Whether you’re decorating on a budget, trying to be a little more conscious of your consumption, or simply love the thrill of hunting for those amazing, one-of-a-kind finds, thrift-store shopping can be a fun and smart way to create a signature aesthetic for your home. In addition to saving money by thrifting, you can also feel good about keeping items from ending up in a landfill by giving them a second life as part of your decor. But how do you get the best deals, what kinds of pieces should you hunt for and how can you style them without your own home looking like a thrift store? We did some digging to find out.
Looking for striking home decor? This is where pros shop in Dallas-Fort Worth
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The difference between thrift stores and consignment shops
Consignment and antique shops are great, but they tend to be pricier because their collections are curated. These stores do all the hunting down and fixing up for you, and that service is offset via higher price tags. While consignment shops are more likely to have highly sought after antiques from pedigreed brands, you can still certainly find hidden gems at nearly any thrift store — you just may have to put in more effort to find what you’re looking for. Balance the odds of what you want being there with the price range you’re willing to pay when deciding where to shop.
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Getting what you need while giving back to the community
Many of your favorite causes run thrift shops to help fund their programs and services. Prime Thrift near Fair Park benefits American Veterans (AMVETS), Disabled American Veterans (DAV) and other local and national charitable organizations, while Out of the Closet in Oak Lawn benefits the AIDS Healthcare Foundation. Genesis Women’s Shelter, a nonprofit that provides safety, shelter and support for women and children who have experienced domestic violence, operates two thrift stores: one in Oak Lawn and another in South Oak Cliff. There are four Soul’s Harbor locations throughout the metroplex, with proceeds going toward its programs to help men break the cycle of homelessness and addiction. Some of these shops even have exclusive relationships with estate liquidators, increasing your chances of finding treasures among their wares.
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If you’re looking for a bit more than just decor, check out your local ReStore, which benefits Habitat for Humanity. There, you can find actual building materials, such as tile, cabinets, wood flooring, windows, doors or even vintage brick. In addition to these, they also have plenty of new and vintage home furnishings, large appliances and more. With 10 locations across D-FW, it’s a convenient alternative to big-box stores when shopping for your next home design project.
Choose your shopping days wisely
For donation-based thrift stores, Mondays and Tuesdays are typically the best days to shop, because most people tend to drop off items early in the week after spending the weekend cleaning. Signing up for emails is a great way to stay on top of the latest finds and deals, but there’s just no substitute for going in regularly. It works the same with searching online, whether it’s eBay, Craigslist, or Facebook Marketplace. “I’m a huge fan of Facebook Marketplace” says Whitney Marsh, an interior designer and business owner who furnished her Oak Cliff coffee shop, B-Side, with thrifted finds. “I also really love Souls Harbor in Waxahachie,” Marsh notes.
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Have a strategy before you start shopping
There are two ways to go about hunting vintage pieces. Either have a piece or project in mind and know what you want to pay for it, or be able to spot a good deal. This can involve researching brands, pieces, and eras to be able to find your ideal mix of quality pieces that aren’t in demand. Marsh says that’s her strategy. “I know what I like, and I also know what brands are known for quality goods,” she explains. “I definitely have a style. I’m drawn toward leather furniture, solid wood, wool rugs and unique art.”
For example, you may love midcentury modern (MCM) pieces, but the popularity of decor from that era means there’s more demand, and unscrupulous sellers may assign that label to random items in order to get them to sell. You may find more success by researching some favorite brands or designers from the MCM era and looking for those specifically to avoid fake listings and inflated prices. Be aware that people will list items online with a famous brand name keyword to get more hits, such as saying a “Pottery Barn-style” rug or “MCM-style lamp.” If you’re shopping in person, don’t be afraid to ask the store’s staff about an item you’re looking for; they may have something similar that just hasn’t been put out yet. Or, they might be willing to take down your name and keep an eye out for items on your list — especially if you’re a regular customer.
Simple design rules to consider
Once you’ve found that unique piece you’ve been searching for, how do you style it? Thrifted pieces bring character into a space, but it is possible to have too much of a good thing, says Marsh. “I like to pair thrifted pieces with more high-end textiles. I love an old leather sofa that’s worn in against a very bold luxury wallpaper.” If you buy a well-worn piece and want to play up that lived-in aesthetic, try to surround it with items that are clean and modern. Too much rusticity can end up looking like neglect. Same goes for smaller items, such as pots, frames or books — space them out in designed vignettes throughout your home instead of clustering them all together. Also, keep in mind that pairing thrifted furniture is easier when they share some similar elements. For example, mismatched nightstands look more cohesive if they are roughly the same size and color.
Thrifting can be a way to save big, depending on when and where you shop, and what you’re looking for. “I definitely shop with a specific corner or space in mind. I also really only pull the trigger on things that seem like they’re good quality and the right price,” says Marsh. But if you’re patient, persistent and know what you want and what you’re willing to pay for it, it’s just a matter of time before you find it.
Buying your first home can be tedious and overwhelming.
While it’s exciting to visit properties and daydream about your dream home, getting over the financing hurdles is another story. But don’t fret.
This comprehensive guide for first-time homebuyers will walk you through the entire process from start to finish.
Benefits of Being a First-Time Homebuyer
As a first-time homebuyer, you may feel a mix of excitement and apprehension. While the home buying process can seem overwhelming, it’s important to recognize the numerous benefits that come with this milestone.
Financial Assistance
First-time homebuyers have access to several financial assistance programs that can make homeownership more affordable. These include down payment assistance programs, low-interest mortgage loans, and grants specifically designed for first-time buyers. Some of these programs are offered by state and local governments, while others are provided by non-profit organizations or private lenders.
Lower Down Payments
Several loan programs offer lower down payment requirements for first-time homebuyers. The FHA loan, for example, requires as little as 3.5% down if your credit score is 580 or higher. The USDA and VA loans even offer zero down payment options in some cases.
Access to Educational Resources
There’s a lot to learn when you’re buying a home for the first time, but fortunately, there are plenty of resources available. Many organizations offer homebuyer education courses that can help you understand the process and make informed decisions. Some lenders and assistance programs require you to take one of these courses, but even if it’s not mandatory, it can still be a valuable resource.
Before Starting Your Home Search
Check Your Credit
Not only will your credit score play a considerable factor in whether you’re approved for a mortgage, but it will also determine your interest rate.
A small increase or decrease in interest rates may not seem like a big deal. However, mortgage loans are for a hefty sum and for an extended period of time. So, a slight increase or decrease equates to thousands of dollars more spent or saved over the life of the loan.
To have the best chance of being approved for a home loan, you should aim for a credit score of at least 620. It’s possible to get approved for select home loan programs with a score as low as 580, but you may have fewer lenders to choose from.
Run the Numbers
It’s tempting for first-time homebuyers to start searching for homes when they know their credit score is up to par. But that’s probably not a good move until you determine how much home you can afford. Yes, the loan officer will give you a figure when you obtain a preapproval, but that amount isn’t always indicative of what you can afford.
Why so? Well, they focus on the debt-to-income (DTI) ratio to get an idea of a loan amount you qualify for. According to the Consumer Financial Protection Bureau, lenders prefer a DTI ratio of 43% or lower with your new mortgage payment. To illustrate:
CURRENT MONTHLY DEBT
GROSS INCOME
DEBT-TO-INCOME RATIO
MAXIMUM MORTGAGE PAYMENT (USING 43% RECOMMENDATION)
$1,000
$4,000
25%
$720
$2,000
$6,000
33%
$580
$3,000
$10,000
30%
$1,300
Note: Debt-to-Income Ratio = Aggregate Amount of Monthly Debt / Gross Income
The problem is that it fails to consider any expenses unrelated to debt. And if you have hefty insurance, childcare, or even grocery bills, that could be a major concern.
So, your best bet is to look at your current budget and come up with a realistic figure for your new mortgage payment. But don’t forget to keep the recommended DTI ratio in mind.
Explore Mortgage Options
There are several mortgage options on the market for first-time homebuyers, but the most prevalent are:
Conventional Loans
A conventional mortgage is a type of home loan that is not insured or guaranteed by the government. It’s typically offered by a private lender, such as a bank or credit union, and is the most common type of mortgage used to purchase a home.
Conventional mortgages typically require a down payment of at least 3% of the purchase price of the home. Borrowers typically must have a credit score of 620 or higher and a DTI ratio of 36% or lower to qualify. If you have bad credit or are unable to make a large down payment may have a harder time qualifying for a conventional mortgage.
If the loan amount is over $726,200, it becomes a jumbo loan and requires a higher down payment.
FHA Loans
An FHA loan is a type of home loan insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD).
FHA loans are designed to make it easier for people to buy homes, especially for first-time homebuyers. They offer lower down payment requirements and more flexible credit guidelines than conventional mortgages.
The minimum credit score required for an FHA loan is 500. If your credit score is between 500 -579, the down payment is 10%. However, if you have a credit score of 580 or above, the down payment is 3.5% of the purchase price.
VA Loans
VA Loans are insured by the Department of Veterans Affairs. They don’t require a down payment and are easier to qualify for than conventional loan products. However, you must be an active-duty member of the armed forces. Surviving spouses also qualify.
USDA Loans
A USDA loan is a type of mortgage offered by the U.S. Department of Agriculture (USDA) to low- and moderate-income borrowers who are looking to buy a home in a rural or suburban area.
See also: 14 First-Time Home Buyer Grants and Programs
Check Out Our Top Picks for 2024:
Best Mortgage Lenders
Most mortgages have a 30 or 15-year term. The latter will cost you more per month, but you’ll save a load of cash on interest.
You can also choose from a fixed or adjustable-rate mortgage (ARM). Fixed-rate mortgages have the same interest rate for the duration of the loan. But ARMs typically start with a lower interest rate for a set amount of time. In fact, they usually span from five to ten years and then adjust depending on the housing market.
Some first-time homebuyers choose ARMs over fixed-rate mortgages because it gives them the option to make a smaller monthly payment in the first few years. It could also mean that you can qualify for a more expensive home. But, be careful not to get too overextended, as erratic market behavior could cause the rate to skyrocket.
Get Preapproved
This is one of the more time-consuming parts of the entire mortgage process for a first-time home buyer. The good news is you don’t have to settle for the first offer that comes your way out of fear that your credit score will take a hit.
“FICO Scores ignore [mortgage] inquiries made in the 30 days prior to scoring,” according to myFICO. So, you won’t be penalized for multiple inquiries.
So, start by researching mortgage lenders that you may be interested in working with. You could also solicit the help of a mortgage broker if you’re strapped for time or want someone to do the legwork for you.
Once you’ve settled on a few lenders, be prepared to provide the following to get preapproved:
Financial statements to confirm your assets, including retirement accounts and real estate
Recent bank statements
Last two pay stubs
W-2s from the last two years
They will also pull your credit report and credit scores. If you qualify, the mortgage lender will then provide you with a preapproval letter, valid for a certain time period, that specifies how much you’re eligible for.
Save Up for a Down Payment and Closing Costs
During the preapproval process, the lender should have discussed loan options that could be a good fit for you. They should also have communicated how much you will need for a down payment and closing costs.
While some sellers may be willing to cover closing costs, be prepared to provide earnest money to secure your offer. And you may need a large down payment if you’re taking out a jumbo loan, or don’t qualify for the FHA or VA loan program. If that’s the case, now’s the time to figure out a plan for it.
If the seller is not paying closing costs, expect to pay between 2% and 5% of the sales price. And if a hefty down payment isn’t required, it’s not a bad idea to bring money to the table. Doing so allows you to reduce the Loan-to-Value, which positions you as less risky to the lender.
You may also be able to avoid private mortgage insurance (PMI), which is required until you reach 20% in equity, and possibly qualify for a reduced interest rate.
How to Find the Perfect Home
Go Home Shopping
All squared away with a preapproval and planned to save up the cash you need? Now, it’s time to go home shopping. But before you go, you have to decide if you want to enlist the assistance of a real estate agent.
It’s possible to find a slew of listings within your price range on the web with minimal effort. However, real estate agents have access to a system that could expand your reach. Even better, they could be integral in helping you choose a home that’s a good buy and negotiating the final purchase price.
And the seller’s agent pays their commission, so no need to worry about forking over extra cash. Just be sure to hire a real estate professional that is seasoned and reputable.
Now for the fun part: home shopping. Be careful not to judge a home solely by its appearance. Some other important factors to keep in mind:
Taxes: are the property taxes affordable or beyond what you can comfortably afford? (You can roll property taxes and homeowners insurance into an escrow account, but they can easily make or break your budget if the figures are steep).
Location: is the home in an area that has historically held its value? Is the location optimal for your commute to and from work?
Crime: is it a high crime area or is it relatively safe?
Condition: how old is the property? Does it need tons of repairs, or is it close to being move in ready?
Floor plan: is the floor plan feasible or ideal for your situation? Would it be appealing to other buyers if you had to sell?
School district: how are the schools? Have they received a good rating, or do they struggle to stay afloat?
All of these factors can have an effect on the value of the property over time.
Submit an Offer
You’ve found the perfect home, and you’re ready to sign on the dotted. Before you can finalize the paperwork and move in, there’s one more important step. And that’s making the offer. Even if the sales price seems fair, you may need to make an offer that’s higher or lower to snag the home.
Why so? Well, there could be a slight or drastic bidding war going on, and the only way for you to win is to beat out the competition. Or maybe your real estate agent did some research and determined the asking price was a bit high based on similar properties in the area or the home’s current condition.
Either way, you want to submit an offer that stands out and gets accepted. Your real estate agent will be able to do so on your behalf. But if you don’t have a real estate agent, check out these letters from Trulia to get you started.
The Mortgage Process
Even after your offer is accepted, there’s still more work to do. You’re not done just yet! It’s time to move on to the mortgage process.
Remember that preapproval letter? The lender will make sure all the information you initially provided is accurate through a process called underwriting.
Depending on how long it’s been since you were preapproved, you may be asked to provide updated bank statements or pay stubs.
The faster you submit the requested information, the quicker you’ll get a response. So, don’t drag your feet if you want a closing date that’s sooner than later.
Home Inspections and Appraisals
Before you close on the home, you will need to have a home inspection and appraisal complete.
The home inspection shouldn’t cost you more than $500. It will give you an overall assessment of the property and identify any potential issues.
The appraisal also plays an integral role as it will give you a solid idea of the home’s fair market value. The lender will mandate it, but it’s not a bad idea to get an independent appraisal done to serve as a second opinion.
An inspection and appraisal may help you decide if you should lower your offer or walk away from the property.
Purchase Homeowners Insurance
Your mortgage lender will require that you take out homeowners insurance. So, you want to start shopping around for quotes and select a policy prior to closing.
Close on Your Loan
At last! You’ve reached the finish line, and it’s time to close on your loan. During the closing, expect to:
Sign a load of paperwork.
Provide any amounts owed for the down payment.
Pay closing costs, which could include property tax obligations, premiums for homeowner’s insurance and association dues, title insurance, and any other costs associated with finalizing the loan.
Pay discount points or prepaid interest that can reduce the interest rate.
But before you show up at closing, it’s a good idea to speak with the lender, so you’ll know what to expect. You can also request a copy of the final closing document, or Closing Disclosure, to see a detailed breakdown of expenses.
A Few More Tips
Here are a few more suggestions for first time home buyers to help you get approved for your first loan:
Refrain from applying for new credit before you close. This could throw off your DTI ratio, lower your credit score, and ultimately prevent you from closing on the loan.
State and local programs may be available to assist with down payments. If you’re low on funds, be sure to explore options that may be available to you.
Several builders offer buyer incentives, like allowances for upgrades and closing costs. So if you haven’t considered new construction, it may not be such a bad idea to take a look if the price points are within your budget.
Should You Rent, Instead?
Perhaps you’ve done a little legwork, ran the numbers, and are on the fence about home buying. You will typically find that it’s cheaper to make monthly mortgage payments than to pay rent.
You can also take advantage of tax deductions and build up equity as you’re making monthly payments. The equity can be borrowed against for a loan or put some extra money in your pocket should you decide to sell before the repayment period ends.
However, renting a home gives you the flexibility to move to a new location if the home isn’t quite what you expected, don’t like the neighborhood, or want something more affordable.
Furthermore, renting allows you to pass the costs of maintaining the home on to the owner. But as a homeowner, you’ll be responsible for costs associated with maintenance and repairs.
Another reason why some choose to rent over buying is the upfront costs. Most landlords require a security deposit. However, it could be substantially lower than the money you may have to bring to the table for the down payment and closing costs.
Ultimately, you have to decide which is the better fit: investing in an asset that could build wealth or continuing to pay rent until you feel the time is right. There is no right or wrong answer; it just depends on your personal preference and financial situation.
Bottom Line
By taking the time to learn about the home buying process, you’ll be well-prepared and save yourself time and headaches. Best of all, you’ll increase your chances of landing your dream home with the most competitive mortgage product on the market.
Frequently Asked Questions
What is the process for buying a home?
The process for buying a home typically involves the following steps:
Determine your budget and get preapproved for a mortgage.
Find a real estate agent and start looking for homes.
Make an offer on a home and negotiate the terms.
Get a home inspection and address any issues that are found.
Get a mortgage and close on the home.
How much house can I afford?
When determining how much house you can afford, there are several factors to take into account. You should consider your income, expenses, down payment, credit score, and mortgage type before making a decision.
A larger down payment can help you get a lower mortgage rate, and a higher credit score can qualify you for better rates and loan terms. Shopping around for mortgage rates and considering different types of mortgages, such as fixed-rate or adjustable-rate, can also help you find the best deal.
Keep in mind that owning a home involves more than just the monthly payments. You will also need to factor in property taxes, insurance, and maintenance costs. You should create a budget that includes all of these costs and leaves room for unexpected expenses.
How much money do I need for a down payment?
The amount of money you need for a down payment will depend on the type of mortgage you get and the price of the home you are buying.
Some mortgage programs, such as FHA loans, allow for down payments as low as 3.5%, while others may require a higher down payment. It’s a good idea to speak with a mortgage lender to determine how much you will need.
Can I buy a house if I have a low credit score?
It’s possible to buy a house with a low credit score. However, it may be more difficult to get approved for a mortgage, and you may have to pay a higher interest rate. Before applying for a mortgage, work on improving your credit scores, as this will help you qualify for a better loan and save you money over time.
How much will closing costs be?
Closing costs are fees that are paid at the closing of a real estate transaction. These costs can vary widely and may include things like mortgage origination fees, title insurance, and appraisal fees. On average, closing costs can range from 2% to 5% of the purchase price of the home.
What is a mortgage preapproval?
A mortgage preapproval is a letter from a lender that indicates how much you are qualified to borrow for a mortgage. The preapproval letter is based on a review of your financial information, including your credit score, monthly income, and debts. A mortgage preapproval can help you understand how much you can afford to borrow and can make you a more competitive buyer in the real estate market.
What is a mortgage rate?
A mortgage rate is the interest rate that you will pay on your mortgage. The mortgage rate will determine the amount of your monthly payments and the overall cost of your loan. Interest rates can vary depending on the type of mortgage you get and your credit scores.
What is PMI?
PMI, or private mortgage insurance, is insurance that is required by lenders for certain types of mortgages when the borrower has less than a 20% down payment. PMI protects the lender in the event that the borrower defaults on the mortgage. The cost of PMI is typically added to the borrower’s monthly mortgage payment.
It’s ironic that the home furnishing retailer Crate & Barrel, known for its modern aesthetic, would be associated with a credit card that’s hardly cutting-edge. The few perks that come with the Crate & Barrel credit card may be found in dozens of other store cards, plus it lacks benefits that come standard in other cards, such as a sign-up bonus.
The products on our list of best credit cards for home improvement have great rewards rates, generous welcome offers, and lengthy 0% APR periods — and some of the cards offer all three. You’ll also get much better redemption flexibility.
Here are five things to know about the Crate & Barrel credit card, issued by Synchrony Bank.
1. There are two versions of the card
The Crate & Barrel credit card. This is a “closed-loop” card, meaning it can only be used to make purchases at Crate & Barrel and affiliated stores such as Crate & Kids and CB2.
The Crate & Barrel Mastercard. This card is “open-loop,” so it can be used at any retailer that accepts Mastercard.
Whether you get the open- or closed-loop version of the Crate & Barrel card will depend on your creditworthiness.
Both cards earn rewards when shopping with Crate & Barrel (see below), but the Crate & Barrel Mastercard also offers 2% back on grocery store purchases (warehouse clubs like Costco are excluded) and 1% back on other purchases.
2. There are two primary perks, but they can’t be combined
Crate & Barrel cardholders may choose to receive one of two benefits:
Earn 10% back (in “Reward Dollars”) for every $200 spent at Crate & Barrel. That’s an excellent earnings rate, but redemption is another matter. More on that later.
Special financing for purchases of $749 or more.
If an order qualifies for 10% back and special financing, you must choose one or the other. The card won’t allow you to receive rewards on a purchase that is also being financed.
3. Reward redemption is severely limited
Reward rates of 10% and above are uncommon, especially on cards with no annual fee. But that rate gets less impressive when you consider the various redemption restrictions you’ll face.
As with most store cards, the rewards you earn are usable only within the retailer’s brand umbrella. But there’s more to keep in mind here:
Your Crate & Barrel card earns Reward Dollars, which are automatically converted into Reward Certificates in $20 increments. On the plus side, there’s nothing for you to “do” to get those certificates — but on the minus side, you’ll have to wait until you’ve hit the $20 minimum threshold, and you won’t be able to save up your Reward Dollars to use them all at once on a large purchase.
You can’t bank Reward Certificates for very long either; they expire 90 days after they’re issued.
Reward Certificates can’t be combined with any other store discount. Moreover, if you don’t use the full amount of your Reward Certificate, the remaining amount is forfeited.
Many general cash-back credits will let you redeem rewards however (and whenever) you like, without worrying about minimum redemption thresholds, expiration dates or the possibility of forfeiting any value.
4. There are three special financing options
The special financing options offered by the Crate & Barrel credit card come in three different term lengths:
6 months of special financing on purchases of $749 or more. This special financing offer never expires.
12 months of special financing on purchases of $1,499–$2,998.99 made before Dec. 31, 2024.
24 months of special financing on purchases of $2,999 or more made before Dec. 31, 2024.
In theory, special financing (also known as deferred interest) seems like a great deal. And it could be — as long as you pay off the entire balance before the term ends. Do that and you’ll owe no interest.
If, however, there’s any balance at all left by the end of the financing period, you’ll owe interest on the entire purchase amount, retroactive to the purchase date.
Credit cards with true 0% intro APRs are much more forgiving because they won’t charge back interest if any part of the balance remains when the APR period expires. For example, the Bank of America® Customized Cash Rewards credit card offers a 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the Intro APR offer ends, a Variable APR that’s currently 18.24% – 28.24% will apply. The card also can earn 3% back on home improvement and furnishings on up to $2,500 of combined quarterly spending between that category and grocery stores and wholesale clubs. (Cardholders must select home improvement and furnishings as their 3% bonus category, although there are other category options.)
5. The interest rate is high
As of February 2024, the interest rate, or purchase APR, for both Crate & Barrel cards was 32.24%. While high interest rates are typical of store cards, that’s not necessarily the norm for all credit cards. According to the Federal Reserve, the average interest rate for interest-accruing credit cards in February 2024 was 22.63%.
If you’ve been contributing to a 401(k) or employer-sponsored retirement account for several years but are now leaving your job, you may be wondering what to do with your retirement account. Do you cash out your nest egg and let the money sit in a bank account until you retire?
It may be tempting to have unrestricted access to a lump sum of cash. But unfortunately, holding your retirement in a bank account could cost you a fortune. Furthermore, the small returns generated won’t keep up with inflation and your nest egg will actually lose value.
A more suitable option: a rollover IRA. Keep reading to learn how they work, along with key benefits and how to initiate an IRA rollover.
What is a Rollover IRA?
In a nutshell, a rollover IRA is an account that is designed specifically to hold funds transferred from employer-sponsored retirement plans, including 401(k), 403(b), profit-sharing and Keogh plans.
The purpose of a rollover IRA is to keep the tax-deferred status of those assets. Rollover IRAs also offer several distinct benefits.
What are the benefits of a Rollover IRA?
When you cash out or take distributions from retirement plans, two things happen. For starters, the funds are subject to taxation and the tax deferral benefit goes out the window. And if you haven’t yet reached 59 ½, you’ll also incur a 10% early withdrawal penalty.
However, an IRA rollover allows you to avoid taxation as long as you transfer the funds properly. Even better, you’ll also escape the 10% penalty.
Other benefits:
It’s free. You read that correctly. That are no fees to open a rollover IRA and transfer the funds from your 401(k) or other employer-sponsored plans into the new account.
Low fees. You may have to pay minimal fees to cover brokerage commissions and fund expenses associated with transactions. But there are financial entities, like Schwab, that offer rollover IRAs devoid of annual or maintenance fees.
No rollover limits. Fortunately, you’re allowed to roll over all the funds in your retirement account, regardless of the amount, without incurring a penalty.
Flexible investment options. Most 401(k) plans only allow you to select from a limited pool of assets, typically in the form of mutual funds, to build your portfolio. But with a rollover IRA, you’ll be afforded the opportunity to choose from an array of assets, including stocks, ETFs, and bonds, just to name a few.
Funds can be transferred to a new employer’s plan. If you find employment elsewhere, and they offer a qualifying retirement plan, you will be able to transfer the funds from the rollover IRA to their plan if you choose to. You also have the option to leave the funds where they are.
How to Roll Over a 401K to an IRA
Direct Rollover
To ensure the funds from your 401(k) or other employer-sponsored plan are moved seamlessly, a direct transfer is the preferred option. Selecting this option also minimizes the chances of an error occurring with the transfer. You’ll also avoid having to pay taxes on your nest egg and incurring early withdrawal penalties.
Even better, it’s easy to execute direct transfers. As all you need to do is contact your former employer and request that they transfer the funds to the entity that the rollover IRA will be housed. Expect to complete paperwork on both the sending and receiving end, but it shouldn’t take too much of your time. And once you’ve done your part, the direct transfer of funds will be completed in a brief window of time.
Indirect Rollover
If you prefer to set up the new account on your own, you have the option to do what’s referred to as an indirect rollover. Rather than having your former employer send the funds directly to the new entity that will manage the rollover IRA, you’ll need to obtain the funds via check and set up the account yourself.
Another important consideration: with direct transfers, your employer usually won’t deduct income tax before sending the funds to the company in charge of managing the rollover IRA. But if you take the indirect rollover route, there’s a chance they will, to the tune of 20%.
This means you could find yourself paying this amount out of pocket to avoid incurring additional penalties and fees when opening up a new account. Even worse, you won’t be eligible to recoup the funds until you file your annual tax return.
You should also know that you have 60 days to do so, or you’ll be on the hook for federal income tax and a 10% early withdrawal fee (if you aren’t yet 59 ½ years of age or older). To give yourself the best possible chance of avoiding any issues, promptly deposit the funds and notate your rollover IRA account number on the check.
Furthermore, follow up regularly until the funds are posted to your account, and you’ve confirmed the account is all set.
Other Important Considerations
Annual Rollover Limits: In most instances, you are limited to one rollover per year.
Roth IRAs: If you’re interested in a Roth IRA, you have the option to convert the proceeds from the rollover IRA. However, you will have to pay taxes right away, as Roth IRAs are comprised of post-tax contributions and distributions are tax-free.
See also: What’s the Difference Between a Traditional IRA & a Roth IRA?
Bottom Line
Rollover IRAs are an ideal way to avoid taxation and penalties when you leave your employer and are no longer eligible to participate in their retirement plan. But, if you’re uncertain if your plan is eligible for a rollover IRA, inquire with your plan administrator to determine what options are available to you. You can also view IRS Topic Number 413 for additional guidance.
Frequently Asked Questions
Why would I want to roll over my retirement account?
There are several reasons why you might want to roll over your retirement account. For example, you may want to move your money to a new IRA with lower fees, better investment options, or more flexibility.
Can I roll over any type of retirement account into a rollover IRA?
Yes, you can roll over most types of retirement accounts into a rollover IRA, including 401(k)s, 403(b)s, and traditional IRAs.
How do I choose the right rollover IRA provider?
When choosing a rollover IRA provider, you should consider factors such as fees, investment options, customer service, and the provider’s reputation. You may also want to consider whether the provider offers any additional services, such as financial planning or investment advice.
Managing debt can be a daunting task, but with the right strategies, you can make it easier to pay off and keep your finances in check.
Whether you’re trying to pay off credit card debt, student loans, or other types of debt, there are several strategies you can use to make the process easier.
Benefits of Effective Debt Management
Managing debt effectively is important for several reasons. First, carrying high levels of debt can be a financial burden and may prevent you from achieving their financial goals.
It can also have a negative impact on credit scores. This can make it more difficult and expensive to borrow money in the future.
Finally, failing to manage debt effectively can lead to financial distress and potentially even bankruptcy. By taking steps to pay off debt and reduce the amount of debt that is owed, you can improve their financial stability and well-being.
What is debt management?
Debt management is the practice of organizing and paying off debts through financial planning and budgeting. The goal is to lower and eventually eliminate debt. You can create your own debt management plan or hire a credit counselor to make one for you.
The advantage of doing it yourself is that it’s free, but it takes time and effort. Credit counseling can take stress off your shoulders, but is an added expense. There are many methods for debt management that you can implement on your own.
Assessing Your Debt
Gathering Debt Information
To effectively manage your debt, you first need to identify all debts and gather relevant information about each one. This includes the creditor, balance, and interest rate for each debt.
If you don’t already have a list of all your debts, you can review most of them on your credit reports. Regularly reviewing your credit report is an important financial habit to get into. You can request a free credit report from each of the three consumer credit bureaus at least once per year.
It can be helpful to create a spreadsheet or use a budgeting tool to keep track of all your debts, including the creditor, balance, and interest rate for each one.
Calculating Total Debt
Once all debts have been listed, it is helpful to calculate the total amount of unsecured debt that is owed. This can give you a better understanding of your overall financial situation and the work that needs to be done to pay off your debts.
Identifying High-Interest Debts
After calculating total debt, you should identify which debts have the highest interest rates. These debts may be a higher priority to pay off, as the interest will continue to accrue and potentially increase the total amount owed.
By focusing on paying off high-interest debts first, you can save money in the long run and make progress in paying off their debts more quickly.
Develop a Plan to Pay Off Debt
Developing a plan to pay off debt is crucial for financial stability and well-being. By identifying a strategy for paying off debts and sticking to it, you can make progress in reducing their debt and improving their financial situation.
Reduce Interest Rates
You may be able to reduce the interest rates on your debts by negotiating with creditors or transferring balances to a credit card with a lower interest rate. It is worth considering these options as they can save money on interest and make it easier to pay off debts.
Create a Budget
Creating a budget can help you identify areas where you can cut expenses and redirect those funds towards paying off debt. This may involve reducing discretionary spending, such as dining out or entertainment. You should also find ways to reduce fixed expenses, such as by shopping around for the best rates on utilities or insurance.
Humans are creatures of habit, and even when we’re in debt, the last thing we want to do is change our lifestyle. But any good debt management plan has to at least consider where your expenses could potentially be reduced. The more you can cut back on other expenses, the quicker you can get yourself out of debt.
It doesn’t have to be a long term change. Even reducing expenses for a few months can help.
Here are some examples of expenses you may be able to reduce:
Minimize entertainment subscriptions, or see if you can save by switching plans.
Minimize dining out and take your lunch to work.
Cancel your gym membership and work out at home.
Knowing your own finances in detail will help you find ways to reduce your expenses. Even if you work with a credit counseling organization, nobody is better placed to figure out how to reduce your costs than you are.
Consolidate Your Debts
One option for paying off debt is to consolidate multiple debts into one loan with a lower interest rate. This can make it easier to manage multiple debts and potentially save money on interest.
Debt consolidation options include taking out a personal loan or using a home equity loan or line of credit. Another option is transferring balances to a credit card with a lower interest rate.
Be sure to carefully review the terms and fees associated with consolidation options and ensure that they are a suitable fit for your financial situation.
Set Goals and Track Progress
To stay on track with paying off debt, it can be helpful to set specific goals and track progress towards achieving them. This may involve setting a target for the amount of debt to pay off each month or quarter.
It could also involve setting a goal for the total amount of debt to pay off by a certain date. Tracking progress can help you stay motivated and see the progress that they are making in reducing their debt.
More Tips on Managing Your Debt
Here are some additional tips for managing your debt that can help you effectively pay off what you owe and improve your financial situation:
Pay More Than the Minimum Payment
Making more than the minimum credit card payment can help you pay off your debts more quickly and save money on interest. Credit card companies typically set a minimum payment that is calculated as a percentage of the balance owed.
Making the minimum payment may be sufficient to avoid late fees and negative marks on your credit history. However, it may not make a significant dent in the overall balance. By paying more than the minimum each month, you can reduce the total amount of interest that you pay over time and make progress in paying off your debts.
Avoid Taking on New Debt
While you’re working on paying off your existing debt, try to avoid taking on new debt. This will make it easier to focus on paying off what you already owe.
Consider Setting up Automatic Payments
There are several benefits to setting up automatic payments for your bills:
Convenience: Automatic payments take the hassle out of remembering to pay your bills on time. You can set them up once and forget about it, knowing that your bills will be paid automatically each month.
Avoid late fees: If you forget to pay a bill, you may be charged a late fee. By setting up automatic payments, you can avoid these fees and save money.
Improve credit score: Paying your bills on time is a key factor in determining your credit score. By setting up automatic payments, you can ensure that your bills are paid on time and improve your credit score.
Simplify budgeting: When you know exactly when your bills will be paid each month, it can be easier to budget and manage your money.
Contact a Reputable Credit Counseling Agency
If your debt has gotten out of control, contact the National Foundation for Credit Counseling (NFCC) for detailed, personalized financial counseling and education. They can help you explore different ways to pay down debt.
A credit counselor can provide advice and assistance with developing a personalized plan for paying off debt and improving financial health. Credit counselors can also help you negotiate with creditors and create a debt management plan.
Seeking professional help can be especially beneficial if you are experiencing financial distress or are at risk of falling behind on monthly payments.
Bottom Line
In modern America, completely avoiding debt is difficult and potentially harmful. However, incurring debt without managing it effectively can be even worse. Follow the tips above, and you’re sure to get a solid handle on debt and use it skillfully.
Frequently Asked Questions
Should I pay off my debt with the highest interest rate first?
It can be a good idea to pay off your debts with the highest interest rates first, as these debts will cost you more in the long run. This is known as the “debt avalanche” method. Alternatively, you can also consider the “debt snowball” method, where you focus on paying off your smallest debts first to build momentum.
See also: Debt Snowball vs. Debt Avalanche
How can I create a budget to help me pay off my debt?
To create a budget, start by listing all of your income sources and all of your expenses, including your debt payments. Then, try to find ways to cut back on your expenses and redirect that money towards paying off your debt. You can also consider increasing your income by taking on a part-time job or negotiating for a raise at work.
What is debt consolidation?
Debt consolidation is the process of rolling multiple debts into a single new loan product with one monthly payment. This brings your payment schedule into a more manageable place.
Ideally, consolidated loans will come with lower interest rates and more manageable payment terms. Personal loans and 0% interest balance-transfer credit cards are among some of the most common debt consolidation options.
What is debt settlement?
Debt settlement is the process of negotiating with a creditor to reduce the level of your outstanding balance. This is one of the last resorts for those who have trouble paying their debts in full.
The process involves working with a debt settlement company to negotiate with creditors on your behalf. Generally speaking, creditors will only entertain debt settlement for debt that isn’t current.
It’s important to note that debt settlement requires you to stop making payments, which will harm your credit score. Debt settlement companies will also take their cut on top of any fees charged for successfully negotiating.
If you choose to take this route, make sure you find a reputable debt relief company to work with.
How can I rebuild my credit after paying off my debt?
After paying off your debt, you can rebuild your credit by making all of your payments on time. You should also try to keep your credit utilization low and diversify your credit mix. Other options include applying for a secured credit card or becoming an authorized user on someone else’s credit card to help establish a positive credit history.
If you are wondering how often you can apply for a credit card, the right pace will vary based on the person, their credit score, and the card issuer’s restrictions. While there’s no single hard number when it comes to that query, once every six months is a good pace.
If you have good credit, a more frequent pace can be fine. If you have poor credit, however, you might want to slow things down. Read on to learn the ins and outs of how often you can apply for a credit card.
How Applying for a Credit Card Affects Your Credit Score
If you want to apply for a new credit card, you may be concerned about whether applying for credit cards hurt credit score. Applying for a credit card can affect your credit score in a few ways, including credit utilization, new credit inquiries, the average age of your accounts, and your credit mix. Here’s a closer look.
New Credit Inquiry
There are two types of credit inquiries: hard versus soft credit inquiries. During a soft inquiry, which is also called a soft pull or a soft credit check, a credit card issuer will check your credit, but it won’t affect your credit score.
However, when you apply for a new credit card, the credit card issuer will probably do a hard credit check. Hard credit inquiries do negatively affect your credit score. Every hard inquiry can drop your credit score by up to five points. However, this impact won’t last forever. Hard inquiries remain on your credit report for up to two years but they can only impact your score for 12 months.
Credit Utilization
Credit utilization is the amount of revolving credit you are currently using divided by the total credit available to you. Credit utilization is usually expressed as a percentage. When you open a new line of credit, like a new credit card, your total credit limit increases, and your credit utilization ratio decreases. This can help build your credit score. Experts recommend keeping your credit utilization below 30%.
Credit utilization can affect your credit score. And if you are approved for a new card, when that credit limit is added to your current credit limit, your total maximum will likely increase, which can lower your utilization percentage.
Average Age of Accounts
The longer the average age of your accounts on your credit report, the higher your credit score will likely be for that category. When you open a new account, it will reduce the average age of your accounts. If you have established credit with multiple accounts that are several years old, a new account opening may not have a significant impact. If all of your accounts are new, adding additional new accounts may have a greater negative impact.
Credit Mix
Lenders like to see that borrowers have a variety of different types of credit. This shows that they can handle different types of payments. The impact of opening a new credit card has on your credit mix will depend on your current credit array. If you already have several credit cards, it may not impact your credit score much. If you don’t have any other existing credit cards, opening up a new credit card could improve your credit mix and therefore help build your credit score.
Recommended: How Many Credit Cards Should I Have?
How Often Should You Apply for a Credit Card
Now, about the question of how often you can apply for a new credit card: While there is no hard and fast rule about how often to apply for a credit card, some experts recommend waiting at least six months between credit card applications.
• Those with poor credit may need to wait even longer between applications to maximize their chances of getting approved for a new credit card.
• Those with excellent credit can probably apply for a new card more often, like every three months.
Why You Should Wait Before Applying
Here are some reasons why you should think twice and delay before applying for a new credit card:
• If you don’t know how to use a credit card responsibly, you may want to consider waiting before applying for a credit card.
Worth noting: If you have bad credit from a maxed out credit card, you may want to work on building your credit score first. Some tips:
• If your credit utilization ratio is high because you don’t have a high credit limit, you could try implementing the 15/3 credit card payment method. The 15/3 credit card payment method is when you make two payments each statement period instead of one. You pay half of your credit card statement balance 15 days before the due date on your statement, and then make another payment three days before the due date. This additional payment can help lower your credit utilization ratio throughout the month, which can also help improve your credit score.
• Other reasons you may want to wait before applying for a credit card include if you’re buying or refinancing a home currently, since applying for a new credit card can result in a higher mortgage interest rate or potentially being declined from the mortgage altogether.
• You should also evaluate the credit card benefits and welcome offer to make sure it is the right fit for you and the best offer that you can get. Credit card sign-up bonuses fluctuate throughout the year. Before applying for a credit card, you should do some research to see what the highest offer has been. If the current offer is significantly lower, consider waiting to apply for that card.
How Many Credit Cards Can You Apply for at One Time
Technically, you can apply for as many credit cards at once as you want. However, you likely won’t get approved for all of them. And you could trigger a slew of hard credit inquiries. So putting in a load of applications likely won’t be worth the negative impact on your credit score.
Credit Card Issuer Restrictions
How many credit cards you can apply for at one time will vary based on the credit card issuer. Each card issuer has its own rules and restrictions about applications. American Express, Bank of America, Capital One, Chase, Citibank, Discover, U.S. Bank and Wells Fargo all have their own issuer restrictions regarding applications, cards and welcome offers.
Credit Card Tips
Once you have been approved for an additional credit card, you need to know how to manage multiple credit cards. Try these strategies to stay in good financial health:
• Understand your obligations. There are several credit card rules to understand so that you maintain your credit score, while taking advantage of the credit card benefits. One of the more important ones is to always pay at least the minimum amount due on time.
• When you are issued your credit card, it will have an expiration date. The credit card expiration date is usually three to five years after being issued. You can find the expiration date on the credit card itself. After the card expires, the issuer will usually give you a new card, as long as your account is still active.
• However, what happens if you don’t use your credit card is that the issuer may close your account. So make sure you are using your credit card.
• Also, make sure you are using your credit card responsibly. That means keeping an eye on your credit limit, your credit utilization ratio, and when your payments are due.
Recommended: What Is a Credit Card Expiration Date?
The Takeaway
How often you should apply for a credit card will depend on a variety of factors, like your credit history, the card issuer, the current offers available, and more. It can be wise to not apply for new credit cards more often than every six months. And once you have a new credit card, make sure to use it responsibly.
Whether you’re looking to build credit, apply for a new credit card, or save money with the cards you have, it’s important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
How long should I wait to apply for another credit card after being approved?
Some financial experts recommend waiting at least six months between credit card applications. However, there is no hard and fast rule about how often to apply for a credit card. It will vary depending on your credit score and the restrictions from the card issuer.
Do I have to wait six months to apply for another credit card?
Waiting six months between credit card applications is not a defined requirement. If you have poor credit, you may need to wait longer than six months between applications to maximize your chances of getting approved for a new credit card. If you have excellent credit, you can probably apply for a new card more often, like every three months.
How often can I apply for a credit card without hurting my credit?
Each credit card application results in a hard inquiry, which hurts your credit score temporarily. Keep that fact in mind as you consider applying.
Photo credit: iStock/Eva-Katalin
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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’s website .
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Home equity loan
Home equity line of credit (HELOC)
Interest rate
Fixed
Variable
Monthly payment amount
Fixed
Variable
Closing costs and fees
Yes
Yes, might be lower than other loan types
Repayment period
Typically 5-30 years
Typically 10-20 years
FAQ
What is a rate lock?
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
What are mortgage points?
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
What are closing costs?
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. It does mean the loan will be more expensive, as you won’t get the lowest interest rate.
It’s possible to get a home equity loan with a fair credit score — as low as 620 — as long as other requirements around debt, equity and income are met.
Strategies for getting a loan despite your bad credit include taking on a co-signer, applying to a place where you currently bank, and writing a letter of explanation to the lender.
Alternatives to a home equity loan include personal loans, cash-out refinances, reverse mortgages and shared equity agreements.
Can you get a home equity loan with bad credit?
Yes, you can. A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. Some home equity lenders allow for FICO scores in the “fair” range (the lower 600s) as long as you meet other requirements around debt, equity and income.
That’s not to say it’ll be easy: Lenders tend to be stringent, even more so than they are with mortgages. Still, it’s not impossible. Here’s how to get a home equity loan (even) with bad credit.
Requirements for home equity loans
Not all home equity lenders have the exact same borrowing criteria, of course. Still, general guidelines do exist. Typical requirements for home equity loan applicants include:
A minimum credit score of 620
At least 15 percent to 20 percent equity in your home
A maximum debt-to-income (DTI) ratio of 43 percent, or up to 50 percent in some cases
On-time mortgage payment history
Stable employment and income
To learn the requirements for a home equity loan with a specific lender, you’ll need to do some research online or contact a loan officer directly. If you aren’t ready to apply for the loan just yet, ask for a no-credit check prequalification to avoid having the loan inquiry affect your credit score.
What are “good” and “bad” scores for home equity loans?
First, let’s define our terms. Here’s how FICO — the most popular credit scoring model — categorizes different scores:
Score
Classification
Source: MyFico.com
300-579
Poor
580-669
Fair
670-739
Good
740-799
Very Good
800-850
Excellent
When it comes to home equity loans, lenders set a high bar for creditworthiness — higher, even, than mortgages. That’s because they are considered riskier than mortgages: You, the applicant, are already carrying a big debt load. Should you default and your home get seized, the home equity loan — as a “second lien” — only gets paid after the primary (the original) mortgage.
Furthermore, home equity loans don’t have government backing, like some mortgages do. The lender bears all the risk.
So home equity lenders set stricter criteria, demanding scores squarely in the “fair” range. A score in the 500s – good enough for an FHA mortgage — will have a tough time qualifying for a home equity loan. Some lenders have loosened their standards of late and are approving applicants with scores as low as 620. But a “good” score, preferably above 700, remains the threshold for many institutions. It can vary even within one lender, depending on factors like the loan amount or other loan terms.
And of course — as with any loan — the lower your credit score, the less likely you will qualify for the best interest rates.
How to apply for a bad credit home equity loan
Before applying for a home equity loan, remember that it’s not just a question of getting the financing, but also how you can overcome a lower credit score to get the best possible rate. Here are some steps to take:
1. Check your credit report
While it’s possible to get a home equity loan with bad credit, it’s still wise to do all you can to improve your score before you apply (more on that below). A better credit score gets you a better rate. It can also help you get a bigger loan (up to the tappable amount of your equity, of course).
Check your credit reports at AnnualCreditReport.com to get a sense of where you stand. If there are any errors, like incorrect contact information, contact the credit bureau — Equifax, Experian or TransUnion — to get it updated as soon as possible.
2. Determine your equity level
To qualify for a home equity loan, lenders typically require at least 15 percent or 20 percent equity. The amount of equity you have, your home’s appraised value and combined loan-to-value (CLTV) ratio help determine how much you can borrow.
Home Equity
Bankrate’s home equity loan calculator can quickly estimate your potential home equity loan amount.
To estimate your home’s equity, take the value of your home and subtract the balance left on your mortgage. While lenders will only consider the official appraised value of your home when determining how much you can borrow, you can get an idea of your home’s value through Bankrate or a real estate listing portal or brokerage. Let’s say your home is worth $420,000 and you have $250,000 to pay on your mortgage:
$420,000 – $250,000 = $170,000
In this example, you’d have $170,000 in home equity. That doesn’t mean you can borrow $170,000, however. If the lender requires you to maintain at least 20 percent equity, you’d need to preserve $84,000 ($420,000 * 0.20). That leaves you with a home equity loan of up to $86,000 ($170,000 – $84,000).
Say you want to add a $60,000 home equity loan to the mix. That would increase your total mortgage debt — for both your first mortgage and the home equity loan — from $250,000 to $310,000.
That 20 percent equity requirement also means you’d need a CLTV ratio of 80 percent or lower. To calculate your CLTV ratio, divide the total mortgage debt ($310,000) by the value of your home ($420,000):
($250,000 + $60,000) / $420,000 = 73.8%
In this example, you’d be under the lender’s 80 percent CLTV requirement.
3. Find out your DTI ratio
The DTI ratio is a measure lenders use to determine whether you can reasonably afford to take on more debt. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income. For example, say you bring in $6,000 a month in income and have a $2,200 monthly mortgage payment and a $110 monthly student loan payment:
$2,310 / $6,000 x 100 = 38.5%
To make things even easier, you can use Bankrate’s DTI calculator.
For a home equity loan, most lenders look for a DTI ratio of no more than 43 percent.
4. Consider a co-signer
If your credit disqualifies you for a home equity loan, a co-signer with better credit might be able to help, in some cases.
“A co-signer can help with credit and income issues for an applicant who has a lower credit score, but ultimately the main applicant or primary borrower will have to have at least the bare minimum credit score that is required based on the bank’s underwriting guidelines,” says Ralph DiBugnara, president of Home Qualified, a real estate platform for buyers, sellers and investors.
A co-signer is just as responsible for repaying the loan as the primary borrower, even if they don’t actually intend to make payments. If you fall behind on loan payments, their credit suffers along with yours.
5. Try a lender you already work with
If your bank, credit union or mortgage lender offers home equity products, it might be able to extend some flexibility, or at least help with your application, since you’re an existing customer.
“A loan officer familiar with the details of an applicant’s situation can help them present it to an underwriter in the best possible way,” says DiBugnara.
6. Write a letter to the lender
Write a letter of explanation describing why your credit score is low, especially if it has taken a recent hit. This letter should matter-of-factly explain credit issues — avoid catastrophizing — and include any relevant paperwork, like bankruptcy documentation. If your credit score was impacted by late payments due to job loss, for example, but you’re employed now, your lender can take this context into consideration.
Lenders that offer home equity loans with bad credit
There are home equity lenders that offer loans to borrowers with lower credit scores. Here are some to consider, along with requirements:
Lender
Bankrate Score (scale of 1-5)
Loan types
Credit score minimum
Maximum CLTV
Maximum DTI
Figure
4.37
HELOC
640
75%-90%
Undisclosed
Guaranteed Rate
3.3
HELOC
620
90%-95%
50%
Spring EQ
2.7
Home equity loan, HELOC
620 for home equity loans, 680 for HELOCs
Up to 97.5%
43%
TD Bank
4.0
Home equity loan, HELOC
660
Undisclosed
Undisclosed
Connexus Credit Union
3.5
Home equity loan, HELOC
640
90%
Undisclosed
Discover
4.4
Home equity loan
660
90%
43%
Pros and cons of getting a home equity loan with bad credit
Getting a home equity loan with bad credit has its benefits and drawbacks. You can tap your equity to help with expenses, but it’s also risky.
Pros
You’ll pay a fixed rate: Home equity loans are for a fixed sum at a fixed interest rate, so you’ll know exactly how much your payment is each month. This can help you budget for and reliably pay down debt, which can help boost your credit score.
You could get out of costlier debt: If you have high-interest debt — like credit card debt — you could pay it off with a lower-rate home equity loan, then repay that loan, with one payment, for less.
Cons
You’re taking on more debt: If you’ve had trouble managing money in the past, it might not be wise to take on more debt with a home equity loan, even if you qualify.
It’ll be more expensive: A lower credit score won’t qualify you for the best home equity loan rates, meaning you’ll pay more in interest.
You could lose your home: If you fall behind on loan payments, you’ll further damage your credit. Even worse: If you’re eventually unable to pay back the loan, your home could go into foreclosure.
What to do if your home equity loan application is denied
If your application for a home equity loan is rejected, don’t despair. First, ask the lender for specific reasons why your application was denied. The answer can help you address any issues before applying in the future.
If your credit was one of the deciding factors, you can improve your score by making on-time payments and paying down any outstanding debt. If you don’t have enough equity in your home, wait until you’ve built a bigger stake (mainly by making your monthly mortgage payments) before submitting a new application.
Both these approaches may take a half-year to a year to make a significant difference in your credit profile. If you’re in more of a hurry, consider applying to other lenders, as their criteria may differ. Just bear in mind that more lenient terms often mean higher interest rates or fees.
And of course, you can consider other forms of financing.
Home equity loan alternatives if you have bad credit
If you need cash but have bad credit, a home equity loan is just one option. Here are some alternatives:
Personal loans
Personal loans can be easier to qualify for than a home equity product, and they aren’t tied to your home. This means that if you fail to repay the loan, the lender can’t go after your house. Personal loans have higher interest rates, however, and shorter repayment terms. This translates to a more expensive monthly payment compared to what you might get with a home equity loan.
Cash-out refinance
In a cash-out refinance, you take out a brand-new mortgage for more than what you owe on your existing mortgage, pay off the existing loan and take the difference in cash. Most lenders require you to maintain at least 20 percent equity in your home in order to cash out.
A caveat, however: A cash-out refi makes the most sense when you can qualify for a lower rate than what you have on your current mortgage, and if you can afford the closing costs. With bad credit, getting that lower rate might not be possible.
Reverse mortgage
Reverse mortgages allow homeowners over the age of 62 to tap their home’s equity as a source of tax-free income. These types of loans need to be repaid upon your death or when you move out or sell the home. You can use reverse mortgages for anything from medical expenses to home renovations, but you must meet some requirements to qualify.
Shared equity agreement
Home equity investment companies might work with you even if you have a lower credit score, often lower than what traditional lenders would accept. These companies offer shared equity agreements in which you receive a lump sum in exchange for an ownership percentage in your home and/or its appreciation.
Unlike with home equity lines of credit (HELOCs) or home equity loans, you don’t make monthly repayments in a shared equity arrangement. Some companies wait until you sell your home, then collect what they’re owed; others have multi-year agreements in which you’ll pay the balance in full at the end of a stated period.
Make sure you understand all the terms of this complex arrangement. Technically, you’re not borrowing money, you’re selling a stake in your home — to a financial professional who naturally wants to see a return on their investment.
How to get a HELOC with bad credit
Applying for a HELOC is pretty much the same as applying for a home equity loan, but if you have bad credit, a loan might have a slight edge over the line of credit. That’s because home equity loans have fixed interest rates and fixed payments, so you’ll know exactly what you need to repay each month. This predictability could help you better manage your budget and keep up with payments.
A HELOC, on the other hand, has a variable rate, which can cause unexpected increases in your monthly payments. For this reason, lenders often have higher credit score criteria for HELOCs than home equity loans.
Tips for improving your credit before getting a home equity loan
To increase your chances of getting approved for a home equity loan, work on improving your credit score well before applying — at least several months. Here are three tips to help you improve your score:
Pay bills on time every month. At the very least, make the minimum payment, but try to pay the balance off completely, if possible — and don’t miss that due date.
Don’t close credit cards after you pay them off. Either leave them open or charge just enough to have a small, recurring payment every month. That’s because closing a card reduces your credit utilization ratio, which can decrease your score. The recommended utilization ratio: no more than 30 percent.
Be cautious with new credit. Getting a higher credit limit on a card or getting a new card can lower your credit utilization ratio — but not if you immediately max things out or blow through the bigger balance. Treat the newly available funds as sacred savings.
FAQ on getting a home equity loan with bad credit
In general, it’s better to get a home equity loan with bad credit. A home equity loan often has a lower credit score requirement compared to a HELOC, and it comes with a fixed interest rate, so your payment will be the same every month, making it easier to plan for.
Yes — in fact, this is the rule for any type of loan, including a home equity product. The higher your credit score, the lower your interest rate.
Editor’s Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
Forex options, also called currency options, are contracts that give the purchaser the option to buy foreign currency from the exchange at a specific price on or before a specific date.
Like stock options, there are two different types of forex options: A call option gives the holder the right to buy currency at a specified price (the strike price), while the holder of a put option has the right to sell a currency at a predetermined price.
Those investing in foreign countries may use forex options as a way to hedge against unfavorable fluctuations of foreign currencies or to speculate on volatility.
What Is Forex Options Trading?
Like options in the stock market, currency options are a derivative instrument. In this case, the underlying asset is a foreign currency pair. Currencies (also known as FX or forex) are generally traded in pairs. One major currency pair, for example, is EUR/USD, which indicates the value of the euro against the U.S. dollar.
Foreign currency options are a way to invest in foreign currency markets without trading in the actual currencies themselves. 💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.
How Forex Options Trading Works
If you understand how to trade options in the stock market, currency options work in a similar manner. Buying a currency call option gives you the right (but not the obligation) to purchase a particular foreign currency at a specified price (the strike price) at any time before its expiration date.
A currency put option works in a similar way, except that the buyer has the right (but not the obligation) to sell a currency at a given price before the expiration of the option.
You can also purchase combinations of both put and call options at different strike prices and/or different expiration dates, depending on how you think the market will move. You can always close out your position before the options expire. Owning options gives you exposure to movements in the exchange rate without having to actually purchase the currency.
Types of Forex Options Available
The most basic currency options come in two types: so-called ‘vanilla’ calls and puts.
Vanilla Call and Put Options
A forex call option gives the holder the right (but not the obligation) to purchase a given currency at a specific price, any time on or before the option’s expiration date. You would generally buy a forex call option if you have a bullish outlook on a particular currency.
A forex put option works in the opposite manner. If you hold a put option, you have the right (but not the obligation) to sell a specific currency at a particular price before the options expire.
Purchasing a put option is something that you would do if you have a bearish outlook on the underlying currency.
SPOT Options
Another type of currency option is single payment options trading (SPOT). With a SPOT option, an investor and broker can set more detailed conditions for the option to pay out. These conditions are either met, or not. Because there are only two possible outcomes upon the option expiring, these options are sometimes called binary currency options.
Example of Trading Forex Options
If an investor expects the value of a currency will fall, they may choose to buy a put option to earn the right (but not the obligation) to sell the currency in question at a predetermined price during a set timeframe.
For example, if a U.S. investor expects the euro will fall in value against the U.S. dollar, they may buy a EUR/USD put option. Essentially, the option can help the option holder protect themselves against depreciation of a given currency. 💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.
Benefits and Risks of Forex Options Trading
Here are some of the pros and cons of trading forex options:
Benefits
Using forex options can be a cost effective way to potentially help hedge an investors’ portfolio against currency risk. For example, an investor who owns foreign stocks may consider investing in local currencies via options to reduce currency risk. Investors may want to weigh the option’s premium, as well as risk against possible outcomes.
Risks
Like any investment, trading currency options comes with a set of risks. Options are complex, high-risk instruments that require investors to understand how they work.
Currency values may fluctuate based on macroeconomic events, economic data, or political events. This means that FX options investors must bear in mind the risk profile of particular countries, as well as that of their own portfolio. Because currencies react to interest rates, trading currency options also bears interest rate risk. Traders who use leverage to potentially earn higher profits with less money, also risk losing more than their initial investment.
Benefits
Risks
Using forex options is a low-cost way to potentially hedge against adverse currency moves.
The price of currencies can be extremely volatile.
Using leverage, there is the potential for higher profits with less money invested.
Political risk as currency markets react to local governments’ policies.
You have many different ways to trade depending on your market outlook.
Options may be less liquid than the currencies themselves.
The Takeaway
Trading forex options can be a way for you to invest in the foreign currency market without actually owning the currency itself. You can use call options, put options, or a combination based on how you think the market will perform.
Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.
Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
What are some types of forex options?
The two kinds of forex options are call options and put options. A call option allows the holder to buy the specified currency at a given strike price, while a put option allows the holder to sell a given currency at a particular price. There are also SPOT, or binary currency options.
What is a forex call option?
A forex call option allows the holder to buy a specific currency at a specific price, on or before the expiration date.
How are forex options settled?
If you hold a currency option that is in the money at expiration, there are two possibilities for settlement. You can settle the option with cash or by a physical delivery of currency. If you are short an in-the-money option at expiration, you may need to deposit cash into your account to settle your account.
Photo credit: iStock/supersizer
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Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes. Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
It’s time to nurture nature with an eco-friendly home life.
In our fast-paced modern world, where technology reigns supreme and convenience is king, it’s easy to lose touch with the natural rhythms of the earth. But as we become increasingly aware of the impact of our actions on the environment, many of us are turning towards eco-friendly living not just for the planet’s sake, but for our own well-being too. Let’s explore how adopting a more sustainable lifestyle can not only benefit the environment but also improve our sleep and energy levels.
Exploring the connection: Sleep, energy, and the eco-friendly home
Sleep is a fundamental aspect of our health and well-being, yet many of us struggle to get enough quality rest each night. Likewise, low energy levels have become a common complaint in our caffeine-fueled society. But what does this have to do with the environment?
The answer lies in the intricate connection between our bodies and the world around us. Our sleep-wake cycle, also known as the circadian rhythm, is regulated by environmental cues such as light and temperature. When we disrupt these natural cues with artificial lights, electronic devices, and erratic schedules, we throw our circadian rhythm out of balance, leading to sleep disturbances and fatigue.
Furthermore, our energy levels are closely tied to our overall health and vitality, which in turn are influenced by the air we breathe, the food we eat, and the products we use. By prioritizing eco-friendly practices, we not only reduce our carbon footprint but also create a healthier environment for ourselves to thrive in.
Sustainable sleep practices
One of the first steps towards enhancing sleep and energy levels is to create a sleep-friendly environment. This means optimizing our surroundings to promote relaxation and restfulness. Here are some eco-friendly home tips to transform your bedroom into a sanctuary for sleep:
Natural materials: James Higgins, founder of Ethical Bedding, shares material matters. “Mindful purchasing and consumption means researching the companies you buy from,” Higgins notes. “Always choose organic (and plastic-free) wherever possible even if this means spending more. Spending a little more on higher quality products that are built to last will pay off in the long run.” Following Higgins’s advice and choosing organic bedding made from materials such as cotton, bamboo, eucalyptus, silk, or linen, which are not only gentle on the environment but also breathable and comfortable for sleep.
Chemical-free products: Avoid harsh chemicals and synthetic fragrances in your bedroom cleaning products and personal care items. Opt for natural alternatives to reduce exposure to harmful toxins that can disrupt sleep.
Mindful lighting: Embrace natural light during the day and minimize artificial light exposure at night, especially blue light from screens, which can interfere with melatonin production and disrupt sleep patterns.
Indoor plants: Incorporate indoor plants into your bedroom decor to improve air quality and create a calming atmosphere. Plants such as lavender, jasmine, and snake plants are known for their sleep-promoting properties.
Energy-efficient appliances: Invest in energy-efficient appliances and electronics to reduce energy consumption and minimize environmental impact. Hsin, with Nanani World, recommends this especially when it comes to lighting. “Switching to LED lighting from conventional incandescent bulbs can reduce energy consumption. LED bulbs last longer and are essential for lowering carbon emissions, which promotes environmental sustainability,” Hsin shares. Specifically, red LED lighting can enhance sleep quality and promote a quicker falling-asleep process, studies have found.
Disconnect from screens: Power down electronic devices at least an hour before bedtime to allow your mind to unwind and prepare for sleep. Sharon Bonner with Bright Ideas Event Agency shares her biggest wind-down tips. “No screen time 90 minutes before sleep and when sleeping, put devices in a Faraday bag to remove potential distraction,” Bonner shares.
Energize your day with sustainable living
Beyond improving sleep quality, adopting an eco-friendly lifestyle can also boost your energy levels and overall well-being. Here are some ways to energize your day while reducing your environmental impact:
Consider a plant-based diet: Incorporate more plant-based foods into your diet, such as fruits, vegetables, whole grains, and legumes. Plant-based diets are not only environmentally sustainable but also rich in nutrients that can increase energy levels and support overall health.Caroline James, with Envirolineblog.com, shares how to further make the most out of your meals. “Sometimes people think that being eco-friendly is more expensive. However, one of my favorite sustainable tips is to plan your meals and write a shopping list at the same time,” James explains. “Something as simple as writing a shopping list helps reduce food waste by assessing what you already have rather than impulse buying. Planning your meals also saves you money when you don’t overbuy and inevitably throw food away.”
Stay hydrated: Drink plenty of water throughout the day to stay hydrated and maintain optimal energy levels. Invest in a reusable water bottle to reduce plastic waste and minimize your carbon footprint.
Re-read labels: A lot of household products are toxic and can negatively affect our health. Rachel Lincoln Sarnoff, former journalist and founder of Mommy Greenest, explains the dangers of certain household items. “When it comes to air freshening and candles (and cleaners, for that matter), avoid artificial fragrances, which can contain hundreds of chemical ingredients including phthalates linked to hormone disruption,” Sarnoff warns. “Unless a label lists the components of what scents the product — such as essential oils—then the word “fragrance” probably means it’s artificial.”Another household item to reconsider is non-stick pans. “[Non-stick pans] are coated with PFOAs that can be harmful to human health,” Sarnoff explains. “If you can’t afford to overhaul your set, start with those that are scratched, which are more likely to leach these toxic chemicals into your food, and replace pans with metal versions that don’t have a non-stick coating. You can have the pans sand-blasted down to a stainless steel base and either continue to use or recycle them.”
Get moving outdoors: Take advantage of the natural world around you by engaging in outdoor activities such as hiking, cycling, or gardening. Spending time in nature can reduce stress, increase energy levels, and foster a deeper connection to the environment.
Reduce, reuse, and recycle: Practice the three R’s of sustainability — reduce, reuse, and recycle — to minimize waste and conserve valuable resources. Valinda, founder of Green and Happy Mom, explains that opting for what you already own is the most eco-friendly choice. “Why buy a stainless steel bottle if your trusty plastic one still serves its purpose? The same principle applies to food containers, bags, and more. When considering a new purchase, explore secondhand options first, ” Valinda concludes. “Not only does this reduce the demand for new resources, but it also helps you save some money.” Emma Reed suggests finding reusable alternatives first and investing in them. “Whether that be reusable wipes for the home, a reusable coffee cup you can take out with you, reusable nappies/diapers for your baby, or beeswax wraps instead of clingfilm, there are many doable and handy options, Reed shares. “On top of being more environmentally friendly, they are also much kinder to your wallet too – it’s a win-win.”
Eco-friendly home: Other ways to cultivate a green oasis
Incorporating eco-friendly practices into every aspect of your home life can have a significant impact on both the environment and your well-being. Here are some overarching green living tips to help you reduce your carbon footprint and create a more sustainable living space:
Simple swaps: Jennifer Young with What’s Good suggests starting with swaps that impact your health first. “For example, your skin is your largest organ and absorbs 70% of what it comes in contact with — your feet absorb 100%! This means the first change is laundry, like clothing, sheets, and towels. Ditch the big plastic bottle laundry detergent and start using concentrated laundry strips or powders,” Young shares. “Both are plastic- and liquid-free which hugely reduces fossil fuel consumption. Plus, there are no synthetic fragrances, dyes, or other harmful chemicals that might interrupt your endocrine system or aggravate your skin. You can further protect your health and save energy by using dryer balls instead of dryer sheets or fabric softener.”Yalu Xu, with Momo Lifestyle, echoes this sentiment that embracing eco-friendly living starts with reevaluating household essentials. “There’s room for sustainability in unexpected areas, like bath mats. Traditional fabric bath mats require weekly washes, using over 2,000 liters of water each year, ” Yalu Xu shares.
“An innovative alternative is a product like Drytomita bath mat. Made from diatomaceous earth, these mats not only absorb and evaporate water quickly but also maintain their cleanliness and functionality like new for years, with simple sandpaper maintenance. It’s a testament to how sustainable choices can seamlessly integrate into, and enhance our daily lives.”Another simple swap, shared by Lamar with BRoadout is opting for reusable alternatives like cotton and choosing sustainable materials like bamboo. “Cotton and bamboo are both sustainable choices and both hold a pivotal role as one of our primary raw materials, featured in a wide array of products, Lamar explains. “Choosing sustainable cotton items for your home, like tents and chairs, or bamboo items like tables, is a thoughtful way to care for your loved ones and the environment.” Lastly, Alyssa Bolaños, founder and CEO of Oh-Eco.com, reminds us not to feel pressure to make all the swaps at once. “My number one tip for living more sustainably is to use what you have, then, get what you need – just the sustainable version,” Bolaños states. “As you run out of your household cleaners or items, swap them for a more sustainable version on your next shopping trip. So instead of a plastic toothbrush, switch to bamboo. Or instead of saran wrap, maybe reusable bowl covers or beeswax wraps. You don’t have to change everything overnight.”
Consider air purifying measures: Jen Stout, co-founder of Healthier Homes, explains the importance of air purifying measures. “Adding a portable air filtration system with UV/ion purification in your living and bedroom areas is well worth the investment,” Stout exclaims. “Something many don’t think about either is paint – look for paints that seal the surface and are zero VOC, to add beauty and color to your space, while keeping the air condition pristine.” Houseplants can also help filter toxins, add oxygen to the air, and contribute to healthy sleep.
Energy efficiency: Ecoclicky support team encourages homeowners to consider renewable energy sources. “Install solar panels to harness solar energy, reducing reliance on non-renewable power sources,” the team shares. “For those unable to install panels, choosing energy providers that offer green energy plans can be a great alternative.” The team also advises upgrading to energy-efficient appliances and LED lighting. “This cuts down on electricity usage along with remembering to unplug devices when not in use,” the Ecoclicky team notes.
By incorporating these overall green living tips into your home, you can create a more eco-friendly environment that benefits both your health and the planet.
Simplifying conserving and preserving the earth
As we reflect on our relationship with the planet, let’s remember that our actions not only shape the world around us but also impact our health and well-being. By embracing eco-friendly living practices, we can enhance our sleep and energy levels while safeguarding the environment for future generations. So, let’s commit to treading lightly on the earth and nurturing a sustainable lifestyle that benefits both ourselves and the planet we call home.
Wesley is a Charlotte-based writer with a degree in Mass Communication from the University of South Carolina. Her background includes 6 years in non-profit communication and 4 years in editorial writing. She’s passionate about traveling, volunteering, cooking and drinking her morning iced coffee. When she’s not writing, you can find her relaxing with family or exploring Charlotte with her friends.