundry room.
 Miscellaneous Décor
In addition to the fun décor items already mentioned above, this is where you can add personality to your laundry room. Consider a custom-made patterned valence for a window to enhance the room's theme while inviting an abundance of natural sunlight into your working space.
To create a rustic feel, consider adding vintage laundry accessories into your space, such as old washboards and irons or weathered metal buckets. Add vintage wall signage in wood or metal, and consider an old accordion wooden peg rack, which can be functional in addition to rustic.
Create a more contemporary feel with an appropriate light fixture and minimal wall décor. Keep your space tidy, clean and simple, adding only a classic vase with fresh flowers for a splash of color. Decorative wall tile such as subway tiles establish a more refined, modern environment.
A modern-day laundry room can include anything from classic framed prints that coincide with your chosen theme to wooden laundry signs or even wall decals and stencils. Block letters spelling "laundry" can also be fun and, depending upon space, can be either hung on a wall or sit on a shelf.
A Functional Space With Style
Bearing in mind that the laundry room serves a very specific purpose, there are still countless ways to maintain a very functional, organized workspace "with style." It can be fun and easy to accessorize while being practical.
Instead of leaving exposed laundry soaps or fabric softeners on your counters or shelves, use decorative wire or wicker baskets to conceal them while adding some charm. Decorative jars, including apothecary or mason jars, make great storage for anything from laundry soaps and loose dryer sheets to clothespins. Creative labeling can be a neat way to add additional detail and personality.
Think creatively. Let your personality be your inspiration. Use the decorative tips mentioned above to design your own unique laundry room.
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