No Santa This Year?
Instead of traditional Christmas bells ringing, many families are only hearing the jingling of the telephone ringing this Christmas season as bill collectors and collection agencies call about past due bills. Are you struggling to have Santa this year?
For the 15.7 million people who are unemployed, and perhaps even more so for the 5.6 million who have been out of work for 6 months or more this year, the Christmas holiday present a lot more than just challenges. There's the issue of money for gifts and all the other elements of the season.
There is a natural tendency to slack off on job hunting until after the new year, fueled by the false belief that "no one is hiring during the holidays." Then there is the pressure to celebrate when there seems there's really little to be happy about.
Even during prosperous years, the holiday season tends to send some people into a financial funk, spending more than they really should on gifts, and paying for them (usually by way of plastic money) well into the new year that follows.
For more families than ever, there seems to be no "Santa list" this year. If you find yourself in this growing group of Grinches, set some realistic expectations for Christmas this year. When you're out of work, that means finding ways to celebrate the holidays that rely more on sharing experiences than sharing wealth you really don't have.
Plan to spend more time with neighbors and friends, and consider doing some volunteer work. Helping others in ways that don't mean spending money you don't really have to spend can be far more rewarding than running up those credit card balances.
And bust the myth that no jobs get filled during the last month of the year. The fact is, pounding the pavement now may make the difference between starting 2010 settling into a new job, or still competing for one.
January is typically the busiest job hunting time of the year. People who are hired in January are usually the ones who applied and interviewed in prior months. You don't typically get hired on January 5th when you just applied on January 4th. It's usually the people who applied for positions in November or December that get hired in January. Since many job hunters will take a holiday break, the competition for available jobs is usually greatly reduced during the holidays. Be aggressive and stay on the job hunt while everyone else is relaxing on the sofa and eating too much. It may just make your new year brighter when you get the call in early January, thanks to your efforts in December.
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Calculating Your Debt to Income Ratio
Before you think about purchasing a home, it's important to consider your debt to income ratio. This is one of the first things a mortgage lender will look at when you apply for a home loan, along with your current credit rating (your ratio also has an impact on your credit rating).
Debt to income is a very simple calculation and is derived from the amount you pay out each month versus the amount of your take home salary. Lenders will calculate this ratio in order to determine whether or not you will be financially able to handle the added debt of a mortgage.
Calculating the ratio is simple: Divide your gross monthly (or take home salary) pay by the total amount of your bills, including: any and all credit cards, car payments, any form of insurance and other loans (such as student loans, lines of credit etc). Leave out utilities and miscellaneous expenses such as food and entertainment.
If your ratio falls under the 35% mark, then you’re doing great and shouldn’t have a problem being approved for your mortgage. If however your debt ratio is above 35%, it then becomes more difficult to get an approval for the loan, and if you do get approved, be prepared to pay a higher interest rate.
It is advisable to ensure that your total household expenses do not exceed 28 percent of your total take home salary (though there are exceptions). Remember, the lower your debt the better debt to income ratio you will have, making your chances of receiving a better interest rate on your mortgage much higher.
Here is a simple break down of the debt to income formula: Minimum monthly credit card payments: + monthly car loan payments: + other monthly debt payments: + your anticipated mortgage payments. Your debt-to-income ratio is your total debts divided by your monthly gross income.
Have questions or comments about this article? Leave us a comment at the end of this newsletter.
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New Tax Filing Rules if Claiming the Home Buyer Credit
If you're planning to claim a home-buyer tax credit on your 2009 tax return, you'd better sharpen your pencil. The IRS says you must file a paper return, and cannot file electronically.
In an attempt to crack down on some of the fraud involving first-time home-buyer tax credit claims filed so far, the new law that extended the credit until next spring imposed a couple of new limits. For example, dependents cannot claim the credit. Anyone younger than 18 on the date of the home purchase cannot claim it unless they make the purchase with an older co-buyer.
Members of the military — and federal employees working for the Foreign Service and intelligence agencies — on duty outside the United States have been given an extra year to buy a home with the tax credit. They can qualify if they go under contract by April 30, 2011, and close the deal by June 30, 2011. Others, however, must wrap their deals up in 2010.
For more explanations, including some what-if scenarios, check out the IRS Web site.
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End of the Year Message
With Christmas fast approaching, and another new year right around the corner, we would like to take a moment and reflect on the year gone by, and look ahead to 2010.
We'd like to send our heartfelt thanks for being a subscriber to our newsletter, and for entrusting us with your real estate needs. For some, that has meant buying their first home. For others, it's meant helping you move up to a bigger home, while still others have downsized.
Whatever our relationship in the past, we say, "Thank you!" If we have yet to serve your real estate needs, we look forward to assisting you in any way possible in the future.
2009 has been a tumultuous year economically for many people, and we understand the position many have taken with a "wait and see" attitude toward home ownership. However, with the revised tax credit plan in place now, and the very high likliehood that once this tax credit expires in April of 2010, the government will back away from further extensions and homebuying will be back to normal (as far as tax credits go.)
With a few exceptions, we believe everyone is more than ready to tear the last month of 2009 off their calendar and look forward, with reserved enthusiasm, to a new year.
We hope there is some way we can serve your needs in 2010 and beyond, but if the timing is still not right for you to become a home owner, or you just aren't in a position in the coming year to make the move you'd like to make, please stay with us as a subscriber. We have some great tips planned for you in the future, regardless of your home buying or selling needs, and we appreciate each and every one of our faithful readers.
To each of you, may this holiday season be filled with the blessings of friendship and love, and may you find peace in knowing that life is precious, and regardless of the state of our economy, as long as you have your health and your family, you have MUCH to be thankful for.
We extend best wishes to every single one of our clients, customers and subscribers, and may 2010 be a prosperous year for you. We look forward to continuing to bring you these newsletters again next year.
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