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Although it can be tempting to go on a shopping spree for new furniture or start buying home improvement supplies, the best way for you to prepare is to save, save, save. Even if you have your whole down payment saved already, you should also be prepared to pay roughly 2-5% of your home’s purchase price in closing costs.
Your mortgage lender will ask for a variety of different documents to verify your income, your assets, and your identity. Being prepared with either physical or electronic copies when your lender requests them will help speed up the approval process. Some of these documents may include:
Underwriters will be carefully examining your credit history, and most lenders will request an updated credit report just before closing. Make sure that you continue making all your payments in full and on time to avoid issues later.
This includes changes in your pay, position, or pay status (for example, moving from an hourly wage to an annual salary.) We’ll discuss changing employers or employment status later on in this article, but the rule of thumb is to always keep your mortgage lender informed — even if it seems like a negligible difference, it’s better to provide too much information than not enough.
Gift funds are exactly what they sound like — money that is given to you as a gift, with no expectation of repayment. They can be used to help you meet your down payment requirements, but different types of loans carry different restrictions on the source of the funds and how much you can receive. For example, some types of loans only allow gift funds that come from relatives, domestic partners, or fiancés; others will allow you to accept money from friends, charities, and down payment assistance programs. And in all cases, gift funds must be properly documented. Make sure you are up front with your lender about your plans to make your down payment, since this can affect the types of mortgages for which you are qualified.
Closing is a team effort that requires the real estate agent, the buyer, and the mortgage lender to work together. Although your lender and agent will be doing most of the heavy lifting, you can do your part by making sure to respond promptly to phone calls or emails and providing all the documentation your lender requests.
Taking on new debt while you’re trying to apply for a mortgage is a mistake you don’t want to make: Doing so can seriously delay or even completely prevent you from closing. Do yourself a favor and avoid new credit card applications, vehicle purchases, and refinances until after you have your new keys in hand. You should also avoid co-signing for anyone else during this time.
One of the things that underwriters look for during the loan approval process is stable long-term employment. Quitting your job or changing employers can signal that your employment situation may be less than stable, which could potentially impact your ability to make your monthly payment. If you do have plans to change jobs, you should notify your lender as early as possible to avoid running into issues later.
If you do need to make large deposits or withdrawals, be sure to document their purpose and where the money is going or coming from. For example, if you are taking a distribution from your IRA or 401(k) to help with your down payment, you should keep some sort of proof of the transaction, such as a copy of the check or a form provided by your broker or financial advisor. Cash deposits and withdrawals are the most difficult to verify because they have no paper trail, so avoid them if possible.
Although it may seem like a great way to supplement your down payment or closing costs, taking a cash advance on your credit card or drawing on a line of credit can alter your debt-to-income and credit utilization ratios. Just like applying for new credit, this can cause serious issues that may prevent you from being able to close.
You might think that paying off debt would help your credit, but it’s best to consult your lender before making changes to your credit portfolio. Additionally, paying off your debt now could use up cash that you’ll need to cover closing costs and appraisal fees later.
No matter where you do your banking, you will need to provide copies of your statements. Overdrafts or NSF checks (short for “non-sufficient funds”) can signal problems with meeting your current financial obligations. Be sure to carefully keep track of your account balance, along with any outstanding checks or automatic payments you have coming out.
Applying for and closing on a mortgage can be stressful, and sometimes it’s downright confusing. Asking questions can help you to understand the closing process, as well as your role in it. Your mortgage lender and your agent are there to help you, so don’t hesitate to speak up when you need clarification or you’d like more information.
The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.
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Nursery? Check.
Car seat? Check.
Lots of cute clothes and tiny socks? Check.
How about an updated financial plan?
It’s definitely not the most exciting part about having a baby, but being financially prepared is important. While the choice to expand your family shouldn't be reduced to merely a financial decision, money can't be disregarded completely.
Here are six tips for soon-to-be parents:
You may or may not already have a monthly budget, but without a doubt, your everyday expenses are going to look very different with a new baby. Be sure to consider the costs of things like:
If you’re new to budgeting, there are plenty of websites and mobile apps that can help you track your monthly expenses. Factoring these new costs into your spending plan can help you spend less time worrying about money and more time focusing on your little one.
If you don’t have an emergency fund yet, now is the time to start one. The purpose of an emergency fund is to provide a financial cushion in the event of something unexpected, like costly home repairs or an illness or disability that leaves you unable to work for a period of time. As a parent, you may also need to take off work if your child becomes sick or needs to go to a medical appointment. An emergency fund can help you make up for any lost wages until you are able to return to work.
As a rule of thumb, you should save up enough to cover 3-6 months’ worth of expenses. Start small by setting more manageable goals for yourself, such as saving $1,000 for each member of your household, and you’ll be there in no time.
If you have to choose between saving for your child's college and saving for retirement, choose retirement. Your child will likely have more than one option to pay for college - including scholarships, loans, work-study programs, and grants - but you can't make up lost retirement savings.
HSAs, or health savings accounts, are often an underappreciated pre-tax benefit that can be used to pay for a variety of current or future healthcare expenses for you and your family. The best part, any money you contribute and don't use in a given year will roll over to the next year. The money in your HSA account can be used for a wide variety of health-related products and treatments, including doctor's fees, breast pumps, and even baby sunscreen!
Similar to an HSA, a dependent care FSA is a pre-tax account you contribute to that's sponsored by an employer. The maximum contribution in 2024 to a dependent care FSA is $5,000 for families. Because these accounts are funded with pre-tax dollars, using them can lower the cost of eligible child care expenses and helps lower your total taxable income. Unlike HSAs, dependent care FSAs do not carry over to the next year, so whatever you don't use, you lose. Because of this, be sure to carefully budget for the amount of child care expenses you actually have.
Adding a baby to your health insurance is essential, but you may want to consider other types of insurance as well. Life insurance can help protect your family by ensuring that your loved ones will be financially secure in the event that you or your partner passes away. Disability insurance (which is often offered as a part of employee benefit packages) can also provide security in the event that one or more of the adults in your household is unable to work for a period of time. Talk to your HR representative at work or consult a licensed insurance agent to find out what options are available to you.
Now is also a good time to either create a will or update your existing one. In addition to stating how your financial assets are to be distributed, a will can also include provisions for who will serve as guardian for your child if you and/or your partner pass away or become incapacitated. A licensed attorney can help you to create a plan that meets your needs.
The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.
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We all know that the unexpected can happen at any time. But when it involves expenses you did not anticipate, are you prepared?
In a 2024 report by the Federal Reserve, 37 percent of adults would not have been able to cover a $400 emergency expense without having to borrow or sell something. Having an emergency fund can help you get through these moments without any long-term consequences, as well as help you maintain financial wellness. Here's how to build an emergency fund and when you should use it.
An emergency fund, or "rainy day fund", is money you set aside for unexpected life events such as a medical bill, a loss of income, home or car repairs, and other needs. The rule of thumb is your emergency fund should cover your basic expenses for three to six months. These funds should not be used as discretionary spending and should be set aside in a savings account.
In general, emergency savings can be used for large or small unplanned bills that are not part of your normal monthly expenses and spending. These extra funds provide peace of mind because you know you'll be able to handle an unplanned job loss or bill if you ever need to. Without one, you could face financial set backs, that turn into debt - potentially having a lasting impact.
The amount you need to have in an emergency fund depends on your situation. If you haven't yet, create a monthly budget that shows all of your income and expenses. This will show you how much money you'll need each month to stay financially stable should an emergency happen. Then, multiply that monthly number by three to six months - this number is your money savings goal.
Building a savings of any size is easier when you're able to consistently put money away. If you're not in a regular practice of saving, here are some healthy saving habits:
It's also important to remember that when the opportunity presents itself, you should take advantage of one-time opportunities to save. There may be certain times of the year - holidays, tax season, bonuses, and more - where you get an influx of money. While it's tempting to spend it, adding a portion of that money to your savings can help you quickly set up your emergency fund.
Where you keep your emergency fund is up to you. You want it to be safe, accessible, and in a place you're not tempted to spend it for non-emergencies. Here are a few options, you can choose the one that makes the most sense for you:
Before using your emergency fund, review your financial need to ensure you are making the right decision. Is the item essential? Is it urgent? Or, can you go without it for now? Not every unexpected expense is a dire emergency, but try to err on the side of caution. Having an emergency fund can help you avoid relying on other forms of credit or loans that can quickly turn into debt.
However, don't be afraid to use your savings if you need it. If you spend it, just work on building it back up.
A great way to start your emergency fund is with a JVB Money Market Account. This account allows you to earn interest on any amount. Another option is a JVB idLock checking account, which gives you the added benefits of writing checks, pay bills, and the use of a Visa® Debit Card to pay for emergency expenses.
The content provided in this blog is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by JVB. JVB does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. JVB does not warrant any advice provided by third parties. JVB does not guarantee the accuracy or completeness of the information provided by third parties. JVB recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.
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