How to Apply for a Joint Mortgage

The home-buying process doesn’t have to be a difficult one. That’s why it’s important to have the right lender on your side when you apply for a joint mortgage.

Lender Selection

Are credit unions any different from the traditional banking branches?

This was a question I had for Jennifer Lopez, Mortgage Loan Officer at Texas Tech Credit Union.

She mentioned that “CREDIT UNIONS as a whole are way better than larger banks.  We have more flexibility, lower interest rates and lower fees.  And all of our staff is onsite, so it makes it easy for me to converse with my team on a deal to make sure it will work.  At the Texas Tech Credit Union, it is ALL ABOUT THE CUSTOMER!!!”

I will have to agree that being onsite with the rest of her team can expedite the application process. Quick and timely communication is important.

My personal experience has been at a large and smaller bank/ credit union. They both provided a great lending experience with responsive communication and easy to use online loan application.

I have to say it was convenient being able to step into the TTFCU branch without having to make an appointment.

Delays can be avoided

“Some common delays we see are when the buyers do not let us know who they are going to use for homeowner’s insurance in time to pull together final numbers for closing.  Closings can be delayed for this reason.  Also, not having sufficient funds for closing already available and seasoned in your bank account”, Jennifer mentions.

When applying for a joint mortgage it is important that you both provide the information in a timely manner. Gather the required documents and submit via the online portal or email the PDF files.

I encourage you to shop around for home-owners insurance but make sure you’ve narrowed it down to a couple to make the transaction as smooth as possible.

I have found that bundling insurance is going to provide the best price.

Which mortgage term is best?

Ready to apply for your mortgage

I asked Jennifer what are some DO’s and DON’Ts when applying for a mortgage.

DO: ASK! Once you’re pre-qualified make sure you run all questions by your lender. Don’t be caught off guard when it comes to your credit.

DON’T: Jennifer was adamant about not financing any furniture, cars or ANYTHING!

I have heard from parties, realtors, sellers, realtors, how the above can cause some delays. I use the word “delay” lightly. It makes for some uncomfortable discussions. Closing dates, moving schedules, leasing terms are all issues you’re likely to see.

Apparently it is common.

Sure you can afford it but do you need it.

Consider the term “house-poor”. You will find yourself pushing the budget when you start walking houses.

It is tempting. Stick to that original figure you first worked out.

Last thing you want to have is a mortgage payment that exceeds 35% of your gross pay. That will leave less money to handle the other ncessities and fewer and fewer wants.

The 35% is a figure I’m comfortable with but you need to calculate that ratio for yourself.

Jennifer can provide in greater detail your debt ratio for the loan application.

Seasoning your credit

It happens! You may find that you’re not immediately ready to qualify for a loan. Don’t let this squash your dreams of home ownership. There are solutions.

Jennifer mentioned it might be helpful to get a secured credit card. This can help in preparing your credit for a mortgage loan. 

“Obviously making timely payments to ALL creditors you owe money to is very important.  I’m always happy to do credit evaluations though for further guidance.”

Get in touch with Jennifer for your pre-qualification mortgage.

Let’s talk to get your approval process rolling.

Buying Your First Home | How To Prepare

modern building against sky
Photo by Expect Best on Pexels.com; Buying Your First Home

Read This Before Buying Your First Home

Congrats!  You decided to take the plunge and start looking for your forever home.  The preparation is not complicated when you understand the home buying process.

Consider the listed information below.  

How Much Can You Afford

Consider how much you can afford.  A recommendation is to purchase a house that will not exceed 25-30% of your take home pay.  Lenders will use the gross income to calculate your mortgage but you can see how this will inflated.  When you budget make sure you use your take home income.  

You will need to include the mortgage, property taxes, insurance, and/or HOA fees when determining how much you can afford.  Remember you don’t want to be ‘house-poor” meaning you have a large monthly payment causing you to miss other obligations. 

How Much Cash Will You Need

Down Payment 

For first time homebuyers you can ask about a Federal Housing Administration loan (FHA).  This loan will require a low down payment of 3.5%.     

You can also do 5, 10, or 20% Down payment if you qualify for a conventional loan.  Keep in mind with a 20 percent down you will not need to pay a  private mortgage insurance. 

Conventional 15yr term or conventional 30yr term- You need to consider how long you will live in the house.  If this is a starter home and you plan to live in it for  5-10 years I would go with a 30yr mortgage.  Your monthly payments will be smaller, $300-600 less a month when compared to a 15yr note.    

A 15yr mortgage will require a larger monthly payment but you will payoff much sooner and save lots thousands of dollars.    

Choose a bi-weekly payment schedule for either a 15yr or 30yr mortgage.  This will save thousands of dollars in interest over the term.    

Home Insurance

You can choose a 1% deductible to cover you property.  This will cover larger expenses like busted water lines, hail damage, mother nature, and fire to name a few.  If you want to lower your monthly payment you can choose a 2% deductible.  Visit with your insurance company to run the figures.   

Realtor Selection

I would visit with a few realtors before working with one.  Ask them questions like the number of houses they’ve sold, how long they’ve been a realtor, and this will give you an idea on how they’ll perform.  

Realtors work for you and are well-versed in the home buying process.  You will find most are very responsive to your texts or calls.  

Don’t be afraid to “fire” a realtor if they are not living up to your expectations.  Start the hiring process all over again.  

Loan Pre-Qualification

After you have determined how much you can afford you will need to work with a bank to pre-qualify.  Most realtors want to know your qualified and will ask if you have a pre-qualification letter.  

But even if you’re not pre-qualified don’t let this hold you back from scheduling house tours.  Don’t let the qualification process scare you.  It is fairly simple as everything is done online.  

It’s ok to shop around for a better interest rate.  So line up a couple of lending institutes.  Rates are fairly low you can get a 3.5% on a 30yr or 2.75% on a 15yr mortgage.  

During this process keep in mind:

`Don’t apply for any other loans, i.e. car loans, furniture, credit cards

`Make large deposits in your personal accounts

Your First Home Selection

When choosing houses you want your property to be comparable to the houses in the neighborhood.  You don’t want to purchase the most expensive house on the block.  If you have to move or decide to sell you may not have enough equity in your house.  

The housing market has been competitive and houses are not staying on the market very long.  Be cautious of houses that are on the market for extended periods of time.  That should set off a caution flag for several reasons: foundation or structure issues, major renovations needed, or neighborhood is questionable.  

Home inspection after an offer is accepted

Home inspections are well worth the money and a must-have for home purchase.  The fees on an inspection range from $300-$500.  Take time to do a walk-through with the home inspector.  I find this part to be very satisfying as it provides me a detailed condition of the home.    

After you have the inspection report take the time to review it.  This is the tricky part.  What should you ask for when it comes time to negotiate?  This is where first time home buyers struggle. Make sure not to ask for every item listed on the report to be repaired.   This will most likely turn off the buyer.  

If there are major issues feel free to bring those up.  The buyer will likely make the repair or make a price concession.  However, if you ask for paint color or carpet allowances the buyer will make the process difficult.  

Closing Costs

In addition to your down payment you will need additional cash to close on your purchase.  This will typically be 5% of the purchase price and will be required before you get your keys.   The closing cost can be negotiated so go ahead and ask.  

The lender will provide a detailed cost estimate and identifies services you can shop for.  Some include the home inspection and survey.  

Like the house make the offer

I will suggest that if you loved the house go ahead and make an offer.  When it is a sellers market the seller will typically have 2-3 offers within a few hours! 

Make sure you come in with a competitive offer to keep the seller interested.  Trust me it is much easier to for the seller to come to the negotiating table when they have a respectable offer versus a low-ball offer.  

How quickly can you move in

The excitement is everywhere! The last leg is where you might see delays. The lender will schedule an appraisal of the property and it will depend on the how busy the appraisers are.

Cheers! You have now been brought up to speed on choosing a realtor, best down payments options and standing out with with a competitive offer. Best of luck on buying your first home!

Disclosure:

The material presented is meant to be informative and is not intended to serve as legal, tax, or other financial advice related to individual situations.  

Head here to collaborate with us on future projects.

Should you be paying your kids an allowance

Kid picking flowers
Kid picking flowers

I never received an allowance and neither should my kids. My logic sounds silly right?

But have you considered how an unconditional allowance is causing damage to your children’s ability to handle money?

Unconditional Allowance

Let’s define unconditional allowance. This is defined as an allowance given to the child without them having done any task or chore to receive it.

I didn’t received an allowance for the chores I should be able to to. This was my contribution to my parent’s house. My spending money came during the summers when I would hoe cotton fields in West Texas. Character-building they called it.

When my kids were younger I struggled on whether they should receive an allowance. Our goal as parents should be to have our children be financially savvy and come to appreciate the work that needs to happen to earn a dollar.

Allowances and Entitlement Attitude

I believe that kids that receive an allowance without having “earned” it have an entitlement attitude. I recall some of my childhood friends who received an allowance and as young adults they struggled mightily in developing a health work ethic and meeting their obligations.

Curious if your poor performers where recipients of an unconditional allowance? They believe just showing up is enough to receive their paycheck. Unfortunately I don’t have the research to draw that comparison but it would make sense.

I still don’t provide a my kids an allowance for doing chores. They both know they can come to me and ask for spending money. I won’t always say yes but will encourage them to find ways to generate that money.

Either the yard needs to be mowed or my blog needs proofreading. The 11 year does a good job of that. The younger one will realize she needs to go above and beyond her chores to earn that money. To my surprise she’ll do just that by doing that extra, like vacuuming, without us having told her.

Why so strict?

Kids are resilient. They will find a means to generate spending money. I am teaching my children to find an opportunity/ need and meet that need. Recently, my 11 year old was making wooden signs and successfully sold all of them!

This proved to be a wonderful learning experience for her. She learned break-even point, revenues, margins, and tools that will benefit her throughout her life.

My learnings

I grew in a household where money was scarse. This limited my world-view and believed many of the myths associated with wealth people. I have taken the initiative to teach my girls an abundance mindset.

An abundance mindset that says that what flows out their hands will come back. A mindset that teaches them to see every transaction as a learning opportunity.

What is loss aversion and steps to overcome it

How this psychological behavior is causing you to lose lots of dollars

Loss Aversion
Loss Aversion

Loss aversion: the pain of losing is twice as strong as the  gain

Hey, did you notice an increase in your paystub?  You may want to check it out.   If you did, you are part of the 90 percent of Americans who will have experienced a positive net gain in their take home money.

But have you given much thought to what you will do with that extra money?

Chances are you haven’t given it much thought.  Honestly, I have not done much with mine yet.

Unfortunately, you and I will struggle to save that extra income because it is so much fun to spend rather than save.  Who can relate?

Wait, I have a mental condition?

Yes, we all do!  There is  a psychological behavior that will keep you from saving.  This behavior is known as loss aversion, or the hate of losing. 

Loss aversion is a psychological state of mind where the “pain of losing is twice as powerful as the pleasure of gaining”.

We know we need to do something smart with that little extra money and yet we choose to do nothing.   This same behavior is seen  in different areas of one’s life:  health, spiritual well-being, education, and list continues.

We know the benefits gained from each of these actions are great, but the pain of losing time, money, relationships, or other resources will keep you from taking action.

Look around your influential circle of friends and you may see the benefits experienced by overcoming loss aversion.   These benefits did not happen overnite.   They took action!

Now that we know that loss aversion keeps us from investing let’s explore the two solutions

The more steps or actions an activity requires the less likely we are to take a step forward to bettering ourselves.   For example, we need to get in shape and for some reason we believe we need a new workout wardrobe, hire a trainer, and post your accomplishments. 

These are but a few things that keep you from taking action.  So many unwritten rules to follow it seems.  But disregard those and get going.

 Let’s look at savings and retirement

The lingo alone will drive one insane!  Annual percentage rate, annual percentage yield, certificates of deposit or CD, bonds, IRA, 401K, etc etc!  

According to a report, 50 percent of Americans don’t participate in their 401Ks and reasons stated include: feeling overwhelmed with the many choices, laziness, and struggle with deposits.

I remember feeling all the mentioned emotions as I enrolled in my company 401K.  Trying to be in compliance with company policies, understand vacation policy and now 401K!

The struggle was real and I’m glad I took that plunge. I was afraid to ask questions. Here’s an MBA student who has no idea how to invest, I thought they would say.  I had no idea or direction and no one to turn to.

Don’t let that hold you back! Take action.

My experiences have shown that the first step you take, is the most important one.  Over time you will become more educated and can make wiser choices in your finances.

Turn the challenges into solutions

You might have heard the acronym KISS- Keep It Simple Silly.  Try taking advantage of automatic contributions.   Let the accounts withdraw from your check before you have time to spend it.   If you don’t see it you will not miss it.

Understand as you save more it does not necessarily mean you will spend less.  If you have a budget in place this will keep you focused on your goals.  I’m old school and prefer to look at spreadsheets when using my budget.  There are apps that keep this process simple.  Don’t see saving or investing as a present loss but a future gain or victory.  Keep focused on your goals.

Helpful bits

We are visual creatures.  We like wooing and awwing over beautifully created pictures.  I can spend hours on hours looking through Pinterest and Instagram.  Do the same for  your finances.  Use visuals rather than figures to help you achieve goals.

For example, instead on fixating on a $500,000 retirement, use visuals that that money will help you reach.  Visuals such as vacations, nicer home, or activities you enjoy doing with your family and friends.

Don’t allow loss aversion keep you from achieving your goals.  Learn to focus on the gains and not what you will be losing.  Remember the pain of losing needs to be dealt with. 

Keep reminding yourself of the benefits or gains you will be able to enjoy.

How have you been able to overcome loss aversion?  Care to share?

https://www.linkedin.com/pulse/loss-aversion-explained-tips-overcome-joel-gallegos

Kaizen Tools For Personal Finances

Kaizen Tools

Kaizen is a well accepted business principal that seeks to improve inefficient practices in industries like manufacturing, logistics, and sales.  And now Kaizen Tools have been adopted in the other self improvement fields like personal finances.

The self improvement fields include:

  • Health and Fitness
  • Personal Finances
  • Personal Relationships
  • Kaizen for Productivity and Business

The Kaizen principal is about focusing on the minutiae.  The idea is that one small change makes a huge difference.  It breaks down the job or task into multiple process and then evaluates each process for waste or inefficiencies. 

The eliminating of waste speeds up your process. The change is then made and will be monitored before proceeding to the next process.

2 Powerful Kaizen Tools 

Consider these two powerful tools to improve your personal finances:  force multiplier and automation.  Both achieve similar results and your risk-tolerance will depend on the tool you choose.

Don’t leave before downloading the FREE Kaizen ebook.

Kaizen Tool
Kaizen Tools for Personal Finances

Kaizen Tools For Personal Finances

Automation

Automation is using software to automate and will include automatic transfers. Set up automatic investment for your retirement accounts.  Enroll in your company sponsored accounts and opt-in for the yearly 1% contribution increases.  Take advantage of your health savings accounts (HSA).  These HSA offers tax advantages throughout your life.

Another example of automation is to create an effective spending plan.  Capture all your expenses at the beginning of your pay period and monitor it as you go.  Plan to tweak your spending plan a few times before you can set it on auto pilot. 

I will not be one to tell you can’t have the latte or avocado toast. I don’t believe these goodies will keep your from being wealthy.

Force Multipliers

Force multipliers can be describe as tools that help accomplish your desired goals.  If you prefer to handle cash you can use envelope system to handle your plan.  You can plan to keep cash for gasoline, groceries, fun activities, etc.

We started out with an envelope system and would later go to an automated one.  The idea was to get comfortable handling cash and understanding how our expenses would fluctuate.

Another example of a force multiplier can be a certified financial planner.  The CFP depicts a tool that will amplify your production output, i.e. gains and dividends.  Most CFP will not charge an upfront fee but rather they are paid by commission by the investment firm.

Kaizen Tools in Your Retirement Accounts

Automation can also provide net worth building gains.  Here you think of diversification through mutual funds, company sponsored accounts, and individual retirement accounts.  Diversification will allow you to weather the ups and downs of the markets.

The method can be considered passive income as you don’t have to talk with your broker or review anything.  I don’t recommend you completely ignore your retirement accounts though.

Force multiplier is a tool that can help you achieve great wealth but comes with greater risk.  Think individual stocks here.  If you put all your earnings in a one individual stock the capital gains are impressive in a bull market.

Now when a bear market roars around the risk is great. Stocks in major oil companies, airlines, and restaurant chains have taken a huge loss and have offset previous gains.

The popularity of commission-free trading has open the door for many novice traders.  I consider myself a novice and invest an amount that will not hurt too much if my portfolio has great losses.

Wrapping it up

Kaizen tools are effective in managing your personal finances and creating wealth.  The tools discussed include automation and force multiplier and are but a couple of tools that Kaizen offers. 

However, regardless of the tools used they will require you your buy-in.   You must dedicate time to achieve your desired results.

Don’t leave before downloading the FREE Kaizen ebook

Loss Aversion Explained and Tips to Overcome It

How this psychological behavior is causing you to lose lots of dollars

Loss Aversion
Loss Aversion

Loss aversion: the pain of losing is twice as strong as the gain

Hey, did you notice an increase in your paystub?  You may want to check it out.   If you did, you are part of the 90 percent of Americans who will have experienced a positive net gain in their take home money.

But have you given much thought to what you will do with that extra money?

Chances are you haven’t given it much thought.  Honestly, I have not done much with mine yet.

Unfortunately, you and I will struggle to save that extra income because it is so much fun to spend rather than save.  Who can relate?

Wait, I have a mental condition?

Yes, we all do!  There is  a psychological behavior that will keep you from saving.  This behavior is known as loss aversion, or the hate of losing.  Loss aversion is a psychological state of mind where the “pain of losing is twice as powerful as the pleasure of gaining”.

We know we need to do something smart with that little extra money and yet we choose to do nothing.   This same behavior is seen  in different areas of one’s life:  health, spiritual well-being, education, and list continues. We know the benefits gained from each of these actions are great, but the pain of losing time, money, relationships, or other resources will keep you from taking action.

Look around your influential circle of friends and you may see the benefits experienced by overcoming loss aversion.   These benefits did not happen overnite.  They probably battled loss aversion at some time yet they did something about it and they took action.

Inaction breeds company and it will have an impact in many areas of your life.

Now that we know that loss aversion keeps us from investing let’s explore the solution

The more steps or actions an activity requires the less likely we are to take a step forward to bettering ourselves.   For example, we need to get in shape and for some reason we believe we need a new workout wardrobe, hire a trainer, and post your accomplishments.  These are but a few things that keep you from taking action.  So many unwritten rules to follow it seems.  But disregard those and get going.

 Let’s look at savings and retirement

The lingo alone will drive one insane!  Annual percentage rate, annual percentage yield, certificates of deposit or CD, bonds, IRA, 401K, etc etc!  That is why your accounts have not grown or you have not started.  According to a report, 50 percent of Americans don’t participate in their 401Ks and reasons stated include: feeling overwhelmed with the many choices, laziness, and struggle with deposits.  I remember feeling all the mentioned emotions as I enrolled in my company 401K.  Trying to be in compliance with company policies, understand vacation policy and now 401K!

The struggle was real and I’m glad I took that plunge. I was afraid to ask questions. Here’s an MBA student who has no idea how to invest, I thought they would say.  I had no idea or direction and no one to turn to.

Don’t let that hold you back! Take action.  My experiences have shown that the first step you take, is the most important one.  Over time you will become more educated and can make wiser choices in your finances.

Turn the challenges into solutions

You might have heard the acronym KISS- Keep It Simple Silly.  Try taking advantage of automatic contributions.   Let the accounts withdraw from your check before you have time to spend it.   If you don’t see it you will not miss it.

Understand as you save more it does not necessarily mean you will spend less.  If you have a budget in place this will keep you focused on your goals.  I’m old school and prefer to look at spreadsheets when using my budget.  There are apps that keep this process simple.  Don’t see saving or investing as a present loss but a future gain or victory.  Keep focused on your goals.

Helpful bits

We are visual creatures.  We like wooing and awwing over beautifully created pictures.  I can spend hours on hours looking through Pinterest and Instargram.  Do the same for  your finances.  Use visuals rather than figures to help you achieve goals.

For example, instead on fixating on a $500,000 retirement, use visuals that that money will help you reach.  Visuals such as vacations, nicer home, or activities you enjoy doing with your family and friends.

Don’t allow loss aversion keep you from achieving your goals.  Learn to focus on the gains and not what you will be losing.  Remember the pain of losing needs to be dealt with.  Keep reminding yourself of the benefits or gains you will be able to enjoy.

How have you been able to overcome loss aversion?  Care to share?

3 Part Communication Style to Help with Money Talks

This simple 3 Step Communication Method will help you have those tough financial discussions. Try this too on tough topics.

I Message - 3 Part Communication Method
Simple Communication Method

This 3 Part Communication Style will make money talks easy

The “I” method is an easy and effective communication style to help with money talks.

It has 3 parts.

Marriage and Money

Marriage and money are hard.  Even more-so when spouses are not able or willing to communicate about them.  As with any relationship,  effective communication is the key for it to work!  It takes practice and application.

Solution

Check out this video where I explain an easy and effective 3 part communication method that will help you handle the most stressful conversations.

The 3 parts are: behavior, event, and emotion.  This method is better known as the “I” Message.

Behavior

This is the behavior that needs to be addressed.  For example, one spouse overspending every month or not paying the bills on time.

Avoid words phrases like “you never” or “you always”.  These phrases will make the situation worse.

Event

The event is an action or consequence caused by the behavior.

Using the example from above, not paying bills on time, an event triggered can be:

  1. credit scored is negatively impacted
  2. will be late charges
  3. foreclosure or repo
  4. deadlines missed

Emotion

The last component of the message is the emotion.  Emotion is used to describe the feelings caused from the event.   Here one can focus one the emotion the event caused.

How did the event make you feel?  Perhaps you were embarrassed, afraid, concerned, uneasy and so on.  These emotions will tend to be negative.

Putting it all together

Now let’s combine the 3 parts.

  1. bills are not paid on time (behavior)
  2. the late payments are causing unnecessary charges and this will affect my credit score (event)
  3. I’m afraid this will cause a bigger balance (emotion).

Consider these notes

  1. Make sure the behavior is tangible (can not be disputed) and you have observed it first hand
  2. Do not use the conversation to address more than one behavior
    1. Don’t piggyback multiple behaviors
  3. Do not address in front of others
  4. Make sure there are no other topics discussed
  5. Make this a one on one discussion
  6. Avoid all distractions
  7. Avoid causing blame or guilt
  8. Avoid using words like “you”
  9. Do not use to manipulate
  10. Do practice or rehearse