7 TIPS FOR BREAKING BAD FINANCIAL HABITS

Getting your finances in order is the first step to the home searching process. Take a quick look through these helpful tips and please let me know if you have additional questions. As your Accredited Buyer's Representative (ABR®), I look forward to helping you find your next home. 

For most of us, our financial habits were picked up early on from watching and learning from our parents as we were growing up. If you were lucky enough to have financially savvy parents to guide you, managing your finances probably comes easily to you and is second nature. For many of us, though, myself included, making smart financial decisions has been a process that we’ve learned by way of trial and error — just as our parents before us. In my case, my parents were simply repeating the cycle and following the financial habits they learned from their parents, which were most likely learned from their parents before them.
So, how do you break the cycle of bad financial habits? It takes time, commitment and a strong desire to want to make the change. If you’re serious about changing your financial habits, here are a few tips and guidelines that may help.

Identifying Bad Habits

This sounds obvious, but if you aren’t aware of what you’re doing wrong, it’s difficult to change it. If you have financial issues, take a step back and analyze your finances. What’s causing you the most trouble? Are you buried in debt? Relying on credit cards to pay for things you can’t afford? Living beyond your means? Not saving enough? Having trouble making payments on time? Before you can attempt to change any of these problems, you have to recognize that they exist and are “problems” caused by habits you want to change.

Defining New Habits
After you’ve recognized the problem, analyze ways to correct them and pinpoint scenarios or situations that cause you trouble. What changes or new habits do you need to make in order to correct the problems and headaches caused by these bad habits? Think big picture and look at every aspect of the problem in order to define ways to correct it. A few examples:

• Struggling with Debt: Where are you over spending? Why are you overspending? Are there any situations or triggers that tempt or cause to spend more than you should? Can you limit your exposure to these situations or triggers?
• Not Saving Enough: How much are you saving? How much do you want to save? How much should you be saving? How much do you need to save? Why aren’t you saving more? What can you do to reverse this problem?

Taking the approach of asking ‘who, what, where, when, and why,’ makes it much easier to identify and define new habits for almost any situation.

Committing it to Paper
Don’t waste the time you’ve spent to get this far by keeping it all in your head. Write it down — all of it. Including the changes you want to make, why you want to make them, how you’re going to make them, the steps you’re going to take to get there — and then post it in plain sight. This will help you clearly “see,” in specific terms, your end goal and will stand as a written affirmation to keep you committed to the end result. It’s harder to dismiss a promise or commitment when it’s in writing and the reminder is right in front of you.

Tackling One Habit at a Time
You know the saying, “Rome wasn’t built in a day,” and neither are bad habits changed overnight. Trying to tackle everything all at once isn’t realistic and usually leads to frustration and a higher likelihood of failure. Start slow and take one step at a time. Keep it simple and slowly work at implementing one or two rules at a time.  As you begin seeing results and these rules begin to become habits, you can work more in as you go.

Setting Mini-Goals
New habits take time to develop and one way to stay on track is by setting periodic goals, or a series of milestones that help you stick to and develop strong “new” habits. For financial goals, you might consider setting milestones for 30 days, 60 days, 90 days or more. These mini-goals can help with planning more long-term goals like “I will be debt free in three years,” and keep you motivated in reaching that three year/long-term milestone.

Making Good Financial Habits Automatic

When it comes to financial habits, one great way to reverse bad habits is to automate good habits. Things like auto pay or online bill pay through your checking account, utilizing direct deposit to allocate a percentage of your paycheck to a separate savings account, taking advantage of 401(k) savings contributions at work, etc. It makes good financial habits so easy that you don’t even have to think about them. Sounds simple, and it is.

Learning to Expect Setbacks, and Rolling with It
We’re not perfect, we’re human. We make mistakes and we will slip up from time to time. The trick is accepting that there will be setbacks, and if you do slip, learning to pick yourself back up, brush yourself off, and keep going. It’s the difference between success and failure and if you “keep calm and carry on” the habit will eventually stick.

This isn’t an exhaustive list by any means. But hopefully, there are a few tips here that will help you in your own financial journey — and as you go, you’ll develop others along the way. The most important aspect of changing bad behaviors begins with recognizing the behavior and then slowly implementing small incremental changes — gradually replacing them — until you essentially reverse the bad habits into good.

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Get Pre-Approved Before You Start Your Search to Buy

When you are preparing to buy a home, you’ll hear your Accredited Buyer’s Representative (ABR®) ask you whether you’re “pre-qualified” and “pre-approved.” Since this is a very important step in the beginning of the home buyer process, I wanted to pass along some information that can help you better understand what is meant by those terms. If you have any questions, please feel free to contact me.


Many homebuyers are confused by the terms "pre-qualification" and "pre-approval." A "pre-qualification" is simply a conversation with a mortgage loan officer, usually over the telephone, to determine how large a mortgage amount you can afford based on your current income and debt situation. The loan officer takes the numbers you give him or her and uses a calculator or computer program to calculate an approximate maximum loan amount based on the current interest rates for various loan programs. That gives you a realistic idea of how much home you can afford to spend on a house.

A "pre-qualification" is just the first step in the mortgage application process. It is not a guarantee that you will get the loan, it just means that you can qualify for a certain loan amount IF your income and credit report checks out as stated. However, that is not always the case. You may have overestimated your actual income, or more commonly, you may have underestimated your monthly debt payments or your credit rating may not be as good as you thought.

The only way to know for sure that you will get the loan amount that you want is to get "pre-approved" for a mortgage. That means filling out the loan application form and providing all the required documentation to prove your stated income and financial assets, such as paycheck stubs, bank account statements and investment statements.

The most important factor in qualifying for a mortgage is your credit score, commonly called a "FICO score." The only way to truly know what your credit score is for mortgage purposes is to have your credit report pulled by a bank or mortgage company. The credit scores that you get from those "free credit report" services are not the same as a mortgage credit score because they use a different computer algorithm to score your credit.

After pulling your credit report, the mortgage company will run your loan application through a computerized automated underwriting system to get a loan approval based on your income, credit and financial assets on your loan application.

After receiving an automated loan approval, which takes only a few seconds to process after submitting a completed loan application form, the bank or mortgage company gathers the paycheck stubs, bank statements and other documents required by the automated loan approval findings.

Your complete loan file is then reviewed and approved by a human underwriter to make sure it meets the lender's guidelines for the loan program for which you are applying. If everything is in order, you will receive a "credit approval" on the loan. That means you have a written loan commitment based on your income and credit and all you need is a house to go with it.

You can then get a "pre-approval letter" from your mortgage company or bank that your real estate agent can use when making an offer on a home. Home sellers and real estate agents love to work with homebuyers who have been pre-approved for a mortgage. They will take you more seriously when you make an offer, and you will have more bargaining power because you can guarantee that your offer will close. It's the next best thing to being an all-cash buyer. Home sales sometimes "flip" when the buyers fail to qualify for a loan and the seller is forced to put the house back on the market. By relieving the sellers of that anxiety in advance, you may be able to drive a tougher bargain on the purchase price because the sellers know you can close quickly.

So if you are shopping for a home, fill out a loan application as soon as possible and get pre-approved. I know that filling out forms isn't a lot of fun, but it is much easier to complete the loan application process while you are calm and relaxed, rather than stressing out over a purchase offer that you just made on your "dream home." There is plenty of pressure involved in negotiating the purchase of a home without adding the stress of applying for a mortgage at the same time.

Introduction

Hello everyone,

I'm told blogging is the thing to do. So, I thought I'd give it a try.

I'm a Realtor working with HomeFirst Realty and Wilkinson Property Management. This company is a family business and has been serving the Northern Virginia area for 25 years. I joined WPM in 2009. Since I've earned my license as a VA Realtor I have worked as a property manager and sales agent. I currently manage about 90 homes in the Alexandria and Arlington areas. 

For more information you can check us out on HomeFirstRealty.com.

I recently obtained my ABR (accredited buyer representation) certification. As an Accredited Buyer’s Representative (ABR®), I have the buyer's best interests in mind so here is some valuable information on things to avoid before you start searching for a home. 

The Top 5 Mistakes Buyers Make

So you're ready to meet the challenge of buying a new home? With some common-sense planning, you can avoid these five common buyer mistakes and steer yourself towards success:

1. Impulse buying. In order to skip this mistake, do some serious research on your specific needs. For example, how do the local schools rate? Are there parks or recreation facilities that fit your needs? Can you tolerate the traffic? Is there sufficient shopping? In other words, rate areas in terms of what is important to you personally. You might find your "dream house" only to discover that resales are terrible, the schools are abysmal, traffic is a nightmare, or that aircraft patterns go right over the front yard. Bottom line – make your dream home earn its stripes. Before you commit to a long term relationship, make certain you are compatible.

2. Not setting any limits. Don't make the classic mistake of buying into more than you can afford. Needless to say, your first responsibility is to pay for your mortgage, taxes, and insurance. If you're set on upgrades or remodeling, can you fit them into your budget? What about furnishings? Can you afford the extra furniture for those extra bedrooms or for that huge new living room? And what about utilities? Those cathedral ceilings are breathtaking, but have you considered the additional energy costs?

3. Not getting pre-approved for a mortgage. Speaking of monthly payments, most experts consider it crucial for buyers to seek pre-approval from a lender before even looking to purchase. While pre-approval does not necessarily mean you are approved for a loan, at the very least it establishes precisely what you can afford. Once you're armed with that information, you can avoid the heartbreak of finding the perfect home only to discover that it's beyond your reach. In addition, pre-approval substantially improves your status as a buyer in the eyes of a seller.

4. Not working with professionals. So, you've found a lender. Now you need to complete your professional support team. Too many buyers believe they can do this on their own, and they disregard professional input. Avoid a nightmare later by assembling a group of professionals who will suit your needs, represent you, and whose expertise you respect. Begin your search with a buyer's agent. Resist the urge to call the number on the For Sale sign. The seller's agent works for the seller. You need an agent who will work on your behalf and negotiate with your interests in mind. Will you need a real estate attorney? It's a good idea to find a suitable lawyer as your search begins, rather than in the midst of it. To say that real estate documents are confusing is an understatement. A real estate attorney is best suited to protect you from unexpected terms or surprises when it's time to sign on the dotted line. And what about a home inspector? Which brings us to the next mistake…

5. Cutting corners on the home inspection. Lenders require a home inspection before they will approve a loan, but the bank generally pays for only standard home inspections that cover structural components such as walls, support, electrical and piping. Buyers are wise to pay for more thorough inspections to include roof integrity, sewage or leaks. A minor investment with your own inspector is a small price to pay in exchange for enormous deficiencies later.

Ultimately, with smart planning and a realistic approach to home buying, you really can enjoy the dream of owning your perfect home.

Source: RealtyPinPublished with permission from RISMedia.