Encouraging your teen to secure their first job is significant. It’s an opportunity for them to contribute to expenses, gain independence and acquire real-world experience. This initial job can shape their development and possibly guide their career path. As a parent, you can support them in this endeavor by offering guidance and resources.

As your teen prepares for their first job, they should consider several factors. They need to think about how to find the right job, manage their earnings, and learn to save. In the following, we guide these aspects to help your teen successfully navigate their entry into the workforce. While you can assist them in this process, the responsibility of job searching and financial management ultimately lies with them.

Finding the Right Fit

First, your teen must apply for and secure a job that aligns well with their abilities and interests. Not everyone is a match for every position, even at the entry level. Although finding a job that challenges your teen may seem beneficial, keep in mind that starting any job is a new and unfamiliar experience for them, naturally pushing them beyond their usual routines and environments.

Therefore, help them choose a job that matches their interests and strengths. If they’re a people person, a server or cashier may be a good choice for them. However, stocking shelves at a grocery store could be great if they’re shy and introverted. Or if they’re athletic and love the outdoors, working as a lifeguard could suit them perfectly.

Whatever the job is, play to their strengths. While they don’t have to love their first job, they shouldn’t hate it either. Some level of positive engagement will set them up so they don’t detest the idea of getting a career later in life.

Handling the First Paycheck

Do you remember the first time you received a paycheck and opened it eagerly to find that it was much less than you expected? You may have wondered what FICA is and what the deductions are on your paycheck. With this in mind, it may help to explain how paycheck deductions and taxes work so your teen can better understand how finances work.

Even with deductions, that first paycheck is probably the most money your teen has seen unless they’re an avid saver. As those paychecks roll in, they may be over-eager to spend and buy things they never considered. It helps to know beforehand what kind of person your teenager is. Are they a big spender or a cautious saver?

If you want your teen to contribute to household bills, have a frank discussion with them. If not, you may want them to save towards their college fund. Whatever the case, they must learn how to budget and save.

Learning to Budget and Save

Even if you don’t anticipate your teenager contributing financially to the family or their future, they must learn budgeting and saving skills. Actively teaching your teen these skills early on will equip them for financial success in later life.

However, teaching some teens this is challenging, so it’ll take some work.

The first step is to help them open a bank account so they can set up direct deposit so paychecks go straight into their account. Then, you’ll want to go over a budgeting plan with them. A common one is:

• 20% for debt repayments and savings
• 50% for things they need
• 30% for things they want

However, if your teen isn’t paying any bills or owing any debts, they may want to adjust their plan. For example, suggesting they save 50% of their paycheck will help condition them to save in the future while guaranteeing a cushion for college and beyond. In addition, even with savings deductions, they’ll still have a solid amount of spending money.

Takeaway

A first job is a big deal. With it comes your teen’s first taste of financial independence. Ensure you’re taking time to prepare them for their first job and paycheck so you can help set them up for success later in life. While convincing your teen to save can seem daunting, doing so is vital for their future.

Preparing Your Teen for Their First Job

Encouraging your teen to secure their first job is significant. It’s an opportunity for them to contribute to expenses, gain independence and acquire real-world experience. This initial job can shape their development and possibly guide their career path. As a parent, you can support them in this endeavor by offering guidance and resources.

View Resource Preparing Your Teen for Their First Job

Home hospital care is a healthcare model that gained significant traction during and after the COVID-19 pandemic, allowing patients to receive acute hospital-level care in their homes.

What Is Home Hospital Care?

Recognized by the federal government, home hospital care is designed for patients requiring acute hospital-level care but prefer receiving it in their homes. This model became particularly relevant during COVID-19 to reduce hospital overcrowding.

Home hospital care is different from regular home health care. It is for more severe health problems that usually need a hospital stay. It includes help after surgeries or taking care of sudden worsening of long-term sicknesses like diabetes, COPD, and heart disease.

Types of Home Hospital Care

Home hospital care primarily involves medical services, focusing on medical care services. These include care by doctors, registered nurses or physical therapists for conditions like diabetes and support in rehabilitation therapies.

While home hospital care is primarily medical, some patients may also receive non-medical care services, which include assistance with daily activities like bathing and housekeeping, often part of broader home care services.

Home Hospital Care Costs

The cost of home hospital care varies based on patient needs and location.

While these services can be more affordable when covered by private insurance, Medicare or Medicaid, specific coverage and out-of-pocket costs depend heavily on individual plans and treatments.

Does My Insurance Cover It?

Insurance coverage for home hospital care depends on several criteria:

• Medicare typically covers skilled home healthcare for a limited time under certain conditions, provided the care is intermittent and less than full-time.
• Non-medical care, such as bath assistance or housekeeping, is generally not covered.
• Medicaid coverage varies by state and individual plans.
• Private long-term care insurance may cover some home healthcare costs.
• To be eligible for insurance coverage, you generally need to meet conditions such as being homebound, having a doctor’s order for home health services, and requiring specific continuous therapies from a certified agency.

Advantages and Benefits

Home hospital care offers several benefits:

• It’s often more cost-effective than prolonged hospital stays.
• Patients can recover more comfortably at home.
• Continuous monitoring can reduce hospital readmissions and mortality.

Drawbacks and Challenges

However, there are challenges:

• The cost can be high, especially without adequate insurance coverage.
• Adjusting to in-home care can take time for some seniors.
• Finding the right home healthcare services requires research and planning.

Takeaway

Home hospital care brings medical services to the comfort of your home. It offers safety, faster recovery and mental health benefits, making it a preferred option for many. However, it’s essential to consult healthcare providers to determine if it suits your needs.

Understanding Home Hospital Care

Home hospital care is a healthcare model that gained significant traction during and after the COVID-19 pandemic, allowing patients to receive acute hospital-level care in their homes.

View Resource Understanding Home Hospital Care

Even though anyone can be a victim of a personal loan scammer, some people are at more risk than others.

Advance loan scammers typically target those financially struggling as they are more desperate for cash and will ignore red flags like “guaranteed loan approval.”

In addition, those with poor credit and urgently needing money may fall for scammer companies that offer loans or credit regardless of creditworthiness.

What Is an Advance-Fee Loan Scam?

An advance-fee loan scam is a personal loan scam that targets consumers with a poor credit history while promising easy access to loans that never materialize.

Scammers can post ads or make calls offering attractive loans to lure in people with bad credit.

It’s best to be cautious to avoid a personal loan scam. If you have poor credit and need a personal loan, watch out for these signs of a loan scammer:

• A genuine lender will not ask you to pay an application fee before considering a loan.
• A legitimate lender will never require you to pay a fee that guarantees your loan application.
• An actual lender will not offer you a loan or credit without checking your credit history.
• A legitimate lender will never use high-pressure tactics like a limited time offer to push you into making quick decisions.

Warning Signs

Here are some of the warning signs of a typical advance-fee loan scam:

• No legitimate lender will offer guaranteed loan approval by paying a fee. Reputed lenders do not ask for payment before they approve your loan application.
• A reputable lender will check your creditworthiness and income to ensure you can afford the loan. They will never promise a loan without checking your credit history.
• An authentic lending company will have a website with “https” and not “http” in the URL. The ‘s’ in the web address indicates that the site is safe to visit. The website will also have a lock sign near the browser that shows that the website protects your information from outsiders.
• A lender may be a scammer if they do not have a valid physical address on their website.
• Unlike reputed lenders, scammers usually make cold calls and offer attractive deals to promise loans and lure away your hard-earned money.
• Personal loan scammers use high-pressure tactics to push you into making hasty financial decisions.

Protecting Yourself

If you have a poor credit history while looking for a loan, consider taking valuable steps to protect yourself from scammers:

• A trustworthy lender must have a place of business registered in your state. Find out whether they’re a registered lender before beginning a loan application.
• Before proceeding with a loan, search for the company’s name with words like “complaints, “scam,” or “review.” Your results will help you decide their trustworthiness.
• If you are dealing with a pre-recorded sales pitch over the telephone, hang up and report it to ReportFraud.ftc.gov. These calls are illegal.
• Walk away if a lender asks for payment in advance for a credit card, mortgage assistance, or debt relief. A legitimate lender will never ask you to pay for a guaranteed loan.
• If you are struggling with debt, you can consider non-profit organizations that offer credit counseling services at a low cost and even for free.

Takeaway

Personal loan scammers typically target those looking for a loan with poor credit history. When successful, they can steal your identity while devastating your bank accounts. It’s best to take some protective measures when securing a loan to help protect your identity and money.

What Is an Advance-Fee Loan Scam?

Even though anyone can be a victim of a personal loan scammer, some people are at more risk than others. Advance loan scammers typically target those financially struggling as they are more desperate for cash and will ignore red flags like “guaranteed loan approval.” In addition, those with poor credit and urgently needing money may fall for scammer companies that offer loans or credit regardless of creditworthiness.

View Resource What Is an Advance-Fee Loan Scam?

Scammers often aim to steal your money and identity by exploiting those confused about health insurance laws and plans.

Health insurance scams typically target older adults, veterans, and immigrants, preventing them from getting the necessary medical coverage.

Warning Signs of a Scam

Here are some signs of a health insurance scam:

• People who assist with the Health Insurance Marketplace are assistors or navigators. Legitimate assistants and navigators will not ask for payment to provide assistance or require personal or financial information.
• Medicare and Medicaid scams occur when fraudsters ask you to renew your card over the phone. They might ask for your Social Security, Medicare and Medicaid ID or bank details and threaten cancellation of the medical benefits.
• Healthcare.gov is the official government site that lets you check healthcare subsidy eligibility, compare health insurance plan prices and begin enrollment.
• Scammers may impersonate government officials and ask to verify information like Social Security, credit card and bank details over the phone. They may ask for payment through gift cards, cryptocurrency or wire money to them.
• Medical discount plans charge a monthly fee to offer discounts on medical products or services from a specific list of medical providers. To get legitimate medical discount plans, check out what the plan claims to provide and whether your doctor participates.

Make sure you have the details of the medical discount plan in writing before you sign up.

Verifying a Scam

Before signing up for a health insurance plan, consider the following steps to help you avoid health insurance scams:

• Visit trusted sources like Healthcare.gov and state marketplaces for comprehensive health coverage.
• Check reviews and research online using the name of the company offering health coverage and words like “complaint,” “fraud,” or “scam.”
• Check with your health insurance commissioner to see if the company selling health insurance is licensed.
• Ensure you get a written copy of the statement of benefits or health policy from the salesperson.
• Scammers often use fake logos and written materials to impersonate major insurers. Where a company claims to sell health insurance policies of a major insurer, you must verify before purchasing the plan.
• A legitimate health plan representative will offer specific information about finding providers within the network, co-pays and deductibles without directing you to a brochure or website.

Common Medicare and Medicaid Scams

People on Medicare and Medicaid plans can get calls from scammers impersonating government officials who try to steal money and personal information.

Medicare scams are mostly related to Medicare Part-D, which requires paying a monthly premium to an insurance carrier. You pay by using the carrier’s network to get prescription medicines.

Medicare plan representatives will never contact you first or come to your house uninvited to ask for personal information or payment.

The state Medicaid Agencies will never ask for your personal information or bank and credit card details to renew your enrollment in the state’s program.

Reporting Scams

If you have spotted a health insurance scam, report it to the FTC at ReportFraud.ftc.gov and your State Attorney General.

You can report Medicare scams at Medicare.gov or 1-800-633-4227.

Takeaway

Health insurance plans can be daunting and confusing for the general public. Staying vigilant and reporting insurance scams to trusted authorities can help you stay safe.

Spotting Health Insurance Scams

Scammers often aim to steal your money and identity by exploiting those confused about health insurance laws and plans. Health insurance scams typically target older adults, veterans, and immigrants, preventing them from getting the necessary medical coverage.

View Resource Spotting Health Insurance Scams

Wire transfers and online payments are excellent ways to transfer funds to individuals and businesses. However, digital payments are immediate and irreversible, and scammers frequently use them in money fraud schemes.

What Are Wire Transfer Scams?

A wire transfer scam happens when scammers pose as an authoritative body like a bank, colleague, or family member and pressure victims into wiring them money.

Scammers often quickly withdraw money from wire transfer scams, making them usually irreversible. With the rise in digital banking, wire transfers happen instantaneously. Scammers transfer the stolen money into another account and disappear before the victim can cancel or recover it.

Types of Wire Transfer Scams

Here are some examples of money-wiring scams:

• While purchasing or refinancing a property, scammers posing as mortgage agents may ask you to wire money based on fraudulent instructions received via email.
• Scammers use counterfeit checks to get your money.
• Fake buyers can claim overpayment and ask to be refunded.
• Fraudsters ask for money or financial details, claiming you have won the lottery.
• Fake loan scams lure victims with promises of a guaranteed loan.
• Scammers impersonate family members and ask you to pay for a family emergency.
• Scammers post fake rental listings and con renters into wiring money before they visit the property.

How Does a Wire Transfer Scam Play Out?

In a typical wire transfer scam:

• Fraudsters send phishing messages and ask for money through wire transfers. Sometimes, they may even hack into online conversations to redirect payments.
• The victim, believing the transfer is legitimate, sends money even if the recipient’s account details differ.
• The money gets wired directly into the scammer’s account.
• Since online wire transfers are instant, the scammer gains immediate access to the funds.
• Once the money moves to the scammer’s account and the payment is processed, it becomes impossible to retrieve the funds.

Warning Signs of a Wiring Scam

Money-wiring scams are easy to spot if you recognize the red flags. Don’t wire money in the following circumstances:

• Scammers create realistic websites to sell products online and attempt to defraud people by requesting wire transfer payments.
• You receive an unexpected request to send money from people posing as friends or colleagues.
• Scammers that ask you to send money to an international country for a cause.
• They’ll tell you won a prize and need to pay a fee to receive it.
• Scammers ask you to send money quickly in private without informing anyone.
• People asking you to make payment using a suspicious email.
• Scammer communicating through a teletypewriter while masking their voice.
• Someone pays you through gift cards, cryptocurrency, or P2P apps.
• The individual asking for payment refuses to communicate via phone.

What to Do if You Wired Money

If you are a victim of a wire transfer scam, you must:

• Inform your bank quickly and provide them with transfer details.
• Ask your bank to contact the recipient’s bank’s fraud department, which can freeze the funds in the recipient’s account.
• Report identity theft at IdentityTheft.gov if you have compromised personal information.
• Share details of the scam with the FBI’s Internet Crime Complaint Center.
• Make a report with your local police department or FBI field office.

Takeaway

With the increase in the popularity of digital banking, money-wiring scams have made an enormous comeback.

If you are a victim of a money-wiring scam, you may have a small window where you can reverse the transfer. Protecting your online money transfers can save you from online financial threats.

How to Spot a Money Wiring Scam

Wire transfers and online payments are excellent ways to transfer funds to individuals and businesses. However, digital payments are immediate and irreversible, and scammers frequently use them in money fraud schemes.

View Resource How to Spot a Money Wiring Scam

A USDA home loan is a unique form of mortgage the government offers to low-to-moderate-income home buyers in qualified towns and rural areas.

What Is a USDA Home Loan?

USDA home loans are mortgages offered or guaranteed by the U.S. Department of Agriculture housing loan programs that allow first-time home buyers in rural areas or those who cannot get a conventional loan to purchase a house.

Also known as RD or rural development loans, USDA home loans have zero down payment requirements and lenient credit scores. Additionally, they allow home buyers with a low income to qualify for a modest interest rate, making homeownership more accessible.

Pros and Cons of USDA Loans

Benefits

• There is no formal loan limit.
• No down payment requirements.
• Loans are available for home purchasing and improvements.
• Loans are available with low fixed interest rates.
• The seller can cover the closing costs.

Drawbacks

• The property location.
• Borrower’s income.
• Loan size.
• Home use (as a primary residence only).

The loan also comes with certain upfront and annual fees.

Key Features and Eligibility

USDA loans are government-backed loans offered to qualified low- or moderate-income borrowers living in designated rural areas. The key features of the USDA loans include:

• No down payment.
• Eligible borrowers have low-to-moderate income not exceeding 115% of the area’s median income. Borrowers must have one year of traditional or two years of seasonal income or self-employment. They must not qualify for conventional financing.
• Not specified, but typically needs the credit score to be 640 or higher.
• Borrowers can pay 41% of their income towards debts while meeting their financial obligations and still qualify.
• In a designated rural area with a population of 35,000 or less.
• The home is a primary, non-income-producing residence.
• Modest (2,000 sq. ft. or less).

The eligibility requirements for a USDA loan include:

• The home must be a primary residence in a rural area with a population of 35,000 or less.
• The loan is available to people with low or moderate incomes, with income limits depending on the loan program and your residence location.
• The borrower must be a U.S. citizen or permanent resident with a proven record of stable income.
• The borrower must have a minimum credit score of 640, although a lower score may also qualify. The borrower must have a demonstrated history of paying back debt.

Types of USDA Loans

Direct Loans

USDA direct loans help low- and very low-income individuals who lack safe housing or cannot qualify for a conventional loan. As of December 1, 2024, the interest rate for single-family housing direct loans is 4.375%.

These loans cover homes with market values below the area loan limit, which varies by location. Depending on the county or state, loan limits range from $398,600 to $919,800. For example, limits may be around $330,000 in rural areas or exceed $700,000 in high-cost markets like Hawaii or California. Borrowers with very low incomes qualify for loan terms of up to 38 years.

4o

Loan Guarantees

The USDA guarantees loans from participating local lenders, allowing home buyers to enjoy a lower interest rate with zero down payment requirements. Instead of paying a traditional PMI, borrowers pay a lower interest rate of 1% and an annual fee of 0.35% of the loan balance.

Home Improvement Loans and Grants

The USDA provides loans up to $40,000 and grants up to $10,000 to help homeowners upgrade or repair their homes. Homeowners can combine loans and grants for a total assistance amount of $50,000.

The loans have a 20-year term with a 1% interest rate. If homeowners sell their property within three years of receiving a grant, they must repay it.

Takeaway

USDA offers direct and guaranteed loans to low- and moderate-income borrowers living in designated rural areas to purchase modest housing at affordable rates. By providing additional support for home improvement projects, the program aims to make homeownership more accessible, ensuring borrowers can upgrade and maintain their homes with minimal financial strain.

What Is a USDA Home Loan?

View Resource What Is a USDA Home Loan?

Jumbo loans, or jumbo mortgages, are designed for financing properties that exceed the loan limits set by the Federal Housing Finance Agency (FHFA) for conventional mortgages. These loans are commonly used by borrowers in high-cost real estate markets where home prices surpass the maximum limits of traditional loans. Jumbo loans are a popular option for high-net-worth individuals and buyers who require larger loan amounts but do not have the liquidity to purchase a high-priced property outright. However, due to their size and lack of government backing, they come with stricter credit requirements and often require a more substantial down payment.

Jumbo Loan Essentials

Jumbo loans are home mortgages that exceed the limits of a conventional mortgage, as set by the Federal Housing Finance Agency (FHFA). Fannie Mae or Freddie Mac cannot guarantee, purchase or scrutinize them.

Unlike conventional mortgages, jumbo mortgages or loans are typically riskier as they lack the guarantee offered by Fannie Mae and Freddie Mac. However, that means that the lenders of jumbo loans are not protected from losses if the borrower defaults.

Because of this, borrowers of jumbo loans need to meet stricter credit requirements, such as a stellar credit score with a very low debt-to-income ratio.

While jumbo loans are considered non-conforming because they exceed the loan limits set by the Federal Housing Finance Agency (FHFA) and are not eligible for purchase by Fannie Mae or Freddie Mac, many lenders structure their jumbo loans to meet the guidelines of a ‘qualified mortgage’ (QM) under Regulation Z of the Federal Truth in Lending Act. However, not all jumbo loans meet QM standards. Qualified mortgages provide certain legal protections to lenders, making them more attractive, but jumbo loans can also be offered as non-qualified mortgages (non-QM), which may come with more flexible underwriting criteria but often carry higher interest rates.

What Is a Jumbo Loan?

A jumbo loan is when the loan exceeds the maximum limit for conventional loans as determined by the Federal Housing Finance Agency (FHFA).

In 2024, the conforming loan limit for single-family homes in most areas of the U.S. will be $766,550, with limits increasing to $1,149,825 in higher-cost areas.

Qualification Requirements

Jumbo loans are specialized and riskier lending options that require stricter underwriting criteria than conventional loans. Because they don’t conform to FHFA standards and involve more money, lenders often set their qualification requirements.

Here are some key requirements:

• Down payments for jumbo loans typically start at 10%, but they may range from 5% to 30% depending on the lender and the borrower’s financial profile.
• Lenders may require a credit score of 700 or 760 to get approved for jumbo loans. Like any home loan, a higher credit score can be beneficial.
• Lenders require a lower debt-to-income ratio to ensure the borrower has sufficient income or assets to cover the loan. While most lenders require a DTI of 43%, they may allow flexibility if the borrower has plenty of cash and solid financials.
• Lenders may require borrowers to demonstrate sufficient income and a healthy cash reserve. Most borrowers will need provable liquid assets and enough cash reserves to cover six months to one year of mortgage payments.
• Borrowers must provide more extensive financial documentation than is required for a conventional loan, including bank statements, tax returns, W-2s, and 1099s. Since jumbo loans typically require manual underwriting, a human underwriter often reviews these documents.
• Lenders typically require at least one appraisal to determine the property’s value, ensuring it justifies the loan amount. For higher-risk or more expensive properties, some lenders may require two appraisals to verify the property’s worth and mitigate their risk.

Advantages and Drawbacks

Advantages:

• Jumbo loans allow borrowers to take out a mortgage that exceeds the FHFA limits.
• Jumbo loans often come with higher interest rates than conforming loans, though competition among lenders can sometimes result in favorable rates for well-qualified borrowers.
• Jumbo loans provide the opportunity to afford more expensive properties.
• Various types of jumbo loans are available, depending on loan terms and whether they are fixed or variable. Veterans or active service members may qualify for a VA jumbo loan.

Drawbacks:

• Jumbo loans generally require a down payment of at least 10%.
• Jumbo loans can involve higher fees and closing costs due to the extra qualifying steps and larger loan amounts.
• Jumbo loans can be riskier without the regulatory protections of conventional loans.

Takeaway

Jumbo loans are a type of mortgage financing that exceeds the government-set limits for conventional loans. They often come with more rigorous credit requirements, a high credit score and a low debt-to-income ratio. These loans are popular among high-income individuals who may choose not to pay for a high-priced home in cash, preferring instead to finance the property and preserve their liquidity for other investments.

What Is a Jumbo Loan?

View Resource What Is a Jumbo Loan?

VA loans are issued by private lenders but guaranteed by the U.S. Department of Veterans Affairs (VA). They are available to active-duty service members, eligible veterans, and certain surviving spouses and can be used for various purposes, such as purchasing homes, refinancing, or covering renovation costs.

Overview

Private lenders issue VA loans, and the U.S. Department of Veterans Affairs (VA) guarantees or partially covers them.

Types of VA loans

There are various types of VA loans:

•  Allows qualified service members to purchase homes without a downpayment.
•  Funds home construction, including purchasing land, labor, and building materials.
•  Finances home renovations.
•  Replaces a current VA loan with a new one at a lower interest rate or converts an adjustable-rate loan into a fixed-rate loan.
•  Refinances to a new loan with different terms and interest rates.
•  Allows borrowers to refinance into a larger loan, converting home equity into cash.
•  Finances energy efficiency improvements for the home.
•  Helps Native Americans build, purchase, or finance homes on federal trust land.

Key Features and Requirements

VA loans have unique features, eligibility requirements and loan limits.

VA Loan Features

VA loans offer these key benefits:

• Reusable loan benefits.
• Only applicable for residential properties.
• Private lenders issue the loans, but the VA guarantees them.
• Available even with a history of bankruptcy or foreclosure.
• No mortgage insurance or prepayment penalties.
• A mandatory funding fee.
• No borrowing limits for borrowers with full entitlement.

VA Loan Eligibility

To qualify for a VA loan, you must meet these criteria:

• You are on active military duty or an honorably discharged veteran who served at least 90 days during wartime or 181 days during peacetime.
• You served at least six years in the National Guard or Selective Reserve or 90 days on active duty under Title 32 orders (with at least 30 consecutive days).
• You are the surviving spouse of a service member who died in action or from a service-related disability, and you haven’t remarried. Spouses can remarry after age 57 or after Dec. 16, 2023. Spouses of missing service members or prisoners of war are also eligible.
• You meet the lender’s income and credit requirements.
• You purchase a property that meets safety and building standards and is your primary residence. You must occupy the home within 60 days, though this can extend up to 12 months with permission.

VA Loan Limits

There’s no set VA loan size limit if you have full entitlement, but lenders may impose limits based on income and debt. Your loan entitlement is also subject to mortgage limits.

For 2024, the standard VA loan limit in a typical U.S. county is $766,550 for a single-family home, but it can go up to $1,149,825 in high-cost areas. If the home price exceeds the county limit, you can still get a VA loan with a downpayment.

Refinancing a VA Loan

You can refinance a VA loan using these options:

• To secure a lower rate or switch from an adjustable rate to a fixed rate.
• For borrowers with conventional loans to convert to a VA loan, taking a larger loan, paying off the original mortgage, and receiving the difference as cash.

How to Apply for a VA Loan

Here are the steps to apply for a VA mortgage:

1. Obtain a Certificate of Eligibility (COE).
2. Compare lenders based on qualification requirements and mortgage rates.
3. Organize financial documents like bank statements, tax returns and brokerage statements.
4. Request preapproval and search for a home that meets the VA’s safety and structural standards.
5. Complete the mortgage application after accepting an offer.
6. Provide additional financial or credit information during underwriting if required.

Pros and Cons of VA Loans

Pros:

• Purchase a home with no downpayment.
• No need for mortgage insurance.
• Lender fees are capped at 1% of the loan amount, lowering closing costs.

Cons:

• Only for purchasing a primary residence.
• Includes a funding fee, which depends on whether you’re buying or refinancing. Funding fees vary based on the borrower’s military status, loan type, down payment (if any) and whether it’s a first-time use or subsequent use of the VA loan benefit.

Takeaway

Service members can use VA loans, guaranteed by the Department of Veterans Affairs, to buy or refinance their primary residences. These loans provide benefits like no down payment, no mortgage insurance and competitive interest rates.

Understanding VA Loans

View Resource Understanding VA Loans

In the past several years, mortgage rates have risen from record lows to the highest in decades. High rates and high housing prices are a tough combination for potential homebuyers. However, even when rates are high, there are ways you can become eligible for lower rates.

Understanding Mortgage Rates

When you take out a loan, mortgages come with interest rates, meaning you’ll pay more than the home’s cash value. When securing a mortgage, you aim to find the lowest rates possible. The lower the rate, the less you’ll pay every month and, therefore, in total.

For example, imagine you’re buying a house for $500,000. You’re putting $100,000 down; your mortgage is a $400,000 30-year fixed loan. For simplicity, these figures focus only on principal and interest and do not include other costs like property taxes, homeowners’ insurance or mortgage insurance.

Consider the following rates based on this example:

In this example, paying an extra 3% would result in paying $283,680 more than if your mortgage rate were 5%.

Strategies to Lower Your Mortgage Rate

Some factors are beyond your control regarding mortgage rates, such as the Federal Reserve raising rates due to current economic conditions. However, there are some strategies you can implement to ensure you’re getting the best mortgage rate available.

1. A higher credit score can qualify you for lower mortgage rates. To improve your score, make sure to pay bills on time, keep credit card balances low, avoid applying for new credit in the months before applying for a mortgage and check your credit report for errors.
2. Liquidity in checking, savings and investment accounts is another positive indicator for lenders, potentially decreasing your mortgage rates. Start saving as much as possible in various accounts. Maintain a solid emergency fund and healthy balances in both savings and investment accounts.
3. Lenders will examine your debt-to-income (DTI) ratio, determining how much of your monthly income goes toward minimum debt payments. A high ratio will lead to a higher mortgage rate or result in lenders declining a loan altogether. For most conventional loans, lenders prefer a DTI ratio below 43%, though some may accept higher ratios under certain conditions.
4. The higher your income and flexibility in your budget, the more likely lenders will consider you a low-risk borrower. Never stretch your budget too thin by taking on a mortgage you can barely afford, as financial situations can change.
5. While most buyers choose fixed-rate mortgages, some opt for adjustable-rate mortgages, where interest rates fluctuate after an initial fixed period. Since these rates are variable, lenders often offer lower initial fixed-rate periods. This option could save you money compared to a fixed-rate mortgage, though it could also cost you more if rates rise.
6. Don’t settle for the first lender you come across. Just as it’s smart to look at more than one home, you should shop around for lenders. Aim to get rate quotes from two to four companies, giving you various options. If you do this, ensure you submit preapproval applications within the same month so your credit score isn’t negatively impacted.
7. Purchasing mortgage points is a strategic way to reduce your mortgage costs if you plan to pay it off over a long period. Mortgage points allow you to pay up-front costs to lower your interest rate, potentially saving you money in the long term if you hold the loan long enough.

Timing and Market Considerations

Once you’ve chosen a lender, lock in your mortgage rate to protect yourself from potential increases before closing. Rate locks typically last 30 to 60 days, though some lenders offer extensions for a fee.

If you aren’t in a rush to purchase a home, consider waiting for home prices and rates to decrease. Timing your purchase in line with market conditions could save you money in the long run.

Takeaway

Mortgage rates significantly impact how much you’ll pay for your home. Even a small difference in your mortgage rate can lead to substantial savings. Take the time to ensure you’re getting the best rate available and always ensure the mortgage you choose is one you can comfortably repay.

Getting the Lowest Mortgage Rate

View Resource Getting the Lowest Mortgage Rate

New Business Account Guide

View Resource New Business Account Guide