Home

Don’t Let Outdated Preapproval Add to Your Home Search Woes

Posted on by Taylor Getler

As mortgage rates continue their stomach-turning rise and serious shoppers compete for a limited supply of homes, would-be home buyers may be struggling to make a successful offer before their mortgage preapproval letter expires.

According to Zillow, more than half of home buyers this year reported making two or more offers before closing on a home — and that’s only after finding one that meets their needs, which takes an average of eight weeks, according to the National Association of Realtors’ 2022 Home Buyers and Sellers Generational Trends Report. For some, the search lasts longer.

A typical letter is valid for 90 days, though that can vary by lender. This time-sensitive document from your lender tentatively estimates how much it is willing to lend you, and on what terms. It demonstrates to the home seller that your mortgage is likely secure, so the deal can close.

If your home search is outlasting your preapproval window but you’re committed to the hunt, you can relieve some pressure by renewing your preapproval with your lender. These tips will help you protect your mortgage preapproval and stay on top of your homebuying budget.

How to renew your mortgage preapproval

Keep your personal financial documentation on hand and get in touch with your lender before your mortgage preapproval window closes.

Confirm the letter’s expiration date

Your preapproval letter should either spell out the expiration date or list how many days the letter is valid (most likely 90 days or fewer). If there is any doubt, call or email your point of contact at the lender to confirm the date.

Contact your mortgage loan officer

Reach out to the mortgage loan officer listed on your letter and explain that you want to renew your preapproval. Since the lender already has your basic information, the re-application process shouldn’t take as long as when you initially applied for preapproval. According to Bank of America, it can take up to 10 business days to receive a new preapproval letter, so plan ahead. This way, you won’t experience a gap where you’re actively home shopping but haven’t been preapproved. This will also help ensure that the rate and total loan amount estimates you’re working with are timely and realistic.

Update your documentation

You’ll have to provide current versions of your preapproval documentation. This includes your most recent pay stubs and asset statements for your bank accounts, retirement accounts and brokerage accounts. If you’ve experienced a major life event that will impact your borrower profile, like a divorce, you’ll want to update your lender. Your credit score will also take a temporary dip, since this reassessment involves a hard credit pull.

Think of the process as a “refresh” instead of an “extension,” since the amount and terms of your preapproval will likely change with your new letter.

Consider a different kind of mortgage

Applying for a new preapproval letter comes with the opportunity to explore different kinds of loan options with your lender, says Sonu Mittal, head of mortgage at Citizens, based in Dallas. For example, adjustable-rate mortgages are becoming increasingly popular as borrowers bet on long-term rate trends. The rates for ARMs are typically lower during the introductory period and then change with the market.

Some lenders advertise loan programs that come with lower or temporarily suppressed rates. For example, New American Funding offers a “buydown loan” that allows borrowers to pay 1% or 2% less than the 30-year fixed rate for their first few years in the home, or a combination of those discounts.

If you choose to switch lenders, you’ll have to shop around again and start the application process over from scratch.

Reconsider the starter home

“If someone got a preapproval a couple of months ago, the probability of them being able to get it renewed is very high,” Mittal says. Still, Mittal says, even a borrower who has kept their finances in good shape could see their budget constrict with a new preapproval letter months later. Rising interest rates are making home loans more expensive, so borrowers renewing a preapproval may see a lower total mortgage amount for the same monthly payment. If you’re having a hard time finding a home within your preapproved budget, you may need to make some concessions.

“I feel like a lot of millennials are trying to make a move into the dream home from renting,” says Steve Ploetz, a Realtor with Century 21 Award in Carlsbad, California. Some home buyers may find that a smaller house, condo or property outside of a preferred neighborhood makes sense as a stepping stone to their real estate dreams. Limiting the scope of your search to what you can truly afford — instead of what ticks the most boxes on your wish list — may present more opportunities.

Check in with your lender often

It’s a mistake to think of a preapproval letter as a static document, Ploetz says. “We’re recommending that our clients touch base with their lender every other week,” he says, so that the borrower can get an updated perspective on what they qualify for and how rates are responding to recent changes in the market. Otherwise, Ploetz says, you risk working with outdated information and sabotaging your search.

If you want to level-up your home-shopping strategy, maintaining your mortgage preapproval is key. Staying in frequent contact with your lender and accounting for a changing budget can give you the tools to shop like a pro, even in a challenging market.

Taylor Getler writes for NerdWallet.

Image from 123rf.com

Image ID: 153730933

Advice for Renters Priced Out of Homebuying

Posted on by Barbara Marquand

Today’s housing market can feel like a dream killer.

Rising mortgage rates, high home prices and a shortage of properties for sale deliver a one-two-three punch.

If you’ve been knocked out of one too many deals and need a timeout, here’s how to regroup and keep the homeownership dream alive.

Give yourself a break

Given the rise in home prices and interest rates, the monthly mortgage payment for a median-priced single-family home with a 10% down payment has jumped by about $800 since January, according to a June 2022 National Association of Realtors press release.

That’s huge.

It’s OK to hit pause if you’re frazzled to the point that you can’t think clearly or are simply priced out.

“If it doesn’t feel right to you … step away and give yourself some breathing room,” says Catalina Franco-Cicero, a certified financial planner with Tobias Financial Advisors in Plantation, Florida. “It’s OK to do that.”

But stepping back doesn’t mean giving up.

“One thing we tell people with any goal that you have is that there’s a big difference between ‘no’ and ‘not yet,’” says Nathaniel Moore, a certified financial planner and president of Agape Planning Partners in Fresno, California.

Strengthen your finances

View the break as an opportunity to get your finances in even better shape.

Budget like a homeowner

Use a mortgage calculator to estimate a monthly mortgage payment, including estimated property taxes and home insurance. Then add utilities plus 20% of the monthly mortgage for unexpected maintenance and repairs, Moore suggests. Subtract your rent payment from that amount and set aside the rest in a high-yield savings account.

“That way, if and when you can get in the home, you don’t have sticker shock or you’re not house-rich and cash-poor because you didn’t account for the other expenses,” Moore says.

He likens the transition to a relay race.

“You want to have a smooth baton handoff, from the ‘renter you’ to the ‘homeowner you.’ If you’re not ready to walk in that house and afford the ancillary costs of living there, that’s when the baton fumbles and drops,” he says. “You want to get to the place where the rental person is running at the same speed as the homeownership person so when the baton is handed off it’s a smooth transition.”

When you’re ready to buy, you can add that extra money you’ve socked away to your down payment, which will help you make stronger offers and may qualify you for better mortgage rates.

“Nobody can truly predict interest rates nor inflation, nor the appreciation rate of homes in a relatively short period of time,” Eric Lefkowitz, president and chief operating officer of Motto Mortgage Mint in San Diego, said via email. “But we can be certain that buyers should be saving for strong down payment options. This will ensure they can get the best available interest rate when the time comes.”

Pay down debt

Paying down credit cards and other debt will improve two measurements: your credit score and your debt-to-income ratio, or DTI. Both are key factors that lenders consider when deciding whether you qualify and at what rate.

A good DTI — the percentage of gross monthly income that goes toward debt — is generally under 36%. The lower the better.

Your credit score is based in part on credit utilization, the percentage of available credit used. Shrinking your debt will lower credit utilization and help your score. Meanwhile, keep making on-time payments to preserve good credit.

“It’s going to give you a better mortgage rate and more options,” says Deb Gillard, a real estate agent with RE/MAX Venture in Owatonna, Minnesota.

Avoid optional big expenses

Resist the temptation to vent your frustration in a spending splurge, whether it’s running up a credit card balance or buying a new car when the old one suffices.

“That’s the last thing you want to do when you’re taking this pause,” Gillard says.

Another enticement may be to move to a nicer apartment. But stay put if you can, advises real estate broker Peggy Pratt, who leads the Pratt Properties Team of Century 21 North East in the Boston area. Paying the security deposit and other moving expenses could cut into savings for a down payment.

Reevaluate your wants and needs

This is a good time to look at the big picture.

“People need to do some soul searching to say, ‘What am I looking for in a home?’” Moore says.

Given home prices and mortgage rates, you may need to adjust your filters. You may need to shop for homes in a different neighborhood or buy something smaller than originally imagined. If the aim is to buy a starter home, build equity and upgrade in a few years, then that flexibility may pay off.

“Homeownership is a step-by-step opportunity,” Lefkowitz said. “You are not committing to stay in a home forever.”

If you could work elsewhere, another option you might consider is relocating to a less-expensive housing market, Franco-Cicero says. That’s a big decision. Taking a pause can give you time to research the quality of life and cost of living in other locations and weigh whether you want to live somewhere else.

Keep in touch with your agent, lender

Besides fine-tuning finances and reevaluating goals, keep in touch with experts you trust who can watch the market and bring you back in when you’re ready, Lefkowitz said.

“This includes a strong Realtor and mortgage professional,” he said. “Together, that partnership can keep the buyers’ best interest top of mind and be ready to pounce on an excellent property when it becomes available.”

Let them know if you can make a bigger down payment, for instance. Keep your agent updated on when you might be ready to jump back into the market and the types of homes and areas you’re willing to consider.

Pratt says she counsels clients to maintain realistic expectations and not give up.

“Hang in there,” she says. “Something will come.”

—

Image ID:78085995

Turn Your Quarantine Clutter Into Money

Posted on by Courtney Jespersen

I placed more online orders than I can count in 2020. And I justified all of them.

My front porch was filled with boxes containing all sorts of things: furniture (I needed to redecorate), paper towels (I needed to stock up), crafts (I needed activities), board games (more activities) and a treadmill (I needed exercise).

But if I’m being honest, I bought a little too much.

Take a look around your place. If your quarantine habits were even a tiny bit like mine, you could turn that clutter into money. Here’s how.

Too much stuff? Sell it

Perhaps you purchased more than you ended up using, like board games or video games. Or maybe you bought new products to replace old items and were left with a drawer of discarded technology.

Whatever the case, you have more than you need. And there are lots of places to sell your stuff online.

Chelsea Lipford Wolf, co-host of the “Today’s Homeowner” TV show and host of the “Checking In With Chelsea” web series, says she made over $1,000 selling things online during the last six months of 2020 through Facebook Marketplace, an outlet for buying and selling locally.

You can, too. Look online for this or another marketplace that suits your needs. For example, Facebook Marketplace caters to local transactions, while other sites focus on product categories like tech or apparel. Read the directions to see how the site works and check for customer reviews or a Better Business Bureau accreditation before committing. Make an account, then get to work.

You can sell almost anything online — technology, furniture, clothing, video games and toys, to name a few.

Here are Wolf’s keys to making things sell:

  • Presentation. “You want the item you’re selling to be the focal point of your photo,” Wolf says. Clean it first, then take flattering photos in natural sunlight, preferably near a window. Get multiple angles.
  • Price. Consider what someone might pay for the item, then price it slightly lower to make it move. You can also check listings posted by other users to determine the going rate.
  • Particulars. Spell out everything in the description, including the brand and any imperfections. A more detailed listing means less back and forth with potential buyers. As the saying goes, “Time is money,” Wolf says.

Too much work? Consign

Depending on which site you use, you’ll have to write listings, package your items and send them either directly to the buyer or to the platform you used to make the sale. In some cases, you can deliver in person.

To save time and effort, take your stuff to a local consignment store instead. You’ll likely make less, but the store does the selling for you. Expect to pocket half of the selling price, Wolf says.

Other options? Give things away to family and friends. Donate to a local charity. And throw away items that have absolutely no use.

Too many temptations? Scale back

Once you’ve sold and donated what you can, fight the urge to impulse shop again. Keeping up your current habits could get you right back to where you started. One way to avoid that? Save first and buy later.

This approach is the exact opposite of putting something on a credit card and paying it off after the fact, says Pam Horack, a certified financial planner and the owner of Pathfinder Planning LLC, based in Lake Wylie, South Carolina.

Save money and wait to place an order until you can afford it in full. Horack says her family has a designated clothing account. When someone needs a new pair of shoes, the money comes from what they’ve set aside.

You can do the same with a general spending account. “If you don’t have money in that account, then you can’t buy it,” Horack says. “That needs to be your rule.”

There are also ways to stay busy without spending much, if any, money. Here are some of Horack’s ideas: Redecorate your house by moving around your furniture. Spend time outdoors. Finish up projects around the house. You’ll spend less and accumulate less stuff.

Too expensive? Buy used

But you can’t stop shopping altogether. For things you absolutely need, consider buying on the same websites you used to make extra money.

When you list products, you won’t sell them for as much as you originally paid for them. That means you can purchase things at a significant discount, too.

Consumers have been buying and selling used during the pandemic, according to Sara Beane, media relations specialist at technology marketplace Swappa. “Everybody is kind of strapped during this unprecedented time,” Beane says.

For example, the site saw a rush on laptops around back-to-school season.

Search used marketplaces by model and condition of the item. You’ll find many price points to fit your budget.

But before you hit the “buy” button, do some organizing, Wolf says.

“If you have so much stuff that you can’t see what you have, then you’re going to buy more than you need.”

This article was written by NerdWallet and was originally published by The Associated Press.

Courtney Jespersen writes for NerdWallet. Email: courtney@nerdwallet.com. Twitter: @CourtneyNerd.

The article Turn Your Quarantine Clutter Into Money originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 127399817

How to Build a Home Office Without Breaking the Bank

Posted on by Annie Millerbernd

For about six months beginning in January, James Hulett’s garage became his home office. His company sent him home earlier than most workplaces in an effort to keep the coronavirus from spreading.

“I have a 3-year-old son who’s way into tools, so he would be [in the garage] finding tools to take them inside and take apart toys and stuff,” he says. “It was a circus.”

In the summer, he and his wife bought a home west of Salt Lake City that could accommodate an indoor workspace. All that was left was to turn it into an office.

Hulett, like employees at many companies in the U.S., expects to work from home at least through the end of the year. Some companies have announced plans to keep office doors closed well into 2021, and others have offered remote work as a permanent option for employees.

If you’re ready to start building your home office, here are tips for managing the costs, plus financing options for more extensive projects.

Consider your cash on hand

Hulett furnished his office using money he could spend within his weekly budget. His emergency fund is ironclad, he says, so dipping into it wasn’t an option.

Over a third (34%) of homeowners who have done home renovations since March 1 took the same approach, paying for their projects with cash they had on hand, according to a recent NerdWallet survey.

If you aren’t using savings designated for home improvement, it’s OK to use your emergency fund, says New York-based certified financial planner Jeff Wolniewicz. After all, he says, that fund is for unexpected expenses.

Just be mindful of how much you need in your emergency fund to feel secure and make a plan to replenish it right away.

“I think everybody has seen how important it is through COVID to maintain that,” he says. “An emergency fund is a huge peace-of-mind right now, so just have that plan to rebuild it.”

You can also put smaller home office purchases on a rewards credit card that gives cash back. Pay the full balance each month to keep interest charges from outweighing the rewards.

Focus your spending

One spending strategy is to invest in pieces that will make your work time more productive and enjoyable and to spend less where it won’t make as much of a difference.

A key piece that can create an effective office environment is a comfortable, supportive office chair, says interior designer Kerrie Kelly, who is based in Sacramento, California.

She suggests finding one that’s similar to what you have at work.

You can also get your money’s worth out of a fresh coat of paint. She says a new color can help create the feeling you want when you’re working.

“If that light blue changes your mood, go for it, or if you think that crisp white is gonna keep you really organized, then go do that,” Kelly says.

Additionally, find a way to compartmentalize. Especially if your workspace doubles as a dining room, for example, invest in ways to hide your work — from yourself, if nobody else. She suggests something like a rolling storage cart.

For his home office, Hulett wanted a formal, work-like atmosphere — he still puts on a button-down and gets ready for work — and for him, that meant an executive desk and credenza.

“I wanted there to be some kind of stepping out of normal home life into a work situation,” he says.

Shop secondhand

Hulett says his office cost $3,500 to furnish, and almost everything in it is secondhand.

His biggest tip is to use websites like eBay and Facebook Marketplace, where people are reselling office furniture in bulk at low prices.

Hulett says his desk was about $100 on Facebook. A similar desk by the same designer is valued at $3,000 by a vintage furniture store. Hulett drove to Phoenix to buy the matching credenza he saw on Instagram for about $800.

“It’s like a weird secondary economic phenomenon of COVID,” Hulett says. “I don’t think it’s ever been easier to get equipment that’s on par with what people are used to using at work.”

Get financing for bigger upgrades

Homeowners hired professionals for about 63% of home improvement projects between 2017 and 2019, according to the NerdWallet report. And professional help doesn’t always come cheap. If you’re thinking about adding a room or a more extensive workspace renovation, you have a few financing options.

A credit card with a 0% interest promotion could help you pay for your office updates interest-free, Wolniewicz says. The no-interest period on these cards is usually 12 to 18 months, so keep the interest rate in mind in case you can’t pay it off during that period.

You usually need good or excellent credit to qualify, Wolniewicz says, and though he sees some issuers making more zero-interest offers than earlier in the pandemic, they may still be hard to come by.

For building a home office, Wolniewicz recommends a home equity line of credit because of its flexibility. You can take only what you need from a HELOC and leave the rest, unlike a home equity loan, which comes in a lump sum.

If you can’t get your hands on a zero-interest credit card and you don’t want to tap your equity, consider a home improvement loan. You usually get the funds from these loans faster than an equity loan, and they can have annual percentage rates lower than a credit card.

Because they have higher rates than HELOCs and typically shorter repayment periods, your monthly payments could be higher, Wolniewicz says, but you’ll also clear your debt faster.

Annie Millerbernd is a writer at NerdWallet. Email: amillerbernd@nerdwallet.com.

The article How to Build a Home Office Without Breaking the Bank originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 94217029

Surprising Things Renters Insurance Covers — And Leaves Out

Posted on by Sarah Schlichter

Insurance is designed to offer peace of mind, but there’s a reason your policy has all that fine print: You might not have the coverage you expect. Like any other insurance policy, renters insurance has exclusions, and knowing about them ahead of time can help you avoid unexpected bills in a disaster.

Just as important, though, is knowing what is covered. All that fine print in your policy likely includes coverage you might not expect, which could save you money down the line.

Covered: Belongings outside your home

Most renters know insurance covers personal belongings within their home but may not realize their things are probably covered off-premises too, including when traveling. Barbara Madvin, an insurance agent at Gaspar Insurance Services, says vehicle break-ins are some of the most common insurance claims she sees for renters. While damage to the car itself is generally covered by your auto policy, your renters insurance pays for items stolen from the vehicle, as long as their value exceeds your deductible.

Your renters policy will also cover your belongings if you move them from your home to a storage unit, a friend’s house or anywhere else to protect them from a covered disaster. In the event of a wildfire or hurricane evacuation, this can be particularly valuable, according to Christine G. Barlow, a chartered property casualty underwriter. This coverage typically lasts 30 days.

Covered: Living expenses if your rental is uninhabitable

While your home is undergoing repairs due to a fire or other covered disaster, your insurance company will usually pay for you to maintain your normal standard of living somewhere else.

A “normal standard of living” is broader than you might think. For instance, if you live in a rental home with a pool that you use every day, “the carrier needs to put you someplace where you have access to a swimming pool,” says Barlow, who is also managing editor at FC&S Expert Coverage Interpretation, a trade publication. If you have pets, your insurer should find you pet-friendly accommodations or board the animals where you normally would.

Not covered: Common disasters

Most renters insurance covers your possessions only in the case of specific scenarios, or “named perils” listed in the policy — things like fire, theft and wind. “If something’s not mentioned in that list, then there’s no coverage,” Barlow says.

For example, flood damage is almost always excluded from renters policies and typically must be purchased separately. (One exception: USAA, which serves military families, includes flood coverage with standard renters policies.)

Not covered: Brand-new stuff

Madvin recommends asking whether replacement cost coverage is included in your policy. If not, your belongings are covered only for their depreciated value, which often isn’t enough to buy brand-new replacements.

Say your 10-year-old TV is stolen and replacement cost isn’t included. “The carrier’s going to say, ‘OK, you paid $1,000 for it 10 years ago; we’ll give you $250 for it now,’” Madvin says. With replacement cost coverage, you’ll receive enough to purchase a new TV.

Not covered: Expensive valuables

Most renters policies cover jewelry and other costly items only up to a specific limit named in the policy, typically $1,000 to $2,000. So if you have an expensive engagement ring, for example, both Madvin and Barlow recommend adding separate coverage for it. An appraisal is usually required.

How to avoid surprises

Before buying renters insurance, take inventory of your belongings. “Most renters underestimate how much stuff they have,” Barlow says, which can leave a coverage gap. Barlow recommends using the Encircle app to upload photos of your belongings and estimate their worth. Other similar apps include Sortly and Allstate’s Digital Locker.

Read your policy thoroughly. Barlow suggests marking it with what’s covered in green and what isn’t in red. Madvin advises paying particular attention to the policy’s endorsements, which are typically add-ons or exclusions to standard coverage.

Confused by all the legalese? Turn to an expert. Talking through your options with an insurance agent or broker can ensure you understand the policy you’re buying. “Unless you really know insurance,” Barlow says, “it’s very easy to miss coverages that you need or to not realize something isn’t covered.”

This article was written by NerdWallet and was originally published by The Associated Press. 

Sarah Schlichter is a writer at NerdWallet. Email: sschlichter@nerdwallet.com.

The article Surprising Things Renters Insurance Covers — And Leaves Out originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 47220962

How to Pay Rent When You Can’t Afford It

Posted on by Melissa Lambarena

After Megan Pearson’s job as a restaurant server was put on hold because of COVID-19-related stay-at-home orders, the single mom had to figure out how to come up with the rent for her apartment in Brooklyn, New York.

“I posted my frustration on Facebook with trying to get through to unemployment the first week,” Pearson says. “I probably made 200 phone calls before I got it all settled.”

Uncertain whether assistance would arrive on time or at all, Pearson took action, reluctantly creating a crowdfunding account at the encouragement of a friend who’d seen her social media post. This move bought Pearson some time and ultimately allowed her to stay in her apartment without having to take on expensive debt.

If you, too, are dealing with an emergency and scrambling to make rent, consider some of the following steps first before resorting to high-interest loans.

Explore free options first

Some states have issued eviction moratoriums during the COVID-19 crisis, but you’re still responsible for paying rent. So the first step is to reevaluate your budget and “find” money where you can.

Cut back on nonessential expenses, lower 401(k) contributions, reach out to creditors for assistance and seek low-income programs for food and utilities, suggests Jeffrey Arevalo, a financial wellness expert with GreenPath, a nonprofit credit counseling agency.

Here are some options that cost nothing or close to it:

  • Take the help you can get. Applying for unemployment or other assistance programs may take time, but it can certainly be worth it. Pearson expects she’ll cover future rent payments with unemployment and coronavirus stimulus money.
  • Talk to your landlord. Explain your situation and ask for more time until a check arrives. You could also request an installment plan or waived late fees. Your landlord might be willing to help, especially if you have a history of paying on time. “It’s worth a shot,” says Arevalo, who notes he’s worked with clients who’ve had success with this step. Whatever terms are negotiated, get them in writing.
  • Call 211. Local nonprofits and religious organizations may offer rental assistance. United Way helps access those services upon calling 211. Note, however, that resources may be limited during national emergencies.
  • Apply for grants in your industry. Associations are raising money for people displaced from jobs in their industries due to COVID-19. Pearson applied for a grant from the Restaurant Strong Fund, which helps restaurant workers affected by COVID-19 closures, though she has not yet heard back.
  • Ask for help from family or friends. Loved ones — and strangers with steady income, for that matter — might be willing to help. Pearson raised $3,995 toward rent and essential expenses via the GoFundMe crowdfunding platform. “If you don’t ask, no one knows you need it,” Pearson says. If you’re not comfortable with crowdfunding, you could also ask family members for a loan.
  • Modify living arrangements. If your lease permits, consider subletting your apartment or a room. Or move in with a loved one and help each other by divvying up rent costs. Of course, moving may come with its own expenses, and if you’re under contract, you’ll have to weigh the cost of breaking your lease. Again, talk to your landlord to see what’s negotiable.
  • Seek professional advice. A credit counselor can review your finances for potential savings toward rent. Currently, GreenPath Financial Wellness is offering free phone-based financial counseling during the pandemic.

Lean on investments

Typically, it isn’t advisable to dip into money that’s meant for your future, but these aren’t typical times. When an emergency threatens to evict you — here and now, in the present — the normal “rules” don’t always apply.

If you have a taxable brokerage account, you could consider selling stocks. Otherwise, the next potential option might be a withdrawal from a 401(k) or individual retirement account, says Andrew Rosen, financial advisor and partner at Diversified, a financial planning firm. Again, raiding your retirement funds is not ideal, but in a crisis it may be necessary — and you may be able to mitigate the financial repercussions.

Under the Coronavirus Aid, Relief and Economic Security Act, for example, those under age 59½ years impacted physically or financially by COVID-19 can withdraw up to $100,000 from an eligible 401(k) or IRA through Dec. 31, 2020, without the usual 10% early withdrawal penalty. The tax bill is spread over the next three years, and you can claim a tax refund if you pay it back before that time. If you’ve lost your job, roll over your 401(k) to an IRA and then make a withdrawal, Rosen suggests.

The CARES Act also lets qualifying 401(k) plan participants borrow 100% of their vested balance up to $100,000 as a loan. And in emergencies unrelated to COVID-19, a loan on a 401(k) — if available through your employer — avoids penalties, taxes and a credit check.

Still, think hard before going this route. If you are truly drowning in debt and rent is just one of many financial obligations you’re unable to meet, you may want to consider other options.

“Most people don’t realize that generally speaking, your retirement accounts are protected in a bankruptcy,” Rosen says.

Choose the least expensive high-interest debt

You could look to finance some of your expenses to help cover rent by, say, opening up a low-interest credit card. But without sufficient income or good credit (typically a FICO score of at least 690), you may be left with only high-interest financing options. Consider the following, in order from least to most expensive:

  • Borrow against your existing credit card’s limit. Targeted offers like the Citi Flex Loan and My Chase Loan let you borrow against your card’s credit limit with a fixed interest rate and term. The money is deposited into a bank account without the need for a credit check or origination fee.
  • Pay rent with your credit card. Some services facilitate rent payments with a credit card, for a price. Plastiq, for instance, will let you charge your rent to your card and will then cut your landlord a check on your behalf, in exchange for a 2.5% processing fee. Weigh the costs of that fee before going this route, and be aware that if you can’t pay it back in full within a billing cycle, you’ll incur interest on the rent payment at whatever APR your card charges.
  • Among your last resorts, consider a cash advance. A cash advance can offer quick cash up to the amount of your available limit, but you’ll pay dearly for it in the form of a steep fee and an interest rate that starts accruing the moment you pull the cash from your bank or ATM. Cash advances could also negatively impact your credit by increasing your credit utilization, a key factor in credit scores. Still, it’s a possibility if you need it, and it’s likely cheaper than turning to a payday loan, which may not be an option anyway if you are no longer collecting a paycheck.

The article How to Pay Rent When You Can’t Afford It originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 41393393

3 Signs That Itemizing Your Taxes May Be Worth the Headache

Posted on by Tina Orem

For many people, one of tax season’s trickiest decisions is whether to take the standard deduction or itemize. Taking the standard deduction may be faster and simpler, but itemizing could save more money if you have the time and energy to fill out extra forms and dig up receipts.

Fortunately, two tax pros say it’s often easy to tell ahead of time whether itemizing could be worth the effort — if you know some of the signs.

Sign 1: You owned a home

Mortgage interest, mortgage insurance premiums and property taxes are typically deductible if you itemize, and they can easily exceed the standard deduction for many taxpayers. There’s a $10,000 limit on the amount of state and local taxes, including property taxes, you can deduct but that’s not necessarily a deal-breaker, says Matt Keefer, a certified public accountant and director of tax services at Gorfine Schiller Gardyn in Owings Mills, Maryland.

“If I know a [single] taxpayer is guaranteed to have at least $10,000 [in deductions tied to state and local taxes], then I only need another $2,200 of other types of itemized deductions to get above the standard deduction,” he says. “That’s the typical way that I look at it to see if it’s worth the effort for the clients to track down all the documents or not.”

Sign 2: You had big medical expenses

Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income can be deductible if you itemize. “So if you have $100,000 [of adjusted gross income], the first $7,500 is not deductible, but the excess is,” says Robert Karon, a certified public accountant and managing director at CBIZ MHM in Minneapolis. Eyeglasses, dental bills, doctors’ fees and other costs that insurance didn’t cover could add to the pot.

Sign 3: You donated money or goods to charity

Charitable donations are popular tax deductions, but you can only claim them if you itemize. When added to other itemized deductions, they can tip the scales toward itemizing, Karon notes. “For many people, it’s not a big number, but if it’s two, or three or four or five thousand dollars, it adds up,” he says.

Signs of things to come

The key is to view the signs cumulatively. Karon says he can get a good idea fairly quickly when people own a home and pay state income tax, for example.

“They’re going to have at least $10,000 worth of [state and local] taxes,” he says. “Second thing you look at is their mortgage interest. If they have a $500,000 mortgage at 4%, that’s $20,000 worth of interest. So already, $20,000 and $10,000 is $30,000. That person’s itemizing. And then you’re going to want to inquire about charitable donations if they didn’t list them, or medical expenses if they didn’t list them.”

Renters who didn’t have a ton of unreimbursed medical expenses or charitable deductions, on the other hand, are probably going to take the standard deduction. “You’re going to be able to eyeball that pretty quickly,” Karon adds.

Tax preparers and tax software typically run the numbers both ways to calculate which route will save the most money.

Even if you go with the standard deduction, the IRS may let you subtract a few extra things without having to itemize. A big one is business expenses from a side gig, which may go on Schedule C, Karon says. And there are so-called above-the-line deductions people may be able to take without itemizing, including for things such as certain IRA contributions, student loan interest, teaching expenses or contributions to health savings accounts.

Think about your state income tax return when deciding whether to itemize or take the standard deduction, Keefer notes.

“Here in the state of Maryland, if you take the standard deduction on the federal return, then you have to take the standard deduction on the Maryland return,” he says. “It’s something to look out for.”

Tina Orem is a writer at NerdWallet. Email: torem@nerdwallet.com.

The article 3 Signs That Itemizing Your Taxes May Be Worth the Headache originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 32360801

How to Give Back Without Busting Your Budget

Posted on by Amrita Jayakumar

It may not come as a surprise that millennials are passionate about giving back.

Millennials as a generation believe in supporting causes more than individual organizations, are likely to be influenced by peer networks when it comes to giving and want to give back in terms of money, time and leadership, according to the Millennial Impact Report, a decade-long study of millennial philanthropic behavior.

As you move through your career, you’ll likely have more room in your wallet to give back. Here’s how to prioritize causes you care about and be strategic about giving, regardless of your income.

Create a giving plan

The environment. Women’s issues. Children’s education. Animal welfare. There are so many causes that could benefit from your time and money that it can be overwhelming.

Begin by writing down the issues you care about most, says Andrea Pactor, interim director of the Women’s Philanthropy Institute at Indiana University.

The act of making the list gives you clarity about what’s important to you and how to direct your spending or your time. (Financial planners say this is also a handy technique for prioritizing your financial goals, like saving for a down payment or getting rid of student loans, and creating a budget.)

“The next step is to do a real assessment of what you’re giving now,” Pactor says. “Is what I’m doing now aligned with my values?”

If you find yourself contributing to causes only when a friend or family member asks for help or clicking yes to Facebook pledge requests, having a giving plan can help you focus on the issues you really care about.

“The benefit of a giving plan is that it enables the person who’s been asked to say no without feeling guilty,” Pactor says.

Determine your do-good fund

Financial experts say there’s no rule of thumb about how much of your income you should dedicate to charitable giving.

Religious communities that practice tithing recommend giving 10% of your income, but unless you adhere to that, there’s no “right” amount, says Christine Centeno, a certified financial planner at Simplicity Wealth Management near Richmond, Virginia.

“It all goes back to what you can afford,” she says. “Charitable gifting is important, but you have to make sure you are saving for retirement and building a cash reserve.” Centeno notes that volunteering your time or expertise can be an alternative to cash donations.

Regardless of how much you make, you can pick a percentage of your income and set it aside for giving, says Theresa Stevens, a financial coach who works with millennials at Declutter Your Money in Providence, Rhode Island.

Stevens says starting now — with as little as 1% — instead of waiting until you reach some target number helps you build a savings habit that you can apply to other aspects of your finances.

When your income changes, revisit your giving plan to see if your priorities have changed and how much you can afford to donate, Pactor says.

Stevens recommends dividing your giving allowance into two buckets — one for causes you choose and one for spontaneous giving. “If I have 5% [set aside] for giving, I might earmark 3% for an organization I’ve chosen and 2% for Facebook fundraisers or causes that come up randomly,” she says. The key is making room in your budget for both your own charitable causes and those of others.

Make a meaningful impact

Even if you feel like your donations are modest, you can ensure every dollar you give counts.

Both Pactor and Centeno recommend looking at websites like Charity Navigator and GuideStar,  which allow you to research nonprofits, see their tax filings and identify organizations that make the most impact on your chosen cause.

Since charity begins at home, your local Community Foundation website is also a good place to start. Many have a list of vetted organizations in your community you can help.

Lastly, if your company matches your charitable donations, use that to double the amount you give to your favorite cause, Centeno says.

—

The article How to Give Back Without Busting Your Budget originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 20130425

5 Halloween Headaches and How Insurance Can Help

Posted on by Beth Buczynski

When ghosts and goblins run amok, only people with the right insurance will be in luck. Find out which policies pay when Halloween pranks are more trick than treat — or when something more serious happens.

1. Your car gets egged

Last year, insurance claims related to car vandalism increased on Halloween and the days before and after, says Kevin Quinn, vice president of claims at Mercury Insurance. Raw eggs, pumpkins and rocks are all common projectiles.

How insurance can help: If your car can’t be cleaned or suffers serious damage, such as a broken window, it’s usually covered by comprehensive car insurance.

2. Goblins toilet-paper the yard

It’s not uncommon for little goblins to damage trees or landscaping while “TP’ing” a yard.

How insurance can help: Homeowners insurance generally will cover you. If you’re making a claim, call your insurer for an inspection before cleaning up. An adjuster needs to document the damage.

3. Yard decorations disappear

Whether it’s your vintage lawn gnome or a lifesize animatronic zombie, yard decor is vulnerable to Halloween thieves.

How insurance can help: Standard homeowners, condo and renters insurance often provides coverage if outdoor decorations disappear. Just be sure you’ve saved the receipts and made a police report.

4. The jack-o’-lantern starts a fire

As with vehicle vandalism, residential fires are more common around Halloween, according to the U.S. Fire Administration. The biggest causes are cooking and heating, but carelessness, open flames, electrical malfunctions and intentional acts can also be to blame.

How insurance can help: Fire damage is covered by homeowners insurance, including living expenses if you have to stay elsewhere during repairs. Rented property typically is covered by the landlord’s policy, but you’ll need renters insurance to get reimbursed for personal belongings.

5. Pedestrians act unpredictably

Besides New Year’s, Halloween sees a higher number of pedestrian deaths than any other night of the year, according to the National Highway Traffic Safety Administration. Sadly, many victims are children.

Costumed kids can be hard to see, often roaming without their parents and more likely to dart into the street, says Nicole Mahrt-Ganley, senior director of public affairs at the Property Casualty Insurers Association of America.

She says adults who are distracted by their mobile devices or intoxicated can also be unpredictable pedestrians.

How insurance can help: Your auto liability insurance covers injuries you cause while driving.

Halloween insurance tips

  • Prevent problems: Park cars in the garage or a well-lit area, use battery-operated candles or glow sticks in your pumpkin and be cautious when driving on trick-or-treat night.
  • Don’t make small claims: If damaged or stolen items are worth less than your deductible, it’s not worth making an insurance claim.

The article 5 Halloween Headaches and How Insurance Can Help originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID: 45554764

Don’t Ignore the Signs of Financial Abuse

Posted on by Kelsey Sheehy

Nearly 70% of millennial women have experienced financial abuse by a romantic partner.

Let that sink in for a second.

That means, for every 10 women you know in that age group, odds are that seven of them have had a partner use money to control or manipulate them, according to a 2017 survey of 2,000 people ages 18-35 by CentSai, a financial wellness website.

Sadly, it’s not surprising given that 1 in 4 women will experience intimate partner violence in their lifetime — often for the first time before they are 25 years old, according to the Centers for Disease Control and Prevention. And financial abuse is present in nearly all domestic abuse cases.

But financial abuse can and does occur absent of any physical violence. And it isn’t strictly a millennial problem, nor is it something that happens exclusively to women. Almost 50% of men in the survey by CentSai said they experienced some form of financial abuse.

Recognizing financial abuse

Financial abuse can run the gamut from subtle to egregious.

It might look like a partner who can’t keep a job or pay their share of the bills. Or one who makes you feel guilty for spending your own money. But it could also be a partner who offers to handle the household finances, then gradually restricts your access to those accounts.

Some other common forms of financial abuse:

  • They open credit cards in your name without your knowledge.
  • They default on accounts in your name, ruining your credit.
  • They make you take out loans or borrow from your family, but don’t pay it back.
  • They hide money from you.
  • They refuse to let you work or try to sabotage your career.

If you feel like you’re being taken advantage of financially, bring it up with your partner. How they react will tell you a lot.

Do they get angry? Do they shift the blame to you? Do they make you feel guilty for questioning them? Or do they apologize and take meaningful steps to remedy the situation?

“A good sign is if you feel like you can have that conversation and your partner is receptive to it,” says Katie Hood, CEO of the One Love Foundation, a nonprofit that teaches young people how to identify and avoid abusive relationships.

But if you’re avoiding these types of conversations out of fear for how your partner could react, that might be a warning sign.

“When someone is in an abusive relationship … they basically start managing their life around another person’s anger and volatility,” Hood says.

Look for patterns

Financial abuse, like most forms of abuse, typically isn’t a one-off behavior, but part of a trend that escalates over time, so it’s important to look for the patterns, Hood says.

“I think about it like falling down a rabbit hole,” Hood says. “It starts out great — you’re adored. The next step is isolation … they basically pull you away from your support network and tether you to them. Then, they start the emotional abuse — manipulating you, being controlling, sabotage, calling you names, calling you crazy.”

How to get help

First, assess your risk level. If you fear for your safety call the National Domestic Violence Hotline at 800-799-7233 or TTY 800-787-3224 or contact a local hotline immediately. They can connect you with resources and help you get out of the relationship safely.

If you’re not concerned for your safety, start building an exit plan.

“The first step is to be aware. The second is to start doing some protection,” says Shannon Thomas, author of “Exposing Financial Abuse.” At this stage, it’s important to not tell your abuser you’re going to leave. “I’ve talked to folks that confronted the abuser, and the next day all the money was out of the account.”

Instead, get educated. Find out where your joint accounts are and how to get access to them. Bank staff can be helpful, Thomas says. It’s difficult, but important, to be honest about what you suspect is going on. Remember, it’s something they’ve likely heard before.

If you suspect a loved one is experiencing financial abuse, express your concern without berating their partner. Point out patterns that you see and ask for their assessment.

“They may get defensive. They may push back,” Thomas says. “But if someone gently asks and says ‘I’m seeing this and I’m concerned,’ it opens the door.”

This article was written by NerdWallet and was originally published by The Associated Press.

The article Don’t Ignore the Signs of Financial Abuse originally appeared on NerdWallet.

Image provided by 123rf.com

Image ID 35137018