finance

Which Debts Are Most Important to Pay Down?

/ Jennifer Larson

For a home loan, it’s not medical debt. In fact, the Biden Administration is focusing on passing legislation through Congress that would eliminate it from being considered in your credit score for many types of financing and home loans. It also depends on what your credit report says (go to http://www.annualcreditreport.com) and a detailed report will show this if lenders can see it or not but it’s not typically a factor to worry about for approval. The biggest hindrance might be your student loans.

Make sure you’re getting as much loan forgiveness as you can and negotiating with your creditors to reduce fees and interest rates. This will help lower your payments and DTI which helps you get approved for more. If you don’t have student loans, your next biggest hurdle is probably your car.

Cars of all brands are absolutely ridiculous nowadays. We have clients paying almost a thousand dollars for Fords and Toyotas and I’m not talking their top of the line models with extra features. It’s insane right now so imagine for luxury cars how that can affect your approval! Add up your car payments and that amount will be how much less you’re approved for in underwriting because that’s all DTI and those numbers are subtracted from your total approval. We start with your front end DTI which is just how much the house will cost you per month to buy. Your back end DTI then starts reducing that amount because we have to factor in your cars, your credit cards, payment plans you’re on, etc. If it’s on http://www.annualcreditreport.com and you pay monthly on it, it’s probably going to reduce your approval amount. Car payments by far are the biggest killers of dreams and buying a house. Don’t buy brand new, and get them two years old at least, to save thousands on dealer mark ups and depreciation.

Next is credit cards 💳. People use these like free money and they’re NOT! Before you apply for a mortgage, make sure you are below 15% utilization and don’t be surprised you have to pay below 10% to get approved. Clients need to understand their current balances due are a major factor because it’s debt we have to account for. Pay it down tremendously before applying. It doesn’t matter if you always pay in full, pay before you apply!!

These are the top debts to pay down (or off if you can) so that your chance of a new house isn’t ruined by all these payments. You can have debt and buy a house but you can’t have a lot of debt. Lenders want to see fiscally responsible borrowers and big car payments and credit card balances are not a good candidate for rates around 7%. Sorry. 🤷‍♀️

Every Woman Needs Her Own Bank Account

/ Jennifer Larson

This has nothing to do with marital status or financial situation. Every woman needs her own savings account. And you need a real account that actually earns you interest. Your standard savings account at your walk in bank isn’t giving you much at all. You’re earning pennies on the Benjamin instead of the dollars you can get from a high yield savings account HYSA from well-established instiutions like SoFi. I opened a free account with them, it didn’t even have a minimum requirement, and auto-enrolled my direct deposit of my stock dividends, royalty checks, company paychecks, earnings, and rollovers. We also did this for our kids. When they turn 18, they’re going to be set for a home once they have a stable job to get approved on their own. When you open a SoFi savings account, you automatically get a free checking account too!

This is not an ad for them. I legitimately did my research and their ability to withstand the market was the top reason I chose them. Small local banks are great for your bill checking account but for savings, get a strong and longstanding bank that can survive. Think 2008 and 2020. There are a couple of other companies claiming to pay out more until you read the fine print and read their average customer payout is actually closer to SoFi and also fluctuates more than SoFi does. Upon many hours of reading and Google searching I also found articles and interviews from the other competitors’ CEOs and he even admitted their volatility during the banking crisis and if it happened during COVID, when the interview took place, they would not have survived. The company does offer home and personal loan programs but not nearly as many viable programs as companies like SoFi because they’re smaller and just don’t have that market share; which is also why their average customer is signed up a whole percentage under their advertiesed APY.

Researching more about FDIC laws and some of the provisions the CEO mentioned gave me more pause. We all know when a bank is failing, the government always does a “bailout” process as per those guidelines which are decades old. Again, think 2008 and 2020. Those are because the laws require the Feds to perform an oversite and dig deep into the insitutions financials. Why did they fail? What were their reserves before and after? How are they being spent? etc. That’s what is happening in those bailout meetings with presidents because FDIC doesn’t just pay out–and that is why I also chose SoFi. Banks that have far less reserves and profitability, as this other CEO admitted his HYSA did, they have far more regulatory procedures to go through to get that money back to customers. That takes a lot of time which means your money could be MIA for an extended period of time while the bank undergoes federal scrutiny and forensic accounting audits. SoFi doesn’t have that problem and in a crash, is far more likely to have your money available. Done deal for me.

HYSAs work exactly the same with one caveat which is also a federal requirement so ALL US banks follow this rule: Limit 6 transactions per month. However, you can open as many free accounts as you want! You can even open a dozen at once and name them. For example; mortage, bills, college fund, etc. I signed up on my phone in like 5 minutes and just put in $50 to start because I had to make dinner and setup my deposits after I put the kids to bed.

You can go here and get started: https://www.sofi.com/invite/money?gcp=2dbe572d-72c2-4f5e-a7a4-c6cbb597ed56&isAliasGcp=false