MONEY buying a home

Single and Thinking of Buying a Home? Here’s Some Advice

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Fewer singles are buying, thanks to crimped finances and tougher lending standards. Before you take the plunge, consider whether you'll be able to handle the costs on your own.

The transition from renter to homeowner proved more complicated than expected for 26-year-old Kimberly Watson. As a single buyer with imperfect credit and without a long job history, she faced several hurdles throughout the lending process before eventually finding and closing on a condo in Hollywood, Fla.

Buying a home is hardly simple for anyone, but navigating the process can be particularly challenging for single buyers, who have only their own income to rely on to pay the bills. Tightened lending standards help explain why the percentage of single buyers declined slightly between 2010 and 2013: 16% of homebuyers were single females and 9% were single males in 2013, according to the National Association of Realtors, compared to 20% and 12% respectively in 2010. A weak job market and debt burdens also explain why singles have stayed away from the housing market, says NAR economist Ken Fears.

Banks are not allowed to discriminate based on marital status, but tighter lending standards can potentially pose a challenge to single buyers because they only have their own income to qualify for a loan.

Some of the tips below can make the process more manageable:

Ask, can you really afford to buy?
Scrutinize your finances carefully and evaluate whether buying a home is even feasible. You won’t have help from a partner to pay the bills, and you don’t want to be “house poor.” Review your credit record, clean up any mistakes, and pay down debt.

Money 101: Get Your Finances In Order Before Buying a Home

Be sure to consider all the recurring expenses associated with homeownership beyond the purchase price and mortgage closing costs. From association fees and property taxes to utilities and lawn care, the bills add up. Take into account maintenance and insurance when setting a budget.

“You’ve got a nice house, but now you’re eaten alive in expenses,” says Doug Lebda, CEO of LendingTree. “Factor in the total cost of homeownership.”

Think long term, says Emma Johnson, creator of WealthySingleMommy.com. You want to be able to afford and keep your home — so it’s wise to have a bigger savings account than you would if you were buying as a couple.

Watson found that to be true after moving in to her condo. She discovered a bad case of mold in her bathroom, and had to spend $10,000 on a gut remodel.

“I thought I would move in, and everything would be as is, and it would be fine,” she says. “Definitely have some extra money on hand.” Our advice: Total the estimated monthly household costs and set aside the difference between that amount and your current rent, or payment. If you’re struggling to make budget, you probably need to wait longer before buying.

Money 101: Should I Rent or Buy a Home?

Save on mortgage costs with special programs
Singles getting a mortgage with only one income should look at FHA loans, which offer lower interest rates and require lower credit scores to qualify. First-time buyers, which includes those who haven’t owned a home for three years, can make a down payment as low as 3.5% of the purchase price. FHA loans require more underwriting and more documentation, Lebda says, so lenders may not offer the program at first; be sure to ask.

If you do go the FHA route, the Homeowners Armed with Knowledge (HAWK) program will cut you a break on mortgage insurance costs if you go through housing counseling.

Not a first-time buyer? You may still be able to save even with conventional loans. TD Bank’s Right Step program, for example, offers a 3% down-payment option without private mortgage insurance (PMI), which is usually required for loans with less than 20% down, says Malcolm Hollensteiner, the bank’s director of retail lending products & services. The program also requires a housing education class.

On any loan, compare costs carefully, and not just rates. A lower rate may mean a higher lender’s fee, said Dean Vlamis, vice president of mortgage lending at Guaranteed Rate.

Money 101: How Much Will Closing Costs Be?

Don’t house hunt alone
Buying a home is an exciting milestone. It’s also a major investment, so don’t let emotions cloud your decisions.

Keep one or two trustworthy people involved in the process as a sounding board. “It’s important to have some sort of voice of reason,” says Jessica Edwards, a Coldwell Banker agent based in North Carolina.

Plan for the future
As you search for homes, consider what happens if you find a partner, or have to relocate for a job. Edwards says she’s seen many singles have to move sooner than they expected because their life circumstances changed. Think about that possibility as you’re searching: “There are a lot more single buyers that are looking at it as a primary residence that they can later turn into an investment,” she said.

Homeownership is a big investment and a lifestyle change — so it’s crucial to make sure you’re financially prepared and have done your homework. It’s better to wait than to find yourself over-stretched after committing to the major purchase. “We’re so inundated with the message that we need to own a house,” says Johnson. “It’s a wonderful thing, but it’s not right for everyone at every point in their life.”

MONEY Careers

How to Tell Chatty Coworkers to Shut the @#$%& Up—in a Nice Way

Chatty coworkers on The Office
In every office, there are some people you want to avoid at all costs. NBC—Courtesy Everett Collection

Open offices naturally lead to more socializing. But you don't have to participate in every conversation. Here's how to duck out without looking like a grouch.

Q: I work in an open floor plan office and lots of socializing goes on. I find it distracting and have a hard time getting my work done. How can I break away from the office chitchat without looking like I’m no fun?

A: Open floor plan offices naturally lend themselves to more socializing. But you’re hardly alone in finding the chatter distracting. A study published last year found that open office layouts had a negative effect on productivity, contributing to “mental workload, poor performance, stress, and fatigue.” Another paper, from 2011, found that sound was one of the main factors affecting workplace productivity, with conversation being among the most annoying of them.

The problem of too-chatty coworkers isn’t limited to those in cubicle-ville. No matter what your work environment, you’ve likely at some point or another been cornered by a colleague—or worse, boss—who jabbers on endlessly about their weekend while you’re anxiously running through your gargantuan to-do list in your head.

The key thing to keep in mind: “Most offenses happen because the other person doesn’t realize it,” says etiquette expert Diane Gottsman, who founded of The Protocol School of Texas.

“Open cubicles require open communication,” she adds. In other words, speak up.

When you need to get something done on deadline, let people know right away when you walk in for the day. Just make it clear you’re stepping away for the benefit of the company or a particular task—not because you’re trying to avoid your coworkers, says Jacqueline Whitmore, founder of The Protocol School of Palm Beach and etiquetteexpert.com. You might say something like, “I just need a little privacy and some time to concentrate so that I can finish this project on time.”

Peppering it with a bit of humor—”I know you miss me, but I’ve got to get this report done by noon or Julian will have my head” —should help you avoid looking like a grump. You might also make use of the “do no disturb” settings on your instant messenger program, phone and email to underscore your point.

For when the din of other people’s chatter becomes overwhelming, have a set of noise-cancelling headphones on hand. The bigger the better, since your “friendly” co-workers may not notice if you’re wearing earbuds. Listen to music or simply white noise, whatever will block out the conversation and help you get your work done. Get a phone headset, too, so you can always look like you’re on the phone even when you’re not.

Have a neighbor whose loud personal phone calls keep disrupting your work? The next time it happens, politely ask your cubemate to quiet down or take the calls elsewhere. It’s more effective to tackle such issues as they arise—with a simple “Can you please keep it down? I’m trying to focus on this work.”—rather than letting them keep building.

When all else fails, duck into your office’s private meeting rooms for a while to guarantee complete silence. Just make sure to communicate with your team and not simply disappear, which sends the wrong message, Gottsman says.

All this said, try not to seem too anti-social. Socializing facilitates camaraderie—and participating shows you’re part of the team. “When there’s a birthday party and everyone runs over, make sure you’re involved,” says Gottsman. “You don’t want to stay seated, hunkering down, and hiding.”

MONEY Ask the Expert

What’s the Right Way to Expand My Portfolio In My 20s?

A financial pro gives a young investor some advice on the smartest ways to gain exposure to the market.

Q: I am in my early 20s and am looking to expand my investment portfolio. I currently have a small 401(k) and an S&P 500 index fund. Should I keep building up my index fund or start diversifying into something with a higher return potential? — Caroline, California

A: Participating in a 401(k) and investing in an S&P 500 index fund are a good start in your early 20s, notes Jim Ludwick, president of MainStreet Financial Planning.

Index funds — which simply buy and hold all the stocks in a market index such as the S&P 500 — aren’t as flashy as actively managed portfolios, where stock pickers can choose only those shares that they think are promising. However, index funds are a simple and inexpensive way to gain exposure to the market.

And there are years, depending on the market, where they can produce some sizeable gains. For instance, in 2013, the Vanguard 500 index fund, which tracks the S&P 500 index, returned more than 32%. That’s around three times the long-term average annual gain for stocks.

However, index funds are only as diverse as the market they track. So a good way to expand at this point would be to invest in other index funds that go beyond the S&P 500 index of U.S. blue chip stocks. An index fund that tracks the Russell 2000 index, for example, would give you exposure to shares of faster-growing small U.S. companies which your existing portfolio lacks.

You can add a Russell 2000 index fund to your mix to complement the S&P 500 fund, which gives you exposure just to large domestic companies.

Or for simplicity, you could trade in your S&P 500 fund for a so-called total market index fund, which in a single portfolio gives exposure to both large and small U.S. firms. “Expanding into a whole market index,” Ludwick notes, “is a very effective way to do it.”

Ludwick further highlighted the importance of investing in overseas markets for those seeking to expand and diversify. He noted that the Vanguard FTSE All-World ex.-U.S. ETF (ticker: VEU), which tracks stock markets outside the U.S., would be a good, low-cost complement to your U.S. holdings.

When investing in index funds, it’s important to comparison shop among vendors — Vanguard, Fidelity, Charles Schwab, iShares, SPDR all offer index products — for fees. Keep in mind that the expenses you pay are deducted from the market returns the fund generates, so the less a fund charges in fees, the more of its returns you get to keep.

Beyond index funds, you could branch out into actively managed portfolios. Studies have shown that over the long run, the majority of actively managed funds trail the basic indexes. Ludwick says active management is effective only in niche markets. That’s where the “insight really pays off,” he says.

However, as with all funds, the lower you can keep the fees, the better off you’re likely to be in the long run.

MONEY buying a home

Half of Millennials Will Ask Mom and Dad to Help Them Buy a Home

For millennials struggling to buy homes, it's mom and dad to the rescue, a new survey says.

When debt and lack of savings stand in the way of homeownership, what’s an eager millennial to do? Ask mom and dad to pitch in, according to a new Trulia survey.

Half of young adult homebuyers, unable to make the investment on their own, said they plan to ask family members for help with a down payment. Meanwhile, 65% said they would not give up their car in order to save to put money down — and 45% said they need their smartphone. For 15%, parting with their Netflix subscription was also not an option.

Almost half of respondents said they didn’t know how much money they’d need to put down in the first place. Of those who did know, nearly two in five said they would put down less than 10%. A 20% down payment is considered best, because it qualifies buyers for the best interest rates and generally eliminates the need for mortgage insurance.

The combination of asking family for money and putting so little down could be “a little bit of a recipe for disaster,” said Michael Corbett, Trulia’s real estate expert.

“I would rather someone not purchase a home, than purchase a home they can’t afford or have to stretch to afford,” he added. Because it creates a “nasty catch-22”: a smaller down payment means a larger mortgage, which means lenders will impose a higher income requirement.

Money 101: What Should I Do Before I Buy a Home?

They may be stretching to afford it, yet millennials comprised the largest group of recent buyers, 31% of purchases, according to the National Association of Realtors’ Generational Trends Study.

This was no surprise to NAR chief economist Lawrence Yun, who noted that younger buyers have the same “American dream” aspiration to own property as the older generation. Which poses a conflict: they “have the desire but not the capacity.”

Indeed, for many, existing debt doesn’t allow them to save enough for a down payment. Student debt delayed homeownership for 54% of first-time buyers, according to a NAR study. Of those facing difficulty, 56% of “Gen Y” attributed the delay to student loans.

The numbers show that young buyers need to wait until they’re ready, Yun and Corbett agreed. Given that homeownership is a major expenditure, buyers should have a good sense of whether they’ll need to relocate in the near future, and how secure their job is.

Money 101: Should I Rent or Buy a Home?

In the event of unemployment, Corbett said, a millennial buyer is unlikely to have enough saved up.

“You don’t want to be strapped,” he added. “When the music stops, you don’t want to be caught.”

MONEY College

Grandma’s Willing to Pay $50,000 of College Tuition—if Only You’d Ask

New survey finds that more than half of grandparents want to help with 529 savings, according to Fidelity. Here's hoping your folks are in that generous majority!

With college admissions season behind us, many high school seniors are eagerly anticipating heading to college in the fall—while parents, on the other hand, are likely be anxious about how they’ll pay for it. Fortunately, many of them appear to be getting help from their own parents: According to a new study by Fidelity Investments, many grandparents are contributing to 529 college savings plans to help finance the high cost of education.

The study found that 53% of grandparents are either already saving or plan to save to assist in paying for their grandchildren’s college costs. Among those who have been socking away money, the median contribution is $25,000, though 35% said they expect to contribute at least $50,000. That’s enough to cover more than two years tuition, room and board at an in-state public college, and more than a year at a private college.

The 529 accounts specifically are an attractive option for grandparents because of the flexibility they offer, said Keith Bernhardt, vice president of college planning at Fidelity. Earnings are not taxed as long as the money is used toward education expenses. Additionally, grandparents are free to change the beneficiary of the account or take the contributions back at any point should they find themselves needing the money for their own retirement. (They will, however, owe income taxes and a 10% penalty on any earnings withdrawn.)

While 529s offer many benefits, families should understand the difference between how parent and grandparent accounts are treated in financial aid assessments. Any distribution from a grandparent-owned 529 counts as untaxed income on the following year’s Free Application for Federal Student Aid (FAFSA). Parent accounts, on the other hand, are counted as assets on the FAFSA— not as income—and factor into determining the Estimated Family Contribution.

“Income is assessed much more heavily,” said Joe Hurley, head of Savingforcollege.com.

Because grandparent accounts have a larger impact on financial aid, he added, owners of these accounts might want to wait to use the account until the final year of college, or they could shift the ownership to the parent.

While the amount and frequency of 529 contributions depends on individual financial circumstances, Mary Morris, chair of the College Savings Foundation and CEO of Virginia529, said she’s seen an overall increase in grandparents getting involved education expenses. Anecdotally, she estimated that 20% of Virginia accounts are owned by grandparents. Many contributions are made as gifts on special occasions, a pattern Morris expects to see more often going forward

Despite the trend, however, “there’s a real disconnect” between generations when it comes to communication about finances, Hurley said. According to the Fidelity survey, 90% of grandparents said they would likely make a contribution to a college savings plan—if asked.

“Parents feel it’s their responsibility to help their children if necessary,” Hurley said. So they’re “reluctant” to ask for help.

But the price tag of higher education has made that conversation one worth having.

“Parents cannot save enough, on average, to pay the full cost of college,” Bernhardt said. “Grandparents recognize that and want to chip in.”

MONEY home improvement

Tackle These Projects Before Selling Your Home (And After Buying)

Home improvement projects that pay off for buyers and sellers, according to Porch.com.

That outdated powder room you never bothered to fix up? Well, that’s not going to fly with potential buyers. So it makes sense that general contractors were the most popular project home sellers took on before listing their home, according to a new report from home improvement firm Porch.

What if you just moved in? You were far more likely to hire a painter.

Whether they’re buying or selling, many homeowners turn to home improvement projects to boost property value or enhance curb appeal. Porch’s analysis of more than half a million projects by region show that many popular projects go hand-in-hand with practical considerations such as repairs and home inspections.

For sellers: The most popular home improvement hires are general contractors and handymen, followed by electricians, plumbers, and roofing professionals. The reason is simple: to avoid any issues during home inspections.

Top Projects Sellers“Have a professional remodeler walk around the house with you inside and out,” Paul Sullivan, chair of National Association of Home Builders (NAHB) Remodelers, recommended. It will “make the process much smoother.”

The work appears to pay off. Contractors provide, on average, 68% return on investment, according to Porch.

One surprise, Porch said: Not many sellers said they were hiring painters. A fresh coat of paint returns close to 100% of the money spent in boosted value, its report said. Sullivan cited one home in a Boston suburb which sold for $60,000 over the asking price within four days, which was “absolutely” due to improved presentation.

Sellers often wonder if they should make the investment in improvements solely to sell, says Tom O’Grady, of the National Association of the Remodeling Industry. They might be comfortable accepting a lower selling price rather than risk not getting their money back in the form of a higher sale price.Top Projects Buyers

Painting is one of the first things buyers tackle after moving in. That brings an average return on investment of 152%, Porch says. Other top projects included installation of new appliances such as dishwashers and refrigerators, roof repair, and home inspections.

Larger endeavors like renovating kitchens and bathrooms are common, Sullivan added, but both he and O’Grady advised against making drastic, costly changes immediately after moving in.

Instead, O’Grady said, small enhancements like crown molding, new tiles, and better light fixtures can dramatically change a room, making it more comfortable for new owners until it’s financially feasible to do a complete renovation.

“Live in the house for a month or two and get a feel for the place,” Sullivan said. “When you’ve lived in a house for 10 years, you know its shortcomings. But when it’s a new house, you only think you know.”

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