Since last year, the United States government has been doing everything in its power to help the economy bounce back from the global recession that’s caused by the COVID-19 pandemic. The recent decline of the economy has lead to many workers furloughed from their job and businesses closing down. Fortunately, the government has devised a plan of giving 90 million individuals stimulus checks.
However, many individuals are not quite sure where they should be allocating their funds. Here are some important ways of getting the most of your stimulus checks:
Start Paying Off Your Debt
First and foremost, your stimulus check should be used in addressing crucial needs in your life. Although groceries, food, and monthly expenditures are necessities you’ll need to focus on; it’s also important to start allocating some funds into your debt. Paying off your debt can save you from being placed in a tough position in the near future.
It’s important to remember that if you’re going to apply for loans and you want to increase your eligibility, you’ll need to focus on your debt. Your debt-to-income ratio (DTI) will play a significant role in whether you qualify for a mortgage loan or not. As the name suggests, this is the percentage of your monthly income that will be allocated towards your monthly debt. The general rule of thumb is that the lower your DTI is, the better chances that you’ll have in getting many of your loans approved. Most experts would suggest having a DTI that’s at least 36% or less than that since this is the model that many loan-issuing organizations follow.
What’s a good way of lowering your DTI? You can always use your stimulus check to pay a good amount of your debt, which can then have an impact on your DTI. Taking steps in lowering your DTI not only reduces potential extra payments that you might have to make because of rising interests, but this can also lower your monthly payment.
In addition to increasing your chances of getting your loan approved, paying off a good chunk of your debt is a great way of keeping much of your credit balance low, which can help with your credit score. Many loan-issuing organizations will place a great deal of time delving into your credit records right before approving your loans.
If you’re looking to make a mortgage loan, you won’t have to look far. There are many mortgage loan companies that can help expedite the process of getting your dream home. Many of these companies are quite aware of the economic crisis that the COVID-19 pandemic has caused and are giving many individuals that need loans a platform where they can rely on. These loan-issuing companies are staffed with professionals with years of experience that can ensure that you’ll have a hassle-free experience.
Making a Good Downpayment and Saving For Your Future
In relation to the previous section, your home’s mortgage can take a good chunk of your monthly expenditure and might possibly be your biggest investment that you’ll make throughout your lifetime. That said, you’ll need to ensure that you make a good downpayment that can give you a significant head-start at the beginning of your mortgage journey.
Although most individuals might think that a 20% downpayment is already a good chunk of what you’ll need to pay for your loan, most people will make a bare minimum payment. In fact, the average downpayment that many first-time homebuyers have is around 10% as of 2020. While 10% is nothing to sneeze at, this can have a lasting impact on your interest rates.
Whatever the reason may be, placing your stimulus check into your bank account is the best and the safest way of getting your own home. At the end of the day, you have to be patient about saving.
Utilizing For Your Closing Cost
Lastly, one of the most important ways that you can use your stimulus check is by utilizing it for closing costs. In most cases, closing costs will usually constitute around 2% – 5% of a certain loan, which can include a variety of factors, such as property taxes and your mortgage insurance. Still, it’s important to remember that this will vary depending on your location, the type of loan that you’ll be getting, and the organization you’re getting your loan from.
That said, you’ll need to keep this in mind when you are setting aside a budget for these types of fees. Although 2% or 5% might not be much, that’s still a lot if we are talking about thousands of dollars.
Becoming a homeowner is a process that will take a good deal of time, money, and effort, and it can be intimidating for first-time buyers. Not only is this a big purchase, but there are responsibilities and long-term costs that people will need to consider. But your newfound home is also an investment that will secure your future.
There are many ways that the stimulus check can work to your benefit. Although it might not necessarily be the largest amount of money that you might get in your lifetime, it’s still a good amount that you can use for debt, mortgage, and other types of necessities. Remember: investing in your future can secure you financially.