Saving Money On The American Dream

Monday, August 28, 2017

You probably have been dreaming about your future and what it might look like for years. Maybe even from childhood.

Everyone’s dream looks different, and as the times change, our realities also become different.

What at one time may have seemed like a great idea, is now unnecessary or even uninteresting.

Maybe four kids and a Penthouse in New York City, has been removed for a quaint two bedroom duplex in Los Angeles and adoption. Who knows what life has in store for us right?

Planning is something everyone has to do to a certain extent.

We don’t come into this world with all of the answers, we figure them out as we go along.

We do usually need two things in life:

1) A car to get us from home to work and back and

2) A place to call home.

Living the American dream may mean a marriage and an apartment in San Diego. Maybe it means a promotion at work and a brand new Audi.

Whatever your dream, there are surefire ways to save money while achieving it. If you are married, you could receive discounts on insurance and taxes.  Having two incomes in this modern America is ideal and honestly, almost necessary.

Young adults today are graduating college with more debt and less opportunities than their parents. But, this is only teaching us to be smarter with our money.

We have every answer we might need at our fingertips. So why not start digging and get ahead of the game?

You may not have thought that with the purchase of a car or home also comes the insurance and taxes that go with it.

Nothing is for free, but when it comes to improving your financial situation, there are many little things to think of.

Let’s breakdown some of those ideas and look for ways to improve on our lives.

 

Buying Your First Car

 

Let’s face it, you need a car. Unless you live in New York City and take public transportation, you need a car.

You may want the new Lexus or maybe a classic pick up. For most of us, we need something reliable with good gas mileage.

You may need a car for work, which could consist of long commutes.

Or maybe you own a farm or a store and a half-ton pickup would be a great tax write-off.

You could be looking for that perfect family car like a minivan.

Either way, you can save money by simply choosing the best kind of car insurance.

Finding cheap insurance isn’t hard to do. You need a little research and great broker.

Every state has their own amount of minimum car insurance you will need, but for not much more, you could be fully insured. This means not only covering liability insurance and property damage, but collision, comprehensive coverage and towing.

There are a few ways to save on your insurance:

  1. Bundle your car insurance with another insurance such as homeowners or renters insurance.
  2. Take a safety driving course- safety courses show that you area trying to be a responsible driver.
  3. Have a good driving record.
  4. Raise your deductible to lower your premium.
  5. Purchase a car with a smaller engine- cars with smaller engines are less risky and therefore cheaper to insure.
  6. Live in a less crowded area- people who live int he city will pay more for their car insurance because the insurance companies think that the more people, the more likely you are to get into an accident.

Before you purchase your first car, remember to get organized.

 

Here area a few things you will want to know before heading to the dealership:

 

  1. What is your credit score? You can ask your bank to send you a printed sheet with your credit score so you can bring this to the dealer. Usually anything over a 700 is considered excellent. If you are just starting out and don’t have much credit, you might want to consider a co-signer.
  2. How much do you qualify for? You can estimate online what you might qualify for using an online calculator. You can also apply for a car loan through your bank and get a good idea of not just the amount you qualify for, but the interest payment as well.
  3. How much can you afford? Just because you qualify for a certain amount, doesn’t mean you will want to pay that bill monthly. Assess your budget and include the amount for insurance as well.
  4. Leasing can be a good option as well. You must stay under a certain amount of miles every year. You should also read the fine print on your contract. However, if you are a businessmen who wants a certain appearance, or maybe you really just need that new hybrid to save on your commute, leases can have value. To lease a vehicle, you must carry full auto insurance.
  5. Remember that with any loan or lease you will most likely need full car insurance coverage. If you can pay cash for a car, you can get away with far less insurance.
  6. Have your drivers license and credit score available. Try and figure out how much debt you may have because your income to debt ratio may matter when it comes to purchasing a car.
  7. Down payments will always help. Your down payment could help you reduce your monthly payment. Usually the more down payment you have, the more car you can qualify for. Most people like to put at least 10% down on their vehicle.

 

 

Purchasing Your First Home

 

The biggest financial decision of your life will most likely be the purchase of a home. Almost 60% of the residents of the United States own a home, because after-all, that is the American dream. We dream of living in the community where our children can run out in the street and play. We think of the upgrades we may one day make to our home, and what colors it might be.

Will there be a two car garage? Maybe a loft? Maybe you want that large corner lot.

When looking to purchase your first home, there are some key decisions which must be made.

One of those is the type of homeowners insurance you will attain. Finding cheap homeowners insurance is easier than you might think. Especially if you bundle with your auto insurance.  You can also save by installing security systems, smoke detectors, and even a sprinkler system. Paying your homeowners insurance premium could be lowered by raising your deductible.

You may not think of insurance when you think of your dream home, but if you want to protect it, insurance is a necessary commodity.

 

Types Of Home Loans

 

Conventional Loan

  • A conventional loan is not guaranteed or insured by the federal government, the FHA or the VA.
  • This includes: conforming loans, jumbo loans, portfolio loans, sub-prime loans, and non-conforming loans.
  • These loans are ideal for people with good credit.
  • They follow conservative guidelines for debt-to-income rations, credit and down payments.
  • They take less time to process than FHA loans.
  • You will need excellent credit to qualify for the best interest rate with theses loans.

FHA Loan

  • This loan is thought to be for the first time homebuyer, but really anyone can apply for it.
  • The down payment is only 3.5%.
  • Usually people with lower credit scored have an easier time qualifying for his type of loan than others.
  • The interest rates usually are a little more than a conventional loan.
  • FHA loans require mortgage insurance to protect the bank.
  • Usually you can only get one of these at a time, so not for second homes or investment homes.

 

VA Loan

  • A VA Loan is for Veterans or active duty military.
  • You can get a home loan with zero percent.
  • The VA does not lend the money but insures it through private lenders.
  • They do charge an upfront “lending fee” which is anywhere from 1.5% to 3% of the cost of the home.
  • This loan can be used multiple times by military members and usually does not have a cap.

 

USDA Rural Housing Loan

  • This is for rural housing only and every state and area has a different definition of what this is.
  • You can also get zero down on this loan.
  • This is more for low to low-moderate incomes.
  • The house must be in a designated area.
  • This loan can be sued to purchase, upgrade and fix a home.

 

Adjustable Rate Mortgage

  • This loan has rates that start out lower than a typical loan and increase over time.
  • Beware of these loans and make sure to read the fine print.

 

Terms You Will Want To Know Before Purchasing a Home

 

  • Debt-to-Income Ratio- This is the amount of money that comes in, or your gross income and then all of your debts. A broker will help you figure out what this means, but basically the banks want to know how much monthly you are paying on debts such as credits cards, car payments, personal loans, before offering you a loan. The lower the debt-to-income ratio the better.
  • Mortgage Insurance- This is an insurance policy which compensates lenders or investors for losses. Usually if you have an FHA loan, you must have mortgage insurance. Many times if you put a down on a house that it less than 20%, you also need this insurance. You pay this insurance monthly and it can be rolled into your mortgage.
  • Closing fees are paid by the buyer of the home and typically range from 2%-5% of the homes value.
  • Broker and real estate fees are typically 6%. This means that the seller of a home must pay their agent 6% of the amount of the home that is sold. This is then split between the selling agent and the buying agent.
  • Homeowners insurance– this is an insurance policy which can protect you from fire, flood, home damages, theft and liability. You can have additional coverage added to your homeowners insurance. For example, if you have a pool, you might consider having a higher liability insurance to cover expenses in case of an accident in the pool or injuries to guests.
  • Credit Score- your credit score greatly affects all of the things you do in life and all of the huge purchases. A credit score of 700 or higher is considered excellent. You may only qualify for a certain type of loan if your credit score is poor. Try working on your credit as soon as you can.

 

Are You There Yet?

 

The fact of the matter is, living the American dream costs money. This doesn’t mean that you should let those dreams you have slip. As you can see, there are many ways to go about purchasing a car or a home.

It may seem scary at first. You are a first time homebuyer and you are all on your own. What do you do?

You just graduated high school and you need a car to get to your knew job, but you don’t have credit established. What do you do?

The  best way to start out is by establishing credit. This means getting a credit card and purchasing items on it. You should be paying off those items at the end of every month. You can also get our student loans for school.

For your first car, you may consider going straight to a bank or credit union for your loan. They may have a lower interest rate than a dealership. Plus, if you walk into a dealership with a loan already in place, you won’t have to go through the hassle and paperwork when you are there.

You first home purchase may be a little further off than you might have hoped. Or, maybe it’s right around the corner. Either way, it is never too early to get yourself educated and start saving. Typically the lowest down payment you will have to make is 3.5% with an FHA loan. But that doesn’t cover moving fees, mortgage insurance and homeowners insurance.

 

Ask For Help

 

Having a mentor through this process is super helpful. A parent, relative, or friend who has purchased a home before can be a good asset. Even if you don’t agree with the way that they live their lives or the decisions they make, they might have good insight. Never turn down a suggestion from someone trying to help you. It doesn’t mean you have to take the advice.

Take a minute, think about your dreams.

What do you want?

Because anything you desire can become a reality.

With a little research and a plan, your American dream is closer than you might think.

Making a list of the things you desire and keeping that list visible daily could help inspire you.

It’s your own American dream, so live it how you see fit.

Anything from your wedding day, to your  first car to your fifth rental property, having insurance for your big purchases is always a good idea.

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