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Buying your first home is an amazing feeling of freedom. But when you fall into the first-time homebuyer category, the whole process can seem majorly overwhelming. Before you start shopping around (the fun part), you’ll want to understand your options and needs, and save up properly (yup, we’re here to help you with those things). And luckily, there are a plethora of programs for first-time homebuyers that can further help you achieve the American Dream of homeownership (thanks, USA!).

Buying your first home like one of the pros is easier than you think—take the process in stride and find ways to enjoy the ride.

Stride 1: How Much Can You Afford to Spend on Housing?

Before you start shopping around, you’ll want to know how much you can spend. This way, you won’t set yourself up for disappointment when you look at properties above your range.

To arrive at the right number, ask yourself:

  • How much take-home pay do you have coming in after savings and expenses?
  • Can you reduce expenses to increase your savings for a down payment and emergency fund?
  • Is planning to have a child or expanding the family on your radar? If so…
    • Will one person stay home to raise the child?
    • Will an extra bedroom be needed?
    • Will the child go to a private or public school?

Stride 2: Figure out Your Housing Needs

Next, you’ll want to determine your needs in a home.

To determine your needs, ask yourself:

  • Do you need (or want) to live close to a city or can you settle down in the suburbs?
  • Do you want to be close to family?
  • How many bedrooms do you want?
  • Is a yard important to you?
  • How close to do you want to be to neighbors and/or schools?
  • Do you need to be close to public transportation?
  • Do you want to climb stairs, or is a ranch more your style?

Pro Tip: Check out HUD’s homebuyer’s checklist—a perfect resource for any first-time homebuyers.

Stride 3: Your Credit Score

Before you start signing paperwork, make sure to do your best to clean up your credit. A lower score may hurt your chances of qualifying for a mortgage; while a higher credit score may help you get a lower interest rate. If you’re planning to buy a home with another person, keep in mind that if you have excellent credit but your partner doesn’t, that may hurt you as well.

Pro Tip: Don’t let a less than perfect credit score get you down, get empowered to improve your credit score.

Stride 4: Save up for Your Down Payment & Closing Costs

Your monthly payment isn’t all that you’ll need to afford when buying a home – you’ll also need to cough up a large sum of money to pay for your closing costs and down payment.

To start this process, do the following:

  1. Use a homebuyer savings calculator to make a plan on how much you’ll need to save.
  2. Open a free high-yield savings account.
  3. Then, set up a recurring transfer to your savings account via your mobile banking app (just set it and forget it—this will also help you grow your emergency fund to cover any unforeseen expenses, like a new furnace or roof).

Pro Tip: Most traditional mortgages require a 20% down payment. For example, if you’re purchasing a home for $200,000, you’ll need to put down $40,000. That’s a big chunk of change! If you’re not in the position to throw down that much loot, you can check out an FHA loan, if you’re a first-time homebuyer. More on that in Stride 5.

Stride 5: Explore an FHA Loan

The Federal Housing Administration (FHA) is a government agency that provides mortgage insurance on loans for approved FHA lenders in the US and its territories. They’ve insured 34 million properties since they began in 1934, without the help of any tax dollars. If this is your first home, you may want to take advantage of an FHA loan, which can help you get a home with generally more flexible credit requirements than a conventional mortgage product. To protect lenders from mortgage defaults, the FHA insures each mortgage, and certain requirements must be met to qualify.

About those requirements:

  • You must live in the home
  • You need to be a U.S. citizen or permanent resident alien, have a valid Social Security number, lawfully live in the country, and be of legal age to sign for a mortgage
  • You need to get a home appraisal by an approved FHA appraiser

And there are several types of FHA loan programs to choose from, including:

  • Adjustable and Fixed rate mortgages
  • Graduated Payment Loans
  • Energy Efficient Mortgage Program
  • Reverse Mortgages for Seniors
  • Office of Manufactured Housing Programs
  • Condo Loans and more

Pro Tip: The major benefits to an FHA loan are lower down payments and closing costs, and flexible credit qualifications compared to a more conventional mortgage product. An FHA loan can help by reducing the amount of your down payment to as low as 3.5%, for those with a credit score of 580 or greater, for buying a home with 1-4 units. To compare with our example above with a $200,000 home purchase price, if you qualify for a 3.5% down payment, you’d only need to put down $7,000.

Stride 6: Take Advantage of Free Resources (like HUD)

If you need help coming up with your down payment, HUD may be able to help you out. HUD, short for the U.S. Department for Housing and Urban Development, has a ton of resources on both the national and state levels. There are limits on how much you can borrow from a HUD-backed mortgage, which vary by state. For example, HUD offers a Good Neighbor Next Door Sales Program, which helps police officers, teachers, firefighters and emergency medical technicians possibly qualify for a discount of 50% from the list price of the home.

Pro Tip: HUD offers grants for first-time homebuyers – here’s a listing of each of the homebuyer grant programs by state. Not every state offers a grant program, but it would be wise to find out.

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

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Cutting Off the Joneses: The Art of Managing Lifestyle Inflation

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The road to reaching your financial goals can sometimes be very difficult and tedious. We tend to hold back from buying certain things, and sometimes, we live on a tight budget in order to make ends meet. But all this seemingly comes to an end when all your hard work pays off and you get a raise, and finally, you can treat yourself to something nice. However, getting a raise can lead you to one of the biggest challenges to reaching your financial goals — and half the time, you don’t even notice it.

Have you ever heard of lifestyle inflation?

Simply put, lifestyle inflation is when your spending increases as your income increases. This can include moving to a more expensive apartment, getting a new lease on a car, or making small, repeat purchases that add up over time. All these can make it hard to break out of living from paycheck-to-paycheck even when your paycheck gets a little bigger.

It’s easy to fall into this trap. After all, what’s the point of working so hard to get a raise if you don’t treat yourself?

While there’s nothing wrong with splurging a little, the cause of lifestyle inflation goes much deeper than simply wanting to treat yourself. An article by Marcus on why ‘Rising Income Levels May Lead to Lifestyle Inflation’, found that young professionals use material markers to express who they are, in order to demonstrate that their career or chosen path is rewarding. In other words, lifestyle inflation is generally caused by the desire to prove your position in life — manifesting itself through material items, the house you live in, or the places you go to. And although doing this can feel good in the short-term, lifestyle inflation poses a problem in the long run, as Trent Hamm of The Simple Dollar explains that lifestyle inflation hinders you from reaching your financial goals. Allocating most, if not all, of your new raise to your spending budget means that you’re not saving or investing any of it for later on — marking a roadblock to your journey towards debt freedom and financial wellness.

If you recognize yourself in these examples, fret not. Here are a few ways you can break the cycle:

Set goals for yourself. Our resident writer Ash Cash stresses in ‘Saving 101’ the importance of setting financial goals in order to save better. Having goals allows you to constantly remind yourself what you need to save for, and why, especially if it’s something you want badly. That way, you won’t be as tempted to stray away from your plan!

Cut out what you don’t need. You’d be surprised at the number of things or activities that you spend on, but can easily cut out of your expenditures. Of course, we don’t recommend doing this all at once. Start small and cancel subscriptions you don’t use anymore, or start eating out just once a week. Make small, manageable moves, and soon you’ll find yourself celebrating the joys of meeting your goals and saving more.

Track your expenses. After receiving a raise, the Balance cite that the best way to identify lifestyle inflation behaviors is to track your spending — even for just a short time. Once you recognize these behaviors, you can start cutting out purchases you don’t need.

Keep a “splurge” budget. Not buying or doing things you want will make you miserable, but overspending won’t be good for you in the long run, either. That’s why it’s a good idea to create a splurge budget for a week or month, and to stick to it. Purchases you don’t “need” come out of that budget, such as buying a new video game, ordering something online, or getting a coffee at a café even if you have a coffee maker at home. If you want something pricier than your budget for the week or the month, try to “save” that budget and let it roll over the next month so you can purchase the item. This way, a splurge budget lets you treat yourself, but also keeps you in check.

Article written by Anna Levy

Exclusively for paradigmmoney.com

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11 Ways to Save During the Holiday Season

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The holiday season is upon us, which means significantly more spending—and more potential to encounter financial trouble. Because of the emotional play many retailers use to get you to buy from their stores, it’s important to be overly vigilant with your spending during this time. Below are 11 ways you can save (instead of spend) during the holiday season.

1. Decide how much you can spend and make a plan.

Many people don’t like to use the word “budget” because it seems restrictive. However, creating a holiday budget or “making a plan,” as we’ll call it here for all intents and purposes, is imperative during the holiday season. By making a plan, you’re avoiding overspending and essentially telling your money what to do—rather than allowing it to be in control.

2. Open a holiday spending account.

Using your main checking account to do your holiday shopping is one of the biggest mistakes you can make during the holidays. Doing so allows you to tap into money allocated for other important things like bills and groceries. By opening a separate checking account for holiday spending, you’ll help yourself stay on budget. And once the money is gone, you have a clear stop on holiday shopping. Make sure it’s a free checking account, opening an account that charges fees would defeat the purpose of doing so.

3. Account for splurges.

Let’s be honest: you’re going to splurge this month. A dress for your office Christmas party? A sale at your favorite retail store? The jeans you’ve been eyeing for months are suddenly 40 percent off? We could go on and on, but you get the drift. Set aside a dollar amount that you’re willing to spend on yourself this month. Knowing how much you can afford will keep you from being swept up by “can’t-miss” deals.

4. Cut back on expenses.

Cutting back on expenses during the holiday season—or even before—will give you more money to allocate towards the holidays. Small changes like cutting your cable (you’ll be visiting family and friends most of the month anyway!) or avoiding takeout meals will save extra cash and make a big difference in your budget.

5. Track your spending.

Using a spending log is essential this time of year. Gifts aren’t the only thing affecting your budget—more social occasions means more spending. From extra Ubers to hostess gifts, your expenses can add up quick. This usually forces people to make decisions that they may not want to make, like tapping into credit or using money that is not allocated for holiday shopping. Using a spending log will keep your spending in check.

6. Narrow down your list.

It’s easy to get caught up in the fun of the season and want to gift something to everyone you’re close to. Let us remind you (as corny as it sounds) that presents are not what the holiday season is about. Take a look at your holiday list and be honest about what you can afford. It’s not fun, but your loved ones don’t want you hindering your financial future for them.

7. Set gift-giving expectations.

Setting gift-giving expectations is really important: If your love ones assume you’re going to spend a lot of money on them, they may feel obligated to do the same in return. Having a conversation early on about gift limits will allow both parties to avoid overspending, not to mention it will sidestep any ensuing embarrassment or guilt that comes with one party not giving an equally as lavish gift.

8. Take advantage of store offers and coupons.

Taking advantage of store offers and coupons should be a given, but you’d be surprised at how many people pay full price for things during the holiday season. Many people feel like they are competing against other shoppers to get the best gifts, so they don’t spend the necessary time finding the best deals. Don’t believe the hype! Make a shopping plan for each individual on your list. Research where you can find the best deals on the product and then sign up for company email lists. Follow sales and make purchases at the right time. Ordering presents in advance (or price shopping with ample time) not only assures that you get the best deals, but also that you don’t spend excess cash on things like rush shipping.

9. Be creative.

Being creative is about understanding that you don’t have to spend an arm and a leg in order to show your love ones you care. There are many people who are more appreciative of the thought that goes into a handcrafted gift than a purchased item from a big box store. Being thoughtful can have a lasting and more memorable effect than breaking the bank. Spending quality time with an elderly relative, helping a friend clean her home the day after a big party, or offering to babysit for a couple are just a few ideas.

10. Reduce decoration costs.

You may feel inclined to go all out when it comes to decorations, but if you’re crafty enough, you can save a lot of money by creating your own. If you really love holiday decor, wait until the season is over and purchase for next year. Prices for decorations are inflated during the holidays, so buying them during the off-season can save you a lot of money.

11. Remember the reason for the season.

We cannot repeat this enough: remember the reason for the season. The holiday season is not all about gift giving. Sometimes your presence is better than your present! The holiday season is about family and friends, and should be cherished in that way.

Do you have a holiday season savings hack that you swear by? ‘Tis the season to share!

11 Ways to Save During the Holiday Season was originally published on TheEverygirl.com.

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5 Tips for Holiday Break

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Photo credit iStock by Getty Images

Like most students, you’re probably looking forward to spending time with family and friends over the holiday break. But before you relax, take a little time first to size up your finances for next semester. Here are a few tips to get you started: 

Review Your Spending from Last Semester

Not sure where all your money went? Now is a good time to examine your spending from last semester by reviewing your bank account statements, check register, credit card statements and receipts (if you saved them). One way to do this is to make two lists: one with all your unavoidable expenses, such as tuition, rent, basic food costs and insurance payments, and another with everything else—in other words, purchases you wanted at the time but did not necessarily need. Now take a look at that second list. Bet you’re surprised at how many things you spent money on that you could have done without, or don’t remember why you purchased in the first place! Make a pledge to cut back on some of those items and watch your savings grow.

Save Your Cash Gifts

Did you get some cash in your stocking? You might be tempted to blow it on those irresistible post-holiday sales, but take a moment to think about your needs for next semester. Will you have enough money for books, school supplies, gas and other school-related needs? At the very least, plan to save 10-20 percent of your extra cash for unexpected expenses like car repairs or medical emergencies. Knowing that you have a little nest egg set aside will give you some peace of mind and allow you to focus on your studies.

Budget Your Anticipated Financial Aid Refunds

If you will be receiving a refund from your financial aid award next term, keep in mind that a good portion, if not all, of these funds may be from student loans that you signed up for. These funds will have to be repaid when you graduate or leave school, so it is important to budget and spend them wisely, and make sure you have enough money to last the entire semester.

Re-apply for Financial Aid

Remember, you must re-apply for financial aid every year. You can submit the federal FAFSA form beginning January 1, 2015 for the 2015-16 academic year. Your state and school may also require you to re-apply or update your information, so be sure to visit with your school’s website or contact the financial aid office for information on deadlines and other requirements. Also, check out Mary’s article in the Huffington Post for more information and tips on applying.

Look for Part-time Job Opportunities

If you think you’ll be running low on money next semester, start looking for some part-time job opportunities or increasing your hours at your current job. The best place to start your job search is right on campus. There are lots of jobs available, from library clerk to food service worker—check with the employment office or website. You might also want to consider capitalizing on your own talents to make some extra cash by offering services such as tutoring, babysitting, dog walking, or repairing cars or electronics.

Following these tips will allow you to enjoy your much-needed break and put you on a path to financial peace of mind for next semester—so start today!

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