There are plenty of bad reasons to buy a house.

Why You Shouldn’t Buy A House

“Renting is just throwing money away.”
“A house is a great investment.”

Sound familiar? Maybe you’re facing pressure from friends or family to make the switch from renter to homeowner. Or, maybe you feel like everyone else is doing it, so you should, too. Maybe it just feels like the logical next step in your path to becoming a Responsible Adult.

But here’s the thing: none of those are good reasons.
There’s only one really good reason you should buy a house: because you’re financially prepared to do so.

We’ve said it before and we’ll say it again. Buying a house is a big deal, and likely the biggest purchase you’ll ever make. You shouldn’t take it lightly and you shouldn’t rush into it. If you’re feeling the pressure but aren’t sure if you’re financially fit for home ownership, there are some things you should know.

Not all investments are good
Your uncle may be convinced otherwise, but a house isn’t always a great investment. Yes, some people make (a lot of) money investing in real estate. But the reality is that most people do not. When you consider market volatility, taxes, interest and depreciation, you may not even get an annual return on that “investment” at all. While time certainly helps level out volatility, not everyone has 30 years to wait for investment to pay off. Unless you’re buying properties for rental income, it’s wiser to think of a home purchase as just that: a home. Not an in investment.

You’re not throwing your money away
Perhaps one of the biggest benefits of renting is the luxury of being able to call your landlord when things go awry. It may take longer than you’d like for the maintenance team to show up, but at least you aren’t footing the bill for that broken furnace.

Are you ready to spend your weekends fixing leaky faucets and doing yard work? Not all houses require extensive maintenance, but some do and almost all of them are bound to need a new roof or water heater or other major repair/replacement during your ownership stint. Experts recommend saving between one and four percent of your home’s value each year to pay for general upkeep and major repairs. If none of that sounds appealing, you may want to keep writing that rent check.

You can’t take it with you
Feel like moving across the country? If you’re renting, your housing situation isn’t likely to prevent you from doing so for very long or cause a major blow to your finances.  You may have to pay a penalty if you leave before your lease is up, but that’s nothing compared to the expenses you could face if your house doesn’t sell.

If you buy a house, you should plan on staying put for at least five to seven years if you plan to break even, ten if you’d like to make a profit. Moving before that could end up costing you money when all is said and done.  If your job requires you to move quickly, you could get stuck in the unfortunate situation of paying rent in your new location on top of your mortgage.

Bottom line: Owning a home is a great thing for some people, when they’re financially and emotionally prepared for the task. But, if you’re buying a home because of peer pressure, societal pressure or any reason other than because you’re financial prepared, you probably shouldn’t.

If you’re not sure if home ownership is right for you, IH Mississippi Valley Credit Union is here to help. Try our online calculators to estimate the costs of owning vs. renting. Or, give one of our Financial Services Officers a call. They’ll give you a financial check-up and put you on the right track to be ready in the future.

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Team of happy college students sitting in the library and communicating. One of them is using laptop. Focus is on woman in the middle.

What you should know about student loans

If you’re like most people, you probably don’t have the funds to pay for college tuition out of pocket. Without student loans, higher education wouldn’t be an option for most students. But just because the majority of students today graduate with debt, it doesn’t mean it’s the right move for everyone. Before you start looking for funding, it’s important to know your options.

First things first, students should max out their free and lower-cost options before turning to private funding. Free options are things like scholarships and grants that don’t have to be paid back. If you still owe after the free money has been used, lower-cost funding like Federal Direct Loans are the next best option. The more expenses covered with these funding sources now means less that’ll have to be paid back later.

Federal vs. Private Loans
If you can’t cover all of your expenses with federal student loans, be smart when you turn to private lenders.  Many private lenders don’t offer borrowers the same protections as federal loans, like deferment, forbearance and specialized repayment plans.

Generally speaking, federal student loans have lower interest rates than private loans. Some private lenders offer loans with variable rates, which could have an initial rate that’s lower than federal options. If you go this route, keep in mind that variable rates change—sometimes drastically. The low rate at signing could skyrocket after graduation. Before you sign anything make sure you’ve researched all your rate options and how they align with your repayment goals.

Co-signers & Credit Checks
Federal student loans don’t require a co-signer or credit check, which is good news for young borrowers with little or no credit. Most private lenders will require a co-signer, usually a parent or family member, who agrees to take responsibility for the loan if the borrower fails to make payments. The upside here is that if your cosigner has really good credit, you could get a lower interest rate.

When it comes to private loans, borrowers should shop around for the best rates—but be careful not to ding your credit in the process. Lenders will pull credit for both the borrower and co-signer to determine the interest rate, so you have about two weeks to comparison shop. After that, every inquiry can temporarily lower your scores.

Borrowing limits
Federal loans usually limit the amount that can be borrowed to the total cost of school, minus any awards (scholarships, grants or work study programs). Depending on the lender, private loans may just have a yearly limit, leaving it up to the borrower to decide how much to take. So it’s important to ask not how much you’re able to borrow, but how much you need to borrow and stop there. You might want a new big screen TV, but you’ll end up paying way more for it in the end.

Repayment
Most student loans have a standard repayment term of 10 years but, with deferments & specialized repayment plans, the average actual repayment is closer to 20 years. Depending on your interest rate, an extra 10 years could mean a lot more money spent overall.

No matter what kind of loans you end up with, federal or private, you’re stuck with them until they’re paid in full. Unlike other debts, student loans aren’t dismissed in bankruptcy. With few exceptions, student loan forgiveness is pretty much limited to death and total and permanent disability.

Need funding to fill your payment gap? IH Mississippi Valley Credit Union offers undergrad, graduate and consolidation student loans that won’t leave you with a mountain of debt. Learn more or apply online at ihmvcu.org/studentloans.

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What to know before you buy your first home

Buying a home is serious business.

If you’re anything like the average first-time home buyer, you probably have ten new questions for every answer you already know. So how do you know if you’re ready to be a homeowner? In addition to saving a down payment and preparing a budget, knowing the answer to a few basic questions is a decent start.

What’s a mortgage?

A mortgage is a loan to finance the purchase of a home. It’s probably the largest debt you’ll ever take on, and is usually more than just a house payment. It’s made of a couple moving parts: collateral, principal, interest, taxes and insurance.

In the case of a mortgage, the house you purchase serves as the collateral, or security for the loan. If you fail to make payments, your lender can seize the home as repayment.

You’ve probably heard the words principal and interest in the context of loans before. The amount you borrow up front is the principal balance of your loan. Typically you’ll make a down payment of at least 20% of the purchase price and borrow the rest. Some lenders will accept a down payment as low as 3.5% of the home’s value for first time buyers. Interest is what your lender charges you to use their money to make the purchase. Together, principal and interest will make up the bulk of your loan.

Like most other purchases you make, you’ll have to pay taxes on your home and the amount you pay will vary depending on where you live.

Before you close on your home, you’ll also have to prove to your lender that you have insurance to protect the house and your belongings in the case of a fire or natural disaster. If you live in a designated flood plain you’ll have to obtain flood insurance, too.

Many borrowers elect to have taxes and insurance rolled into their mortgage payment through an escrow account. This way, they can make small payments every month instead of worrying about a large annual or semi-annual payment.

Do I really need 20% for a down payment?

Not necessarily, but it’s recommended. How much you’re required to put down will depend on your lender and qualifications.

The Federal Housing Administration (FHA) has programs tailored to first time buyers that offer low down payments, low closing costs and easy qualifications. Some states also offer their own assistance programs for first time home buyers.

If your down payment is less than 20%, you’ll have to pay for private mortgage insurance (PMI).

What’s private mortgage insurance (PMI)?

PMI protects your lender if you default on your loan, but you pay the premiums. It’s a requirement for any mortgage loan with a down payment less than 20%. There’s really no benefit for the borrower, so it’s best to avoid it if you can.

If you opt for a lower down payment, you’ll have to make PMI payments until the balance of the loan reaches 78% of the home’s original value.

If you get an FHA loan, you’ll have to pay PMI for the life of the loan, even if you get the balance down to 78% of the original value. The only way to remove PMI from an FHA loan is to refinance.

Should I work with a real estate agent?

Unless you have expert level knowledge about the area you hope to buy in, and know a lot about how to properly price a home and make an offer, you’ll probably benefit from working with a professional.

The listing agent works for the sellers, not buyers. A buyer’s agent will help you get the best price, give you independent advice and may even be able to point you towards listings you wouldn’t know about otherwise.

What’s the difference between preapproval and prequalification?

Prequalification is usually the first step in the mortgage process. You’ll provide your lender with a basic picture of your financial situation including debt, income and assets. In most cases you can do this over the phone or even online. Your lender won’t pull your credit report or take an in-depth look at your ability to finance a home, so you’ll only get a ballpark number of what you might be able to afford based on surface level information. It’s essentially an estimate, and just because you’re prequalified for a certain amount doesn’t mean you’ll be approved for that amount (or even be able to afford it).

Preapproval is the next step. You’ll probably fill out a mortgage application, and your lender will take a hard look at your financial situation—pull your credit, assess debt to income ratios and verify your employment. When it’s all said and done, you’ll be given a specific amount for which your mortgage is approved. You’ll probably also get a written contingent agreement allowing you to shop for homes at or below that dollar amount.

Getting preapproved will save you a lot of time and disappointment by narrowing down your price range before you start looking at homes. You can totally avoid those homes you know you can’t afford, and focus on your real options. You gain advantage when dealing with sellers, too—you’ll be able to make serious offers that aren’t contingent upon obtaining financing. If you’re competing against other buyers for the same home, your bid may be more appealing compared to someone who hasn’t arranged financing.

What are closing costs?

These are the fees associated with the close of any real estate transaction. Closing takes place when the buyer takes position of the home’s title.

How much you pay depends on where you live and what home you buy, but total closing costs are usually around two to five percent of the homes total purchase price. Typically, your lender will give you a Closing Disclosure that outlines any fees a few days before closing.

If you’re still searching for answers, check out our first time home buyer checklist and see where you stand before you get started.

Ready to get moving? Contact our home loan officers today for more information!

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How to Cope with Market Volatility

Recent market swings, brought on by falling oil prices, China’s slowing economy, and political uncertainty have many investors concerned about their retirement savings. Market volatility plays a big role in the performance of investments over time. Consider taking these six steps to minimize its impact on your investments.

Know your long-term goal.
It’s important to develop a long-term, disciplined plan for saving and investing so you can draw from your savings throughout retirement. Think of it as being able to pay yourself each month when regular income from your employer stops.

Stick to your plan.
Nobody can predict when the market will have its best days, so it’s vital to stay the course regardless of market shifts. Steadily investing the same amount on a regular basis lets you take advantage of dollar-cost averaging, avoid the temptation of timing the market and takes the emotion out of investing.

Consider asset allocation.
Asset allocation can be an important investment strategy. Dividing your contributions among stocks, bonds, real estate and cash allows you to balance the risk of your investment if one investment class is performing poorly. The right asset allocation for you depends on a few key things: your comfort level with risk and how much time you have until retirement.

Diversify.
Diversification takes asset allocation a step further by spreading your money into different options within each asset class. This spreads the risk so investment balances may be less affected by short-term market swings.

Rebalance regularly.
Rebalancing should be a part of your action plan. Over time your asset allocation can change as some investments grow more than others. Rebalancing returns your investments to the original allocation, keeping it consistent with your long-term goals.

Monitor your investments.
Once you choose the mix of investments that works with your goals, it’s important to review it periodically. Life is full of unexpected changes that can affect your tolerance for risk or the time horizon for your plan.

A financial professional can review your investments and help make changes to you plan on an ongoing basis, and incorporating these six steps will help you stay on course. Let us know if we can help you meet your long-term investing goals.

Bob Blaze, CFP®

Bob Blaze, CFP®

 

Article by Bob Blaze, CFP®, Financial Advisor
Bob has been helping clients with financial planning for more than 20 years, and a CFP® professional for nearly ten. He currently specializes in personalizing wealth accumulation strategies, Individual Retirement Accounts (IRAs) and retirement plan rollovers.

 

Source: “Coping with Market Volatility.” Principal Fund Distributors. August, 2015.

Our advisors are securities licensed in IA, IL, and WI. Securities offered through Broker Dealer Financial Services Corp., Member FINRA (www.FINRA.org) & SIPC (www.SIPC.org). Securities are not are not federally-insured; are not obligations of the credit union; are not guaranteed by the credit union; involve investment risk, the value of the investment may fluctuate, the return on the investment is not guaranteed and loss of principal is possible; may be offered by a dual employee who may accept deposits on behalf of the credit union and may sell non-deposit investment products on behalf of a third-party securities broker-dealer.
Advisory services offered through Investment Advisors Corp., an SEC registered investment adviser. 

 

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College by the Numbers: The High Cost of Higher Education

A lot of people these days will tell you that a college degree is no longer optional—it’s a must have to find a job. In fact, a four-year degree is often touted as having the same significance as a high school diploma in decades past.

Though there’s not much data to back up those assertions, research by the National Center for Education Statistics shows that in 2014, young adults age 20-24 with a Bachelor’s degree had an 88.1% employment rate, compared to just 63.7% for those with a high school level education.

The prospect of a better job and better income is one major driver for those seeking higher education, but the results aren’t always cut and dry. If you’re one of the many students impatiently waiting at your mailbox for a college acceptance letter, here are the numbers you should know before you enroll.

90%
According to Princeton Review, the overwhelming majority of students & parents feel that financial aid (education loans, scholarships or grants) will be necessary to pay for higher education. Ninety percent of students said financial aid would be “extremely” or “very” necessary.

$35,000
The cost of higher education is constantly on the rise. According to the Wall Street Journal, the class of 2015 graduated with an average student loan debt of $35,000, making them the most indebted class ever.

$79,250.45
The average cost of a degree for those attending a public, in-state college or university is $79,250.45. While that may seem steep, those attending a private school can look forward to a bill closer to $177,000 for a four-year degree.

35%
Though plenty of students are afraid they won’t get into their college of choice, 35% are concerned they’ll get into their first-choice college, but won’t be able to attend due to the high cost or insufficient financial aid.

$1,298
In 2015, it’s estimated that students at four-year colleges and universities spent an average of $1,298 on books and supplies, according to College Board.

$48,000
The average starting salary for bachelor’s degree holders is $48,000, versus $30,000 for those who stopped after high school. Keep in mind that your starting salary is largely dependent upon your major—Engineering majors earn the most with a median starting salary of $64,367, and Liberal arts and Humanities majors earn the least at $36,237.

$26,000
Every year IHMVCU awards $26,000 in scholarships to students who excel in the classroom and their communities. Interested? Learn more and apply online at ihmvcu.org/scholarships.

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IHMVCU Newsletter – Winter 2016

Your copy of the fall newsletter is hitting mailboxes next week!Cover

Featured articles:
Q&A with the New CEO
How to get the Most of Your Refund
Buy a Home Without Going Broke
Keeping Your Information Safe

Click here to read the entire newsletter early.

 

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3 Ways to Get Your Budget Back After the Holidays

If holiday spending left you dreading the mailman, you’re not alone. According to a survey conducted by American Research Group Inc., Americans plan to spend an average of $882 this year on Christmas gifts alone. Add in the cost of family dinners, decorations and other holiday events and your average American household is spending well over $1000 during the holiday season.

If you’re one of the many Americans who to plan to make all their holiday purchases with a credit card, or you just totally overshot your budget, you may find yourself carrying a mountain of new debt into the New Year.

Here are some suggestions to get your budget back on track before the temperatures start rising again.

Know what you spent.
Don’t be surprised by your bill in January. Save your receipts from any holiday related credit card purchases and immediately make a mental subtraction from your checking account. You’ll know what to expect when the holidays are over, and you’ll have enough to pay for it.

Make a repayment resolution.
Many Americans add holiday purchases to existing credit card debt. If this sounds like you, separate the total you spent on holiday purchases and make a plan to pay off that amount by the end of the first quarter of the year. You’ll be back to making pre-holiday payments by April.

Save your bonus.
While it can be tempting to use that year-end bonus or money you got has holiday gifts to just pay off your credit card debt, it’s probably only a temporary solution. According to Nancy Anderson, a financial planner and Forbes.com contributor, it’s often better to develop a realistic repayment plan and save your hard earned bonus to prevent the same debt-accumulation problem in the coming year. To find out if this is the best plan for you, read her article “When Not to Pay off Your High-Interest Credit Card Debt.”

For more help rebooting your budget, check out our easy savings, debt and budget calculators at ihmvcu.org/calculator. See what it will take to pay off your debt, calculate your household cash flow or even see the impact of setting a savings goal.

What’s your best holiday budget advice? Share in the comments, on Facebook or Tweet us!

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5 Tips For Hosting Your First Thanksgiving

Thanksgiving DaySo you’re hosting Thanksgiving for the first time. The big day is only two weeks away, and if you’re freaking out—don’t worry. IHMVCU has taken the time to round up the best advice for first time hosts and hostesses.

Don’t forget to thaw the turkey.
If you’re using a frozen bird, know that depending on the size it can take up to a week to thaw entirely. If you’re feeding a large crowd, you definitely need to plan ahead—so buying the turkey the night before is probably not a good bet. According to the USDA, it takes about 24 hours in the fridge for each 4-5 pounds of turkey.

Remove the giblets.
If you’ve never roasted a bird before, you may not know that there’s a little bag of giblets (i.e. raw organs) inside your turkey. The good news is that your turkey may not be ruined if you forget to remove it. Again, the USDA has some great food-safety advice when it comes to giblets. If you do forget to remove them, giblets packed in paper are no concern if accidentally cooked in the turkey. Giblets packed in plastic are a different story. If the plastic bag comes out of the turkey unaltered, the giblets and poultry are safe to eat. If the bag is melted or altered at all, it’s best to trash the whole bird.

Use a turkey bag.
The internet and IHMVCU staff agree—when cooking a turkey, using an oven bag is a no-brainer. You get moist, juicy turkey inside and crispy skin outside. The bag method doesn’t allow the juices to evaporate though, so there’s no fond for gravy (aka brown bits at the bottom of the pan). If you want gravy, poke a hole in the bottom of the bag during the last hour of cooking, allowing the juices to drain into the bottom of the roasting pan.

Do as much as you can the night before.
Most side dishes can be prepared the night before and reheated before dinner. Our very own VP of Marketing, Amy Orr, even roasts her turkey the night before. Think it can’t be done? Think again. Roast and carve your turkey as usual, then put the meat in a storage container with a little juice, and store the rest of the drippings separately. On the big day, transfer your meat and the juice you stored it with to a glass or metal container, cover it with foil and throw it in the oven with one of your sides until warm. Amy says you’d never know it was cooked the night before, and we trust her.

You don’t have to do it all.
Asking around the IHMVCU corporate office, most people agreed it’s perfectly acceptable to ask your guests to bring a dish. Rather than just asking everyone to bring something, give everyone a specific dish to bring. You don’t want to have four bowls of mashed potatoes and no green bean casserole.

What’s your advice for first time hosts and hostesses? If you’ve never hosted before, what’s your biggest worry for the big day?

Share with us in the comments, or start a conversation on Facebook or Twitter!

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4 Last Minute Halloween Costumes From Things You Already Own

Coming up with a witty and original Halloween costume can be hard. Sometimes putting it off so you can give it more thought helps, and other times that leaves you without a costume in the eleventh hour.

Don’t worry—IHMVCU is here to help. These costumes aren’t witty or original, but you can make them with things you probably already have around the house. The fact that you already have most of the supplies makes them super budget friendly, too.

Ghost
What you’ll need:
A sheet
Scissors

You can probably figure this one out. Extra points if you use a patterned sheet (like the ghosts in Beetlejuice).

 

 

M&Ms
What you’ll need:
Friends
Several t-shirts in different colors
White fabric paint

This one requires a little time for the paint to dry, so you’ll need to start it the night before you plan to wear it. Gather a group of friends and have everyone paint a lowercase “m” on a colored t-shirt, then move as a group for the night.

 

Cupcake

Photo credit: Womansday.com

Photo credit: Womansday.com


What you’ll need:
Box cutter
Hot Glue Gun
Round laundry basket
White suspenders
2 pairs adult white tights
Wrapping paper
Batting
Multi-colored straws
Red Cap
White sweatshirt
White or silver shoes

This one is a little more in-depth but guaranteed to be super cute. Check out this easy tutorial from Woman’s Day for instructions.

Gum Stuck to a Shoe
What you’ll need:
A pink hooded sweatshirt
A shoe
Glue

Wear the sweatshirt with the hood up and glue the shoe to the hood.

Now you’re sure to get into even the most exclusive Halloween parties (if the only requirement is a costume, that is). Trying one of these out? Have one that’s even better? Share you photos with us on Facebook or Twitter!

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The Credit Union Difference


If you’re in the market for a financial institution, it pays to learn more about the credit union difference.

You might think it’s hard to join a credit union, like it’s an exclusive club with a lot of weird requirements. The truth is credit unions are for everyone! Credit unions, like IHMVCU, serve a common field of membership based on things like geographical area, employer or membership in an organization. No matter who you are there’s a credit union for you, and joining is easy!

Credit Unions even offer all the same services as banks—a worldwide ATM network, online banking, mobile deposit, loans, mortgages and checking accounts. Banks and credit unions might look pretty similar on the surface, but many credit union members claim to feel a stronger sense of loyalty and familiarity with credit unions. But why? What’s the credit union difference?

Credit unions are member-owned financial cooperatives.
That means every member is an owner. What does that mean for you? Credit Unions work for your best interest—not stockholder profits. You can’t buy stock in credit unions and we don’t issue payouts to stockholders. Credit union earnings are returned to members in the form of lower loan rates, higher deposit yields and lower fees.

Credit unions care about your financial well-being.
We want our members to live their best financial lives and feel informed and empowered in their financial decisions.

At IHMVCU, we’re using our CDFI (Community Development Financial Institution) designation to address rising poverty while fulfilling our mission to improve the financial well-being of our members. In the coming year, we’re rolling out new programs designed to address poverty drivers and educate members on available resources and programs to help them achieve financial success.

Credit unions are people helping people.
Credit unions exist to help people achieve financial success, not to make shareholders wealthy. At IHMVCU, we make our members feel like they’re worth more by giving back to the communities we serve. Last year our employees raised nearly $15,000 for Family Resources, Race for the Cure, Toys for Tots, City of Moline Police Department, Angel Tree and QC Paws through casual days, bake sales, raffles and personal contributions.

We’re committed to serving area youth with our support of Big Brother Big Sisters, Boys and Girls Club and our Cash for Class scholarship program. We offer $26,000 in scholarships, paving the way for educational opportunities that won’t leave students with a mountain of debt.

People helping people isn’t just a motto to credit unions, it’s a way of life. And it’s how IHMVCU tells members You’re Worth More.

 

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