Building Credit 101: Tips for Recent Grads

If you’re a recent college grad, you’ve likely heard speeches about pursuing your passions and believing in yourself, but you probably haven’t heard much about establishing a good credit history. Here’s what you need to know.

It matters – a lot

Qualifying for mortgages, auto loans, apartments and even jobs has become dependent, to some degree, on your credit history.

Find out where you stand

The first step is knowing your current status. Access your credit report by visiting Annual Credit Report.com. Make sure all the information on the report is accurate, because errors can – and do – occur. Damaging discrepancies need to be corrected right away.

Build a credit history

Your credit history is one of the key factors making up your credit score, the all-important three-digit number that determines the rates you pay on everything from credit cards to mortgages to auto insurance.

The best time to build a credit history is when you’re young, and the best way to start a credit history is to get a credit card. This may sound counterintuitive, but if you don’t have a credit card, the scoring system has no information to go on for assessing your creditworthiness, so you come across as a credit risk.

Research credit card options

While many of the major issuers offer cards geared toward new applicants with little or no credit history, you might stand a better chance of getting a card at a credit union. Size up your card options on a site such as LowCards.com.

Gas cards and department store cards are also typically easy to get and can be a good place to start if your options are limited.

Another possibility – especially if you don’t have any credit history or your credit is damaged – is to get a secured card. These cards work just like a regular credit card, except that you place a security deposit with the credit card issuer to obtain one. They typically require $200 or more for the deposit, and this amount becomes the credit line for the account.

Use credit responsibly

The way to keep your credit score high is to spend responsibly within your means. Don’t use more than 30 percent of your available credit, and pay off your balances in full and on time every month. Your payment history contributes to 35 percent of your credit score, so this point is important.

Chip away at student loans

Student loans are a form of debt, and are therefore taken into account as part of your credit score. And while you may be worried about a lender seeing all of this debt (likely tens of thousands of dollars), there’s no need to be concerned if you’re handling your finances properly. Just be sure you’re managing your debt obligations and repaying them on time, every time.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published May 29, 2015.

from Zillow Porchlight https://www.zillow.com/blog/building-credit-for-grads-177080/

Robert Downey Jr. Picks Up His Second Home This Month

Despite four decades in Hollywood, the “Avengers” star isn’t any closer to slowing down. If anything, Robert Downey Jr. is busier than ever. He’s got one movie in post-production (“Spider Man: Homecoming”), “The Voyage of Doctor Dolittle” in pre-production, is currently filming another “Avengers” movie, and has announced two other films.

Somehow he’s still making the time to pick up new homes — one on each coast. Less than two weeks ago, it was reported that the actor purchased a windmill cottage in East Hampton. This time it’s a $3.8-million Malibu manse.

Perched on a sunny cliff, the 3,384-square-foot residence offers sweeping water views from many rooms. In the living room, retractable glass walls flood the huge space with light, and make it feel seamlessly integrated with the outdoor terrace. The kitchen boasts an eight-burner stove, two sinks and a separate wine fridge.

Photos from Zillow listing

The 3-bed, 3-bath mid-century modern home is actually quite modest for such a big star. It still has an enviable view of Malibu Lagoon and a backyard with all the celebrity fixings — a pool, a hot tub, a fire pit, an entertaining area and even a putting green — but it’s a far cry from many of the other homes he is rumored to own.

Related:

from Zillow Porchlight https://www.zillow.com/blog/robert-downey-jr-buys-in-malibu-216549/

Can You Save Money by Bundling Home Services?

Why pay full price for something if you can get what you want, plus another item, at a discount? This is called bundling, and researchers have been studying the pros and cons of it for decades.

Although many consumers think of bundling as a modern concept – it’s often used to combine TV, internet, and phone services, for example – the practice has been around for years in a variety of forms.

As a homeowner or renter, navigating the benefits and pitfalls of bundling household services means using a little common sense and a bit of economic reasoning. It also requires being aware of when and how products are bundled.

What is bundling?

Everything from fast-food combo meals to items in a two-for-one deal could be considered bundled, especially if sold at a lower price than the separate parts.

For households, bundling might mean purchasing home and car insurance together at a slightly lower rate – the average American, for example, saves 16 percent when bundling the two policies, according to the latest data from InsuranceQuotes.com.

The possibilities for bundling household services abound, according to Andrew Schrage, co-owner of Money Crashers Personal Finance: "You might find someone on Craigslist who can help with electrical, plumbing, and air-conditioning/heating needs. You’ll likely get a discount, because you’ll be bringing that person more work.“

Mixed versus pure bundling

There are several types of bundling, each with varying levels of consumer benefit, according to George John, a professor at the University of Minnesota’s Carlson School of Management. As a homeowner, you’ll most likely encounter these two types:

  • Mixed bundling. The consumer chooses between separate items or a bundle. The pieces will likely be more expensive individually, but the consumer has the option to buy just one piece.
  • Pure bundling. Occurs when the seller offers only a bundle and no individual pieces. This would happen, for example, if a town has only one moving service, which requires clients to buy its cardboard boxes.

In such a scenario, consumers are worse off, because the seller increases its profit by requiring such a deal. The company can get away with it "because they have a very strong market position,” John says.

Understanding your needs is key

Why are so many services offered in bundles? “This is somewhat controversial, but it turns out that companies make more money when they offer you discounts on those bundles, because consumers get tempted into buying it,” John says.

To win at the bundling game, keep your needs in mind, and stay strong in the face of alluring deals. Bundles are a true victory for consumers only if they genuinely need all parts included in it.

When consumers fail to shop around for the other items in the bundle and go for the packaged deal instead, they often walk away with products they don’t want or need – and sometimes pick up lesser-quality goods along the way.

Finally, the touted time-saving advantage of combining bills, which service providers sometimes use as a selling point, may not economize that much time, especially if a consumer would be signing up for automatic bill payments anyway.

Service providers “want to take your attention away from the fact that it’s actually a price move. They want to tell you that you’re getting a better experience if you bundle,” John says.

Client-controlled bundling

Consumers triumph when they control what’s in the bundle. Have a nanny who you pay a little extra to make dinner each night? That’s a bundle. “It’s totally a good deal, because you know the benefit that comes from having the same person watch your child and cook for you. You’ve made the judgment,“ John says.

At the end of the day, discipline is key. Saying no to unnecessary items, looking for other options instead of pure bundling, and refusing to be duped by false benefits will ensure you win the bundling game.

Related:

from Zillow Porchlight https://www.zillow.com/blog/bundling-home-services-216459/

What Do Buyers and Sellers Pay in Closing Costs?

Rarely does a buyer or seller show up to the closing without knowing exactly what their costs of sale will be.

In fact, based on the mortgage loan amount of the purchase/sale price, it’s not hard to ballpark either side’s closing costs. Before you get too far along in the process, ask your real estate agent or mortgage professional for an estimate.

Once you have a real, live deal with a closing date, you should be able to know your costs pretty close to the penny.

If you’re new to real estate or haven’t bought or sold in a while, here’s what you need to know about closing costs.

Buyers have a higher number of costs

In a closing, both buyers and sellers have costs. Usually, the buyer is faced with more line-item expenses than the seller (although sellers pay more).

For starters, most buyers are getting loans to make the purchase, and many of the charges stem from the loan.

A buyer should receive a loan estimate form early on in the sale process. This document spells out all the approximate costs the buyer will face when making the purchase, so there aren’t any surprises at closing. Some buyers use the information on the loan estimate form to shop for different lenders, interest rates and costs.

Typically, buyers getting a loan will see some of the following costs:

  • Appraisal fee
  • Origination fee
  • Prepaid interest
  • Prepaid insurance
  • Flood certification fee
  • Tax servicing fee
  • Credit report fee
  • Bank processing fee
  • Recording fee
  • Notary fee
  • Title insurance

Be sure to go through these fees line by line with your mortgage professional to understand exactly what they are and how they apply to your loan.

Aside from the expenses of getting a loan or buying a home, some expenses, such as property taxes or homeowners association dues, are pro-rated and paid at the time of closing. For example, if you’re buying a home and you close toward the end of the property tax period, you’ll likely need to pay the balance of taxes upfront.

The same holds true for prepaid loan interest. If you close toward the end of the month, the lender may ask for the first month’s payment up front.

Negotiate sharing some of the costs

Coming up with an extra one to two percent toward closing costs can be a bigger deal than a $5,000 reduction in the purchase price, so ask the seller to pick up some of the closing costs as a part of the negotiation.

Credit for $5,000 to go toward closing costs will be a much greater bang for the buyer’s buck. The price reduction won’t amount to much more than a few dollars per month over the length of the home loan. But saving $5,000 at the closing will be money right back in the buyer’s pocket.

Sellers pay the commission

For sellers, there are always fewer line items on an estimated closing statement. But the seller generally bears the biggest brunt of the fees: the real estate commission.

The commission is based on a percentage of the total sale price, so it tends to be the biggest fee. In addition to the real estate commission, sellers may have to pay the balance of their property taxes, if they haven’t done so already, as well as any prorated homeowners association dues.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published December 6, 2013.

from Zillow Porchlight https://www.zillow.com/blog/who-pays-closing-costs-140343/

Renters: Are You Ready to Buy a Home?

For renters planning to buy a home, preliminary steps like creating a budget and saving for a down payment are obvious. Here are five more advanced steps toward moving out of your rental and into a dream home of your own.

Understand the full cost of homeownership

As a renter, a single rental fee covers your monthly housing payment. But as a homeowner, four main factors go into your monthly housing payment: principal, interest, taxes and insurance (P.I.T.I.). Understanding these costs will help you determine how much house you can afford.

Together, principal and interest comprise your monthly mortgage payment, with the principal paying down your loan balance each month, and the interest paying your fee for borrowing the money. Use a mortgage calculator to determine how much of your payment goes toward principal versus interest each month.

Taxes refer to property taxes, which are assessed by the county you live in. They average 1.2 percent of your home’s value each year.

Insurance — paid to a homeowner’s insurance company of your choice — is required when you have a mortgage. Lenders require that your insurance cover the cost of rebuilding the home if it is ruined by fire or other disaster. This “replacement cost” is determined by your insurer, and must be agreed to by your lender. Insurance will typically cost $700 to $1,200 per year for a single family home.

For condo owners, there’s a fifth monthly cost category: homeowners association (HOA) dues. These fees cover common area amenities, landscaping, ongoing upkeep and reserves for future maintenance like roof replacement or exterior painting. These monthly dues range from $100 for cheaper condos to $1,000 or more for luxury condos.

Single family home buyers can take a useful cue from HOA budgets, which generally require that at least 10 percent of dues go toward reserves. Even if you’re not buying a condo, it’s a good idea to set up a similar savings plan for future maintenance like replacing a roof or major appliances.

Know your homeowner tax benefits

Mortgage interest and property taxes are deductible when you file your annual tax returns, and reduce taxable income.

These deductions significantly lower your cost of homeownership. For example, for a $300,000 home with 20 percent down and a 30-year fixed mortgage at 4 percent, monthly P.I.T.I. is about $1,545. Tax deductions reduce this total housing cost to about $1,215.

Study rent-vs.-buy math

Often, people judge the cost of renting vs. buying by comparing P.I.T.I. to a rental payment. But to get an apples-to-apples comparison, you actually have to look at after-tax-benefit homeownership costs and rent costs.

Using the example above of a $300,000 home that costs $1,215 per month after taxes, you could compare this residence to a home that rents for about $1,200. If the $300,000 home was more spacious or in a more desirable area, the math would seem to favor buying — but don’t forget this example requires a $60,000 down payment.

Identify mortgages that fit your budget and timeline

If you don’t have 20 percent to put down, you can still get a mortgage with as little as 3 percent down. However, if your down payment is less than 20 percent, you’ll have to pay mortgage insurance, which is about .85 percent of your loan amount, and isn’t tax deductible.

Your monthly P.I.T.I. (which includes mortgage insurance) is about $1,995 on a $300,000 home with 3 percent down and a 30-year fixed mortgage at 4 percent. After tax deductions, this total housing cost drops to about $1,614. And you’d only need $9,000 for the down payment.

You can also lower your rate and P.I.T.I. with a shorter-term loan like a 5-year ARM, but rates on these loans will adjust in 5 years, so you risk having a much higher payment if you plan to stay in the home longer than that.

Start preparing your credit score now

Credit scores are critical for getting the best mortgages with the lowest rates. Lenders want reliable on-time payment history as well as credit depth.

More credit accounts are better, so renters with only one credit card should consider obtaining more credit. Just note that your credit score can drop 5 to 15 points when you first open a new account, then will come back up when you’ve established a good payment history.

Have questions about purchasing a home? Check out our Home Buyers Guide.

Related:

Originally published January 5, 2015.

from Zillow Porchlight https://www.zillow.com/blog/renters-prepare-to-buy-a-home-167285/

Oscar-Winner Jeff Bridges Sells His Montecito Mansion (at a Discount)

Photo: ShutterStock

The Dude abides — by this sale.

After listing the home two years ago, actor Jeff Bridges has finally sold his 5-bedroom, 5.5 bath house for just under $16 million.

Bridges — best known for his roles in “The Big Lebowski,” “Crazy Heart,” and “Hell or High Water” — bought the property in 1994 from “Footloose” musician Kenny Loggins. Bridges originally listed the property for $29.5 million in 2015.

The home resembles an Italian villa with ivy-covered walls, a terra-cotta roof, and a massive, hand-carved door. The property, dubbed Villa Santa Lucia, is set on 19 wooded acres, and offers views of the Pacific Ocean.

Photos by Jim Bartsch

The sunken living room boasts an antique stone fireplace and wood-beamed ceilings. Nearby chandeliers are adorned with Murano glass, and the master bedroom features its own intimate sitting area next to a fireplace.

There are musical artifacts — including a stash of guitars — throughout the home (Bridges won an Oscar for his role as a singer in “Crazy Heart,” and has released several albums). And, in case you’re looking for a place to stash that “nice marmot,” there’s a 770-square-foot guest cottage with skylight and galley kitchen.

French doors open from the living room to a terrace overlooking the ocean in the distance. The backyard’s turquoise pool features a small waterfall. For chillier nights, the patio also offers an outdoor fireplace.

The new owners will have a selection of A-list celebrities as neighbors, including Ellen DeGeneres, Oprah Winfrey, and even Al Gore.

Susan Perkins of Sotheby’s International Realty carried the listing.

Related:

from Zillow Porchlight https://www.zillow.com/blog/bridges-sells-montecito-216093/

Kylie Jenner’s Rent Is More Than Most Americans’ Annual Salary

It’s not hard to figure out where Kylie Jenner’s penchant for real estate comes from. She undoubtedly picked up a few tips from her mom, frequent home buyer Kris Jenner, who will be the executive producer on Scott Disick’s new home flipping show, “Royally Flipped.” But unlike with many of Kylie’s previous transactions, it doesn’t appear she’s looking for a profit this time.

Jenner is renting a Beverly Hills pad that’s on the market for a whopping $35 million. Set on four sprawling acres with a private golf course, a tennis court, and a vineyard, the home offers a lot for that price tag.

The luxurious 5-bed, 8-bath home is certainly Kardashian-worthy. Towering floor-to-ceiling windows draw attention to sweeping views of the ocean, mountains and city. But the best view is from the back of the curved home, where an upper-level balcony provides a breathtaking hilltop view of Los Angeles.

Photos from Zillow listing

Also tucked away in the 10,050-square-foot home: a comfy home movie theater, a 300-bottle climate-controlled wine cellar, and a library with its own bar. If you follow the spiral staircase up to the second story, you’ll find a master suite with a fireplace, a separate seating area, two walk-in closets and a gorgeous marble bathroom. French doors off the master bed also lead to a smaller private terrace.

Behind the house, a well-manicured backyard offers up a pool, an outdoor kitchen, a fireplace and multiple seating areas with their own fire pits. It would be hard to find a backyard more worthy of a hosting a dinner party.

The home is also listed for sale, so if someone scoops up this unbelievable property, Kylie might have to be on the lookout for another rental.

Related:

from Zillow Porchlight https://www.zillow.com/blog/kylie-jenner-35m-mansion-216041/