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Buying Your First Home

Buying your First Home

Owning your own home has been part of the American Dream for years.  The pride of ownership and sense of belonging somewhere have been strong factors in motivating over 60% of all households to own their own homes.  In addition, there can be true financial rewards from home ownership.  But, not always.

How Much Home to Consider
Buying and owning a home is expensive.  You will need to consider many different factors:

  1. A down payment (perhaps 20% of the purchase price)
  2. Mortgage closing costs
  3. Monthly mortgage payments
  4. Property taxes
  5. Insurance. 
  6. Utilities
  7. Furnishings

Deciding how much to spend for a home can be complex.  You probably want as nice of a home as possible, but you want to be able to afford it.  What you can afford depends on the size of your mortgage, mortgage rates, costs of home ownership, your other expenses and your income.  One rule of thumb to consider is that the total of your mortgage payment, property taxes and insurance should be no more than 28% of your household income.  Here is a worksheet and a table of mortgage payments to help with the calculation.

Sample Monthly Mortgage Payments for a 30 Year Fixed Mortgage

Interest Rate

Mortgage Amounts

 

$100,000

$150,000

$200,000

$250,000

5.0%

$536.82

$805.23

$1,073.64

$1,342.05

5.5%

$567.79

$851.68

$1,135.58

$1,419.47

6.0%

$599.55

$899.33

$1,199.10

$1,498.88

6.5%

$632.07

$948.10

$1,264.14

$1,580.17


Check out our mortgage calculators to provide more precise payment levels and you can also calculate mortgage payments for other lengths of mortgages.

Worksheet

 

Sample

Sample

 

 

Mortgage amount

$100,000

$150,000

$

$

Monthly payment x 12

($599.55x12)

$7,195

($899.33x12)

$10,792

 

 

Property taxes

$2,625

$2,625

 

 

Insurance

$1,200

$1,200

 

 

Total

$11,020

$14,617

 

 

 

 

 

 

 

Household income

$50,000

$50,000

 

 

Times 28%

x.28

x.28

x.28

x.28

What you can afford

$14,000

$14,000

 

 

Difference

+$2980

Affordable

-$617

Stretching affordability

+ or

+ or

The sample is based on buying a $175,000 house with a 6% 30 year mortgage.  As the chart shows, this person can probably comfortably afford buying the home with a much larger down payment.  As a practical matter, the person could probably be comfortable with a mortgage in the $125,000 to $130,000 range.

Tax benefits from home ownership
Many taxpayers find that the interest on their mortgage and the annual property taxes they pay are large enough to enable them to itemize their deductions instead of using what is commonly referred to as the standard deduction.  The standard deduction for single filers on their 2011 tax returns is $5,800 and $11,600 for joint filers.  For many homeowners, their interest and property taxes exceed those amounts.  Be sure to keep track of when you pay your property taxes.  Some taxing districts have due dates close to the end of the year and you must have paid the tax before December 31st to get the deduction.

The IRS also allows you to exclude any gain on selling your house up to $500,000 if you file a joint income tax return and meet certain requirements.  You may want to investigate these tax advantages further or talk to a tax accountant to completely understand the tax advantages.

Potential gains from selling your home
The housing market in many areas of the country is currently suffering.  While that may be bad news for existing owners, it can be very good news for those buying their first home.  When the housing market improves, and the odds are good that it ultimately will, the value of your home may rise. 

Summary
If you are like millions of others, owning your own home is a primary financial and lifestyle goal.  The pride of home ownership and the financial rewards are attractive.  Just make sure you understand that there can be some downsides before you make the decision.

Contact a Representative Today

Back to Education Resources

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Personal Social Media Account Security

For many of us, social media has become a part of our everyday lives and helps us conveniently keep tabs on the people and topics we care most about.

Recently however, there has been an increase of social media account take overs by cybercriminals. As stated in the media, one contributing factor in some of the social media account takeovers has been the use of weak passwords.


Tips for creating a stronger password:


  • Passwords should typically:
    • be at least 8 characters in length
    • contain at least 1 number
    • contain at least 1 special character (!@#$$%)
    • contain both upper and lower case characters.
  • Do not use your name, date of birth, maiden name, mother’s maiden name, address, or other easily guessable words for passwords. 
  • Another way to create a strong password is to use a series of words that do not relate to each other. For example, JumpingFastRelaxStop!#.

 


Social media additional security options:


Another way to help avoid social media account takeover is to use the additional security options available. Two-factor authentication adds an extra layer of security that drastically decreases your chances of account takeover. Two-factor authentication is essentially the using of two separate components to verify your identity, the combination of something you HAVE with something you KNOW. A good example of two-factor authentication you most likely are already used to is withdrawing cash from an ATM, for example. Having both your debit card AND knowing a pin number is required to complete the withdrawal and protect your identity.

A popular and convenient two-factor authentication method is using a combination of both an online password and a text message verification sent to your phone. Enabling this type of authentication typically follows this process:

  1. Enter your password into Facebook or another website
  2. Immediately receive a text on your phone with a temporary pass key
  3. Enter the passkey received back on the site/app and you’re logged in

This may seem like overkill, but enabling this two-factor authentication will drastically decrease the chances of your social accounts being hacked. And actually, the process of setting up and using this authentication is pretty simple and convenient.

 


How to enable two-factor authentication:


Many popular social networks like Facebook, Twitter, LinkedIN, and others already support two-factor authentication. To learn more about how to do so on the most popular sites on the web, be sure to check out this article:

http://socialcustomer.com/2014/04/how-to-enable-two-factor-authentication-on-50-top-websites-including-facebook-twitter-and-others.html

Wednesday, April 22, 2015

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Buying Your First Home

Buying your First Home

Owning your own home has been part of the American Dream for years.  The pride of ownership and sense of belonging somewhere have been strong factors in motivating over 60% of all households to own their own homes.  In addition, there can be true financial rewards from home ownership.  But, not always.

How Much Home to Consider
Buying and owning a home is expensive.  You will need to consider many different factors:

  1. A down payment (perhaps 20% of the purchase price)
  2. Mortgage closing costs
  3. Monthly mortgage payments
  4. Property taxes
  5. Insurance. 
  6. Utilities
  7. Furnishings

Deciding how much to spend for a home can be complex.  You probably want as nice of a home as possible, but you want to be able to afford it.  What you can afford depends on the size of your mortgage, mortgage rates, costs of home ownership, your other expenses and your income.  One rule of thumb to consider is that the total of your mortgage payment, property taxes and insurance should be no more than 28% of your household income.  Here is a worksheet and a table of mortgage payments to help with the calculation.

Sample Monthly Mortgage Payments for a 30 Year Fixed Mortgage

Interest Rate

Mortgage Amounts

 

$100,000

$150,000

$200,000

$250,000

5.0%

$536.82

$805.23

$1,073.64

$1,342.05

5.5%

$567.79

$851.68

$1,135.58

$1,419.47

6.0%

$599.55

$899.33

$1,199.10

$1,498.88

6.5%

$632.07

$948.10

$1,264.14

$1,580.17


Check out our mortgage calculators to provide more precise payment levels and you can also calculate mortgage payments for other lengths of mortgages.

Worksheet

 

Sample

Sample

 

 

Mortgage amount

$100,000

$150,000

$

$

Monthly payment x 12

($599.55x12)

$7,195

($899.33x12)

$10,792

 

 

Property taxes

$2,625

$2,625

 

 

Insurance

$1,200

$1,200

 

 

Total

$11,020

$14,617

 

 

 

 

 

 

 

Household income

$50,000

$50,000

 

 

Times 28%

x.28

x.28

x.28

x.28

What you can afford

$14,000

$14,000

 

 

Difference

+$2980

Affordable

-$617

Stretching affordability

+ or

+ or

The sample is based on buying a $175,000 house with a 6% 30 year mortgage.  As the chart shows, this person can probably comfortably afford buying the home with a much larger down payment.  As a practical matter, the person could probably be comfortable with a mortgage in the $125,000 to $130,000 range.

Tax benefits from home ownership
Many taxpayers find that the interest on their mortgage and the annual property taxes they pay are large enough to enable them to itemize their deductions instead of using what is commonly referred to as the standard deduction.  The standard deduction for single filers on their 2011 tax returns is $5,800 and $11,600 for joint filers.  For many homeowners, their interest and property taxes exceed those amounts.  Be sure to keep track of when you pay your property taxes.  Some taxing districts have due dates close to the end of the year and you must have paid the tax before December 31st to get the deduction.

The IRS also allows you to exclude any gain on selling your house up to $500,000 if you file a joint income tax return and meet certain requirements.  You may want to investigate these tax advantages further or talk to a tax accountant to completely understand the tax advantages.

Potential gains from selling your home
The housing market in many areas of the country is currently suffering.  While that may be bad news for existing owners, it can be very good news for those buying their first home.  When the housing market improves, and the odds are good that it ultimately will, the value of your home may rise. 

Summary
If you are like millions of others, owning your own home is a primary financial and lifestyle goal.  The pride of home ownership and the financial rewards are attractive.  Just make sure you understand that there can be some downsides before you make the decision.

Contact a Representative Today

Back to Education Resources

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