Save Hard & Spend Smart Blog
Are you thinking of buying a home this year? We've put together a few tips to help lay the foundation to a rewarding home-buying experience.
Check Your Credit Score
Do you know your credit score? If you're in the market to buy a home, your score will help to determine the loan and interest rate you qualify for. Understanding your credit score can help you better understand the role your score plays in your financial life. Checking your credit score will allow you to identify red flags, like a low score or credit accounts that you may not be aware of, so that you can work to address any issues before you apply for a mortgage.
Understand Your Finances
It's always good practice to document your finances (income, liabilities, and assets), but this practice is especially important when you're planning on purchasing your first home. Your income, liabilities (debts and financial obligations), and assets, are key to helping your lender determine what you can afford. Understanding your spending habits will help paint an accurate picture of your finances. Do you have enough money saved for a down payment or closing costs? If your spending habits aren't aligning with your goals, you'll want to adjust where you can so that you can start saving to cover these costs. Speak with a financial service representative about your options to make sure that you're choosing the mortgage that best fits your budget now and in the future.
Buying a home, whether you're a first-time homebuyer or have purchased multiple homes in the past, is a major milestone and one of the most important and biggest purchases you'll ever make. So, if you're unsure about any step in the homebuying process, ask questions. Your credit union is here to help with any financial questions or concerns you may have. Speaking with a financial service representative can help you plan, simplify, and streamline the process of purchasing your home.
Learn More or Contact Us Today!
You can learn more about our home loans and the home-buying process by visiting our website or speaking with a credit union representative. To speak with a Members First credit union representative in our loan or mortgage department, please call (850) 434-2211 and select option 2. Our Member Information Call Center hours are Monday-Friday, from 8:30-4:30 p.m.
It’s certainly not the most exciting part of running your very own small business, but understanding and fulfilling your business tax obligations must be a priority if you want to keep your doors open. Failing to properly file your federal and state business taxes could mean losing your business or even facing criminal charges. Yikes!
Read on to make sure you understand the tax obligations of your business and will be able to meet them when they come due.
The first step in being able to pay the proper business taxes is to apply for an employer identification number (EIN)—also called a federal tax identification number or business identification number. This nine-digit number is like a social security number for your business. It helps the IRS keep track of your business and its employees for tax purposes. But that’s not all it does.
An EIN is used to open a business bank account, apply for a business credit card or loan, and work with suppliers without having to use your personal social security number. It’s important to keep your business and personal finances separate for many reasons, including protection against fraud and identity theft and keeping business loans off of your personal credit report.
Not all types of businesses need an EIN for tax purposes (although you might want it for the reasons listed above), including sole proprietorships with no employees and simple member LLCs with no employees. If your business falls into either category, you can use your social security number when filing your income taxes.
The application for an EIN from the IRS is easy and free. You can apply online via the IRS website or by mail, fax, or phone.
Federal business taxes
The type of small business you have determines which taxes you’ll need to pay, how to file, what forms to use, and when payments are due. The following taxes are a good sampling of the most common types of business taxes. Visit the IRS website to learn more.
All types of businesses must file an annual income tax return. The amount owed is based on revenue made throughout the year. The exact tax form you should use will depend on the structure of your company (e.g., sole proprietorship, partnership, corporation, S-corporation, LLC, etc.). Federal income taxes are “pay-as-you-go taxes,” meaning instead of paying one lump sum at the end of the year, you’ll need to make estimated tax payments each quarter (more on that below).
Small business owners pay a self-employment tax, which covers contributions to Social Security and Medicare taxes, similar to the taxes withheld from the paychecks of most wage-earning employees. This is also a pay-as-you-go tax.
As previously mentioned, federal income and self-employment taxes are pay-as-you-go taxes that must be filed and paid quarterly. The IRS understands that accounts receivable and invoices may not all be paid by the end of each quarter, so you file and pay these taxes estimating what you owe based on your estimated revenue.
For those small businesses with employees, you will have employment tax obligations, including social security and Medicare taxes, federal income tax withholdings, and federal unemployment tax.
Excise taxes are paid by businesses that sell certain products, use certain types of equipment, and rely on heavy fuel usage. Many businesses who incur this type of tax pay for it by including the cost in product or service prices.
In addition to federal taxes, each state has its own income and employment taxes that businesses must pay. There may also be additional fiscal requirements, like mandated workers’ compensation and unemployment insurance. Be sure to learn about the taxes and requirements in your state before your business’s first tax season!
Understanding and correctly paying the appropriate business taxes on time means your small business will avoid overpaying on estimated taxes, will keep more money on hand to spend on expenses and invest for growth, and will avoid underpaying the government and being forced to pay a large sum during tax season.
Are you thinking about buying your first home or another property for rental income? Members First is here to lend a helping hand with the home-buying process from advice to financing. Whether you’re in the initial states of the home-buying process (i.e. thinking about purchasing a house, but aren’t sure you’re ready yet) or are ready to begin shopping, here are a few questions to ask yourself to make sure you’re on the road to success to buy your new home.
Are your finances in order?
Buying a house is a big commitment and it may be the biggest financial decision you’ll ever make. Before you start falling in love with the condo downtown or the sweet house with the wraparound porch at the beach, you want to make sure you’re financially ready. Do you have other financial goals or commitments that may get in the way of buying your home? Using a budgeting calculator and mortgage repayment calculator can help you determine your budget and what home you can afford.
Once you’ve done that, check your credit score and start paying down debts. A higher credit score and low debt to income ratio will help you qualify for a lower mortgage interest rate. Plus, knowing your score will help you determine if you should take the time to build-up your credit and hold-off on home ownership for a while.
If you have questions or concerns, make use of your credit union. Talk to one of our knowledgeable financial service representatives. Give us a call at (850) 4342211 or stop by a branch near you.
Do you have a plan for the down payment?
Once you’ve determined what you can afford, you can start to figure out how much you want to save for a down payment. Although, 20% down payments are ideal, you can put down less. While a smaller down payment requires less money up-front, it means you’ll have to pay mortgage insurance. The type of home loan you use can impact the minimum down payment requirement.
Apart from your down payment, you’ll want to set aside money for closing costs. Closing costs generally run from 2% - 5% of the total cost of your loan. It is also a good idea to have an emergency fund in case your home needs unexpected repairs. When purchasing your home, you may be able to negotiate payment of closing costs and repairs with the seller, but since this is not guaranteed, it’s a good idea to have these funds set aside just in case.
What are your must haves in a home?
Create a wish list. Come up with a list of must-haves and nice-to-haves. Do you want a backyard? Do you want to be close to amenities like coffee shops, boutiques, or green spaces? If you have children or plan to have children, is there a particular school you want them to go to? Do you need a large kitchen for cooking or entertaining? Are you handy or is getting a move-in-ready home non-negotiable? All these things can impact the cost of your home and help you determine what you’re willing to compromise on during the home-buying process.
Ready to purchase your new home?
Learning about home loans will help you find the right mortgage for you. Learn the advantages and drawbacks of Conventional loans, FHA loans, VA loans, and more. Plus, choosing the right home loan can boost your chances of approval and save you money in the long run.
Once you’ve done your research and are ready to get pre-qualified or get a mortgage, start collecting paperwork you’ll need for your mortgage like:
- W-2 forms from the past two years (you may need more, if you’ve changed employers).
- Pay stubs from the past 30-60 days.
- Proof of other sources of income (including documentation of gift money).
- Federal income tax returns for the past two years.
- Recent bank statements.
- Details on long-term debts like auto or student loans.
- ID and Social Security Number.
We understand the process can be confusing or frustrating. That’s why we’re here to lend a helping hand with financial questions and concerns you may have. Give us a call at (850) 434-2211 or stop by a branch near you. If you’re ready, get pre-qualified today.
Your Privacy Is Important to Us.
As Congress considers new infrastructure spending, lawmakers are considering unconventional sources of revenue to fund their plans. One proposal under consideration would require financial institutions like Members First Credit Union of Florida to report to the Internal Revenue Service (IRS) many activities on accounts with balances over $600.
Such an Unprecedented Grab of Your Personal Financial Data Raises Several Concerns:
- This proposal would violate the personal privacy of consumers like you by forcing credit unions and other financial institutions to provide the government with information that does not reflect taxable activity.
- Financial institutions — particularly those in rural and low-income communities — would face a new and expensive regulatory burden that could make it untenable to serve those consumers already left behind by Wall Street banks.
- The government relies on decades old data systems to store and secure IRS information. These systems have already been compromised in recent years, and the addition of this type of data only increases the likelihood of a future breach of your personal financial information.
What Can You Do?
At Members First Credit Union of Florida, we care about our members and value civic engagement. We believe it’s our duty to inform you when legislation is being discussed that could directly affect you. Please consider lending your voice to this important effort and send an e-mail to your U.S. Representative.
Are you thinking about buying your first home or another property for rental income? Members First is here to lend a helping hand with the home buying process, from advice to helping you finance the purchase of your new home.
You'll need more than cash to purchase your home. So, before you sign on the dotted line and start unpacking your household goods, here's assets you'll need in order to qualify for a home loan with a low interest rate:
- Steady Income
Steady income shows that you are capable of affording monthly mortgage payments. When you apply for a home loan, you may be asked to provide a signed letter from your employer stating your position and salary, two years worth of pay-stubs, or two years of income tax returns.
- Low Debt-to-Income Ratio
Your debt-to-income ratio is the ratio of your monthly debt obligations (student loans, car loan, credit card balances, personal loans, etc.) to your gross monthly income. Carrying a high debt-to-income ratio will make it harder to qualify for a home loan. It is suggested that your debt-to-income ratio is no more than 43% of your total gross income. So, before you begin your house hunt, work to pay off current debts and lower your debt-to-income ratio.
- Good Credit Score
A good credit score is an important way to gauge how you've managed credit, loans, debt in the past, and if you pay your bills on time. Credit scores fall on a scale of 300 to 850. While a score that falls between 670-739 is considered good, a score of 749 or higher will ensure that you get the best rate possible.
You are allowed one free credit report each year from each of the three primary credit reporting agencies (Experian, TransUnion, and Equifax). To request your free credit score, visit annualcreditreport.com. So, while you're saving for a down payment on your future home purchase, check your credit score and work to improve it. Pay off debt, pay bills on time, and don't open or close any lines of credit (e.g. store credit card, personal loan, etc.).
- Cash For A Down Payment
The money that you plan to spend as your down payment on your home should be in the form of cold, hard cash in an account that you can easily access (not a CD or account where you pay a fee for the withdrawal). It may be tempting to put all or part of the down payment on a credit card, but doing this will affect your debt-to-income ratio, lowering your creditworthiness.
In order for you to receive the best loan rate and avoid paying PMI (Private Mortgage Insurance) on a conventional loan, you need to save up for a down payment of at least 20%. With other strong elements — like low debt-to-income ratio and excellent credit score — you may be able to put less money down and still get a good rate. However, you'll ultimately be taking out a larger loan and will pay more interest on the larger principal over the life of the loan.
- Cash For Closing Costs
Be sure to also put aside some of the cash you've saved up for paying closing costs. Closing costs include loan origination fee, title search and recording fee, appraisal fee, inspection fee, property taxes, etc. While these costs can vary, they typically fall between 2% - 5% of a home's purchase price.
While you can sometimes roll these costs into your home loan, it's best if you're able to pay them up front with cash, so you can avoid a higher monthly mortgage payment and possibly a higher loan rate. You may also be able to pay these fees with monetary gifts from relatives or by negotiating with the seller to pay the closing costs — especially if they are eager to sell.
Ready to purchase your new home? We're here to lend a helping hand.
All loans are subject to credit approval. Rates and terms are based upon individual credit worthiness. NMLS #405711