5 Things You Need to Know About Attainable Housing

• What is attainable housing?
• Are there any assistance programs available?
• How does attainable housing help in a competitive market?
• Are there any additional costs to budget for?
• What else can I do to make housing affordable?

1. What is attainable housing?

You’ve probably heard of affordable housing, which usually refers to programs for low-income buyers. So, what is attainable housing? It’s designed for middle-income households—people who earn too much to qualify for low-income assistance but not enough to comfortably afford expensive market-rate homes.

Attainable housing often includes:

• Smaller single-family homes
• Townhomes or condominiums
• Duplexes and triplexes
• Homes in up-and-coming neighborhoods

These properties are meant to be within reach for middle-class buyers, often through special financing programs, incentives, or new construction projects aimed at affordability.

Pro Tip: Some lenders may partner with builders to offer exclusive financing options for attainable housing. Ask your lender about their builder offerings—it may help you get more competitive rates.

2. Are there any assistance programs available?

The good news? You don’t have to do this alone. There are plenty of programs designed to help middle-income buyers get into a home. Here are a few worth looking into:

• First-time homebuyer programs: Many states and cities offer down payment assistance, lower interest rates, and grants for first-time buyers. 
• Government-backed loans: Loans like FHA, VA, and USDA loans allow for lower down payments, making it easier to buy with less upfront cash.
• Employer homebuyer assistance: Some employers offer homebuyer benefits, especially for teachers, healthcare workers, and first responders.
• Local homebuyer incentives: Some cities provide special financing for middle-income buyers looking to purchase in revitalization areas.

These programs can make a huge difference, and the right mortgage team will make sure you’re aware of all the options available to you. Your real estate agent may also be able to help.

3. How does attainable housing help in a competitive market?

Attainable housing expands your options beyond traditional homes. Still, if you’ve been house hunting, you know it’s competitive no matter what you’re looking for. Homes in this price range often get multiple offers, so you’ll need to be strategic. Here’s how to improve your chances:

• Get pre-approved early. Sellers take buyers more seriously when they have a pre-approval letter from a lender. Attainable housing means typically lower costs, so you don’t need to be pre-approved for as high an amount to compete as you would for a traditional home.
• Expand your search area. Homes in up-and-coming neighborhoods or just outside major metro areas may be more affordable than homes in suburbs, while still offering more space than housing in popular neighborhoods like downtown areas.
• Be flexible on home features. If you’re willing to do a little cosmetic work, you might find a great home at a lower price. Renovation loans can help bridge the gap between what you can afford upfront and your ideal home features.

The key is to be prepared and move quickly when you find a home that fits your needs.

4. Are there any additional costs to budget for?

Attainable housing doesn’t necessarily entail any unique fees. However, as with any purchase, the price of the home itself isn’t the only cost you’ll be paying. Keep these four expenses in mind to strategically create your best budget:

• Property taxes and HOA fees. Even if the mortgage payment is affordable, these extra costs can add up. Make sure your budget has some wiggle room.
• Maintenance and repairs. Older homes might be cheaper upfront but could require expensive fixes. Luckily, a renovation mortgage could help you roll the repair costs into your home loan.
• Private mortgage insurance (PMI). If your down payment is less than 20%, you may need to pay PMI. This only applies to Conventional loans, however.
• Utility costs. Bigger homes or older properties can have higher energy bills. Attainable housing is typically smaller, so you could actually enjoy lower utility bills as a result.

5. What else can I do to make housing more affordable?

If buying a home still feels out of reach, there are creative ways to make it work.

• Consider a duplex or triplex. Buying a multi-unit property allows you to rent out part of the home, helping to cover your mortgage.
• Look into co-buying. Purchasing a home with family or friends can split the costs and make homeownership more affordable.
• Check for energy-efficient homes. Some homes qualify for energy-efficient mortgage programs, which can help lower utility costs over time.

The goal is to find a home that not only fits your budget now but remains affordable in the long run.

Key Takeaways: 4 Things to Love About Attainable Housing

What is attainable housing? After reading this blog, hopefully it’s a straightforward, affordable solution to reaching your homeownership goals. As you explore the right path to homeownership for you, keep these four benefits in mind:

• Attainable housing offers an affordable alternative to traditional homes
• There are more options than you might think when it comes to the types of homes that are considered “attainable housing”
• While your income level may disqualify you from financial aid reserved for affordable housing, attainable housing can still be paired with other programs for even more accessible pricing
• Compared to traditional suburban housing, attainable housing has an overall lower environmental footprint

Attainable housing is designed for middle-income households—people who earn too much to qualify for low-income assistance but not enough to comfortably afford expensive market-rate homes.

The post What Is Attainable Housing? An Affordable Solution You’ll Love appeared first on Cardinal Financial.

Depending on the date of closing, the amount of property tax that a homebuyer and seller are responsible for will vary. The process of figuring out who pays how much is called tax proration, and it’s one cost that many buyers overlook when calculating their cash to close.

What is tax proration?

Tax proration is when property taxes are fairly divided between buyer and seller based on the date of ownership transfer or closing.

Simply put: Tax proration helps level the playing field. Property taxes on homes are often billed at the beginning of the calendar year for the year prior. So in 2024, you’d get a property tax bill for 2023. Let’s say you bought and closed on a home in November 2023. Should you be responsible for the property taxes owed on that home for the months before closing? Didn’t think so. Enter tax proration. 

Tax proration involves a bit of math to figure out how much of the bill each party is responsible for. Here’s where it gets more complicated: Homeowners (or the sellers) don’t typically pay their part of the property tax bill directly. Depending on the date of closing, or the particular situation, you have a couple of payment options to consider.

How to pay property taxes with tax proration

Tax proration pro-tips

Before you close on your home, keep these three tips in mind.

• Leverage: Depending on the market, the property tax bill could be used as leverage. In a seller’s market, where there are tons of competing bids, motivated buyers might offer to pay the seller’s portion of property taxes to get a leg up on the competition or expedite the sale. In a buyer’s market, the seller might offer to pay the entire property tax bill in exchange for coverage of other closing costs.
• Exemptions: Age and disability status could come with tax implications, for yourself or the sellers. Those implications affect tax responsibility. For example, perhaps the seller is a disabled senior citizen. Local laws might have provided relief for that person—relief that is unlikely to be passed on to the buyer. Communicate with your team to determine potential roadblocks.
• Projects: New builds, rehabilitation, and renovations will result in different tax assessments. New builds may not have received a tax assessment at the time of closing, and since there was no previous owner, the buyer would be responsible for an entire year’s worth of taxes. Rehab and renovation projects increase a home’s value, which could result in an increased tax bill. Make sure your assessment is up-to-date to avoid any surprises.

How to pay property taxes post-proration

After you’ve calculated and paid your initial prorated tax bill, you’re responsible for annual state and local property taxes for as long as you own the home. You may be able to deduct those property taxes (up to a certain amount) when it comes time to file your tax returns. Individually, you can deduct up to $5,000 in property taxes. Filing jointly? Double that figure and enjoy a $10,000 deduction.

Keep in mind that property taxes vary depending on where you live and other factors, so there’s no single correct way to go about it. Consult a tax professional, do your research, and don’t take shortcuts as you take on this part of homeownership. Ok, now that we got the serious part out of the way: Deep breath. You’ve got this!

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

The post Tax Proration: How to Pay Property Taxes Like a Pro appeared first on Cardinal Financial.

So, if you’re looking for the best ways to build good credit, you’ve come to the right blog. Here are our top seven tips. Let’s get into it, shall we?

1. Knowledge is power.

Maybe you signed up for a store’s charge card to get that extra 20% off one day. Maybe you took out a car loan to celebrate your first adult job. And maybe, just maybe, you have a few late payments hiding amongst the skeletons in your proverbial credit closet. We get it—looking at your own credit score and the history attached to it can be frightening for some people. But if you don’t know what you’ve got, you won’t know what to improve. Our advice? Get familiar—not only with your own credit history, but with how credit works in general. 

First, you’ll want to pull a copy of your credit report from a reputable, reliable source. Any one of the three major reporting agencies (Equifax, Experian, or TransUnion) ought to do. Everyone in the United States can get six free credit reports from Equifax per year until 2026. Per the Federal Trade Commission’s Consumer Advice section, that’s on top of the report you’re able to get for free each year from the three aforementioned agencies. All you have to do is visit AnnualCreditReport.com to get started.

After you’ve pulled and reviewed your credit report, you’ll want to keep this in mind: Each reporting agency calculates your score differently, and not all creditors report to all three bureaus. While they may vary slightly, they all follow the FICO scoring method, which uses predictive data analytics to generate an accurate credit score. That said, they all consider things like account age, payment history, balances, and the number of accounts when generating your score. 

2. Error. Error. Error.

While the nation’s leading credit reporting agencies use digital tools and analytics to read your data and generate a score, those tools are often operated or read by people. And let’s be honest, people make mistakes sometimes. Lenders and creditors are no different. 

Should you obtain a copy of your credit report and discover an error or two—maybe an amount owed is higher than you thought, or maybe your address is wrong—you’re more than welcome to dispute those errors. In fact, you’re well within your legal right to do so, since the Fair Credit Reporting Act promotes the accuracy, fairness, and privacy of consumer information held by credit bureaus. It gives you the right to dispute errors or inaccuracies, have them investigated, and (hopefully) get them corrected. 

3. A low balance is a good balance, but no balance is better.

Hands down, one of the best ways to build good credit is to keep your balances low, or flat-out non-existent. Hey, we understand—sometimes you have to use a credit card to get by until the next paycheck, and sometimes you’ve gotta take out another student loan to cover a semester’s tuition. Those balances play into your “debt-to-income” ratio, or DTI. 

As a mortgage lender, we and other companies use your DTI as one way to gauge your readiness for, and ability to pay off, a home loan. Different home loans and programs have different DTI requirements, but generally speaking, a higher DTI signals greater risk for the lender. We want to know you can pay back what you borrowed, and having to pay off a bunch of other accounts may get in the way of that ability to repay. 

How can you lower your DTI? Lower your balances. There are a number of ways to approach this, but one of the most popular methods is sometimes referred to as “the snowball method,” where you pay off the smallest balances first to free up funds for later payments on larger balances. Even getting a small balance to zero is a win, so don’t hesitate to get started as soon as you’re able.

Want to learn more about DTI? Check out this blog to get all the details.

4. The best time is on-time.

Of all the things that can hurt your credit score, late payments are near the top of the list in terms of impact. That’s because payment history is a major player in determining your credit score, and even one missed payment can cause your previously stellar credit score to go sideways. The later your payment, the greater the impact.

• 30 days late is usually seen as a minor mistake.
• 60 days late is a red flag. 
• Once you hit 90 days late or more, creditors start exploring their options—one of which is sending your account and balance to a collection agency.

Of all the things that can hurt your credit score, late payments are near the top of the list in terms of impact.

Getting sent to collections won’t just damage your credit, it’ll drive you up a wall and have you ready to do whatever it takes to make them stop calling you. So, whatever you do, try not to fall behind. 

An easy way to help keep you on track? Auto-pay. Obviously you’ll want to make sure you’ve got cash in your account to cover every payment, but if you’re someone who frequently forgets to make payments (even minimums), this is a no-brainer. 

5. Budget best practices.

For some people, remembering to make payments isn’t the problem. It’s having enough money in the first place.

While living by a budget may not have a direct impact on your credit report, per se, it will lead to better financial habits. That trickle-down effect should then find its way to your credit report, because you’ll have budgeted appropriately to pay down (or pay off) your balances on time, every time. 

Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it. Some folks need a little help with accountability, so ask a friend to tell you “no” next time you want to put a new pair of shoes on that credit card. And while there are apps abound to help keep track of your money and where it’s going, sometimes you can get away with a simple spreadsheet that documents when your money is coming in and what it’s going to. We’re talking simple addition and subtraction, folks. Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it.  

Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it.  

6. Live within your means. 

Just because credit can help you buy things you wouldn’t typically be able to afford, that doesn’t mean you should depend on it. A smarter way to get a handle on your finances is to live frugally and well within your means. 

If you want to use a credit card for daily expenses and bills, fine, no one will stop you. We recommend treating it like a debit card instead of a credit card, though. If you rack up expenses, pay them off in full each month with your income. That way, you reap the rewards (literally, in some cases—hello, cash back) but maintain good standing with a low or zero-dollar balance. 

Alternatively, consider going on an all-cash diet. Once you’ve got a habit of responsible spending, then you can get back into using your credit card. 

7. Age is more than just a number.

Everyone loves a new pair of shoes, but when it comes to credit reports, the older your account, the better. Earlier, we mentioned credit bureaus keeping track of how long your accounts have been active. That’s where this piece comes into play. 

An older account, especially one that shows consistent on-time payments and a history of keeping a low balance, will do wonders for your credit score. On the other end, new accounts can temporarily lower your score and will impact the average age of your credit profile. One account you’ve held in good standing for 10 years is better than several new accounts you’ve opened up back to back over the last three years. Each new account lowers the average age, which is a major factor in your credit score. 

An older account, especially one that shows consistent on-time payments and a history of keeping a low balance, will do wonders for your credit score.

That said, opening new accounts is still key to building good credit. A blend of accounts shows lenders and creditors that you’re able to balance different types and amounts of debt. The secret is to keep those older accounts open, even if you’re not using them all that often anymore. 

The best way to build good credit? Be responsible.

If you’ve ever wondered how to build good credit, now you’ve got the goods. Take this information and make your credit work for you, not the other way around. And if you know someone else who wants to know how to build good credit, be a pal and share this blog.

The post The Best Ways to Build Good Credit appeared first on Cardinal Financial.

Mortgage insurance protects your lender if you default on your loan. What kind of mortgage insurance you’ll need depends on if your loan is backed by the government or a private lender.

What is mortgage insurance? The basics.

Even though mortgage insurance is designed to protect your lender, that doesn’t mean you can’t benefit from it. In fact, it can actually make homeownership more attainable. By paying mortgage insurance, you could get approved for a loan that you otherwise wouldn’t qualify for. Putting 20% down isn’t always realistic for prospective homeowners, so paying a monthly fee for insurance can be a better route than paying more upfront.

Mortgage insurance vs. home insurance

As you’ve probably gathered by now, home insurance and mortgage insurance are not the same thing. Home insurance (also called homeowners insurance) is what protects you from liability if damage or loss occurs to assets within your home (or to the home itself). The exact amount of coverage you have depends on the policy you choose. If you have an escrow* account, your home insurance can be included in your mortgage payment. Mortgage insurance (unless you’ve qualified to drop it—more on that later) is already part of your mortgage payment regardless.

*Escrow is an account, usually created by your lender, that allows your lender to collect estimated taxes and insurance and pay those costs on behalf of you, the borrower. It helps consolidate your homeownership expenses so you don’t have to keep track of separate monthly bills.

Types of mortgage insurance

Now that you’ve got the basics of mortgage insurance down, let’s get into the different types you might encounter as a home buyer. The type of mortgage insurance you’ll need depends on whether your loan is backed by the government or a private lender.

Private mortgage insurance (PMI)

If you have a Conventional loan, you’ll likely need to pay private mortgage insurance (PMI). Your lender will set up insurance for you with a private, preferred insurance company. Your rate is calculated based on your down payment and credit score. Once you reach 20% equity in your Conventional loan, you’re eligible to stop paying mortgage insurance. Once you hit 22% equity, it’s dropped automatically.

Depending on your lender, you may also have to pay PMI if you have a Jumbo loan. These loans exceed the conforming loan limits of Conventional loans and are for luxury homes and homes in high-cost areas. Because your down payment on a Jumbo loan will likely be considerably higher than a Conventional loan, many lenders will not require PMI even if you put down less than 20%.

FHA mortgage insurance premiums (MIP)

If you have an FHA loan, your insurance will be collected by the Federal Housing Administration (FHA). Insurance is required on all FHA loans, regardless of your down payment amount. This is called a mortgage insurance premium (MIP).

One important thing to note about mortgage insurance on FHA loans is that it includes a fee you’ll pay at closing as well as a monthly payment that’s part of your mortgage bill.

USDA guarantee fees

USDA loans are backed by the United States Department of Agriculture. USDA loans don’t require mortgage insurance in the traditional sense. Instead, you’ll pay a guarantee fee. This cost includes an upfront fee at closing equal to 1% of your loan amount. Even though it’s called an upfront fee, you may actually be able to split that cost up throughout your monthly mortgage payments. Your monthly payments will also include your annual guarantee fee, which is equal to 0.35% of your loan balance.

How can I drop mortgage insurance?

For government-backed loans (with the exception of VA loans) mortgage insurance premiums and fees are just part of the package—the only way to stop paying them is to pay off your mortgage entirely or refinance to a Conventional loan. Conventional loans aren’t government-backed, so they offer a bit more flexibility when it comes to dropping mortgage insurance once you reach 20% equity.

Another way to avoid paying a monthly mortgage insurance fee is to pay it off upfront when you take out your home loan. If you have a Conventional loan, any funds you have for upfront costs may be better directed towards your down payment, though. After all, the more you put down, the sooner your insurance can be dropped.

So, now that you know more about mortgage insurance than you probably thought there was to know about mortgage insurance, you’re ready to start the home buying process with confidence. You’ve got this.

The post What is Mortgage Insurance? Your Need-to-Know Guide appeared first on Cardinal Financial.

If that’s the case, or if your needs have shifted throughout various life stages, you may want to consider new home construction. Not just any new construction, though—custom construction, or the opportunity to build your dream home from the ground up. 

A one-time close construction loan, which allows you to pay for a plot of land, all the lumber, and the labor with one convenient mortgage, may be able to help. 

Breaking down the benefits

There are three main reasons to consider a one-time close construction loan when building a custom home: Cost, credit, and closing. 

Cost

Depending on what type of one-time close construction loan you go with, your down payment probably won’t be what you think it’ll be. Sure, there’s the common notion that you should put down 20% (which we’ve dispelled before), but VA buyers could obtain financing with nothing down and FHA buyers could build a custom home with as little as 3.5% down. 

Beyond that, a one-time close construction loan allows buyers to roll the cost of land, building materials, and labor into one loan—saving you from having to pay two mortgages: one for the land and another for the home itself.  Even better? You’ll make interest-only payments during construction, saving money upfront. 

With a one-time close construction loan, you’ll make interest-only payments during construction, saving money upfront. 

Credit

Because you won’t have to take out two separate loans to fund the purchase of land and labor, there’s no need to worry about re-qualifying. So, instead of taking two hits to your credit report—potentially and unnecessarily dragging down your score—you only have to submit one application and go through one underwriting process.

Closing

Since a one-time close loan pays for the land and the construction, you only have to work through one closing. That closing occurs before construction even begins, and because a one-time close loan comes with a fixed rate, you never have to worry about market changes forcing your rate to rise. 

It’s all part of the process

Building a custom home isn’t as simple as buying a bunch of wood and throwing some shingles on a frame. Because a one-time close construction loan is still a mortgage, it comes with its own set of procedures and requirements. Here’s what you can look forward to:

1. Contractor Validation
   We’ll review your builder’s qualifications, including their own credit reports, building history, and project references.
   
2. Project Approval
   If your construction details meet loan standards, we’ll make sure the budget fits the project and approve a start date.
   
3. Underwriting
   After submitting your application, our underwriter will review the information like they would any mortgage.
   
4. Closing
   Once approved, we’ll schedule a closing date to sign final documents and pay whatever closing costs are left to pay.
   
5. Funding
   Throughout construction, your builder can request to draw funds from your loan to pay for materials, labor, and other costs.
   
6. Completion
   This one’s easy! Once construction is over, it’s time to grab some friends and pack those moving boxes.
   
7. Conversion
   Once everything’s done and dusted, we’ll convert your one-time close construction loan into a permanent mortgage.

Any downfalls?

One-time close construction loans are pretty straightforward, and they come with a long list of benefits (including the fact that they can be used for primary, secondary, and investment properties). That said, there are some considerations to think about before opening an application. 

First, due to the COVID-19 pandemic, lead times on construction materials, as well as their costs, are both heightened in the current market. So, keep in mind: These factors could impact your total loan amount. 

Second, a one-time close loan tends to come with a higher interest rate. If rates are already higher due to market conditions, you may want to run your budget with your rate quote to make sure everything is affordable.

What’s it cost?

Some sources report that building a house can cost anywhere from $500 to $1,000 per square foot, depending on location. According to American Home Shield, the average house size in the U.S. is 2,500 square feet, meaning a custom build may run anywhere from $1.25 to $2.5 million. 

If that number shocked you, don’t worry too much. Other sources pin the average cost of a custom, similarly sized home at about $500,000. 

So when you’re building a house, your location, equipment, and finishes can and will push your costs up or down. The safe bet is to leave some cushion in your budget, just in case. Even safer? Get pre-approved for construction loan financing with a lender you trust. That way, you know exactly what you’re getting into with your one-time close construction loan.

The post Land, Lumber & Labor: How the One-Time Close Construction Loan Does It All appeared first on Cardinal Financial.

Pro Tip: Saving up for renovations? Check out our best money-saving strategies here.

5 DIY home renovation budget tips

• Make small changes first
• Embrace the paint
• Focus on your floors
• Rethink your storage space
• Demo it yourself

1. Make small changes first

The temptation to give your home a big overhaul is understandable, but you might be surprised what a significant difference small updates can make. So, before you start knocking down walls and ripping out cabinets, take inventory of small details that are easy, cost-effective swaps. This could include:

• Replacing hardware on drawers and cabinets
• Installing decorative switch plates over your standard light switch covers
• Adding statement fixtures in focal lighting points like your dining room, entryway, or front porch
• Updating your decor palette (darker tones add depth and drama, while lighter tones can help open up your space)

If small changes still aren’t doing the trick, it’s time to take it to the next level: Repainting.

2. Embrace the paint

Painting sometimes gets a bad rap for being a pain, but it’s well worth the work. To get the biggest bang for your buck, start with accents like trim, cabinets, or even a single accent wall. For best results, try these paint job tips and tricks:

• Paint during dry weather. Humidity makes it harder for paint to dry, resulting in more drips and uneven patches.
• Invest in the right tools. Make room in your budget for quality brushes, roller covers, and tape to save yourself a lot of frustration and do-overs.
• Use primer. If you’re considering renovations, we’re assuming the walls aren’t in pristine shape to begin with. Before applying paint, a primer base will ensure it all goes on evenly.
• Start at the top and work your way down. The last thing you want is paint dripping down onto the surface you thought you just finished.

While paint is a cost-effective update, you may want to avoid choosing colors that are too on-trend for your DIY home renovation. Unless, of course, you want to paint it all again in a year or two. If that’s your thing, don’t let us stop you. Otherwise, neutrals are always a safe bet.

3. Focus on your floors

Refreshing your flooring may seem like a lot of work, but it’s actually one of the more budget-friendly DIY projects out there. Plus, there are a lot of simple ways to give your floors a new look. If you’re working with a natural wood floor, try sanding it and applying a new coat of varnish. Peel and stick tiles are also an easy option, especially for smaller spaces like bathrooms and utility rooms. A fresh coat of paint can also spruce up your floors, just make sure to plan your painting schedule for a time when you can be out of the house long enough for it to dry without getting stepped on.

4. Rethink your storage space

Storage may not be the first thing that comes to mind when you remodel. After all, isn’t the point of storage to keep things out of sight, not draw attention to them? Not necessarily. Open shelving’s moment may be passing, but implementing stylish storage into your home can still involve minimal effort with a big payoff.  Some easy-to-update options include:

• Portable kitchen islands
• Free-standing bathroom cabinets
• Ottomans and benches with storage
• Stylish entryway racks
• Headboards with built-in shelving

5. Demo it yourself

Finally, the fun part. Breaking things down requires less finesse than building, but don’t dive in without brushing up on some fundamentals of demolition. Experts recommend staying away from demo on interior spaces unless you’ve done it before. Otherwise, you risk knocking down a load-bearing wall or damaging wiring and plumbing. On the other hand, outdoor spaces like a deck or porch should be simple enough for a novice to handle.

If the DIY route isn’t for you, renovation loans can help you finance your professional home updates and your mortgage in one convenient process.

Are there any other DIY home renovation tips to know?

You’re investing more than money when you DIY. You’re also investing your time, energy, and creativity. So, before taking on a DIY project, remember that it will probably look worse before it looks better. Don’t get discouraged halfway through your renovations! The mess and inconvenience now are well worth you loving your space later (and the boosted home equity doesn’t hurt, either).

The post DIY Home Renovations on a Budget appeared first on Cardinal Financial.

It’s not always easy to stick to your goals, especially when life throws challenges your way. That’s why we assembled a short list of financial planning tips for 2023. Together, we’re going to get your finances in shape so you can maximize your budget this year and in the future.

1. Self-Evaluate

Before you know what financial planning tips you need to act upon, you need to know where you’re at. This is one of the toughest parts of financial fitness, because it involves a hard, honest look at your finances. 

According to CNBC, 63% of U.S. adults are living paycheck-to-paycheck, leaving little money leftover for spending once bills are paid. Despite some news stories suggesting this is because people are spending too much on lattes and avocado toast, the simple fact is that prices for just about everything in life have been increasing—cost of living and rent included—while wages remain stagnant.

So let’s ask ourselves the hard questions:

• How much money do you earn, after taxes, per month?

• How much of that money goes to essential bills, like electricity or childcare?

• How much of that money goes to non-essential bills, like streaming subscriptions?

• After all of your bills, how much is left to spend?

• More importantly, how much is left to save?

• How much do you have in savings right now?

The answers to these questions may not be easy to swallow. The best medicine rarely is. 

While there are a host of apps that can help you manage your budget and track your spending, a simple spreadsheet may be your best (and most cost-friendly) option because it forces you to type out everything line by line and update it regularly. 

The point is that before you get in shape, you need to know where you stand. Once you’ve painted with broad strokes, you can get into the finer details by creating a budget and a plan of action.

2. Pay Down Debt

According to debt.org, Millennials (ages 24-39) have an average debt of $87,448. Gen X’ers (ages 40-55) are almost $141,000 in debt on average. Considering the median age of a first-time homebuyer is 33, it’s easy to see why many people are hesitant to buy a home. 

Look, debt is a fact of life. And not all debt is bad debt! For many of us, we’ll be paying off student loans for years to come. For others, credit cards are a looming shadow. If you’re overwhelmed by your debt, add a tab to your aforementioned spreadsheet and start tracking that as well. 

Balances, due dates, interest rates, minimum payments, etc.—all of it will help you regain control over your financial fitness.

3. Plan Ahead

Once you’ve got your debt under control—or once you’re comfortable with your debt—it’s time to plan ahead. That means savings.

In life, there are three main things to save for: emergencies, retirement, and buying a home.

We’re not financial advisors, so we can’t tell you how to save for retirement. What we can tell you, however, is that saving is vital to financial fitness. 

Think about it: a lot of people go into debt because an emergency pops up. 

A car breaks down, a pet gets hurt, a roof leaks, someone loses a job—there are a litany of emergencies that could arise at a moment’s notice, and being able to dip into cash savings is healthier than wading into a deeper pool of debt. 

One of the safest assumptions for an emergency savings fund is three to four months of your monthly net income. Alternatively, enough cash to cover three to four months of your monthly expenses (cost of living, bills, etc.). That gives you the liquidity to cover yourself and your family until things get back on track.

4. Check In

Next to the self-evaluation, this is one of the most critical financial planning tips for 2023. 

It’s one thing to make a resolution. It’s another thing to make sure you’re sticking to it. Once again, it involves answering hard questions. 

• How much debt have you put on or paid off?

• How much money have you put into savings?

• What extraneous bills have you gotten rid of?

• Have you been updating your budget regularly?

Checking in doesn’t always require positive progress, either. Things happen. Life throws curveballs, and that’s okay. What matters is that you maintain a clear view of where you’re at and what steps you need to take to get to where you want to be.

5. Reward Yourself

Financial fitness is a lot like physical fitness. It’s not all about the grind—it’s about celebrating the wins, even the little ones. 

Like we said earlier, too many blame lattes or avocados for the paycheck-to-paycheck lifestyle. For many, lattes aren’t even a concern—a full tank of gas is. Don’t let other articles make you feel guilty for rewarding yourself. 

Hit your savings goal for the month? Go to dinner with the family. Pay off a credit card? Go get a massage. Do something that makes you feel good, because after all’s said and done, it’s still your money.

What’s important is making sure the rewards don’t turn into a daily occurrence, and that your rewards still fit within your overall budget. 

At the end of the day, small progress is still progress.

Before you get in financial shape, you need to know where you stand. Once you’ve painted with broad strokes, you can get into the finer details by creating a budget and a plan of action.

The post Five Steps to Financial Fitness: Your Financial Planning Tips For 2023 appeared first on Cardinal Financial.

Tax return season is upon us. As checks come in the mail, renters have the chance to put those extra earnings toward something more than clothes or food. But let’s face it: coming up with that daunting 20% down payment isn’t easy. In fact, saving for a down payment on a home is one of the biggest obstacles that renters face in the transition to homeownership. This year, consider taking your tax refund and putting it toward a down payment, like many other first-time home buyers do.

Any amount helps

If you’re a renter looking to become a homeowner, it’s critically important to have accurate expectations. That means understanding that your tax refund probably won’t be the entire 20% down payment you’d like to provide. It will likely be much lower than that, depending on your situation. In fact, the IRS states that the average tax refund in 2016 was $2,860.

Good news for many first-time buyers is that borrowers who qualify for an FHA loan will only have to provide 3.5% and those who qualify for a fixed-rate Conventional loan may only need to put down 5%, through Cardinal Financial. In February 2017, the median U.S. home price was $228,400, requiring a down payment of only about $8,000 for an FHA loan and $11,420 for a fixed-rate Conventional loan. These estimations just go to show that any amount you receive as a tax refund can be a substantial contribution to a down payment on a home, even if it doesn’t cover the entire cost.

Is it a smart move?

There is wisdom in using your tax return money in this way, but it truly depends on the borrower. While mortgage rates are still historically low, borrowers have the opportunity to use their tax refund and move onto bigger and better homes that might have monthly mortgage payments that are lower than what they’re currently paying in rent.

However, the decision to purchase a home shouldn’t be based on whether the market is good for buying. That may be a factor in your consideration, but before you buy a home, you should make sure that you’re ready to buy a home. It’s as simple as that.

If you are relying solely on your tax refund as down payment money, that could be a sign that you haven’t been able to save any money on your own. In actuality, the only reason why you’ve come upon this extra cash is because you overpaid in taxes last year. If you haven’t been able to save for a down payment, there’s a chance you also have revolving debt and lack an emergency fund. When you apply for a mortgage, you have to prove that you’ll be able to sustain many monthly payments into the future, and if your tax refund is your primary source of down payment money, you may not be able to swing that.

While these are important factors to keep in mind, don’t forget about random repairs. Once the house is yours, your mortgage may truly be cheaper than what you were paying in rent—which is great. However, there are many extra costs of homeownership that can pop up or be forgotten. For example, you may be saving $200 a month to own, but during your first year you may have to cough up $4,000 to replace your HVAC unit. There are some things you just can’t predict.

You decide

How will you use your tax refund this year? If you’re thinking about putting that money toward a down payment, call us and ask one of our Loan Originators if homeownership is possible for you right now.

The post Should I Use My Tax Refund as a Down Payment? appeared first on Cardinal Financial.

Consider this: in 2021, the average age of a first-time home buyer was 33. If those people stuck with a 30-year mortgage to term, they’d be 63 by the time the loan was paid off. Sixty-three also happens to be the average age of retirement in the United States.

Of course, many people move before their mortgage is paid off. Others opt to refinance, and both options have their upsides depending on the situation. But what if we told you there were ways to pay down (or pay off) your mortgage well before maturity?

3 Tips To Paying Off Your Mortgage

Tip 1: Make An Extra One-Time Payment Each Year

Setting aside a little extra cash every month and making an annual “lump sum” payment is an easy way to pay down your mortgage earlier than previously scheduled. Instead of getting a latte every morning (or finding another luxury to skip — after all, we all need our coffee), put that money in a designated savings account and let it accrue over the year.

Want to get extra bold with your payment plan? Add whatever bonuses, commission checks, and/or cash gifts you receive to the account. At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

Pro Tip: Contact your lender or review your closing disclosure to find out if there are any prepayment penalties, or if they’ll accept partial payments on top of your standard monthly payment. 

Tip 2: Make Bi-Weekly Payments

Another method to paying off your mortgage early is splitting your monthly payment into bi-weekly payments, also known as making payments every other week. With this approach you’d make 26 payments, each of which would be half as much as a full monthly mortgage bill.

For example, if you had a $2,000 mortgage payment per month and made monthly payments, you’d be paying $24,000 per year. With $1,000 bi-weekly payments, you’d be paying $26,000 per year — or adding a full extra payment per year.

Pro Tip: Not every lender accepts this style of payment. Speak with your lender to find out if partial payments are okay or if full payments are preferred. 

Tip 3: Refinance With A Shorter Term

For homeowners who have been chipping away at their home loan balance for a few years, or for those who are simply looking for a better rate (aren’t we all?), refinancing is always an option. While there can be upfront costs associated with refinancing, if you’re looking for a shorter term, you can look into swapping your 30-year mortgage for a 10- or 15-year mortgage.

The good news? If you’ve followed the tips above — making larger lump sum payments and making bi-weekly payments (or adding a little extra to your monthly payment) — you should see better results when refinancing.

Pro Tip: The caveat here is that even with substantially lower interest rates, your monthly payment will likely still be higher than what you’ve been paying, so budget accordingly. 

Considering The Cons

We love the idea of taking control of one’s finances, and who wouldn’t want to own their home outright? However, there are considerations to be made when thinking about paying off your mortgage early. In the interest (ha) of helping you make the best financial decision for you and your future goals, here are some things to think about before taking action on the tips above:

1. By paying off your loan, you’ll lose out on the ability to deduct the interest you’re paying when it comes time to file taxes.
2. You may be responsible for a prepayment penalty. Those amounts vary, and some lenders may not charge you at all, but it’s something to think about.
3. Closing an account — especially one you’ve had for a few years or longer — will temporarily bring down your credit score.

If these are all things that you think you can live with, then go forth and conquer your home financing. And if you want to refinance once rates drop, we can help with that too!

At the end of the year, make a large principal-only payment toward your home loan, separate from your standard mortgage bill.

The post 3 Tips to Help You Pay Off Your Mortgage Early appeared first on Cardinal Financial.

When you apply for a mortgage, your lender will look at your entire financial picture to determine whether or not you qualify. This vetting includes a review of your credit history, employment, the funds you have availabl to purchase a home, and more. These factors will ultimately determine the type of loan and interest rate you qualify for. But just what does a lender look for on your credit report? Knowing that somebody is going through your records with a fine-toothed comb can be a little intimidating, but we’re here to give you a heads up on what a lender is looking for when they review your credit report.

Credit History

The most important factor lenders look at when analyzing your credit report is your credit history. This shows how well you’ve paid your bills, like credit cards, student loans, and auto loans. If you take care of your financial obligations on time and don’t use all the credit available to you, lenders will look more favorably on your application as it’s a sign that you can responsibly handle your credit.

Lenders will also check to see if you have any recent significant derogatory events on your credit report. A significant derogatory event is any single event that may give the lender cause to consider you a high risk for future default. Examples of significant derogatory events include bankruptcies, foreclosures, deeds-in-lieu of foreclosure, pre-foreclosure sales, and short sales. If you have any of these events on your credit report, you’ll probably have to wait a while before you can apply for a new mortgage. These waiting periods are usually between two and seven years, depending on the circumstances.

Debt-to-income Ratio

Also found on your credit report, your debt-to-income ratio is one of the most important things that lenders pay attention to when considering you for a mortgage. Your debt-to-income ratio (DTI) tells them whether your income can cover your mortgage payments and other debts (such as credit cards, student loans, auto loans, and other obligations). Your DTI puts a quantitative value on your ability to pay back your loan. The higher your DTI, the more likely it is that you will not qualify for the mortgage amount you applied for. Think of it this way: if your total income cannot cover your monthly expenses and leave you with some spending money for things like groceries, gas, and entertainment, then it could be difficult to make your monthly mortgage payments. Lenders look at your DTI in two ways:

Housing Ratio: This is your gross monthly income divided by your proposed monthly housing expenses (your mortgage payment, including principal, interest, taxes, insurance, and homeowners association dues, if applicable). The limit for this ratio is typically around 26% to 28%.

Total Debt Ratio: Your gross monthly income divided by the sum of all your recurring debt payments (such as student loans, auto loans, credit card payments, etc.) including your proposed housing expenses. This limit is typically around 43%.

One of the most important things that lenders pay attention to when considering you for a mortgage is your debt-to-income ratio.

Payment History

At the end of the day, your lender is lending you money with the intention of getting paid back. That being said, they want to see that you have a track record of not only making payments, but making them on time. A major determining factor in your credit score is payment history, which accounts for about 35% of the total score. Late or missed payments, especially on your mortgage, or a past bankruptcy are all considered red flags to lenders—because nobody wants to loan money to someone who won’t pay them back. That doesn’t mean that a few minor late payments will stop a lender from giving you a loan, but you may be either approved for a smaller loan or your interest rate may be higher than that of someone who has never missed a payment.

New Accounts

It’s always good to have an established credit history. However, opening a bunch of new credit card accounts in a short period of time may cause your credit score to drop and the lender to question if you are having trouble managing your finances. It may be tempting to put new appliances and furniture on new credit cards, but be patient. You’ll have plenty of time to buy things for your new house after you close.

Stable Employment

Another important indication of your ability to repay is a record of stable employment, which can also be found on your credit report. Lenders will look at how long you have held your current job and how long you have worked in your current profession. Having a stable job lets your lender know that you have a dependable source of income to repay your mortgage. Moving jobs frequently may affect your ability to be approved for a mortgage, especially if those job changes are not consistent for your industry.

Did this blog post help you prepare for the pre-approval process? We want to know! Tell us on social media!

The post What Are Lenders Looking for on My Credit Report? appeared first on Cardinal Financial.

*This joke was written and endorsed by an introvert, from indoors.

8 factors to consider before renting out a room in your primary residence

As you start your live-in landlord journey, two big questions likely come to mind: 1) Can I rent out a room in my house? and 2) How do I rent out a room in my house? To help get the answers you need, let’s explore eight key factors.

• Landlord-tenant laws
• HOA restrictions
• Zoning laws
• Terms of your mortgage
• Rental income taxes
• House rules
• Lease agreements
• Tenant screening processes

1. Landlord-tenant laws

Landlord-tenant laws can become tricky in a primary residence because issues that you wouldn’t consider in your own home might breach the requirements for a rental property. The exact laws will depend on where you live, but in general, you can expect to uphold the following standards:

• Provide advance notice or obtain permission before entering the tenant’s unit. Or in this case, room. Your lease agreement should outline clearly which areas in the home are considered common and which are private to avoid confusion here.
• Maintain a safe and habitable home. Repairs that you might be tempted to put off, like fixing the hot water in the guest bathroom or changing dead lightbulbs, could create potential liabilities if you don’t address them while your tenant is living in the home. Oh, and no mold. That’s a big one.
• Provide and maintain promised amenities. If you advertised your home as having certain amenities like in-unit laundry or reserved parking, you’re required to keep those amenities functional and available for your tenant.

2. HOA restrictions

If your neighborhood has an HOA, they may have restrictions about renting out rooms in your home. Get in touch with your HOA and check their bylaws to make sure you’re not in violation of any policies before you start composing that perfect Craigslist ad.

Pro Tip: Learn more about HOAs and how to handle them here.

3. Zoning laws

Your homeowners association isn’t the only one that may have renting restrictions. Your city could also have zoning laws in place that may prevent you from using your home as anything other than just that: your home. If you can rent out a room, you’ll likely still need to get a license or permit from your city to do so.

4. Terms of your mortgage

Rental income can be a great way to pay off your home loan faster. But before you go all in, make sure that renting out a room in your primary residence doesn’t violate any of the terms of your mortgage.

Pro Tip: Your mortgage lender would be happy to keep in touch after you’ve closed on your home loan. So, if any questions about your terms arise, don’t hesitate to reach out for clarification.

5. Rental income taxes

Qualifying for more tax benefits* is a great reason to become a homeowner, but becoming a landlord can actually mean paying more taxes than if it was just you living in your home. When you’re budgeting how much to charge your tenant, don’t forget that not all of that will be going into your pocket. You’ll have to pay a marginal tax rate (the amount you pay for every additional dollar of income) plus local and state income taxes.

*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

6. House rules

Make sure to outline your house rules in your lease agreement, otherwise your tenant won’t be liable for violations. Some common house rules to consider implementing include:

• Rent due date and late fee policies
• Maintenance responsibilities
• Pet policies
• Renters insurance requirements
• Quiet hours
• Security deposit policies
• Lease renewal and notice periods

Pro Tip: If you find your list of house rules growing to an increasingly complex matrix, that’s usually a good sign that landlord life is not for you. The more particular you are about your space, the harder it will be to share it.

7. Lease agreements

Your house rules are an important part of your lease agreement, and your lease agreement is an important part of your success as a landlord. In other words, make sure you get it right. In addition to house rules, you’ll want to include the following in your lease agreement:

• Lease duration
• Rent and security deposit amount
• Definition of common areas
• Utility responsibilities

Your lease agreement is what makes the rules you set legally binding. So, if you’re not sure how to go about drawing yours up, it’s never a bad idea to consult a lawyer.

8. Tenant screening processes

Taking all the necessary legal precautions before renting out a room in your house is only half the battle. You also need to find the best way to choose the right tenant. The first step is creating a rental application that sets out the criteria you’re looking for (within reason, don’t violate fair housing laws, please). The more thorough your application process is, the better you’ll be able to assess whether or not an applicant is a good fit. If you’re not sure where to start, check out this guide.

And remember, it’s not just about the application. Since you’ll essentially be roommates with your tenant, it’s also helpful to meet them in person and get to know a little bit about them. Not too much, though—it’s hard to be a landlord and a friend at the same time.

Is there anything else to consider before renting out a room in my primary residence?

Nope!

Kidding. Ultimately, the decision comes down to whether or not you’re comfortable having another person in your home, but you may also want to ask:

• How much rent should you charge? It should be less than the average one-bedroom apartment in your area, otherwise there’s not much motivation for a tenant to choose your one room over a separate apartment.
• How much time do you spend at home? If you’re away from home often, it may make sense to earn additional income from your residence while you yourself aren’t able to enjoy the perks of homeownership.
• Is your home in a good location? You likely won’t get many applicants for your rental if it’s not located near anything that would make life easier for your tenants, like restaurants or public transportation.
• Are you a good roommate? All the criteria you’re assessing in your tenant, they’re also assessing in you. Be honest with yourself and make sure you’re ready to responsibly cohabitate with another person. Renting out a room in your home requires a little more social finesse than college freshman dorm living.

So, should you rent out a room in your house? That’s your call. But if you do decide to embrace your inner landlord, now you know where to start. Good luck and remember the golden rule: Treat others the way you want to be treated.

Make sure you’re legally and mentally prepared to share your space before you decide to rent out a room in your primary residence.

The post How to Start Renting Out a Room in Your Primary Residence appeared first on Cardinal Financial.

Tis the season of savings—or so they say. While it’s true that some of the best retail deals of the year are happening right now, some would argue that this is the season of spending. As such, you might be inclined to believe that buying a house is completely out of the question at this time of year, but think again! Homeownership is possible and can be affordable for people of all kinds of financial backgrounds. Take a look at these five tips for making a home purchase affordable and see if your dream of homeownership is possible this holiday season.

Consider a different neighborhood

So you’ve got your dream neighborhood picked out and you can’t stop thinking about it. You can’t imagine living anywhere else. You’re convinced that it’s perfect in every way—except for the price tag. When you’re that invested in a particular neighborhood, it’s tempting to enter a bidding war where you either agree to pay a price that’s way over your budget or have to walk away empty-handed. If this sounds like you, you may want to consider searching for a home in a less expensive neighborhood.

This is where making homeownership affordable requires give and take. Those neighborhoods a little farther from downtown? Don’t write them off completely. You just might have to consider houses in other neighborhoods where location isn’t in such high demand. Although farther from your target location, these areas may just offer more land and a bigger house at a better value.

Save up for amenities

Amenities make for a great place to start when you’re making homeownership affordable for you. If considering a different neighborhood isn’t an option, it might be time to dial it back on your must-haves list. Expand your opinion on what’s acceptable. You may need to refocus your search for “the perfect home” to a search for a great home that has just what you need.

A great home doesn’t have to come with all the latest and greatest features. You may have to be willing to save up and make gradual improvements after you purchase the home. Some characteristics of residential properties that may increase the value of the home include brand new appliances, a finished basement, renovated kitchen and bathroom, new floors (carpet or hardwood), a big yard, and finished landscaping. Look for houses that don’t have these features and you’ll usually find that they’re more affordable.

Lower your utility bills

Let’s face it: Owning a home is expensive. Typical costs include your monthly mortgage payment, a down payment, mortgage insurance, property taxes, and utility bills that are usually higher than those for renters. This list doesn’t even cover all of the costs that some homeowners pay. And don’t forget that, once you buy a house, you give up the convenience of free maintenance that you had as a renter. All repair bills are now in the hands of your financial responsibility.

Nevertheless, there are plenty of options available that help you cut down the costs. Many states and utility companies have programs that help low-income residents pay for utility services. These programs include anything from energy and utility assistance to housing initiatives and more. One example of this is AT&T’s Access program, which provides home internet service to low-income households—some packages are as low as $5 a month! Get this: Some states even provide cell phones for low-income residents. It just goes to show that it’s possible to make homeownership affordable and income-qualified assistance programs for utility bills can help.

Check out FHA loans

Backed by the Federal Housing Administration (FHA), these loans are perfect for borrowers who are trying to make homeownership affordable. Only 3.5% of the total price of the home is needed for a down payment and borrowers can have a credit score as low as 580 to qualify. FHA loans are more flexible in credit, income, and down payment requirements, making them a secure choice for borrowers who might not qualify for conventional loans.

But, with FHA loans, you have to take the sweet with the sour. These loans require you to pay for two types of mortgage insurance—one is an upfront premium that’s rolled into the mortgage payment and the other is an annual premium that’s broken down into monthly installments. In addition, your desired home must meet minimum property standards and pass an inspection made by an FHA-approved appraiser.

Research other government assistance programs

Aside from FHA loans, if you’re on the hunt for affordability, there are many other assistance programs available that are specially made to help low-income residents reach their homeownership dreams. The U.S. Department of Housing and Urban Development (HUD), for example, offers many of these types of government-funded housing programs. Don’t let financial struggles keep you from living in a home that’s suitable for you and your family’s needs.

Don’t believe that homeownership is out of the question this holiday season. If you’re dreaming of owning your own place now or in the near future, take these tips to heart, learn about your options, and find what works best for you.

The post 5 Ways to Make Homeownership Affordable for You appeared first on Cardinal Financial.