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<h3><strong>Does Saving Up for a House Seem Hopeless? A Guide for Today’s Tough Market</strong></h3><p><br></p><p>For those of you who hope to buy a home soon in today’s high-priced market, probably the most daunting hurdle is amassing the down payment. With the median home price currently hovering around $400,000, a 20% down would amount to a whopping $80,000. Now, who has that much laying around? Anyone?<br><br>Further complicating matters is that you’re saving up for more than a house. You might be simultaneously socking away money for retirement, paying down credit card debt or college loans, or setting aside something for the day your kid heads off to college, too.<br><br>With all this in the mix, the challenge of saving enough for a down payment can sometimes seem insurmountable. Can you just stop everything and save for the house? Well, in a word, no. But you can learn to prioritize, juggle, and adopt some clever strategies to help you reach your goals.<br></p><h2><strong><br></strong></h2><h3><strong>Should I save up for a house or pay off credit cards first?</strong></h3><p>Debt is something of a national pastime. On average, Americans carry $6,194 in credit card debt, according to the 2019 Experian Consumer Credit Review. And the average credit card interest rate is 18.26% for new offers and 14.54% for existing accounts, according to WalletHub’s Credit Card Landscape Report. And as you probably know, the more your spend, the more your balance and payments go up.<br><br>Ideally, you’d eliminate this kind of debt before you start hitting the open houses.<br><br>“If you are buried in debt, when you buy a house you might just not be able to make ends meet,” says Jay Zigmont, certified financial planner and founder of Childfree Wealth. “Paying off your debt before buying a house will set a sound foundation.”<br><br>But paying down credit cards is not an easy thing to pull off. If you can’t quickly knock off your credit card debt, or if you have multiple cards with debt, zero in on the highest-interest debt first since that’s the kind that threatens to escalate quickly. You can consult your credit card company about reducing your rate, or find the lowest interest rate and debt-consolidation offers online, and consider doing a balance transfer.<br><br>“With the amount you have available every month, contribute 50% to saving for your home and 50% toward debt,” says Satinder Dhinsa, a certified financial planner at Freedom 55 Financial.<br><br>As you lose or lower the debt, you can take the money you had been sending to creditors and put it toward saving for your down payment.<br><br>“Not only does paying down high-interest debt reduce the stress on your bank account, but it will also improve your eligibility for a larger mortgage at a more favorable rate,” says Dhinsa. “If you have too much consumer debt, it will impact how much mortgage you qualify for.”<br><br>Look at paying down credit card debt as part of the homebuying process. It will benefit your bank account and boost your peace of mind. Plus, when you find your dream home, your mortgage application will be that much better for it.</p><p><br></p><h3><strong>Can I buy home with college loans?</strong></h3><p>The toughest hurdle to saving for a home if you’re 40 or younger is student loan debt, according to a survey of recent homebuyers by the National Association of Realtors®. But student loan debt is in some ways more forgiving than credit card debt. It’s not as bad for your credit rating because these loans typically have longer repayment timelines and lower interest rates.<br><br>Of course, you want to keep current on your student loans, but don’t sweat trying to pay them off fast. Just plug along with minimum payments, and don’t forget the silver lining: You can claim a tax deduction for the interest paid on student loans.<br><br>“If you have student loans, this is OK, as these are low-interest rates,” says Dhinsa. “Having a student loan does not prevent you from getting a mortgage, though it affects affordability and the amount of mortgage you may be approved for.”<br><br>Sometimes, it might seem as if student debt is standing in the way of your saving for a down payment. Perhaps your loan is privately financed and you worry that your interest rate will rise or the monthly amount due on this kind of debt is oppressive. In situations like these, investigate your options to lower that debt.<br><br>“If you’re holding on to student debt, now is the time to refinance your private student loans. Since private loans don’t qualify for the same payment pause that public loans do, you’ll want to finance your loan now at a fixed rate before interest rises,” says Michael Jeffcoat, founder of The Jeffcoat Firm, a legal firm.</p><h2><strong><br></strong></h2><h3><strong>Should I save for a house or retirement first?</strong></h3><p>Saving for retirement should always be a priority—especially if you’re young. Consider the magic of compounding interest: If you invest $1,000 at age 20 and contribute $83 a month (around $1,000 a year) until retirement, by age 70 you’d have $465,000. If you did the same but waited to start until age 30, you’d end up with about $225,000. If you left it until age 40, you’d have about $105,000.<br><br>But reality check time: How the heck can you sock away enough for a down payment if you’re funneling money into an individual retirement account or 401(k)? You might even wonder, is it ever OK to stop contributing to your retirement for a while, so that you can put all your money into paying off debt and saving up for a house? The superheated housing market we’re in might have you wondering where you can cut bait.<br><br>“Some people pause their retirement savings to save for a house,” says Zigmont. But on a 401(k), “you want to at least contribute enough to get the employer match if you have one.”<br><br>Plow anything else available beyond that into a house fund. So, yes, you do have permission to take this priority off the front burner for a bit.<br><br>One last bit of advice: Do your best to avoid pulling money out of retirement savings vehicles for your down payment. Penalties and loss of tax-deferred status on these funds can put you behind the eight ball in the long run.<br></p><p><br></p>

First Time Buying 101

<h3><strong>How to Boost Your Credit Score: Advice for First-Time Home Buyers</strong><br></h3><p>If you need a mortgage, a good credit score, also called a FICO score, is essential—and it’s within your control.<br><br>In a nutshell, a credit score is a simplified calculation of your history of paying back debts and making regular payments on loans. If you’re borrowing money to buy a home, lenders want to know you’ll pay them back in a timely manner, and a credit score is an easy estimate of those odds.<br><br>Here’s your crash course on this all-important little number, and how to whip it into the best home-buying shape possible.<br></p><p><br></p><p><br></p><h3><strong>Pull your credit report</strong><br></h3><p>There are three major U.S. credit bureaus (Experian, Equifax, and TransUnion), and each releases its own credit scores and reports (a more detailed history that’s used to determine your score). Their scores should be roughly equivalent, although they do pull from different sources. For example, Experian considers on-time rent payments while TransUnion has detailed information about previous employers.<br><br>To access these scores and reports, financial planner Bob Forrest of Mutual of Omaha recommends using AnnualCreditReport.com, where you can get a free copy of your report every 12 months from each credit-reporting company. It doesn’t include your credit score, though—you’ll have to go to each company for that, and pay a small fee.<br><br>Or check with your credit card company: Some, including Discover and Capital One, offer free access to scores and reports, says Michael Chadwick, owner of Chadwick Financial Advisors in Unionville, CT. Once you’ve got your report, thoroughly review it page by page, particularly the “adverse accounts” section that details late payments and other slip-ups.<br></p><p><br></p><h3><strong>Assess where you stand</strong><br></h3><p>It’s simple: The better your credit history, the higher your score—and the better your opportunities for a home loan. The Federal Housing Administration requires a minimum credit score of 580 to permit a 3.5% down payment, and major lenders often require at least 620, if not more. So what can you do if your credit report is in less than shipshape? Don’t panic, there are ways to clean it up.<br></p><p><br></p><h3><strong>Improving your score with error disputes</strong></h3><p>A 2013 Federal Trade Commission study found that 5% of credit reports contain errors that can erroneously ding your score. So if you spot any, start by sending a dispute letter to the bureau, providing as much documentation as possible, per FTC guidelines. You’ll also need to contact the organization that provided the bad intel, such as a bank or medical provider, and ask it to update the info with the bureau. This may take a while, and you may need documentation to make your case. But once the bad info is removed, you should see a bump in your score.<br></p><p><br></p><h3><strong>Erase one-time mistakes</strong><br></h3><p>So you’ve made a late payment or two—who hasn’t? Call the company that registered the late payment and ask that it be removed from your record. “If you had an oopsy and missed just a payment or two, most companies will indeed tell their reporting division to remove this from your credit report,” says Forrest. Granted, this won’t work if you have a history of late payments, but for accidents and small errors, it’s an easy way to improve your credit score.<br></p><p><br></p><h3><strong>Increase your limits</strong></h3><p>One no-brainer way to increase your credit score is to simply pay off your debt. Not an option right now?  Here’s a cool loophole: Ask your credit card companies to increase your credit limit instead. This improves your debt-to-credit ratio, which compares how much you owe to how much you can borrow.
<br><br>“Having $1,000 of credit card debt is bad if you have a limit of $1,500. It isn’t nearly as bad if your limit is $5,000,” Forrest says. The simple math: Although you owe the same amount, you’re using a much smaller percentage of your available credit, which shines well on your borrowing practices.<br></p><p><br></p><h3><strong>Pay on time</strong><br></h3><p>If you’re often late with payments, now’s the time to change. You have the power to improve your credit score yourself. Commit to always paying your bills on time; consider signing up for automatic payments so it’s guaranteed to get done.<br></p><p><br></p><h3><strong>Give yourself time</strong><br></h3><p>Unfortunately, negative items (such as those habitually late or nonexistent payments) can stay on your report for up to seven years. The good news? Changing your habits makes a big difference in the “payment history” segment of your report, which accounts for 35% of your score. That’s why it’s essential to start early so that you’re sitting pretty once you’re shopping for homes and find one that makes you swoon.
<br><br>Once you’ve set your credit on a better path, it’s time to tackle the next major hurdle: saving for a down payment.<br></p>

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