Mortgage Shopping Essentials

Buying a home is a big commitment – that’s why you should cover every financial base before agreeing to a mortgage. Need some insight on what to look for when considering a house? Review this list of mortgage shopping essentials to prepare yourself (and your bank account!) for becoming a homeowner.

1. Mortgage Type

Mortgage payments come in many shapes and sizes depending on the lender. Knowing which type you’re interested in can help determine how much you’ll be paying.

Most mortgages are defined by being fixed or adjustable. The interest rates of a fixed mortgage will stay the same the entirety of the mortgage, whereas the adjustable mortgage’s interest rates will change as the market does. Both mortgages types can either be conventional conforming or noncomforming. Conventional conforming loans are defined by Rocket Mortgage as, “a loan that’s not insured by the federal government.” These loans can be fixed or adjustable and are the most common mortgage you will run into.

Nonconforming loans are government backed loans, and are ideal for borrowers with lower income, savings and credit scores. This includes mortgage types like FHA’s and VA’s. FHA’s are backed by the Federal Housing Administration and VA’s by the Department of Veterans Affairs that operate under certain qualifications for borrowers. These mortgage types tend to have lower down payments and interest rates, and are more accessible to those with credit issues.

Young couple closes on house by signing official document with financial counselor.

2. Payments

Making loan payments is a crucial step to home owning. You should agree to a payment period that is realistic for you to prevent late or insufficient payments. The average mortgage payment is due every month at the same rate during the allotted time it will take to pay the loan off (think between 15 and 30 years). Balloon payments, on the other hand, are a mortgage payment that starts with a smaller interest rate and ends with a large amount upfront to pay the rest in full. Because of this, the payment period is shorter than average.

How often do you think you’ll be able to make your mortgage payments? Monthly payments are most common, but some lenders also offer weekly, biweekly and semimonthly payment plans depending on the circumstances of the borrower.

Smiling woman calculates payment costs on table with documents spread out.

3. Know Your Interest

Credit and the current housing market typically determine a borrower’s interest rates. So what can you do to make yourself appealing to lenders and secure a house? Rocket Mortgage explains, “While you can’t control market rates, you can have some measure of control over how a lender views your application. The higher your credit score, the more assured a lender will feel that you can repay the loan with on-time payments.” A good credit score coupled with minimal debt history and a steady income is a great start to preparing yourself for securing a mortgage.

House sits on street during a sunny day with a For Sale sign on its front lawn.

4. Insurance

Mortgages also come with insurance. PMI, or private mortgage insurance, is paid when their down payment is less than 20%. PMI’s usually cost somewhere between 0.2%-2% of your total loan amount, and can be paid on a monthly basis like your mortgage payment, in a lump sum, or a combination of the two.

MPI’s, or mortgage insurance premium, are more common with nonconforming loans and are paid upfront. If borrowers put down at least 10% of your down payment, then you’ll only owe MPI payments for around 11 years. Anything less than 10% of your down payment, however, will mean paying MPI costs for the rest of loan’s payment period.

It’s also important to factor in the cost of your Escrow – that is, the funds collected each month to cover real estate taxes and homeowners insurance.

Financial counselor helps client with paperwork for owning a house.

5. Additional Costs

Other than the initial loan payments, some extra costs include application fees, closing costs, potential prepayment penalties, as well as aforementioned costs such as insurance, escrow and interest. Your budget should include these costs when looking for a home.

Young woman uses calculate to calculate budget with her savings in a piggy bank.

Owning a home can be a thrilling experience, especially to those who are new to it. While the process can be intimidating and lengthy, learning about each step can make things go smoothly. Through our partnership with First Heritage Financial we offer our members multiple rates to make their home owning dreams a reality. Do you have any questions related to loan payments/home ownership? Give our loan office a call or schedule an appointment and we’ll help you every step of the way!

Summertime Savings

Saving money is a goal that most people have year round, but as the seasons change the more likely we are to spend on things like travel, entertainment and recreation. Summertime is no reason to give up on your financial goals! These five financial tips for summer can aid in your pursuit to save money and reach your budgeting goals.

1. Set a Specific Goal

You’re more likely to reach your desired budget by being specific about how much you want to save. Saying to yourself, “I need to stop spending so much this month” is a great start, but doesn’t create a goal that seems attainable. Instead, sit down and decipher a reasonable amount of money you’d like to save up to within a certain period of time. “I would like to have $5,000 more in my savings by September” gives you an actual number and time frame for you to work towards.

2. Host Instead of Head Out

Summer is the perfect time to get together with friends and family, but frequent public gatherings can become pricey. Rather than going out during your next event, host at your home or local park to cut costs. This allows you to have more control over things like food and entertainment along with the added benefit of ending your day without a hefty bill.

3. Schedule Later Vacations

It’s no surprise that early summer is the busiest time of year for sought after travel destinations. This means the prices for things like hotel rooms or airfare can skyrocket during June and July. Scheduling your next big trip in August could lead to cheaper rates. According to Protective Life Corporation, “Data from Tripadvisor suggests you’ll spend 23% less if you travel after the early summer rush.”

4. Support Local Events

Going to local events is a great way to support your community while saving money on travel costs. Here in York, there are multiple events during the summer such as First Fridays held by Downtown Inc. and the York State Fair that are great for the whole family. Look up the city you live in to see if they have any summer events that catch your eye – you might be surprised at what you find!

5. Save on Road Trip Snacking

Road trips are a great way to see new places and spend time with loved ones. They also encourage passengers to overindulge on snacks during a stop at a gas station or rest stop. The next time you hit the road, buy (or make!) the food you want before the trip rather than overspend when you stop.

If you or a loved one need extra help regarding structured plans to improve spending habits, increase savings and better understand your finances, look no further than YEFCU’s Financial Counseling services. Our staff is immensely knowledgeable, readily available and those with their Credit Union Financial Counselor certification can help aid those in need of assistance.

How to avoid financial stress

Personal finances can take up a lot of our mental space. While keeping up with your bank accounts encourages financial responsibility, it shouldn’t become stressful or obsessive. Help Guide says, “An American Psychological Association (APA) study found that 72% of Americans feel stressed about money at least some of the time.” When we focus too heavily on our finances it can become detrimental to our mental and physical health. Learn more about the multiple ways you can engage with your funds without succumbing to financial stress.

1. Stay Organized

Consider taking inventory of all of your monthly expenses as a way to anticipate how much money you’ll be spending. Money Mentors says, “Understand the finer details of your finances, like when you get paid, when your bills are due, your monthly budget and your savings. Find an organizational tool that works for you―whether that’s in an app, spreadsheet or journal.” This way you can account for non-negotiable expenses and when they’re due, like bills, rent, child support, etc. as well as any money put into savings and spent on leisure. Budgeting your expenses this way can reduce the chance of being blindsided by monthly costs and becoming stressed about what you can or can’t pay.

2. Have An Emergency Fund

Life can be unexpected. Because some costs can’t be anticipated, it’s easy to stress over the unknown. Avoid digging into your savings by creating an emergency fund to pull from instead. This can leave you more prepared for whatever life decides to throw at you. It’s important to start small – depositing even a few dollars each paycheck into this account will build up over time. But eventually you will have a reliable safety net when it comes to unplanned expenses.

3. Automate Your Payments

Tracking your costs not as efficient as it sounds? A great option is opting for automated payments. Citizens Bank explains, “Setting up automatic bill pay can help alleviate the stress of remembering to pay bills and avoid costly penalties for missed payments.” If you tend to be forgetful when it comes to paying bills, automated payments can help lift some of your financial burdens. This is also a great method to building your savings or emergency funds – you can also have funds automatically moved over each month to ensure your accounts are growing.

4. Reduce Debt

Debt is a huge contributor to financial stress. When creating a budget, try including a plan to slowly chip away at what you owe. Just like building up a savings account, debt won’t always go away overnight, but making any attempt at minimizing your debt will help you feel less stressed about it. If you need more professional help, financial institutions like ours have financial counseling services to aid in consolidating debt and creating a savings plan to build up your finances.

5. Reach Out For Help

If your financial stress is all encompassing, reach out to someone you trust about your worries. This could be a friend, a loved one, or a professional. Speaking about your financial stress can help relieve any negative feelings you may have, as well as open yourself up to advice for your situation you hadn’t thought of alone. Allow yourself to speak without fear of judgement, and you may view your financial stress from a different perspective.

While there are certainly lots of economic factors outside of our control that can cause us stress, it’s important to focus on what you can control. If you don’t, you risk falling into a cycle where nothing productive gets done. According to Help Guide, “Financial problems adversely impact your mental health…The decline in your mental health makes it harder to manage money…These difficulties managing money lead to more financial problems and worsening mental health problems, and so on.” Break out of this cycle by adopting smart financial practices and getting the help you need for your financial stress.

Budgeting For Back-To-School

As summer winds down and the new school year slowly approaches, so too does the need to go back to school shopping. According to Credit.org, “The National Retail Federation tells us the average family spending for back-to-school expenses will be $696.70 this year.” For many, this number may be out of their family’s budget. So what are the best ways to save on school supplies that still set students up for success? The answer may lie in shopping with a plan, taking inventory of what you already have, comparison shopping and taking advantage of sales.

1. Shopping with a Plan

Going back to school shopping without a plan or budget is an easy way to indulge in impulse buying you may not be able to afford. “Set a budget for back-to-school shopping before you go to stores, then figure out how much you can spend for various items on the list. “ says Consumer Reports. Making a list of the items you need and sticking to it will also help avoid unnecessary expenses while guaranteeing you get what you need for the school year.

2. Take Inventory

If you’ve been buying school supplies for a while, there’s a good chance you already have a collection of items bought in previous years. Take inventory of what you already have before you go shopping, that way you know what you can recycle for the current year and what you absolutely need to buy new. This can also decrease the chance of buying duplicates of supplies you may already have.

3. Comparison Shop

While most shoppers flock to big department stores and make all of their purchases there, it’s important to know you have options when it comes to where to shop. According to Credit.Org, “Use web sites and newspaper ads to compare prices, and remember that a lot of stores will stock up on school supplies where they normally wouldn’t, so don’t just look at the obvious retailers.” Often times you’ll find items cheaper from places like the dollar store or bargain stores that aren’t always marketed for school supplies.

4. Take Advantage of Sales

There’s no doubt about the prevalence of back to school sales during this time of year. Don’t feel afraid to take advantage of the discounts provided by popular brands! Feel free to use coupons as well as they can also help with saving money. As long as these sales aren’t used to justify impulse purchases, they are a great way to encourage shoppers to stick within their budget.

Looking for more interactive resources? American Consumer Credit Counseling has a great budgeting worksheet perfect for keeping up with expenses while allowing users to personalize it to what they need. YEFCU also has a plethora of savings accounts to choose from for budgeters to use specifically for back to school funds. No matter what your situation, by adopting smart financial practices you can make the most of your back to school budget and manage your school supplies spending.

The Role of Technology in Modern Banking

It’s no secret that technology rules the modern world. It’s present in our homes, our hospitals, our transportation and even our kitchen appliances. So it should come as no surprise that technology also plays an integral role in how we do our banking. In the past 30 years alone we’ve seen almost every financial function go digital or advance in some way. While that may come as a relief to some, others remain doubtful about the need for technology in their financial practices in the first place. One thing’s for sure – without technology the financial world would look extremely different than the one we know today. For better or worse, technology is here to stay, and you may be surprised to learn what processes financial institutions rely on it to complete.

Online & Mobile Banking

A man is sitting at a desk with an open laptop as he types away on his smartphone and dollar signs come out of the screen

The practice of interacting with your accounts online has quickly become a staple in modern banking. This is usually done through your financial institution’s official website or mobile app. Online banking is insanely convenient as it allows you to accomplish tasks at home that were previously only performed in person. Instead of walking into an office to apply for a loan or deposit a check, users can accomplish those things from the comfort of their own home. Mobile banking through your institution’s official app is even more convenient as it removes the need to be at home with a computer. The only thing you need for mobile banking? A smartphone. This allows users to bank from virtually anywhere as long as they have a phone, making their funds and the ability to interact with them always available to them. Without the internet, almost all a person’s banking would still need to be done in person.

ACH

ACH (also known as Automatic Clearing House) allows for credit unions and banks to process electronic money transfers. This technology is responsible for processing things like direct deposit, bill pay, and even smaller electronic transactions like shopping online. Before the development of ACH, employees received physical checks on payday and had to take it to their bank to deposit it. Nowadays direct deposit sends money directly to an account digitally. Much like using online banking, this process cuts out the need for going in person to a credit union or bank. It’s the same for bill pay. Users rely on ACH to automatically pull the funds they need to successfully pay their bills from their accounts. If you’ve ever paid a bill online, you know just how much this feature comes in handy!

Credit & Debit Cards

Once upon a time there was a world without either debit or credit cards, so they both are pieces of technology within themselves. But did you know they didn’t always work the way that they do today? Magnetic strips on debit and credit cards didn’t come around until the early 1970’s, and it wasn’t until 2012 that they introduced the idea of the chip feature. In more recent years the tap feature has become the new norm, ceasing the need to insert your card anywhere and replacing it with a simple tap to purchase items. These cards play integral roles in modern day banking as they are the most commonly used forms of payment. Without them, cash would still be in the spotlight, and the convenience of an ATM (or making late night online purchases) would be obsolete.

Artificial Intelligence

A common topic in technology is that of Artificial Intelligence and the benefits it may or may not bring to the table. What most people don’t know is that AI is already a fairly common part of our world, especially banking. If you’ve ever called your credit union or bank and gotten an automatic message, then congratulations! You’ve interacted with AI. Many financial institutions also have what’s called a virtual assistant feature on their website, allowing users to chat with AI to answer commonly asked questions. While Artificial Intelligence gets a bad rep, there are many ways companies use them to garner better user experiences for their members and make their transactions more efficient.

Looking Towards the Future

Technology is ever adapting – what we see in banking today may be out of use in the next few years. Even now we’re seeing advancements in electronic payments through apps like Cashapp, Zelle, and Apple Pay. The need for physical debit cards has started to dwindle with digital wallets through Apple or Google becoming more common. Cryptocurrency like Bitcoin has become a notable addition to the financial world as it continues to go more and more digital. There’s a lot to look forward to when it comes to the technology used in modern banking. But just as it’s important to make these advancements, it’s equally important to appreciate the practices that have stood the test of time. At the end of the day, everyone has the right to choose exactly how they complete their finances. Thankfully technology provides us with multiple options to pick from!