Biz Bits: Buying a home: Prepare by getting your finances in order
Tip of the Week
For those considering buying a home, the current real estate market presents some unique opportunities. One of the side effects of the economic roller coaster ride of the past few years is that home prices have gone down and more homes have gone on the market. For buyers, that means more choices and better deals. However, those same tumultuous years also can also teach buyers a lesson: Make smart buying decisions and be wise with your finances.
Impulsive buying is never a good idea when it comes to a purchase as significant as a home, but it was something of a trend at the height of the mid-2000s. Now, with banks lending far more cautiously, you need to be absolutely certain that your finances are in order - and healthy - to be able to get the best deal on your purchase.
There are a number of steps you can take to get ready to buy a home, and you might need to work on them simultaneously. Consider that you'll need to start saving, if you haven't already, but you'll also need to review your credit score and do what you can to either maintain it or work toward healthier credit. Both of these tasks will help make the home-buying process better for you.
Your credit is an important factor in determining the terms under which you can get a mortgage. Broadly speaking, the better your credit is, the more positively you'll be viewed by lenders - and that can lead to better interest rates. And because you'll be paying off your home for years to come, it's important to get the best rate possible.
Start by checking your credit report. You're entitled to one free check of your report, from TransUnion and other credit reporting agencies every year. As much as you need to check your report to find out what shape your credit is in, it's also essential to review it for inaccuracies or fraudulent activity, both of which can have a negative impact on your score.
If your credit health needs some work, start taking action immediately. Paying bills on time, reducing your overall debt and limiting new credit inquiries can all help to build your credit - but be patient as it can take time for your positive actions to take effect. Nevertheless, the sooner you make the effort, the sooner you'll see results.
Making a prudent decision about buying a house comes down to an honest assessment of what you can afford. Keep in mind that you might be approved for a loan that's larger than what is practical for you to afford. While it may be tempting to buy a pricier house, the stress of struggling to make payments could diminish your enjoyment of your new home and even put you at financial risk. One rule of thumb is that most borrowers can afford a home loan that runs about two and a half times their annual salary.
Buying a home is a complex process, but one that is ultimately very rewarding when done right. By organizing your finances well in advance, you'll help set yourself up for success.
Today's technology is constantly being updated with models showcasing newer, faster features. To keep up with the latest tech-trend, many consumers are tempted by retailer buy-back programs. The Better Business Bureau provides the following points for consumers to consider about a retailer's buy-back program:
- Buy-back programs can provide a sense of insurance on your product. Buy-back programs essentially guarantee a resale value, meaning they act as insurance against loss of value. But like any insurance policy, its true value can become nominal and hard to define. Before becoming a member of a buy-back program, make sure to read the fine print of any agreement. Many buy-back options have conditions and constraints that could ultimately keep you from being able to sell back your used gadget.
- Remember, the program favors the retailer. In exchange for your old gadget, your return will come back in the form of a gift card more times than not. This plan and gift card means you are locked into the issuing retailer for your next technology purchase. Not to mention, you may end up paying triple the sales tax when all exchanges are completed. While sales tax rules vary from state to state and buy-back programs vary from program to program, you are the one responsible for paying the tax. By paying the tax once when you buy the item and again when you return it, and then again when you use the gift card, you may end up paying triple the tax in the end.
- Buy-backs are not ideal for the forgetful or the disorganized. If you haven't saved your original receipts, power cords and manuals, you could be at a loss or your payout could be less than expected. Many buy-back programs insist all the original items be brought back to the store at the time of the exchange.
- Mobile phone contracts do not end when you sell back a phone. When you purchase a new phone and add the retailer's buy-back program, you can resell your phone back to the retailer for the agreed upon dollar amount. Keep in mind that even when you sell your phone back to the retailer, your cell phone provider will keep billing you for the duration of your contract.
- You can compromise your identity. Before selling your electronics back to the retailer, be sure to take care of your personal data. Many electronic items such as your smart phone or laptop can hold a great deal of personal information. If this information gets into the wrong hands, your identity and information about others could be compromised. Be sure to fully wipe out all personal data before reselling to a retailer.
- You could get more for your electronic gadgets elsewhere. Reselling electronics is not new. Many consumers use online auction or classifieds to sell their gadgets. In many instances, you could get more for your electronics by using these sites rather than opting for a retailer's buy-back program.
For more tips, visit www.bbb.org.
According to Kiplinger.com, the most expensive cities to live in are:
10. Anchorage, Alaska
9. Oakland, Calif.
7. Washington, D.C.
6. Santa Ana (Orange County), Calif.
5. Stamford, Conn.
4. San Jose, Calif.
2. San Francisco
1. New York City