Guide to Choosing the Best Debt Consolidation Companies

  • Get Out of Debt

In a world of last resorts and desperate measures, debt consolidation is a veritable godsend. It’s an effective, low-cost, and hassle-free solution that can clear troublesome debts in one fell swoop and leave you with something more suitable and manageable.

But as helpful as debt consolidation is, it’s not always an easy and straight-forward solution. Some debt consolidation companies will give you more problems than solutions, more questions than answers, and others will refuse you outright.

In this guide, we’ll take a look at the best options available to you as you seek to consolidate your debt.

How to Get a Debt Consolidation Loan

Debt consolidation can be somewhat of an enigma, a Catch-22. It’s at its most helpful when you have a lot of unsecured debt and a history of late payments, but this also means you have a poor credit score, in which case you might be refused a loan. 

After all, debt consolidation is a personal loan and a personal loan requires a good credit score. 

Bad Credit Options

Your options are somewhat limited if you have bad credit, but you’re not without opportunity:

New Credit Card

This is rarely a good option as credit cards come with high-interest rates and likely won’t benefit you unless you can find a balance transfer card with a long introductory period. 

These cards allow you to move debt from one credit card to another and for a fixed period (typically 12 to 18 months) you won’t pay any interest. You can use this period to clear the debt or at least make a significant impact so that you’ll pay less interest when the introductory period ends.

Credit Unions

A credit union may provide you with more possibilities than a bank, offering better rates and targeting these towards borrowers with lower credit scores. They can also help you to establish a debt management plan and provide you with a credit counselor.

Friends and Family

If you can’t get a consolidation loan from a bank, credit union or credit card provider, you can try asking friends or family. This is a huge ask, but if you have a terrible credit score and a lot of debt, it’s one of the only ways you can get a personal loan. You can ask them to lend money directly or take a loan on your behalf. 

In either case, make it worth their while with a monthly payment that covers more than the principle of the loan. Even if you’re repaying 10% or 20% on the total cost of the loan, it’s likely to be much cheaper than a traditional consolidation loan, which is designed to prolong the loan’s term, keeping monthly payments low but overall interest payments high.

Improve Credit Score

It’s an option you probably don’t want to see and have no doubt already considered, but the simple fact is that every time your credit score improves your chances of getting a consolidation loan improve with them. The difference between a 5% loan and a 10% loan is massive over several years as compound interest kicks in and the interest costs escalate.

It can take years for your score to improve enough to make a difference, but only if you have a lot of derogatory marks. If your score is weak because of a limited history, the odd missed payment, and very few active accounts, you can fix it in a few months. Take a look at our guide on how to improve your credit score fast to learn more.

Good Credit Options

A good credit score improves your chances significantly. There is no guarantee, but you’ll certainly have more options than someone with bad credit.

Debt Consolidation

Banks and credit unions have created loans specifically for debt consolidation. They will take your circumstances and debt into account, look at manageable monthly payments, and then provide you with the money you need to clear your debt.

This money can be used to clear credit card debt and loan debt and will come with a favorable interest rate. There may also be an origination fee, which is charged as a percentage of the loan.

Personal Loan

A personal loan is more of a DIY option. Shop around for a loan that offers a favorable interest rate and provides enough money to cover your debts, apply, and then use the funds to clear those debts. There may be an origination fee, which is charged to cover processing fees.

How to Start with Debt Consolidation

In simple terms, debt consolidation is refinancing. You’re swapping one loan for another, but in doing so you’re essentially refinancing the terms.

 If you only have one or two debts to clear, your first step should be to seek refinancing. Contact your lender and look at extending the agreement.

They may also recommend a debt management program. Both options are often more favorable than consolidation and at the very least they should be considered. Once you’ve exhausted those possibilities, you can look into acquiring a consolidation loan. 

What to Look for in a Debt Consolidation Company

Debt consolidation is a world away from debt settlement, which can be a bit of a minefield when it comes to scams. However, debt consolidation scams do exist as well, and you need to look out for these, remember to look for:

Interest Rates

If something looks too good to be true, it probably is. Make sure the company is regulated, the site is secure, and the offer is genuine. Don’t be tempted by introductory rates and false promises, only to be blindsided by small print.

Just because it’s a debt consolidation loan doesn’t mean you’re getting a beneficial rate. It’s not uncommon for consolidation loan providers to offer you interest rates much higher than the ones you already have, which means you’ll pay much more interest over the lifetime of the loan.

Changing Rates

Not all rates are fixed, so make sure your rate is. It can be helpful to use a loan rate calculator to make sure you’re getting a good deal and won’t pay more than you already are. Focus on the long-term as well as the short-term, lower monthly payments are great, but not if they mean you will pay twice as much interest over the course of the loan. 

Check the BBB

The Better Business Bureau is a great source of information when dealing with companies in the financial sector. A company’s absence from this list isn’t necessarily a sign that it’s a scam but it should warrant further research. Look at complaints and mediations as well as reviews and company info.

Look for Affiliations

Does the company work with the National Foundation of Credit Counseling or the Financial Counseling Association, do they have any worthwhile affiliations? These partnerships can be a sign that you’re dealing with a legitimate consolidation company.

How Do Debt Consolidation Companies Work?

Imagine that you have $30,000 in debt spread across three credit cards:

  • Credit Card 1 = $10,000
  • Credit Card 2 = $10,000
  • Credit Card 3 = $10,000

You’re paying 20% APR and making monthly repayments of $300 each or $900 total. Those loans will be repaid in approximately 4 years and in that time, you’ll repay just over $4,700 in interest per card, amounting to a total repayment of $44,100.

If you take out a 5-year personal loan at 10% interest, you’ll pay $637 a month and repay just $38,245, saving you a couple hundred bucks a month, nearly $6,000 in total, and making the debts more manageable, all at a cost of an additional year.

However, there are some issues to consider here. Firstly, if you really want to reduce those monthly payments, you’ll need to increase the loan’s term. If we reduce it to under $300, then you’ll pay back close to $70,000 and it’ll take 20 years to clear.

This is essentially how many consolidation companies work. They’ll promise to clear your loan debt and leave you with a low monthly payment, but in doing so they’ll prolong the life of your loan and leave you repaying massive amounts of interest.

Of course, if you get a loan with just 4% interest, you can clear the above debt in 4 years, pay just a couple grand more, and repay less than $700 a month. But this option isn’t available for the majority of borrowers.

Pros and Cons of a Debt Consolidation Loan

Debt consolidation is not always the best option. It certainly can be if you have the freedom of choice and a great credit score to back it up, but if you’re struggling in that department then debt consolidation can be a nightmare that drags you into lifelong debt.

Pros

  • Clear Debts: Turn multiple debts into one manageable one.
  • Lower Rates: Pay less money every month, thus improving your debt-to-income ratio and decreasing outgoings.
  • Fewer Penalties and Missed Payments: With lower monthly payment demands and fewer debts, your risk of missing payments and accumulating penalties reduces.
  • Multiple Options: There are several options available, even for borrowers with a low credit score.

Cons

  • Extend Debt: It can extend the length of your debt.
  • Pay More: You may pay more money over the lifetime of the debt.
  • Prolonged Misery: Unlike debt settlement, it won’t drag you out of debt any time soon and if your debts are causing you great stress, it may prolong that.
  • Credit Score: A consolidation loan will appear as a new account on your credit score, although at the same time the other accounts will be cleared. You may, therefore, take an initial hit, but this will even-out before long.

The Best Debt Consolidation Loan Companies

There are dozens of reputable debt consolidation companies out there, many of which provide loans that can be used to purchase cars, make home improvements or launch a business, as well as consolidate debt. 

There are a few key points to consider when looking for a debt consolidation company including the minimum credit score they require, the origination fee, the loan amount and term, and whether or not they require anything specific from borrowers.

With those things considered, here is a selection of the best debt consolidation companies out there right now.

BestEgg

BestEgg is has funded more than $9 billion worth of loans with a 95% customer satisfaction rate and an A+ BBB rating.

The process is quick and easy and you can secure as much as $35,000 for consolidation and major purchases. You need a minimum credit score of 640 to apply and they have interest rates ranging from a low of 5.99% to a high of 29.99%.

There are origination fees, however, and they also require an extensive credit history, which rules them out if you’re young and are only just starting to build credit.

LightStream

LightStream was launched back in 2013 as a division of SunTrust Bank. It requires a minimum FICO Score of 660, but there is no origination fee, no minimum debt-to-income ratio, and there is also a co-signer option.

You can borrow anywhere from $5,000 to $100,000 with LightStream and use this to repay loans from approved lenders, with terms fixed for between 2 and 7 years.

LightStream’s rates are between 5.49% and 17.29% and its higher maximum loans make it a great option for consumers with substantial amounts of debt.

Upstart

You can borrow as little as $1,000 with Upstart and repay this over 3 to 5 years. You only need a FICO Score of 620 or more to apply. There is an origination fee, however, and this can be quite expensive, but it all depends on the individual and the size of the loan, ranging from 0% right up to 8%.

Upstart claims to have lent over a quarter of a million individuals more than $3.2 billion since it was founded.

Discover

One of America’s most trusted credit card providers also offers consolidation loans to all consumers with a credit score of 660 or more. You can borrow between $2,500 and $35,000 with Discover and monthly payments can be spread over a term of between 3 and 7 years. 

This is a personal loan, but one that can be used for debt consolidation, and there is no origination fee or minimum debt-to-income ratio requirement.

Other Reputable Debt Consolidation Loan Companies

There are many other reputable companies in this sector, including a whole host of banks, credit unions, and lenders:

  • Marcus, By Goldman Sachs: A 660 credit score is required; respectable interest rates are offered.
  • Prosper: The lowest rates are a little higher than some other companies, but there is also a lower cap on the maximum, with loans between $1,000 and $45,000 on offer.
  • Payoff: Get up to $35,000 with interest rates that drop as low as 5.99%.
  • Upgrade: Loans up to $50,000 with a minimum credit score of 600.
  • Avant: A good option for bad credit and loans up to $35,000.

Debt Consolidation vs Debt Settlement

Debt settlement aims to clear your debts and works best when you have missed payments and old debts. A debt settlement company, such as National Debt Relief, will ask you to pay money into a secure account and then use this money to negotiate with lenders. National Debt Relief’s goal is to get the lenders to settle for a reduced amount and clear the debt in exchange, thus removing them from your credit report.

However, debt settlement has a notable impact on your credit score. Not only do companies like National Debt Relief request that you stop making payments so they can use the money to negotiate, thus leading to missed payments, but the process can take several years and you may be sued in that time.

It’s also not an option if you don’t have much more to spare every month. This means your only option is to use money that would otherwise go toward paying off debts, which in turn means those debts will default and you’ll miss several months of payments, potentially entering collections.

Debt consolidation avoids all these issues and is a simpler process that does much less damage to your credit score. A new account will appear on your credit report and reduce your score, however, and debt consolidation is not without its issues.

FAQs on Debt Consolidation Loans

Still have some questions about these loans, how they operate, and how they can help you? Take a look at these frequently asked questions which cover some of the points we have yet to discuss:

What are the Different Types of Debt Consolidation?

Debt consolidation takes many forms and applies to any personal loan or balance transfer that moves one or more high-interest debts into another, low-interest account.

A large, low-interest personal loan is the best option and one we have discussed extensively already. Other options include:

  • Home Equity Loan
  • Bank Consolidation
  • Credit Union Consolidation
  • Balance Transfer Card
  • New Credit Card
  • Refinancing
  • Home Equity Loan

How Does it Affect Your Credit Score?

Debt consolidation can both positively and negatively affect your credit score. On the one hand, you will be hit with hard inquiries and a new account penalty. Your average account age will also drop. On the other hand, your credit utilization score should reduce and your payment history should improve now you have more manageable debt.

What are the Financial Consequences of Debt Consolidation?

In the short-term, debt consolidation will improve your debt-to-income ratio as you’re reducing your monthly payments while maintaining the same earnings. This gives you more buying power and provides a little breathing space.

It also relieves pressure that would otherwise be applied from multiple high-interest loans and credit cards, pressure that could result in delinquencies.

What Should You Consider Before Applying?

Make sure you have understood the pros and cons and that you know what you’re getting yourself in for. As discussed already, debt consolidation isn’t for everyone and it’s not without its problems. You may be signing up for decades of debt.

Don’t focus too much on the lower monthly payments and try to look at the bigger picture.

Can I Use My Credit Card After Debt Consolidation?

Try to keep cleared credit cards active, as this will improve your credit utilization ratio by keeping your debt low and available credit high. Don’t rush into using them again, however, unless you have properly budgeted and know you’ll be able to clear the balance every month.

The last thing you want to do is accumulate more credit card debt after going to great lengths to pay it off.

Why Am I Being Refused?

Your credit score may be too low or you may have a limited credit history. Lenders want customers who have a proven track record, which means your score needs to be respectable and you need to have a record of monthly payments, cleared accounts, and debt variety.

What Other Options Do I Have?

Debt consolidation is far from the only option and while it is one of the better ones for many consumers, it’s not suitable for everyone. Other options include:

  • A Debt Management Plan: A debt management plan is preferable in many ways as you don’t need to apply for new loans, pay origination fees, and worry about your credit score taking a hit. It’s all about helping you manage your debt.
  • Non-Profit Credit Counseling: As with debt management, credit counseling is geared towards helping you find your feet, manage your debts, learn to budget, and maneuver through difficult times. The ultimate goal is to avoid delinquencies and last resorts like bankruptcy.
  • Repayment Plan: If you’re struggling to meet your current monthly payments, try to negotiate a repayment plan with your creditors. They want to make sure you pay your debts and don’t default, and if that means reducing monthly payments and prolonging the term, they’ll be happy to do it.
  • Debt Settlement: A good option if you have some money put aside, can afford to wait, and have multiple debts that you want cleared completely.
  • Bankruptcy: It should always be a last resort as it can leave a mark on your credit report that stays for 10 years, but bankruptcy is an option nonetheless. We only recommend looking into this if you can’t find a debt consolidation loan; debt settlement and debt management is not an option, and you have more debts than you can afford to pay. Don’t take bankruptcy lightly, even if it seems to be in-vogue with celebrities.

Source: pocketyourdollars.com

Home Prices vs. COVID-19: Will They Go Up or Down?

Posted on May 7th, 2020

It’s time to take a look at how COVID-19 could impact home prices given the massive disruption to the local, state, national, and global economy.

On the one hand, inflation is expected due to all the government spending, which could lead to a price increase since real estate often acts as an inflation hedge.

Conversely, if tons of borrowers lose their homes due to unemployment, we could see properties flood the market. And when combined with fewer eligible buyers, it could lead to a supply glut.

Consider the Lack of Housing Supply and Mortgage Quality

  • The housing market has three great things working in its favor right now
  • Housing supply is low enough even if buyer demand wavers during this uncertain time
  • The quality of today’s mortgages is excellent any many homeowners have lots of equity
  • Mortgage rates are at record lows, which further increases home buyer appetite

First, let’s compare today’s housing market to the one in 2006. They really couldn’t be any different, both from an inventory standpoint and from a mortgage perspective.

Simply put, back then there were way too many homes being built, and not enough demand to meet that supply.

At the same time, banks and lenders were doling out home loans to anyone with a pulse, knowing they could quickly bundle the underlying mortgages and sell them to Wall Street shortly after origination.

Taken together, it was a recipe for disaster. Homeowners had massive mortgages they couldn’t truly afford that were often set to adjust higher just months after they took them out.

They also had no skin in the game, aka home equity, so there wasn’t much incentive to stick around and try in vain to keep a sinking ship afloat.

Today, Americans are sitting on the most home equity in history, and very little of it is being tapped thanks to tighter underwriting guidelines that have only become more restrictive since COVID-19 reared its ugly head.

Meanwhile, there’s an inventory shortage that has likely only worsened as fewer existing homeowners list their properties, and mortgage rates are at record lows.

In short, homeowners today have tons of equity and historically cheap mortgages, and home buyers have fewer properties to choose from and ridiculously low mortgage rates at their disposal.

The Great Unknown Ahead

  • Ultimately nobody knows what the future holds or how we recover post-coronavirus
  • 1 in 5 Americans have already filed for first-time unemployment benefits since mid-March
  • That will likely worsen over time and lead to increased mortgage forbearance requests
  • The big question – is this income hit temporary for most homeowners or permanent?

Now it’s wonderful that today’s mortgages are mostly pristine, and that homeowners have tons of equity to serve as a cushion if forced to sell.

But we’re living in a very fluid and strange environment at the moment that could change in no time at all.

For example, one in five Americans have filed for unemployment since mid-March, and that’s likely only going to get worse.

So even if many of these homeowners had super affordable mortgages, a lack of income and the inability to tap their equity could put them at risk quickly.

To counter that we’ve got the mortgage forbearance offered via the CARES Act, which is great for struggling homeowners but only lasts for 12 months.

What happens after that? At best, if they simply have to resume making normal payments, there’s a decent chance not everyone will be re-employed and able to do so.

The world has changed and may not go back to “normal,” and thus not everyone will have the realistic ability to return to making monthly mortgage payments.

Even if they’re offered a loan modification to lower their payment, it still might not be enough if they can’t find work.

The same goes for investment properties such as those offered by Airbnb and other short-term vacation companies, or kiddie condos owned by parents in college towns, which might remain vacant.

If this is the case, we could see a flood of new properties hit the market similar to what we saw back in 2008, 2009, etc.

That’s where these two very different housing markets could begin to intersect. The good news is we didn’t have a supply glut before COVID-19 came around.

Back in 2006, we had a massive oversupply that was further exacerbated by a financial bubble, so it was a one-two punch.

Additionally, one could argue that both homeowners and lenders were to blame for what happened back then.

Sure, lenders offered high-risk products, but borrowers happily pulled out billions in cash out along the way to spend on who knows what.

Today, you can’t really blame a homeowner who is unable to make their mortgage payment due to the coronavirus epidemic.

And it’d look really bad to foreclose on this type of homeowner, which could limit the damage and keep inventory tight.

But here’s the thing – no one can sit here today and say they know what’s going to happen with COVID-19. And data models can’t forecast properly in this environment.

So really anything right now is a guess.

What Are We Seeing So Far in the Housing Market?

homebuyer demand

  • Home sellers mostly haven’t budged on listing prices
  • Prospective sellers are ready to go once stay-at-home orders are lifted
  • Amenities like big yards and home offices are becoming more important to buyers
  • Home buying demand is recovering and listing prices are up from a year ago

Everyone seems to want to call this event temporary – a moment in time that will magically fix itself once the economy opens up.

I don’t subscribe to that, as much as I wish it were true. You can’t simply erase what’s happened the past several months, nor what lies ahead in the aftermath.

Speaking of, are we even “after” yet, or is this still in the early innings. While that too can be debated all day long, again no one really knows.

But we can look at early impact to get some sort of a clue.

The MBA reported that seasonally adjusted home purchase applications increased 6% from a week earlier, with even bigger gains seen in California and New York.

The ever-cheerful National Association of Realtors reported that home sellers have not lowered their listing prices as a result of COVID-19.

In the latest week, 73% of Realtors said their clients did not reduce listing prices to attract home buyers.

That’s been pretty steady for the past few weeks since NAR began reporting on it.

Additionally, they said today that 77% of prospective sellers “are preparing to sell their homes following the end of stay-at-home orders.”

In other words, once this blows over it’s going to be real estate business as usual, sans discount!

Interestingly, buyer needs might have changed – they now want a big backyard to play in and grow their own food, along with a home office and possibly a home gym too.

The less is more thing may no longer be a hot trend, nor is urban living possibly as popular. The Burbs are back!

Over at Redfin, it’s also good news with nearly 53,000 homes hitting the market during the week ending April 24th, compared to just over 48,000 for the week ended April 13th.

Additionally, pending home sales have increased from less than 31,000 to more than 32,500 during those same periods.

Despite the rise in new listings, there were less than 700,000 homes for sale in Redfin markets nationwide, the lowest amount the real estate brokerage has seen during the past five years.

That might explain why the median listing price was $308,000 for the week ending April 24th, up 1% compared to the same period last year.

Home buyer demand has also begun to climb back after taking a hit in March, a sign potential buyers are unfazed and ready to move forward.

A Home Price Projection from Zillow

Zillow scenarios

  • Company sees home prices falling just 2-3% by the end of 2020
  • With a recovery in home prices throughout 2021
  • Their pessimistic model sees a 3-4% decline in prices and no recovery in 2021
  • Home sales are expected to fall 50-60% in all their models before rebounding at varying speeds

Now let’s take a look at a projection from Zillow, the creator of the Zestimate that should know a thing or two about home prices.

They have forecast a mere 2-3% drop in home prices through the end of 2020, which will be followed by a recovery in prices throughout 2021.

That means a small drop this year that is recovered next year could mean no material change for home prices due to COVID-19.

So they appear to be on the “this is temporary” wagon. Prior to the coronavirus outbreak, home prices were expected to rise 3.3% on average in 2020, and 2.7% in 2021, per the Zillow Home Price Expectations Survey, which includes a panel of more than 100 economists and experts.

But again, their “proprietary macroeconomic and housing data” might not be well-equipped to take into account a pandemic.

They have three different scenarios for home prices, including an optimistic, medium, and pessimistic outlook.

At best, they drop only 1-2% this year, at worse they fall 3-4% and “remain depressed through 2021.”

In all cases, home sales are expected to take a big hit of 50-60%, though when they recover varies.

That might hurt real estate agents and mortgage lenders if mortgage refinance volume begins to waver.

The good news, despite all the horrible news, is that homeowners are a lot better off today than they were in 2006, which means more of them should be able to get through this crisis without losing their home.

And that should bode well for home prices.

Source: thetruthaboutmortgage.com

Preparing To Buy a House in 8 Simple Steps

In life there are some situations a person simply can’t prepare for, like locking the keys in a car full of groceries or having a head full of shampoo when the smoke alarm goes off. Luckily, purchasing a home doesn’t have to be one of those moments.

Buying a house is probably one of the biggest financial decisions many people will make in their lifetime, and the process can be lengthy and complex. From getting a bird’s-eye view of their overall financial picture to calculating housing costs and securing loan pre-approval, there are many actions for home buyers to take as they get ready to purchase a home.

With the right resources and a solid strategy, however, purchasing a house can be a smooth process.

8 Steps to Prepare for a Home Purchase

1. Determining Credit Score

A home buyer’s credit score can impact their ability to secure a mortgage loan with a desirable rate. It can also affect how much they’ll be required to pay as a down payment when it’s time to close.

In a recent report from the National Association of Realtors , home buyers who had debt said it hindered their ability to set aside funds for a down payment by a median of four years.

Credit score can be influenced by a variety of factors, from payment history to amount of debt (a.k.a. credit utilization ratio) to age of credit accounts, mix of credit accounts, and new credit inquiries.

Payment history is the main factor that affects a person’s credit score, accounting for 35% of an overall FICO® score. Missing a payment on any credit account—from unpaid student loans to credit cards, auto loans, and mortgages—can negatively impact a person’s credit score.

By making on-time payments, limiting the number of new inquiries on their credit file, and working to pay down outstanding balances, home buyers could potentially boost their credit score and qualify for a lower mortgage rate.

Is There a Credit Score “Sweet Spot?”

Many buyers wonder whether there’s a desired credit score range or “sweet spot” to obtain a mortgage. The 2020 Q1 Federal Reserve Report on Household Debt and Credit found that the median credit score of newly originating borrowers increased to 773 in the first quarter for mortgages—up 14 points from 2019.

That’s not necessarily to say a credit score of 773 is a must for securing a mortgage, but the difference between a credit score in the 600 range and one in the 700 range could amount to about half a percent less interest on a mortgage loan and add up to a lot of money over time.

Credit scores can also affect the amount of the down payment itself. Many mortgage lenders require at least 20% of the house’s sale price be put down, but might offer more flexibility if the buyer’s credit score is in the higher range. A lower credit score, on the other hand, could call for a larger down payment.

Whether home buyers have debt or not, checking credit reports is still a recommended first step to applying for a mortgage. Understanding the information on credit reports is invaluable in knowing whether time is needed to repair credit, which could potentially lead to a higher credit score and possibly lower mortgage loan rate.

2. Deciding how Much To Spend

Deciding how much to pay for a new home can be based on a variety of factors including expected and unexpected housing costs, up-front payments and closing costs, and how it all fits into the buyer’s overall budget.

Calculating Housing Costs

There are several housing costs for home purchasers to consider that might affect how much they can afford to offer for the house itself. The costs of ongoing fees like property taxes, homeowner’s insurance, and interest—if the loan does not have a fixed rate—can all lead to an increase in the monthly mortgage payment.

Closing costs are fees associated with the final real estate transaction that go above and beyond the price of the property itself. These costs might include an origination fee paid to the bank or lender for their services in creating the loan (typically amounting to 0.5% to 1% of the mortgage), real estate attorney fees, escrow fees, title insurance fees, home inspection and appraisal fees and recording fees, to name a few. To get an idea on how this can impact your budget, use this home affordability calculator to estimate total purchase cost.

Last year, the average closing costs for a single-family property were $5,749 including taxes, and $3,339 excluding taxes, according to a recent report from ClosingCorp .

In addition to closing costs, expenses that potential home buyers might want to consider are repairs and updates they might want to make to a home, new furniture, moving costs, or even commuting costs.

Finally, unforeseen costs of a major life event like a layoff or the birth of a new child might not be the first expenses that come to mind, but some buyers could find themselves making a potential home buying mistake by not getting their finances in order to prepare for the unexpected.

Making a list of these estimated expenses can help home buyers calculate how much they can feasibly afford and create a budget that could help them avoid being overextended on housing costs, especially if they might be paying other debt or saving for other financial goals.

3. Saving for a Down Payment

Saving money for a house is one of the biggest financial goals many people will have in their lifetime. And how much they’re able to offer as a down payment can significantly impact the amount of their monthly mortgage payment.

A larger down payment can also be convincing to sellers who see it as evidence of solid finances, sometimes beating out other offers in a competitive housing market.

The average down payment on a house varies depending on the type of buyer, loan, location, and housing prices, but, according to Zillow’s 2019 Consumer Housing Trends Report , 56% of buyers put down less than the typical 20% down payment, 19% put down 20%, and 20% of home buyers put down more than 20%.

For first-time home buyers, 20% of the price of the home can seem like a daunting figure. Many buyers find that cutting spending on luxury or non-essential items and entertainment can help them save up the funds.

Other tactics could include getting gifts and loans from family members, applying for low-down-payment mortgages, withdrawing funds from retirement, or receiving assistance from state and local agencies.

For buyers who were also sellers, proceeds from another property could also fund the down payment.

4. Shopping for a Mortgage Lender

There are many mortgage lenders competing for the business of the 86% of home buyers who finance their home purchases. These lenders offer a variety of mortgages to apply for, with a few of the most common being conventional/fixed rate, adjustable rate, FHA loans, and VA loans.

Buyers might not realize they can—and should—shop around for a lender before selecting one to work with. Different lenders offer different variations in interest rates, terms, and closing costs, so it can be helpful to conduct adequate research before landing on a particular lender.

Mortgage lenders must provide a loan estimate within three business days of receiving a mortgage application. The form is standard—all lenders are required to use the same form, which makes it easier for the applicant to compare information from different lenders and make sure they are getting the best loan for their financial situation.

5. Getting Pre-Approved for a Loan

While it might seem like a bit of a nuance, getting prequalified for a loan versus pre-approved for a loan are two different things.

When a buyer is prequalified for a loan, their mortgage lender estimates—but does not guarantee—the loan rate, based on finances provided by the buyer.

When a buyer is pre-approved, the lender conducts a thorough investigation into their finances that includes income verification, assets, and credit rating. This pre-approval gives a guarantee to the buyer that they will be able to obtain the loan and breaks down exactly what the bank is willing to lend.

Having a pre-approval letter in hand can help some buyers get ahead by appealing to the seller as a serious intention of purchase and a lender’s guarantee to back that purchase up.

6. Finding the Right Real Estate Agent

According to the National Association of Realtors 2020 Generational Trends Report :

•  89% of all buyers purchased their homes through a real estate agent.
•  The primary method most used to find that agent was referral.
•  All generations of buyers continued to utilize a real estate agent as their top resource for helping them buy a home.

While the internet and popular real estate search websites have made it easier for home buyers to hunt for a house online, most buyers still solicit the help of a real estate agent to find the right home and negotiate the price and purchase.

Also, many realtors are experts in their particular housing market, so for buyers who are searching in a specific location, a real estate agent may be able to offer valuable insights that might not be revealed online.

7. Exploring Different Neighborhoods

By researching neighborhoods where they might want to purchase a property (both in-person and online), home buyers can get a better sense of what living in their future community could look like.

Many real estate websites provide comparable listings to help determine a reasonable offer amount in a given neighborhood.

Check out housing market
trends, hot neighborhoods,
and demographics by city.

They may also highlight nearby school ratings, price and tax history, commute times, and neighborhood stats like home value fluctuations or predictions, and walkability ratings.

All of this information can help paint a picture of life in the area a home buyer chooses to settle in. Doing a deep dive into a desired neighborhood can help inform a more realistic decision on where to buy a house.

8. Kicking off the House Hunt

Once the neighborhoods are whittled down, the loan is secured, the real estate agent has been signed, and the savings are set aside, the official house hunt can begin.

For 55% of buyers, the most difficult step in the home buying process was finding the right property. Some had to undergo a considerable process before making the final purchase, with most searching for 10 weeks and seeing a median of nine homes first.

With the help of a trusted real estate agent and a housing market with adequate inventory, most home buyers can begin to book showings, attend open houses, and formally put down an offer on a house they like.

In particularly “hot” markets, houses could receive several offers, so home buyers might want to be prepared to go through the bidding process with a few properties before they get to that glorious final sale.

Home buyers might wish they could snap their fingers and move into their dream house as quickly and painlessly as possible. While that is not realistic, SoFi can help simplify the mortgage loan process.

Without any hidden fees or prepayment penalties, a SoFi home loan could be the right option for many homebuyers. For questions about buying a home, SoFi offers home loan resources, guides, and tips to steer future homeowners through the process. There are a lot of steps, but managing them can be easier with a helping hand.

Learn more about how SoFi home loans make the mortgage process as quick and painless as possible.



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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
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Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.

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Source: sofi.com

The Difference Between Credit Card Refinancing and Debt Consolidation

  • Credit Card Debt

Average credit card debt in the US changes depending on who you ask and where they get their information. In 2019, Experian estimated this to be $6,194, while a leading credit site produced a figure closer to $8,000. At the same time, data pooled from the US Census and Federal Reserve calculated a more modest $5,700, which is likely to be the most reliable figure.

In any case, there’s one thing that researchers can agree upon: This is a growing problem and it won’t be going away any time soon.

The good news is that credit scores are improving, and debtors have never had more options for clearing their debts, including consolidation and refinancing.

In this guide, we’ll look at both of these options and more, covering cash-out refinance plans, balance transfer consolidation, and more, giving you the knowledge and tools needed to clear your credit card debt and get back into the black. 

What is Credit Card Refinancing?

Credit card refinancing generally refers to a balance transfer, although it has also been used to refer to debt consolidation. In both cases, you refinance one loan or debt with another, often keeping the same balancing but adjusting the terms to something more manageable.

We’ll show you how you can properly refinance your debts in this guide as we look at both consolidation and refinancing.

How Does it Work?

A balance transfer moves all your credit card debt onto a new card provided by a new lender. These cards offer 0% APR introductory rates to tempt new customers and these rates mean you can avoid paying interest throughout that period, which typically lasts for 12 to 18 months.

If you have a $5,000 balance with a 20% APR, this switch could save you $500 in the first year. That’s $500 more towards your balance and if you continue making the monthly payments, the debt will reduce significantly by the end of the year and the 0% introductory period.

If that sounds too good to be true, it is. Sort of. These cards can help to shoulder some of your financial burdens and in certain circumstances, they are lifesavers, but there are a few downsides. Firstly, these cards typically charge a fee that can be as high as 5% of the balance. On the aforementioned $5,000 debt, that’s $250. 

Secondly, at the end of the introductory period, the interest rate will kick-in and this is often charged at a premium. If you use this period to avoid paying interest and not to reduce your debt, you could end up in a worst position than when you started.

Who is Refinancing Right for?

You will need a fairly clean credit report and a respectable credit score to get a high-limit credit card. There are multiple cards with 18-month introductory periods, 3% transfer rates and APRs that go as low as 16% once the 0% period ends. 

As soon as you drop below the 700s, you’ll struggle to get any of these and if you drop below 580, you’ll find it difficult to get anything at all, let alone something large enough to cover your current credit card debt.

How Does Refinancing Credit Cards Affect Credit?

If you finance your credit card debt you’ll see an instant improvement in your debt-to-income ratio, which compares your gross income to all debt payments (including student loan debt, credit card debt, mortgage debt, etc.). This figure is imperative for your financial health and needs to be considered before you shop for mortgage rates or acquire any new debt, because if it’s too high then you may struggle to make payments and could face financial ruin.

An improvement in this ratio, therefore, is always beneficial. The problem is, it doesn’t have any impact on your credit score. One of the ways that refinancing will impact your score is by initiating a hard inquiry, which follows all new loan and credit card applications. This can reduce your score by as many as 5 points.

Opening a new account will also reduce your score. If you’re consolidating several debts into one, then those debts will clear and that will improve your score in the short-term and the long-term. Generally speaking, it’s always beneficial for your long-term credit score and financial wellbeing but be prepared for a short-term reduction. 

Can You do a Balance Transfer with Multiple Cards?

You can generally transfer anywhere up to five balances, providing they all remain within the specified credit limit. Balance transfer applications often include sections for multiple debts and cards. Input the details of all your credit card debt into these sections and then wait for them to finalize the decision process, being sure to keep making your payments while you do.

You cannot, however, transfer money into cards offered by the same lender. This may seem counterintuitive, but it’s important to remember that balance transfer cards and their 0% introductory rates are used to attract new customers, hopefully beginning a process that will see the customer fall into a cycle of debt. If they already have you as a customer and you’re already trapped in that cycle, they don’t have much to gain by offering you a 0% balance transfer. 

Credit Card Refinancing vs Debt Consolidation

Debt consolidation is often used interchangeably with refinancing and there are many similarities and programs that provide both options. The ultimate goal of these options is also the same, but there are some key differences.

How is Credit Card Refinancing the Same as Debt Consolidation?

The goal of consolidation is to swap many large minimum payments and escalating interest rates for one manageable monthly payment and respectable interest rate. Refinancing works in a similar way and aims to achieve the same result, albeit with some key differences.

The main difference between these two concerns how the original debts are dealt with. With refinancing, you’re moving all current debt to a new credit card via a balance transfer. Your original credit card debt is repaid, and your attentions shift to your new card.

When you consolidate credit card debt, your original debt is paid off and your focus is shifted to a new debt, preferably with a lower annual percentage rate and more favorable interest terms.

Tips for Credit Card Refinancing

If you’ve decided that credit card refinancing is the best way to clear your credit card debt, then keep the following in mind to ensure you get the best deal:

Monitor Your Credit Score

Your credit score will play a massive role in determining the sort of rate you’re offered. 50 points could be the difference between a card that has a short introductory period and a high-interest rate, and one that has 0% for 18 months and provides a respectable APR. Those 50 points can be gained in as little as a month or two depending on your situation.

We have a complete guide on How to Improve Your Credit Score Quickly that you can read to better understand what your options are, but here are a few quick tips to help:

  • Pay More: If you have extra cash at the end of the month then use it to pay towards the debt with the highest interest rate. This will reduce the compounded interest, which in turn will reduce the term and the total amount you pay. Both of these will improve your score long-tern, but the greater balance reduction will also help the next time your score is calculated.
  • Increase Limits: You can increase limits of active credit cards to give your credit utilization a boost. This accounts for 30% of your total score, so it makes a big difference.
  • Look for Mistakes: If you notice any mistakes on your credit report, dispute them. These are much more common than you might think and by disputing them you can remove them and improve your score.
  • Be Careful with Hard Inquiries: Credit scoring systems allow something known as “rate-shopping” whereby all applications for the same type of loan are included in one hard inquiry providing they take place in a fixed period. However, this is not true for credit cards, and all applications will count as a separate inquiry. Be very careful when comparing balance transfer cards and make sure you don’t agree to any hard inquiries unless they are absolutely essential.

Look for an Introductory Period

You need a 0% introductory period of at least 12 months, but there are many cards that extend this to 18 months. Anything less may not give you the time you need to get your finances in order and start making those crucial payments.

Check the Transfer Rate

The transfer rate is displayed as a percentage and can vary considerably. Even a difference of 2% (between the lowest average of 3% and the highest average of 5%) can account for $400 on a debt of $20,000.

Don’t Neglect Rates and Penalties

If a card is offering terms that seem too good to be true, you need to do a little digging. Look at the terms and conditions to discover what the APR will be when the introductory period ends and what sort of penalties they charge. The 0% introductory period is a massive positive, so it’s okay if the other terms are a little worse than what you have now. But there’s a line, and you don’t want to go from 16% interest to 26%, for instance.

Start Repaying

The purpose of these cards is not to give you a break from interest payments so that you can pump more money into your vacation fund or buy that new games console you’ve had your eye on. That might be what the lender (secretly) wants, but to get the maximum benefit out of balance transfers you need to repay all or most of your debt during the introductory period.

Use this opportunity to reduce the debt by as much as you can because every cent you pay is one less cent for future interest to be calculated against.

Keep it Open

Don’t be tempted to cancel the card as soon as your debt has been repaid as this will greatly reduce your credit utilization ratio, which will impact your credit score. Instead, keep the card active, but try not to use it except for in emergencies and when you’re 100% confident you can clear the balance at the end of the month.

Tips for Acquiring a Consolidation Loan

There are companies that specialize in providing consolidation loans, both in the form of student loans and personal loans. These companies work by repaying your debts with a single, large consolidation loan—leaving you with just one payment to make every month and one debt to worry about.

But much like refinancing, consolidation is not without its issues. To make sure you get the best deal and are mot burdened with more debt than you can afford, remember to:

Check the Total Interest

Many consolidation loans work by reducing the interest rate and minimum payment but increasing the term. On the surface, it looks like you’re getting a great deal, but in reality, you could be paying two or three times as much during the lifetime of the loan.

Use a loan calculator to determine how much the consolidation loan will cost you over the term. A lower interest rate and monthly payment is great and in the short-term, it can provide a huge boost to your finances, but you don’t want to be stuck with a loan that requires you to pay more in interest than the principal.

Understand the Impact on your Credit Report

Some consolidation loan companies, particularly those in the debt management sector, will insist that you close all but one credit account. This removes temptation, but once those old accounts close and are replaced by a brand new one, it will also remove a sizeable chunk of your credit score.

This is not true if you do it yourself using a personal loan, but this can be a risky option and isn’t suitable for anyone with a less-than exceptional credit score.

Don’t Miss a Payment

It should go without saying, but it’s crucial that you never miss a payment on your new loan. Doing so could drastically reduce your credit score and reduce your chances of acquiring a loan or line of credit in the future. 

If you’re on a debt management plan, missing a payment could result in the lenders scrapping their agreement and demanding that you return to your original terms. Even if you have a personal loan it’s important to keep meeting those payments on time as each late payment will appear on your credit report and reduce your credit score.

Look at Other Options

When you have taken the above into consideration, you need to ask yourself if a consolidation loan is the best option for you. Is it the cheapest, easiest, and most hassle-free way for you to escape debt? Are there other debt relief options that are more suitable?

There are other ways to consolidate credit card debt. Refinancing might be a more viable alternative, but you can also look into debt settlement. We have written about debt settlement extensively already and while it’s not perfect and can make your situation worse, it’s also ideal for people who feel like they are at the end of the line and are being rejected by lenders despite having access to a steady income.

Choosing Between a Debt Consolidation Loan and Credit Card Refinancing

Refinancing is a great option if you have a lot of credit card debt and a high credit score, as that way you’re almost guaranteed a prolonged introductory period and a high fixed rate of interest. However, if your score is low, your options are a little more limited. There is no origination fee to worry about, but there is a balance transfer fee, there may be high penalties, and the interest rate you’re offered at the end of the introductory period will be high.

In such cases, you should look into debt management or a fixed-rate loan, both of which will seek to clear all of your credit card debt and leave you with more manageable payments. Your credit score may take a significant hit in the short-term, but you’ll be much better off a few months later and can look forward to a brighter financial future.

Source: pocketyourdollars.com

Mortgage vs. Cash: Which Is the Better Option When Buying a Home?

Last updated on November 21st, 2020

It’s been about eight months since my last mortgage match-up, so let’s give it a whirl again.

Today, the focus will be on taking out a mortgage versus simply using cash when purchasing a home.

Of course, it’s not that simple for the majority of the population to throw a few hundred thousand dollars (or more) down on a property. So for many, this won’t even be an option.

But it’s worth visiting regardless to see how even the very rich often opt for a home loan when they’ve got plenty of cash to spare.

Buying a Home with Cash Has Its Benefits

cash vs mortgage

  • Cash buyers are more attractive to home sellers
  • The home buying process can be a lot faster without a mortgage
  • Don’t need to abide by any mortgage lender’s rules
  • No property restrictions or inspections to worry about
  • Don’t have to pay interest to the bank for several decades

First let’s talk about buying a home with cash. This is almost certainly the favored approach of real estate investors and perhaps the mega-rich, though billionaires like Mark Zuckerberg still take out mortgages.

And investing gurus like Warren Buffett think the low mortgage rates are a great deal…

But for a large swath of the population, this either/or question doesn’t even get any consideration because most of us can’t afford to buy a home (or even a small condo) with cash.

Still, there are some advantages to buying a home with cash as opposed to taking out a mortgage.

The most obvious is that you don’t pay any interest when you buy with cash. That’s right, no mortgage, no interest payments.

Additionally, you don’t have to make any payments to principal either, seeing that you own your home free and clear right off the bat.

However, that doesn’t mean you won’t have recurring costs. You’ll still need to pay homeowner’s insurance (unless you’re really brave), along with property taxes and possibly HOA dues depending upon where the property is located.

The insurance thing becomes optional when you own your property outright. Not so if you have a mortgage because you don’t really own your home. Your lender does, until that loan is actually paid off in full.

Another plus to paying with cash is the negotiating power you gain when making an offer. If you’re going up against some other would-be buyers that need to finance the purchase, you’ll have the upper hand in pretty much every situation.

Sure, you could get outbid by another buyer willing to offer more for the home, but your cash offer should be king if all else is equal. And it may still be king even if you offer less than the competition.

Once your offer gets accepted, you won’t have to worry about dealing with a bank or mortgage lender. That means it doesn’t matter if your credit score is in bad shape, or if you don’t have the necessary income to qualify for a mortgage. Or if you’re a foreign national who might otherwise have difficulty getting a loan.

There is still a process to purchasing the home, but you can cut out the middleman, otherwise known as the lender. And that means you won’t have to pay lender fees, including a costly loan origination fee, or lender’s title insurance, underwriting fees, and so on.

But you might not want to skimp on the appraisal, even though it’s not a requirement. It’ll buy you some time to determine if the house is in good shape and worth what you agreed to pay.

That lack of a mortgage also means you’ll be able to move in sooner, or rent out the property sooner. Speaking of renting it out, you won’t have to worry about occupancy issues, or a higher mortgage rate because it’s an investment property.

Taking Out a Mortgage, Even If You Don’t Have To

  • A lot of very rich people take out mortgage loans
  • Not because they have to, but because they know home loans are cheap
  • Instead of tying up all their money in a single property
  • They put their hard-earned cash to work in other investments that can yield better returns

On the other hand, there’s the traditional approach to buying a home, with the help of a mortgage.

This is kind of the default option more out of necessity than preference. As I alluded to earlier, most of us can’t afford to buy real estate with cash. We need a mortgage to get the deal done.

In fact, many Americans need a sizable mortgage to get the job done, with practically zero-down FHA loans a popular choice for a large number of prospective home buyers.

So like it or not, a mortgage is often just a fact of life.

The number one downside to a mortgage is all that interest. On a $200,000 loan set at 4.5%, the total amount of interest due over 30 years is close to $165,000. Y

eah, you pay nearly double what you agreed to pay for the home. Sounds pretty rough, doesn’t it?

But like I said, this is the price of not having a substantial amount of money to put down. Along with that, you also have to pay a bunch of lender fees, which can certainly add up.

If you put down a very small amount, you’ll also be subject to paying mortgage insurance premiums, possibly for life if you go with an FHA loan and never refinance.

Oh, and you don’t just get a mortgage. You need to qualify for a mortgage, and not everyone qualifies for countless reasons. Having the lender pry into your personal and financial life may also be extremely annoying and frustrating, but if you need hundreds of thousands of dollars, they’ve earned that right.

The good news is that you write off that mortgage interest as long as you itemize deductions and they exceed the standard deduction.  So some of that interest can result in a lower tax bill each April, which lessens the blow pretty significantly.

Additionally, mortgage rates are dirt cheap compared to just about every other type of loan out there. Yes, you pay a lot of interest, but it’s only because the loan amounts are so large.

That means there’s a decent chance you can invest the money that would be locked up in your home (if you paid cash) at a better return elsewhere.

Having a mortgage on your home also means you’ve got more liquidity and less at risk, assuming something goes wrong.

Imagine something devastating happens to your home that isn’t covered by insurance. Would you rather have 20% invested, or 100%?

Also consider the recent housing bust – a lot of homeowners were able to walk away from their homes relatively unscathed because they didn’t have much invested.

Those who purchased all-cash could cut their losses, but they couldn’t walk away without losing a lot of money. There’s also that old saying about putting all your eggs in one basket.

If you don’t have money in other places, it certainly shouldn’t all be tied up in your home.

[Mortgage affordability calculator]

Can You Get the Best of Both Worlds?

  • Most home buyers put down a small amount of cash and take out a mortgage
  • The sweet spot might be a 20% down payment
  • This allows you to avoid costly mortgage insurance and obtain a low mortgage rate
  • You can invest your excess funds elsewhere or prepay the mortgage if that’s your goal

Absolutely. Most people buy homes with cash and a mortgage, not just either or. In other words, when you put 20% down on a house, you’re paying a decent chunk of cash and financing the rest.

As a result, you avoid the requirement for mortgage insurance, you get a lower rate of interest, and you have an equity investment.

Putting down 20% or more should also put you in a pretty good position when it comes to a bidding war, though an all-cash buyer willing to make a good offer will always have the upper hand.

Additionally, you can always pay your mortgage off earlier than planned seeing that most mortgages don’t have prepayment penalties anymore.

Sure, you will subject yourself to the closing costs associated with a mortgage, along with the qualifying process, but you don’t have to pay off your mortgage over 30 years.

If you decide your money isn’t earning as much as you’d like, you can move more of it towards the mortgage balance.

Got plans to retire in 10 or 15 years? Start prepaying the mortgage faster so you’ll be free and clear by the time you’re on a fixed income.  Or go with a 15-year fixed mortgage instead.

Remember, it doesn’t have to be an either/or discussion. You can make adjustments based on your financial standing as time goes on. With cash, you can also pull equity via a cash out refinance. So both options provide flexibility.

Advantages to Buying a Home with Cash

  • No need to qualify for a mortgage
  • No need to shop for a mortgage
  • No mortgage payments (good if you lose your job or are close to retirement)
  • No interest due
  • No lender fees
  • Homeowner’s insurance isn’t required
  • You don’t need to pay for an appraisal
  • More negotiating power when making an offer
  • Lower purchase price possible
  • Faster closing process
  • Could be a better return for your money than a low-yielding CD or bond
  • Set it and forget it investing (don’t have to manage your investments)
  • Can tap home equity if and when needed
  • Can always sell or take out a mortgage
  • Less hassle overall (one less thing to manage)
  • Sense of security because it’s your home!

Disadvantages to Buying a Home with Cash

  • Most of us don’t have the money required to buy a home with cash
  • Mortgage rates are a cheap source of financing
  • Real estate is an illiquid asset (not easy or free to sell)
  • The property could lose substantial value
  • You could lose a lot of money if your home is destroyed and not covered by insurance
  • You miss out on the mortgage interest deduction
  • Your return on investment might be poor relative to other options
  • Poor diversification if a lot of your money is in one single property
  • House rich and cash poor if savings get depleted

Advantages to Buying a Home with a Mortgage

  • Mortgage rates are very low
  • Mortgage interest is tax deductible
  • Inflation should make future monthly payments “cheaper”
  • You only need to bring in a small down payment
  • More cash on hand for anything else
  • Getting a mortgage isn’t really that difficult
  • A mortgage can actually improve your credit score
  • You can prepay your mortgage whenever you want in most cases
  • You can invest your money elsewhere for a better return
  • Your money is more liquid
  • Forced savings each month
  • Less risk if something happens to your home or if values drop

Disadvantages to Buying a Home with a Mortgage

  • Tons of mortgage interest must be paid
  • 30 years of monthly payments (maybe less, but still a long time!)
  • You need to shop for a mortgage
  • You need to get approved for a mortgage
  • You could get declined
  • More (lender) costs associated with a mortgage
  • Closing process more work and more time
  • You may buy more house than you should (get in over your head)
  • Harder to sell the property if little or no equity
  • You can lose your home if you fall behind on payments
  • You don’t actually own your home

Source: thetruthaboutmortgage.com

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Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.