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KEY POINTS
While it is a good idea to make a 20% down payment on a home if you can, it isn't always required.
If you're willing and able to pay mortgage insurance, you can consider FHA and conventional 97 loans.
USDA and VA loans have more eligibility requirements, but don't require any down payment at all.
There are a lot of myths and misconceptions about home buying out there. As Vivian Tu of Your Rich BFF noted in a recent video, pop culture doesn't always tell the truth about the mortgage process, and not everyone buys a "single-family home, with a white picket fence, in a development" by making a 20% down payment and using a conventional mortgage. Tu discussed four different types of mortgages that have a lower upfront cost for the borrower, and can therefore make it easier for the average American to buy a home. To be clear, if you can make a 20% down payment for a home purchase, you will be able to avoid paying for extra mortgage insurance that can add hundreds of dollars to your monthly mortgage payments. And unlike, say, homeowners insurance, this type of insurance (called MIP on an FHA loan or PMI on a conventional loan) only benefits your lender, as they are taking on a larger risk by lending you more than 80% of the cost of a home purchase. But since it can be difficult to save up a 20% down payment for a home if you live in a high-cost area or don't make a large salary (or both), read on to learn about four types of mortgages that might be available to you with less money down.
1. FHA
An FHA loan can be a great move for first-time home buyers, as it is a product specifically created by the federal government to help more people buy homes. FHA stands for the Federal Housing Administration, which is part of the Department of Housing and Urban Development (HUD). Traditional mortgage lenders, like banks, offer FHA mortgages, and then this government agency guarantees the loans by compensating your lender if you don't pay your loan back. This means FHA mortgages are available with a 3.5% down payment for people with lower FICO credit scores (as low as 580 for that 3.5%; if you have a credit score between 500 and 580, you'll need to make a 10% down payment). FHA mortgages come with the privilege of paying for mortgage insurance premium (MIP) for the life of the loan, but if you refinance to a conventional mortgage once you reach 20% equity, you can eliminate the extra costs.
2. Conventional 97
A conventional 97 is a conventional mortgage with a 3% down payment requirement, meaning that you'll be financing 97% of your home purchase. However, you'll need to pay private mortgage insurance (PMI) until you reach 20% equity. Unlike FHA mortgages, if you're hoping to score a conventional mortgage with only 3% down, the credit score requirements will be more stringent. The minimum FICO score for a conventional loan is generally 620, but to qualify for a better interest rate, you'll likely need a score in the 700s or better. So a conventional 97 could be the mortgage loan for you if you don't have a robust down payment but do have really good credit.
3. USDA
If you want to buy a home in a qualifying rural or suburban area of the country and are considered low income, you can look into a USDA loan. They are offered by mortgage lenders and guaranteed by the U.S. Department of Agriculture. USDA loans actually don't have any down payment requirement, but borrowers must have income below a certain percentage of the median income in their area. The home being purchased must also be the buyer's primary residence, and they must have a reasonable credit score, which will be determined by the lender, who will also consider debt-to-income ratio and other financial factors to approve or deny an application for a USDA loan.
4. VA
Finally, if you're looking to buy a home and you happen to be a veteran or active service member, you might qualify for a VA loan. Like USDA loans, VA mortgages have no down payment requirement (there will be a funding fee equivalent to a percentage of your home's purchase price, and it will be less if you can make some down payment, so just because it isn't required, doesn't mean it's not a good idea anyway). VA loans have some pretty neat features; surviving spouses can qualify for them, and you can use the mortgage program over and over again.
If you're worried that homeownership is out of reach for you because of how difficult it can be to save a down payment, don't despair. Research your options, which may include some or all of the above types of mortgage loans that come without stringent down payment requirements.
Ashley Maready is a former history museum professional who entered digital content writing and editing in 2021. She has a BA from Hood College and an MA from Shippensburg University.
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By: Dana George |
Updated
- First published on July 25, 2023
Costco has a faithful legion of fans -- otherwise known as members. There are 123 million of them, to be precise. Throughout the years, Costco has added new membership benefits, some less well-known than others. Here are four that members may not realize exist.1. RV parkingWhether you spend part of each year visiting the highways and byways of North America or you're hoping to rent an RV for your next vacation, it's good to know that some Costco locations allow RVs to park overnight in their lots. Free overnight parking can certainly cut down the cost of travel.Consider the convenience. You arrive near closing time, pick up all the items you've already burned through or forgotten to bring, and spend the night in a well-lit lot. Granted, pulling an RV into a (typically) packed Costco lot may not be the easiest thing you've ever done, but once the lot clears out, you may even hear the sound of crickets.Notice we said that some Costcos permit overnight parking for RVs. When a store does not, it's often because local ordinances don't allow it. However, with so many Costcos scattered across the country, you should have options.The easiest way to determine which Costcos allow overnight RV parking is to check this Costco locations finder. Once you see one near where you plan to stay, call that store and ask to speak with the manager. Once you have them on the line, ask about their overnight policy. If the store does permit overnight parking, ask for permission to stay. According to the Camper Report, Costco has rules for campers, so you may want to ask where you can get a copy of those.2. Home, auto, renters, and specialty insuranceIn the back of our minds, most of us realize that Costco offers insurance, but we're not sure of the details. Partnering with CONNECT, powered by American Family, Costco members receive discounted rates on many of their insurance needs. Beyond the initial discount, CONNECT allows you to add more. For example, you may qualify for a safe driving, multi-policy, or student discount.And if you're an Executive member, CONNECT sweetens the pot even more by providing you with benefits like roadside and lockout assistance.At a time when many people are unhappy with the insurance industry, 9 out of 10 members who sign up for CONNECT coverage go on to renew their policy with the insurer.3. Home and business suppliesWhile it may occur to you to pick up envelopes and printer paper at Costco, have you ever taken advantage of the low prices on items like checks, ink stamps, and address labels? Many of the supplies you need to take care of business -- at home or in the office -- are available for up to 50% off.Executive members enjoy an even deeper discount.4. Floral deliveryOnce you factor in delivery costs, sending a lovely bouquet of flowers to someone can cost a small fortune. That's not the case at Costco. Costco's online floral department offers everything from anniversary and graduation bouquets to bulk flowers. And here's where the real savings come in: Delivery is free. The price you see listed on the site, plus tax, is the price you pay.Few things are more frustrating than typing your credit card number into a florist's site, only to learn that delivery costs nearly doubled your purchase price.As Costco layers on new perks, keeping track of them may become even more difficult. It's a good idea to check periodically to see if there are any you're not taking full advantage of.
By: Emma Newbery |
Updated
- First published on Aug. 7, 2023
Are SNAP benefits enough?A monthly payment of $973 for a household of four equates to around $8 per person per day. While SNAP benefits aren't designed to cover everything, it isn't easy to feed a family on around $2.66 per person per meal. Indeed, research from the Urban Institute showed that the maximum benefits often don't cover a family's food costs. "Amid inflation, SNAP benefits did not cover the cost of a meal in 99 percent of counties in 2022," said the report.The new benefit amount -- a monthly increase of $34 for a household of four -- is roughly in line with cost-of-living increases measured by the Bureau of Labor Statistics (BLS). Its latest Consumer Price Index figures show that the cost of all items in June, 2023 was up 3% over the year before. However, inflation does not impact all aspects of life equally.The BLS data also shows that food at home increased by 5.7% year over year. The new SNAP benefits do not match this. Hypothetically, a 5.7% increase in benefits for a family of four would mean a new monthly payment of $992, rather than the planned $973.In addition, this year brought the end of the pandemic-era emergency food benefits throughout the country. According to CBPP calculations, this meant the average person received about $90 a month less in SNAP benefits. Even factoring in the increased SNAP benefit amount, many households have seen a significant drop in their food benefit amount, and the revised 2024 payments will do little to close this gap.How to make your SNAP benefits go furtherIt can take time and energy to provide healthy food for your family on a strict budget. The challenge is that in a busy household, time and energy are also limited resources. Even so, if you can carve out some time to plan your grocery-shopping trip, it can make a big difference.Here are some ways you might stretch your SNAP benefits a little:Use cash back apps and coupons: Look for cash back apps that work in stores that take your EBT card. You'll usually need to download an app and then scan your receipt after you've been to the store. Pay attention to coupons, whether in store or online as these can often carry hefty discounts.Always shop with a list: Planning your food shopping is one of the best ways to reduce costs. Even more so if you use a cash back app or coupons. Check what offers are available on items you normally buy before you go shopping. Mark the items that qualify for rewards or discounts on your list, so you don't miss them when you're shopping.Look for double up programs: There are Double Up Food Bucks or other programs in various states that essentially give you two for one on all produce at participating farmers markets and stores. It's a great way to get more fruit and vegetables for your SNAP dollars.Buy in bulk and batch cook: It isn't always easy to find the extra cash for bulk buying when you're eking out every cent. However, if you can manage it, you may be able to save both money and time. You might, for example, batch cook a stew and freeze portions for future meals.Unfortunately, food insecurity still impacts many American households. If you don't have enough money to feed your family this month, look for additional help. Find out what food pantries and soup kitchens are operating in your area on which days, and whether you'll need to present any documents. Call United Way at 211 for information about assistance programs in your area.
By: Christy Bieber |
Updated
- First published on Sept. 5, 2023
Incomes vary widely across the United States, with some people making many times the amount that others earn. If you've ever wondered how your personal finances stack up, and what "class" your income officially puts you in, here's what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here's what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time -- your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It's probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn't mean people who don't make a lot of money can't be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here's how you can improve your standingDon't be discouraged if you aren't in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you're underpaid, it doesn't hurt to make a request for more money -- especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve -- especially if you prioritize saving as much as you can for as long as you can.
By: Maurie Backman |
Updated
- First published on Sept. 13, 2023
At some point in 2022, I discovered Aldi and began shopping there weekly. I found that I was able to save money on my grocery bill by purchasing certain produce items there. And since I happen to have an Aldi adjacent to my local Costco, it wasn't particularly out of my way.But over the past few months, I've become less enamored with Aldi. Here's why.1. The selection is just too limitedAldi -- at least near me -- is a minimally stocked grocery store. The shelves aren't loaded the way they are at my nearby ShopRite and Stop & Shop.To be fair, this was the case when I first started shopping there. But because there's just not a lot of selection, I'm generally limited to only buying a few items when I pop into Aldi.Not so long ago, I was running into Aldi for some fruit, which I usually buy there, and I needed to grab shredded cheddar cheese. Normally, I get that at Costco, but I didn't want to run next door to Costco and wait in a line for cheese alone. Unfortunately, though, Aldi didn't have the cheese I needed, so I had to make an extra stop anyway.2. The inventory is too inconsistentNot only is there a limited selection of food items I can buy at Aldi, but sometimes, I can't even find the five or six things I'm looking for. Aldi was once my go-to source for avocados, since it's an expensive purchase and Aldi tends to sell them for less than Costco (at least in my area). But the last few times I stopped at Aldi, avocados weren't in stock.And that's happened to me with other things, too. Over the past several months, I've struggled to find everything from cucumbers to strawberries at Aldi as well.3. What the store saves me on groceries, I lose via lost working hoursShopping at Aldi still has the potential to save me a little money on groceries. At a time when supermarket prices are up 3.6% on an annual basis, that helps.The problem, however, is that even though Aldi is right near Costco in my neighborhood, thereby allowing me to combine those trips, it still takes time to visit an extra supermarket. I have to find parking, wait in a checkout line, and spend time searching the shelves.While it's nice to save $2 here and $3 there, the reality is that a stop at Aldi might cost me 20 or more minutes of work -- especially when I don't manage to find the things I need. And losing out on that work time often means forgoing more than $2 or $3 of income. So from a time perspective, it's just not worth it.Shopping at Aldi could make sense for a lot of people. If you're someone with flexibility in your schedule and grocery list, and you're not so picky about the brands you bring home, then it could pay to spend the time visiting Aldi, even if you don't always manage to find all the things you need. But I've reached the point where shopping at Aldi makes less and less sense for me, so I'll most likely stop going there unless it's a one-off basis.
By: Brittney Myers |
Updated
- First published on Sept. 17, 2023
The Season of Pumpkin Spice is upon us, and, as in years past, there seems to be more pumpkin-inspired treats to try than ever before. While your finances certainly wouldn't appreciate you buying them all, there may be a few pumpkiny creations worth a try.For instance, Sam's Club has already started offering some of its pumpkin-spiced selections for the season, including a few new items that are already a hit with shoppers. Take a look.1. Member's Mark Pumpkin EmpanadasIf you're only going to try one pumpkin-inspired Sam's Club item this season, maybe it should be this one. These gourd-eous snacks aren't very healthy (don't look at the nutrition label if you can't handle the truth!), but reviewers seem to think they're downright delicious. They recommend convection baking (air frying) for the best crust.Price: $12.68 (20 pieces, $0.63/ea)2. Starbucks Pumpkin Spice coffeeArguably the most frenzy-inducing of the seasonal pumpkin spice items, this coffee blend will cost you nearly as much per cup at Starbucks as you'll spend on the bag at Sam's Club. Quality-wise, this isn't going to be quite as good as something freshly ground at the cafe, but it has overall positive reviews and is infinitely better for your savings account.Price: $19.98 (35 ounces, $0.57/oz)3. Pumpkin & Spice Glade Plug-insScent is pretty powerful -- both in good ways and bad -- and the right scents can get you ready for the season. Plug-ins are a popular way to add some subtle fragrance to your home, and this Pumpkin & Spice scent from Glade has good reviews for its pleasing aroma.Price: $12.98 (2 warmers and 6 refills)4. Member's Mark Pumpkin Spice PecansPairing pumpkin spice and pecans is nearly a seasonal overload. The pecans in this creation are buried under a coating of pumpkin-spice-flavored white chocolate, making it more a sweet snack than a salty one. Either way, Sam's Club shoppers are enjoying this seasonal treat (though a few do point out the high calorie count).Price: $9.98 (17 ounces, $0.59/oz)5. Pumpkin-flavored pumpkinsAlright, so they're not actually called "pumpkin-flavored pumpkins." They're just, you know, regular pumpkins. Like, the vegetable. In all this pumpkin spice frenzy, I think the regular, OG pumpkin often gets forgotten. But no matter what other pumpkin-based oddities hit the shelves this season, remember that the gold-fleshed standard is there alongside them.Price: $6.98 eachPace yourself on the pumpkinChances are good you're tempted by at least one or two of these goodies. And, of course, Sam's Club isn't the only place packed with pumpkin products this time of year.But you need to remember that you can't have them all.Trying even just this small number of items would cost you more than $60 -- and that's before you start in on the seasonal favorites popping up elsewhere. In no time at all, your pumpkin-padded credit card bill will be as full as your fridge.The key to anything in life is moderation. Pick a few particularly pumpkiny delicacies to try -- and leave the rest for next season.
