Welcome to QNB's Lending Blog. Here you'll find helpful articles to keep you informed about the latest retail lending news.
- Budgeting for Your First Car
- How is Your Credit Score Calculated?
- Is an ARM Right for You?
- Gain Financial Freedom One Day at a Time
- Understanding Your Closing Costs
- Can Debt Consolidation Offer You Relief?
- Ready, Set, Search from Anywhere
- Your Road to Better Credit
- Ready to Buy? Questions You Should Ask Mortgage Lenders
- What are the Reasons to Use Home Equity?
- Planning to Buy This Summer? Get Ready Now!
- How Does Refinancing Differ from Home Equity Lines of Credit?
Budgeting for Your First Car
Buying your first car is exciting! But with all the makes and models available today, picking out the perfect car can be a little daunting. Here are a few tips to help you prepare to purchase your first car.
Set up a realistic budget. How much can you afford to spend on a car? An easy way to learn what you can afford is to get preapproved. Once you know what you can afford, stick to that amount. Also prepare for additional expenses like gas, insurance, registration, title fees, taxes, maintenance and repair costs.
Do your research. Sure, that sports car looks fun, but how much money will it take to keep it running? Make a list of things you need in a car and research reliability, safety features and gas economy for different makes and models of vehicles.
Only buy what you can afford. If you’re financing a car, make sure you can put down at least 20 percent of the car’s price or you’ll probably end up owing more than it’s worth. If you can’t afford to put down the 20 percent or pay off the car in 48 months, don’t buy the car. Instead, purchase a less expensive vehicle or wait until you’ve saved more money.
Read the fine print. If you finance a car, know what you’re committing to. Dealerships love to convince people they can afford a monthly payment, but sometimes the cost is higher than you think.
Take someone with you to the dealership. Do you know anyone who has a knack for making a deal? Or who knows cars inside and out? Get them to go with you for the test drive and take them out to lunch as a thank you. Having someone with some insight on your side at the dealership can help you make a wiser decision and possibly negotiate a great deal.
Buying your first car is a step toward financial independence. By following these tips, you’ll be sure to make the right choice at the right time.
How is Your Credit Score Calculated?
Your financial information depends on a positive credit score. Because of this, it's important for you to understand the contributing factors that make up your credit score:
Payment History (35%). This factor contributes the greatest weight to your overall credit score – and for good reason. Your payment history helps answer the question: “Will you repay credit extended to you by a lender?” Your credit report includes every type of credit you’ve received and how you’ve repaid that debt. A lender will be able to see if you’ve been late or missed any payments, and whether you’ve had a bankruptcy or any other type of collection issue.
Credit Utilization (30%). Another key factor lenders review is how much credit you have available. This allows lenders to learn how you use credit and whether you can take on more debt.
Credit Age (15%). The next contributing factor to your credit score is how long you’ve had credit. Your credit score is derived by how long your oldest and most recent accounts have been open. Typically, your credit score will improve when you have a history of responsibly paying off your credit accounts for a longer period of time.
Mix of Credit (10%). Your credit score is also impacted by the different types of credit you carry as well as the mix of credit you have (revolving and installment loans). The more mix of credit you have, the better your score will be.
Number of Inquiries (10%). Your credit score is impacted by the number of “hard inquiries” on your credit report. A hard inquiry occurs when a lender checks your credit score in response to a credit application you’ve submitted. A large number of hard inquiries (especially if they occur in a short period of time) can have a negative effect on your score. On the other hand, your credit score is not affected by a “soft inquiry.” These inquiries include preapproved credit offers, or when a lender reviews your existing account to potentially offer an increased credit limit.
Check your credit score at least annually (free of charge) by visiting annualcreditreport.com.
Is an ARM Right for You?
When you’re ready to buy a home, there are many mortgage options to choose from. How do you choose the one that’s right for you? Should you get an adjustment-rate mortgage (ARM) or get a fixed-rate mortgage? Consider the following when deciding on a mortgage.
If you don’t mind a fluctuating rate, an ARM may be right for you.An ARM is a mortgage that usually offers a low introductory rate (up to 10 years) at a lower rate than you can get with a fixed-rate loan. After an introductory period, your rate will adjust annually to reflect the current market conditions. If you’d rather pay a lower rate for the first few years of your loan, with the option of a higher rate (especially in our existing market environment) each year, an ARM is a good choice. However, if you prefer having the same monthly payment throughout the life of your loan, a fixed-rate mortgage makes more sense.
If you’re going to live in your home for just a short time, an ARM may be right for you. Some people move often – due to work or the need for change. If you’re planning to move within five to 10 years of getting your loan, an ARM is a great option because you can take advantage of the low introductory rate and avoid a possible higher rate later in the loan term. But, if you’re planning to stay in one place for a long time, be sure you’re comfortable with a potentially changing rate. If you’re not, consider a fixed-rate mortgage.
If mortgage rates continue to remain low, a fixed-rate mortgage may be your best option.Over the next five, 10 or even 30 years, interest rates are likely to go up. With a fixed-rate mortgage, you can keep your loan rate low, which in turn, keeps your monthly payment low.
These are just general things to consider – what you ultimately decide will be based on your loan amount, where you’re going to live, and the types of loans available. Talk to your loan officer to help you determine the best mortgage for you.
Gain Financial Freedom One Day at a Time
Are you feeling trapped by the amount of debt you have? You’re not alone. Many people feel overwhelmed by debt – especially after the holidays - and simply don’t think there is a way out. Take a look at three simple steps you can take to get started on your path to financial freedom.
Step #1: Understanding Your Financial Picture
Before you can even begin to get out of debt, you must have a clear picture of what you owe. You should start by writing it all down. Then, you must keep track of how much money you bringing in every month and know exactly where you are spending money every day. This may seem tedious, but it is necessary.
Step #2: Focus on Ways to Spend Less
In your financial analysis, you will find a few areas where you are spending more than you probably think. For example, maybe you discover that you’re spending $100 a month going out to lunch. So, maybe the next month you only spend $80 or $90 for lunch. By shaving off $10 a month in 10 different areas, you will have an extra $100 to pay off debt.
Step #3: Start with Smallest Amount First
Create a plan based on the loans you want to pay off as soon as possible. We recommend you pay off the smallest amount of debt you have first and work up from there. For example, you have $25,000 in unsecured debt (debt that is not secured by a car, home, etc.), which is made up of two credit cards with a balance of $10,000 each and a personal loan of $5,000. We suggest making a larger payment on your personal loan first. So, if you would normally pay $25 per month, maybe pay $40 per month toward the principal amount. Once that loan is paid off, then you use the extra $40 to begin paying the credit cards. Remember, the real key here is that you must avoid gaining more debt at the same time.
Understanding Your Closing Costs
Most potential home buyers calculate how much of a mortgage payment they can afford and shop within that budget. When budgeting to buy a home, consider additional expenses that come with a real estate transaction – like closing costs.
Closing costs are fees paid at the close of a real estate transaction that must be paid in full before the title of a property can be handed over to a buyer. These fees are charged by your lender for services performed to close your loan, such as appraisal fees, inspection fees, title insurance fees and taxes. Typically, closing costs range between 2-5% of the purchase price of a home. For example, if your home costs $250,000, you will likely pay between $5,000 and $12,500 in closing costs.
Lenders must give you a loan estimate within three business days of receiving your completed mortgage loan application, which includes an estimate of your closing costs broken down by type of fee and amount. Review your loan estimate closely and ask your lender any questions you have. Don’t leave anything to chance. You’ll be responsible for paying these fees so understand them and make sure they’re fair. If you feel they’re unreasonable, try another lender or comparison shop.
If you can’t pay for the closing costs at closing, you may be able to roll them into your mortgage. This could end up costing you more in interest over time, but it might be necessary. You may also be able to negotiate who pays the closing costs with the seller. If sellers are motivated, they may agree to assume some or all of your closing costs.
Can Debt Consolidation Offer You Relief?
Are you feeling trapped by the amount of debt you have? You're not alone. Many people feel overwhelmed by debt and simply don't think there is a way out. How can you find relief from what may feel like crippling debt? Let's learn more about how consolidating your debt may work for you.
Debt Consolidation Loan
Many financial institutions offer debt consolidation (or personal loans) to help you consolidate all of your debt into one low-rate loan. For example, let’s say you have two credit cards: one with a balance of $5,000 at a rate of 12% APR, and another with a balance of $10,000 at a rate of 18%. By consolidating that debt into one low-rate personal loan with an interest rate of 7%, you can potentially save hundreds of dollars every year. This can also help you avoid late fees, because you now will make one payment instead of multiple payments.
Low-Rate Credit Card
Depending on your credit score, you may be able to get a credit card with an interest rate lower than any of your current cards. Many institutions, for example, will give you a 0% APR option to transfer your balances to their card for six months or even a year. By doing so, you’ll initially save hundreds of dollars because you are not paying interest on any of the debt, thus being able to pay off your balance faster. However, the trick is to not put any further balances on that card unless you face some sort of emergency. Furthermore, you should also make sure that the rate offered on the new card is lower than any of the rates on your existing cards after the “0% introductory period” ends.
Whichever route you choose, consolidating your debt will only be successful if you follow a budget and limit adding more debt.
Ready, Set, Search from Anywhere
You've made the decision to buy a new home and are prequalified for a mortgage. It’s time to begin your search. Did you know you can do it without leaving your couch? Starting your search online can narrow down your favorites and prepare you for the first meeting with your real estate agent. Here are five tips to help in your search for the perfect home.
Search websites from the experts. Focus your search on websites that are sponsored by experts – Zillow.com, Redfin.com, Homes.com, Trulia.com or Realtor.com. These sites are updated regularly and provide the most recent information about homes for sale in your area. Target your search – with the maximum amount you want to spend, number of bedrooms and bathrooms, and ZIP code. Drill down until you find homes you want to walk through in the neighborhood you prefer.
Go mobile and get connected. The services mentioned above have apps you can use to stay updated during your search. You can get text alerts when homes become available at your price point. Some apps even show homes you may like based on your search history.
Make sure you visit the homes you like. You’ve found the perfect home online. You’ve looked at the photos, and it’s got everything – the countertops you want, a double oven, a large backyard, and even a Jacuzzi. But, beware – they’re only photos. Sometimes sellers will pick only the best photos for the website, with the best lighting. Make a list of homes you’d like to visit to share with your real estate agent. This is a big purchase – take your time and look at as many homes as you want.
Keep an open mind. One of the worst things you can do is get attached to a home you’ve found online – and find out it’s been sold. Make a list of several homes you want to visit with your real estate agent. Prioritize your list with your favorites at the top. Once you visit them, either keep them on the list or scratch them off.
Ask questions. Searching for a home online gives you the chance to create a list of questions to ask when you visit a home. The more informed you are about a home, the more confident you’ll be in choosing the right one for you. So ask away – from HOA rules to whether the home is wired for surround sound.
Your Road to Better Credit
Are you looking to improve your credit this year? By following these simple steps, you’ll be on the road to better credit, which will lead to a better financial future for you.
Pay Your Bills On Time
It’s essential that you pay your bills on time every month if you want to improve your credit score and avoid late fees. One way to accomplish this goal is to set up automatic bill repayment, which you can do this using QNB-Online's Bill Pay service. If you don’t feel comfortable with automatically repaying your loans, you should consider setting up alerts on your accounts to remind you when bills are due. That way, you never miss a payment or forget about one.
Reduce the Amount of Debt Your Owe
If you can pay a little extra toward the principal amount on each of your loans every month, you’ll be able to see the dividends fairly quickly. Of course, this is easier said than done. Start by increasing your payments by an extra $10 each month for all of your loans. As time progresses, you can increase that amount and start reaping the benefits of lower debt and a higher credit score.
Only Use What You Need
Another important piece of advice to follow is to only use the credit you really need. It is always better to save for a larger purchase than to put the amount on a credit card and pay it off over time. You may encounter situations where you must make a large purchase and credit is your only option. Just make sure you use the best credit option available to you.
Get Rid of Unneeded Credit Cards
While it is important to have credit cards, it is not recommended to have 10 of them. Pick one or two credit cards that provide you with the greatest benefit, and work to eliminate the rest. It’s important to speak with a credit adviser prior to closing a long-term card, because you want to make sure you are not hurting your credit score in the “length of credit history” category by doing so.
The reality is that improving your credit score may take time. But, if you take small steps every day to do so, you will reap the benefits and end up with a better credit score in the long run.
Ready to Buy? Questions You Should Ask Mortgage Lenders
Buying a home is one of the biggest financial decisions you’ll make. It’s important to research not only what home is best for you, but what mortgage loan you should apply for as you begin the process. If you’re ready to buy a home, there are a few crucial questions you should ask potential mortgage lenders.
What loan options are available and relevant to your circumstances?
Look at all the loan options available to you. Be sure to ask the following questions:
- What is the interest rate? Is it fixed-rate or adjustable?
- What is the estimated monthly payment?
- What is your estimated down payment amount?
- Are there any additional fees or penalties, such as closing fees or prepayment penalties?
- Are there any other costs to consider, such as appraisal fees, credit fees, escrow, inspection fees, recording fees and taxes?
- Do you qualify for any special loan or payment programs, such as VA loans or FHA loans?
- Will you have to pay mortgage insurance?
You don’t want to be stuck in a loan that’s not best for you, so go over details with each of your potential lenders. Going over different loan options with different lenders may uncover a loan you may not have considered – one that suits you best.
What does the home-buying process look like with each lender?
After going over the specifics of your loan, ask each lender you’re considering about their home-buying process – from a preapproval to closing. Every lender has a different way of doing things – so just find one that aligns with your home-buying goals. Consider the following:
- When will they pull your credit score?
- Do you need to be prequalified as well as preapproved for a loan?
- What information will they need for a preapproval? What is the turnaround time for a preapproval answer?
- How quickly can you close?
- Where will your closing take place?
How will the lender communicate with you?
Communication is key to any lending relationship. Choose a lender with a communication style that works best for you. Consider the following:
- Who will be your main point of contact? Will it be someone different than who you speak to at first?
- Does the lender prefer email, phone calls, or U.S. mail?
- Is there an online portal you can access to submit documentation and view your loan status and progress?
Most lenders will answer most of these questions before you ask, but it’s good to know what to expect in the process.
Choosing the right lender leads to a more rewarding, and less stressful, home-buying experience. If you have questions about the mortgage lending options available at QNB Bank, click here, or call 215-538-5600.
What are the Reasons to Use Home Equity
If you’re sitting on equity in your home, did you know you can use it for good? And, in many instances, you can write off the interest earned from your taxes. Here are three great ways to use the equity in your home.
Use #1: Make major home renovations.
Typically, major home renovations require large amounts of money – whether you’re putting in a pool, adding on to your home, or putting in a new kitchen. A home equity loan allows you to pay one lump sum for the renovation, while a home equity line of credit (HELOC) gives you the option to make interim payments over time depending on the need of your contractor or other vendor.
Use #2: Pay for college expenses.
We all know a college education can be quite expensive. But, did you know you can use the equity in your home to pay for it? Use a home equity loan to pay for everything upfront for the year, or take out a HELOC and use for expenditures throughout each year. The beauty of using a home equity loan or HELOC is the rates are usually lower than student loan rates, which saves you a lot of money over time. However, you’ll have to make payments on that loan immediately as opposed to a student loan that doesn’t require payments until after graduation.
Reason #3: Consolidate your loans.
Many people choose to consolidate their loans into one lump-sum payment using a home equity loan or HELOC. In many instances, the rates will be lower (especially if you’re consolidating a credit card or personal loan), and you’ll be able to make one payment each month instead of multiple payments for multiple accounts. The trick is to avoid using the credit you consolidated; otherwise, it’s not that wise of a decision.
Although you can use your home’s equity in various ways, be aware that any way you use a home equity loan or HELOC puts your home at risk. Just stay disciplined and committed to making your payments on time, and you should see significant savings over time.
To learn more about the home equity programs available at QNB Bank, click here, or call 215-538-5600.
Planning to Buy This Summer? Get Ready Now!
If you’re planning to buy a home this summer, you should prepare now. Here are five things you can do to help you get into the home of your dreams as quickly as possible.
Before you start looking for a home, get pre-qualified. This way, you’ll know what you can afford and can shop within your budget. Plus, you’ll be a “serious” buyer to a seller. Discuss loan options with your lender and start thinking about how you plan to finance your home.
Hire a real estate agent.
You can do a lot of searching on your own, but it’s still essential to have a real estate agent help you with the home buying process. Your agent can help you find a home you like, within your budget, and negotiate the best deal for you.
Find out your credit score.
Your credit score is key to getting the best loan possible. By law, you get one free credit report each year by going to annualcreditreport.com. Take advantage of this free offer and review your score. Make sure everything is in order. If your score is lower than anticipated, talk to your lender about how you can improve it before buying your home. There are things you can do to change your score in as little as three to six months. The better your score, the more options you’ll have.
Save for your down payment.
The type of loan you choose determines the amount you need to save for a down payment. For example, if you’re eligible for an FHA loan, you put down as little as 3.5% of the purchase price. Some loans require no down payment at all. In most instances, though, you need to prepare for a down payment of approximately 20% of the purchase price.
Get your documents in order.
If you know you’re ready to buy within the next three to six months, start a file to use for documentation purposes. Ask your lender what you’ll need for the loan and start preparing now. Some of these documents include paycheck stubs, W-2s or I-9 tax forms, bank account statements, investment statements, details on current real estate holdings, or tax returns. Keep this information updated for your lender when you’re ready to buy.
Buying a home takes time, but the process is easy when you’re prepared. To learn more about the mortgage process at QNB Bank, give us a call at 215-538-5600. We’ll walk you through everything you’ll need to get into your home as quickly as possible.
How Does Refinancing Differ from Home Equity Lines of Credit?
Cash-out refinancing and opening a home equity line of credit are both good options for making funds available using the equity in your home. But, there are significant differences between the two. Here is some information about both options to help you make the right choice for your circumstances.
A cash-out refinance actually pays off your existing first mortgage and creates a new mortgage loan. At closing, you’ll receive a lump sum from the money left over after your existing mortgage is paid off – which you can use as you wish. Many choose this option to gain access to cash or get a mortgage at a more competitive rate. Just know that a cash-out refinance has closing costs much like your original mortgage – and those can be significant.
Home Equity Line of Credit
A home equity line of credit, or HELOC, is considered a second mortgage as it is usually taken out in addition to your existing first mortgage. With a HELOC, you can withdraw funds as needed during a predetermined draw period – usually 10 years. You pay interest only on the amount you draw. When the draw period ends, you are no longer able to withdraw your funds and you have a certain period of time to repay the outstanding balance. Unlike a cash-out refinance, you usually have no closing costs.
The benefits of doing a HELOC include paying down principal faster than a cash-out refinance and the ability to recover costs faster. Plus, the cost to open and use a HELOC is much lower than a cash-out refinance.
What's the Best Option for You?
It depends on your needs and circumstances. If you need access to the equity in your home, do your homework. What is it you need the money for – something short-term? Or, do you want to lower your mortgage rate and use the cash for other improvements or expenses?
We're happy to help you find an option that's right for you. To learn more about the cash-out refinance and HELOC products available at QNB Bank, call us at 215-538-5600.
Information is for informational purposes only and is not intended to provide legal or financial advice.