Money Minute: Pre-qualification Checklist for a New Home

Prequalification Checklist for a New Home
• Ready to buy your next home? As a prospective homebuyer — or as a realtor — you want to make sure you know what you need to qualify for a home loan. In order to prepare for this huge step, here is a home loan prequalification checklist.
• What Is Prequalification, Exactly?
o First, it's important to note that pre-qualification can be a good first step in the home buying process, though it's not required. If you're looking to get a mortgage, you'll want to get pre-qualified by a reputable lender first. This is an easy process, but it's important to remember it's not the same as being pre-approved for a mortgage — though some lenders may use these terms interchangeably. The process of pre-qualification takes a look at your numbers and can give you an idea of how much you may be approved for, though nothing is set in stone.
• In order to get prequalified for a home loan, here's what you will need:
o Income: A lender wants to know how much you can reasonably afford for a mortgage given your current income.
o Assets: On top of your income, a lender may want to know how your overall financial health is and know that you can handle a responsibility like a mortgage.
o Debts: A lender wants to know how much debt you have — and look at your overall debt-to-income ratio in order to assess what you may be able to afford.
o Credit: A peek into your credit history can offer a lender an idea of how responsible and creditworthy you are.
o The good news is that with this information, you may be able to be pre-qualified by a lender and that this process may take place in person or by phone.

• Having a prequalification letter can show that you're really serious about homebuying - and can open doors in the homebuying process and make the mortgage process much easier. It can save you time and a lot of hassle so that you know what you can actually afford.
• If you’re ready to buy a home, getting prequalified is an important step to take. You will have a clear idea of your budget when house shopping, and you’ll be prepared to place an offer when you stumble upon your future home. Keep this checklist in mind and contact a mortgage loan officer when you are ready to take the first step.

Additional online resources from KeyBank:

Buying a Home

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Making your Direct Deposit Work Harder for You
• According to the National Automated Clearing House Association (NACHA), 82 percent of Americans are paid via direct deposit. What makes it so appealing? Besides the convenience of not having to deal with a paper check every time you get paid, there are real financial advantages to setting up a direct deposit account.

• Here's how to make direct deposit work harder and save you more money.
• Split Your Payroll
o When money goes straight into your savings account, you're less likely to spend it. Diverting a fixed dollar amount or a percentage of your paycheck into a savings account via direct deposit makes it a breeze to save automatically. You can also split other direct deposit payments, such as income tax returns from the IRS, into multiple accounts.

• Watch Your Savings Grow
o Even contributing a small portion of each paycheck to your direct deposit account helps your savings flourish. A mere $50 a month adds up to $3,000 in five years. Plus you'll likely earn interest on this money, giving you cash for simply keeping it in the bank. As you save more, your savings account balance will grow. Many banks offer higher interest rates for accounts with bigger balances, so your interest income could increase significantly.
o Depending on how much money will go into your direct deposit account each month, using direct deposit may even help you avoid monthly savings account fees. This adds up to more money in the long run.

• Build Financial Security
o In 2016, the Federal Reserve released a statistic that revealed how deep America's savings challenges run: 46 percent of adults would be unable to cover a $400 emergency expense – or they'd have to either borrow money or sell something to do so. This is especially scary because each year 22 percent of Americans pay out of pocket for an unexpected medical expense.

• These facts are a tough wake-up call, but it's also an opportunity to get your financial health in good standing and feel prepared for whatever life may throw at you.
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• By making changes to your saving (and spending) habits now, you'll be able to take care of unexpected costs in the future. Plus, direct deposit will remove the temptation of spending today what you should be saving for tomorrow. While it might be tough to get used to at first, you'll be grateful once you see how even a little money every month compounds into huge results over time.

What to do with wedding money

• Just got hitched? If you requested cash gifts, you’ve probably found yourself with a hefty chunk of change. While you may be tempted to splurge on some home furnishings or a lavish honeymoon, use this money to grow your wealth and start your life as newlyweds off right.
• If you’re wondering what to do with all of that wedding money, here are five smart ways to use those cash gifts.

• Pay Off Debt
  • Using your wedding gift money to pay off debt will put you and your spouse in a better place to achieve your long-term financial goals. Paying off your debt relieves you of a big burden and opens up extra money each month to save for the future. If you have several kinds of debt, use your wedding money to pay off high-interest debt first — think credit cards and loans with high annual percentage rates. Focusing on paying off debt with high interest will save you the most money in the long run.
• Spend Some of It
  • Since that money was given as a gift, give yourself permission to spend some of it to celebrate your new life together. You might want to use some of it now or set it aside for a fun savings goal like a long-weekend getaway. While it’s perfectly OK to enjoy some of that wedding money now, be sure not to go overboard. Set an amount you can freely spend while devoting the rest to knocking out some of your other money goals.
• Save It for a Rainy Day
  • With nearly half of Americans reporting that they wouldn’t have the money needed to cover an unexpected $400 expense, sock away some of your cash gifts for an emergency. You never know when you’ll be hit with a surprise expense like a major car repair or urgent dental work — or even a painful blow like a job loss.
  • If you don’t have much saved up for a rainy day fund, start saving by opening a designated savings account, depositing some of your wedding money and setting up automated transfers so that you’re saving on a regular basis.
• Save for Retirement
  • While it may feel light years away, putting some of your wedding money toward retirement can help you set the foundation now for a solid nest egg for your golden years. It’s important to remember that while you can borrow for a house, a car or a return to school, the one thing you can’t take out a loan for is your retirement. So the earlier you can start saving, the better. If you don’t have a retirement account from your employer, you can set up an individual one such as an IRA or a SEP IRA.
• Start a Nest Egg for a House
  • With the average cost of a house in the U.S. coming in at $368,100, consider putting your wedding cash toward a down payment on a home. The more you’re able to save, the smaller your monthly payments will be. And if you can afford a down payment of at least 20 percent, you won’t have to pay private mortgage insurance.
• When it comes to what to do with your wedding money, being savvy will help you and your new spouse build a sound financial foundation for your life together. While you don’t necessarily have to put all of your wedding gift money toward your future, putting away part is a good step in the right direction. Your future selves will thank you.

Additional online resources from KeyBank:

What to Do With Wedding Money: 5 Smart Ideas 

Can a Wedding at Home Save You Money?

6 Ways to Have Proper Wedding Etiquette While on a Budget

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Understanding Cybersecurity Protection and the Signs of ID Theft
• ID Theft is a serious crime, but increased awareness of cybersecurity protection can help you avoid or mitigate this type of loss. According to the FBI, in addition to what's known as "smash and grab" burglaries or theft of credit cards and ID cards, criminals are now stealing personal data through email phishing scams and computer intrusions. If you believe your identity might have been stolen, there are many resources available to help you recover from this type of crime.

• Signs of ID Fraud
o Catching ID fraud early is the best chance you have to limit your losses. When reviewing bank and credit card statements, question anything that appears out of the ordinary. Receiving mail or phone calls about accounts you did not open can also alert you to the possibility of ID theft. The Federal Trade Commission states that you may be a victim of identity theft if you notice unexplained withdrawals from a bank account or incorrect charges to your credit card account. You should review your credit report every six months and follow up on any credit card or account that you don't remember opening. Closing inactive accounts will also limit the number of accounts you need to manage and check on each year.

• Action Steps to Stop ID Theft
o ID theft is a serious crime and should be treated as such. If you think someone is misusing your personal information, your first step should be to report suspicious activity. You can reach out to law enforcement or report it online at IdentityTheft.gov. You should also contact all financial institutions where you maintain accounts as well as creditors including credit card companies. A fraud alert can be added to your credit report informing potential creditors that you are the victim of identity fraud. This will help to avoid additional accounts opened under your name.

• How Your Bank Can Help
o If you are a victim of identity theft, your bank can help. Most financial institutions have dedicated fraud and ID theft representatives who can help you determine if you'll need to temporarily freeze an account or close it and open a new one. Or, if your debit card was compromised, you can work with your bank to replace it. Banks can also place passwords on your accounts as additional verification before granting access to your funds. If you've signed up for online banking access, you can quickly review your recent transactions and withdrawals in order to flag unknown activity.

o As more financial transactions move online, increased awareness of cybersecurity protection allows you to pick up on discrepancies quickly. Banks and credit card companies are working to prevent ID theft with increased security measures to ensure their customers' transactions are completed as safely as possible.

Additional online resources from KeyBank:

What is Identity Theft?

Key Conversations: Combatting Identity Theft

Top Tips to Reduce Identity Theft

ID Theft Prevention & Wealth Protection Checklist

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Checking vs. Savings Account: Why Not Understanding the Difference Can Cost You Money
• When considering where to put your money, have you weighed the benefits of using a checking vs. savings account? Both accounts can be used for many different purposes and not understanding those differences can literally cost you hundreds — even thousands — of dollars.

• Knowing when to use one over the other starts with understanding the purpose intended for each account.

• What Is the Purpose of a Savings Account?
o The purpose of a savings account is to give you a safe location to place your money for a long period of time. It also provides an opportunity to help your money grow so that you can more quickly meet your savings goals and build up a safety net.
o It's important to have a safety net for all of those unexpected expenses such as a burst hot water tank, a flat tire, a leaky roof, your phone dying...you get the idea. Without this cushion, you might need to turn to loans or credit cards as a way to cover these "unexpected" costs, which could set you way back on your financial goals. Having some extra dollars saved up also gives you some peace of mind that you can cover any of those emergency expenses and actually contributes to a happier and healthier you, since you won't have that nagging 'what if' feeling.
o For that reason, a savings account is a place where you should feel encouraged to save. As a way to help you reach your goals faster — as well as a way to reinforce saving instead of spending — banks pay you an interest rate on the money you keep in this account, allowing the balance to grow over time.

• What Is the Purpose of a Checking Account?
o The purpose of a checking account is to have a place to hold your money before it's spent in the near future, as well as to facilitate the spending of that money.
o When you deposit your money into a checking account, as soon as the deposit "clears" and the actual money makes it to your bank, you can start using that money for whatever you may need. This comes in handy when paying your bills, writing checks to a parent who spotted you $50 last month and getting cash out from an ATM for a fun Friday night.

• When Does It Make Sense to Use One Over the Other?
o When deciding whether to put your money in a checking vs. a savings account, it's best to think about what you are using the money for. Do you intend to spend it on bills? Or do you intend to hold onto it for longer?

• Here's some guidance for when to use which type of account.
o Use a checking account when you need to spend the money on bills or other expenses in this month or even the next. You won't want to park money in a checking account for longer periods of time though, as it typically doesn't earn as much interest as a savings account. A checking account gives you easy access to that money, which means the ability to spend it via checks, cash withdrawals or debit card purchases in the most convenient way, usually without restrictions on the number of transactions you can make.
o Use a savings account, like Key Active Saver, when you're saving up for a specific goal and you want to get to your goal even faster by growing that money through interest. Put money into savings that you don't plan on spending for at least a month into the future (and ideally much longer than that). Think of it as a safe place to park your money until you need it.
o Of course, it's a sound money strategy to have both a checking account and a savings account, as these two accounts will cover several of the different purposes you have for your money. While having a savings account without a checking account would be quite inconvenient for everyday money needs, having a checking account without a savings account means you're not thinking about building your financial future. Finding a balance between short- and long-term funds is a great start to Financial Wellness. So if you haven't already, open a savings account and start saving today.

Additional online resources from KeyBank:

Checking Accounts

Key Advantage Checking Account 

Key Student Checking Account

Savings Account Comparison

KEY4KIDS® Savings Account 

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Key Community Mortgage and Other Options for Buying a Home

• Many homeowners believe that they should put down 20 percent of a home's value in order to purchase. However, there are many options available when it comes to purchasing a home with little to no down payment, including options from KeyBank.

• If you're a first-time homebuyer, putting down 20 percent can be challenging. Sometimes buyers assume that Private Mortgage Insurance (PMI) is required, adding to monthly costs. However, these requirements are not necessary for all mortgage products — there are options available to everyone.

• Here are some options that may work for your situation.

• Key Community Mortgage® Exclusively from KeyBank
  • The Key Community Mortgage® is an affordable mortgage product offered specifically by KeyBank to match various lending needs. Here are some of the criteria to qualify:
• Up to 100 percent financing available
• No Private Mortgage Insurance (PMI)
• Conventional financing
• No income limitations on qualifying properties
• Accepts alternative credit
• FHA Loan

• The Federal Housing Administration (FHA) is part of HUD.gov, and they've been providing loans since 1934. With an FHA loan, you still go through a lender but the FHA insures the loan. Some of the advantages of an FHA loan include:
• Low down payments
• Low closing costs
• Easy credit qualifying
• For first-time homebuyers, your down payment can be as low as 3.5 percent.

• VA Loan
• Veterans Affairs mortgages, also called VA Loans, are for active and retired service members, and eligible surviving spouses. Keep in mind that length of service determines eligibility.
• Unlike FHA loans, VA Loans do not require a down payment or PMI. But interest rates may be competitive. VA Loans go through private lenders so you aren't applying directly to the VA. However, the VA does guarantee the loan.

• Here are some of the benefits of a VA Loan:
• No down payment as long as the sales price doesn't exceed the appraised value
• No PMI requirement
• VA rules limit the amount you can be charged for closing costs
• Closing costs may be paid by the seller
• The lender can't charge you a penalty fee if you pay the loan off early
• VA may be able to provide you some assistance if you run into difficulty making payments

• Fannie Mae And Freddie Mac Low Down Payment Loan Programs
• Fannie Mae's HomeReady program requires only a 3 percent down payment. You must meet the following to qualify:
• Have low to moderate income
• Be a first-time or repeat homebuyer
• Have limited cash for down payment
• As part of its Home Possible Mortgages program, Freddie Mac requires down payments that range from 3 to 5 percent. Eligibility varies, depending on location.

• Which Option Is Best for You?
• As you can see, there are a number of ways to purchase a home without putting down the standard 20 percent. The option that is best for you will likely require a few conversations with your lender. Be sure to speak with your financial advisor before making any final decisions.

Additional online resources from KeyBank:

Which Mortgage is Right for You?

Federal Housing Authority (FHA) Home Loans

How to Qualify for an FHA Loan

Buying a Home

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

How to Buy a Fixer Upper That's Not a Money Pit
• Have you dreamed of what it would be like to buy a fixer-upper and return it to its former glory? In an effort to save money, perhaps you're checking out some homes that are not quite move-in ready. Or maybe you've been itching to put your power tools and DIY knowledge to good use. But does it make financial sense to buy a fixer-upper?

• Here's how to tell the difference between a home that needs a little financially manageable TLC and one that could end up costing you more in the long run.

• First, Get a Home Inspection
o If you enjoy watching home buying shows, you might be under the false impression that home inspections happen after you purchase a home. They shouldn't — you should always get an inspection before purchasing a home.

o Sometimes the best diamond-in-the-rough deals come as-is, meaning that the sellers may not pay for cosmetic or structural fixes. With the exception of a hot seller’s market, as-is home prices should reflect the amount of work they need. A home inspection may be more crucial in as-is purchases; it can allow you, the buyer, to walk away from some potentially huge and costly headaches. Get separate inspections for any issues where you expect to pay a hefty price to fix, such as a roof or fireplace.

• Consider the Home's Age
o Older homes are like older cars — it's tough to find the parts for an authentic restoration. The TV shows make restorations look easy, but remember, they have a production crew to hunt down those vintage door knobs and it's their full-time job.

o The older the home, the more potential there is for financial headaches, such as lead paint and asbestos, both of which require professional abatement. The inner workings, such as knob-and-tube wiring or outdated/nonexistent heating and ventilation systems, may require substantial upgrading.

• Focus on the Structure
o REALTORMag lists the 10 most common problems found during a home inspection. When it comes to a money pit, fixing foundation and structural issues will hit your home improvement budget the hardest. Structural problems aren't a DIY project. According to Home Advisor, the national average for fixing foundation problems is $3,995.

o Time and the ever-changing elements can also ravage a structure from the bottom up and the top down. Water can often cause some of the worst damage. Inspections might miss a costly byproduct lurking behind walls — such as black mold, which must be removed by a professional. Sellers also have to disclose known flooding, but this isn't always foolproof. To be on the safe side, for past and future flooding issues, check the home's location on FEMA's Flood Map.

• Do the Right ROI Analysis
o Calculating a return on investment means more than the cost of the home plus renovations subtracted from other homes in the neighborhood. In fact, it may be difficult to recoup the full value of your renovation, especially for work that requires a contractor, which will increase your cost. Keep in mind, the Family Handyman could also help you tackle renovations yourself and save money in the process.

o For a better ROI analysis, check out Remodeling's Cost vs. Value Report. Of course, the most important calculation is whether you can really afford that mortgage after all.

• Factor in the Odds and Ends
o Before you buy a home crammed with stuff, factor in the cost and time to remove it and haul it away. Planning on a gut job? Factor in getting rid of all of that construction debris. Demolition day looks so effortless on the TV shows, but according to Realtor.com that's not always the case.

• And, lastly, as with any real estate purchase — location, location, location. Make sure you buy a fixer-upper in a neighborhood with stable or increasing home values. A diamond-in-the-rough in an abandoned mine is fool's gold.

Additional online resources from KeyBank:

How to Buy a Fixer Upper That's Not a Money Pit

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Important Financial Documents: How Long Should You Keep Them?
• When you receive financial documents, what do you typically do? Some collect everything in an ever-growing pile of paperwork while others may elect to toss them in the trash or send them through the shredder.
• However, neither is ideal as there are some important financial documents you should hold onto in a safe and secure place.

• Pay Stubs
o It's safe to say that the majority of people are paid every two weeks. That means that throughout the year, you're likely to accumulate a lot of pay stubs. If the money hits your account, do you really need to keep your pay stubs? The answer is yes, for at least a year. Keep your pay stub records for the calendar year and make sure that it syncs with what's on your W-2. If everything lines up, you can shred your pay stubs after a year.
o Alternatively, you might be able to opt for electronic delivery through your work. That way your pay stubs will be stored securely by your company and will be easily accessible when you need them.

• Bank Statements
o You should keep your monthly bank statements for at least a year as well. Bank statements are a good way to prove your income for things like applying for a new apartment. It's also good to have for tax time, just in case you need to comb through your records.

• Credit Card Statements
o Keep your credit card statements for one month or until the next one arrives, this can be helpful in case you need to go back through and make sure everything is correct. If there are no errors and everything looks good, you can shred it when your next statement arrives.

• Utility Bills
o You might have various utility bills throughout the month. You can stash those away for at least one month until the next statement arrives. Again, make sure that everything looks good and there are no mistakes. When your next statement comes in, you can shred your old utility bills.

• Receipts
o Do you really need to keep receipts? Some crumple receipts up and toss them in the trash. But if you want to be especially diligent, it can be a good idea to keep them for a month. This way you can match them to your credit or debit card transactions and ensure everything is correct. If you're making a big purchase or purchasing something you might need to return, keep the receipt indefinitely.

• Tax Return
o Tax time can produce a lot of paperwork. While you might want to be done with all of that paperwork once you've filed, you'll want to keep your tax returns and all relevant paperwork for seven years. The IRS typically uses a window of three years for any audits, so having your previous paperwork is a must.

• Confirmations
o If you get a confirmation about any debt paid in full, consider keeping them. You should also keep all documents related to purchasing your house.

Additional online resources from KeyBank:

Important Financial Documents: How Long Should You Keep Them?

Five Easy Ways to Securely Store Documents with Key Wealth Direction® Vault

Declutter Your Mind by Decluttering Your Home

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

Getting out of credit card debt
• The average New York resident carried a $3,710 credit card balance in 2017, about $600 more than the national average, according to a report from the state Comptroller's Office. Here are some tips to help get you out from under your debt.

• If you have existing high-interest credit card debt, it's in your best interest to open a balance transfer credit card with a low- or no-interest teaser rate, transfer the high-interest balance, and pay it down over the course of several months. As long as you pay off the balance before the regular rate kicks in, you'll greatly reduce the cost of carrying the debt.

• Consider Setting a Monthly Spending Limit
o This is a more specific approach that takes the "pay your balance in full each month" strategy one step further. Setting a strict monthly spending limit that's well within your budget increases the chances that you'll actually be able to zero out your monthly balance and avoid interest charges.

• Set up Spending and Security Alerts
o KeyBank’s HelloWallet tool can help with this. If you're worried about controlling your credit card spending, set up customized spending alerts that let you know when you've made an abnormally large payment or exceed a certain balance threshold. Pair these informational alerts with security alerts designed to flag potentially fraudulent spending patterns.

Additional online resources from KeyBank:

Pay Off Credit Card Debt Calculator

5 Tips to Manage Credit Card Spending

How to Raise Your Credit Score by Paying Off Debt 

Take Control with Debt Consolidation

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)

How to Qualify for an FHA Loan
• The federal government created the FHA loan program to improve housing standards, stabilize the mortgage market, and to help make mortgages more affordable and accessible. If you want to purchase a home but aren't sure if you have the means to do so, here's what you need to know in order to qualify for an FHA loan.

• When an FHA Loan Makes Sense
o An FHA loan is a good option for anyone who may be worried their credit score or funds for a down payment won't be enough for a traditional loan. However, your rate may differ depending on your exact credit history.
o Borrowers who have low incomes may also want to consider an FHA loan because there may be more flexibility in terms of debt to income ratios compared to traditional mortgages. Interest rates for an FHA tend to be lower than traditional mortgages, helping you lower your monthly payment and overall loan costs.
o Even if you have great credit, an FHA loan may make sense if you can't afford to put much toward your down payment. While some traditional mortgages may require as much as a 20 percent down payment, FHA allows for as little as 3.5 percent for down payment. For first time home buyers, this could work in your favor by allowing you to redirect cash to other housing expenses.

• Qualifying for an FHA Loan
o To qualify for an FHA loan, you may need a certain credit score as well as a steady employment history, which you can prove through tax returns and pay stubs. A lender will use this to look at what percentage of your pay will go toward housing-related expenses.
o As for the property itself, you can only take out a loan if you're the primary occupant. You'll need to have the property appraised by someone who has been approved by the HUD. The appraiser will check to see if the house meets certain standards. If not, the seller needs to agree to the required repairs, or you'll need to take care of them prior to closing.
o To find a list of updated requirements, check with the Federal Housing Authority or a mortgage lender, such as KeyBank, that offers FHA loans.

• How It Compares
o An FHA loan is great because you don't need a large down payment or a perfect credit score; however, you will be required to pay for mortgage insurance. Mortgage Insurance Premiums (MIP) help protect the loan investor against loss in the event that the borrower defaults on their mortgage. You'll have to make multiple payments: one that you pay upfront during closing as well as an annual premium within your periodic mortgage payment. Unlike traditional mortgages, you may not be able to terminate this mortgage insurance, depending on various factors including your down payment.
o While this will give you a better understanding of what an FHA loan entails, you'll still want to do your research and calculate the costs before diving head-first into a purchase financed by an FHA loan.

Additional online resources from KeyBank:

Federal Housing Authority (FHA) Home Loans

How to Qualify for an FHA Loan

(This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. KeyCorp 2017. KeyBank member FDIC.)