Mistakes on a Plane (or, When Pigs Fly)
So as my regular readers know, (Hi Mom! Hi Dad!) I recently took a vacation to California. A splendid time was had by all and I'm feeling nice and refreshed. However, I did have to spend quite a bit of time in airports and on planes, and couldn't help but notice all of the potential hazards that await a prospective home buyer who's trying to save for a down payment and get a loan. Since I know a lot of you will soon be traveling through the holidays, I figured a few warnings might be of use so that you don't return from your trip to a nasty surprise.
Protect your savings
Airport taxes. In Chicago, airport purchases have a 1% sales tax surcharge. That's on top of the highest sales taxes in the nation. Prepared foods across the board have even higher taxes than other stuff. This means that anything you can bring with you, especially snacks and meals, will save you money. If you make it yourself with grocery store materials, you'll save even more. You'll have to buy your beverage, but keep it simple.Table of Sales Tax rates courtesy of the Illinois Restaurant Association
|Cook County Tax||0.25%|
|Cook Home Rule||1%|
|Chicago Home Rule||1.25%|
|MPEA (Pier & Airport)||1%|
Captive audience. It's very easy to make excuses when you're in the airport and spend money on souvenirs, one-time use items and assorted curiosities. You've got no means of comparison, you may well be bored, and you can make the excuse that your travel is a special occasion. However, most vendors in airports are chains. Those of you who like to support small businesses are shooting yourselves in the foot. Save the souvenir budget for experiences that will have significance in your memory.
Stick with your Per Diem. When you're traveling for business, your employer may give you what's called a "per diem," or a set amount of company money that you can spend for your daily food & other needs. Usually these amounts are calculated based on pretty advanced accounting formulas, but a quick call to a friend at your destination will give you an idea of what you'll spend on average during a normal day. Allocate a specific amount that you want to spend each day and don't go beyond it.
Laundry is everywhere. I was shocked to see the size of some of the luggage that was getting hauled off of the baggage claim carousel yesterday. Maybe the travelers in question had been on the road for a long time, but I'm pretty sure some of them were just clothes horses. At $25 for the first bag and $35 for each additional bag (at least on US Airways), it really does make a difference how much stuff you bring. Remember, washing machines exist in most of the country beyond Chicago. Is it really worth $60 to avoid having to do a load of laundry at your destination?
Seat pocket reading. Remember what I said about being a captive audience up there? There's one situation that's even more dangerous for your wallet than being bored in an airport. When you get on the plane, you've got a good half an hour before you can open up your laptop or tablet and get back to your standard raft of entertainment. In the meantime, you're faced with that bastion of wasteful spending called Skymall. I don't care how bored you are. Read the airline magazine. Read the safety card. Say hello to the person sitting next to you. Watch the ground crew. Do not pick up Skymall.
Make lists. About a week before you travel, start making a list of everything you use during a day, plus snacks and entertainment. Next to each item leave space for two checkmarks. Plan what will go in your checked bags and what will be in your carry on. When you're packing, check off each item as you place them into your suitcase. When it comes time to go back home, check them off again to make sure you don't leave anything behind. Prior planning can protect you from many emergency shopping trips to pick up forgotten necessities.
Protect your loan application
'Tis the Seasoning. Many trips home for December this year will result in a negotiation with family members over the gift of a down payment, or a portion thereof. Remember that there are many restrictions on these kinds of gifts that can cause trouble for both you and your family. Russ Martin of Smart Mortgage Advice has a great article on some of the concerns with gifted down payments. Of concern are the amount given, the timeframe between the gift and the purchase, and the overall documentation of the process.
Miles vs Mortgage. As I was sitting on the plane just before landing, I heard the flight attendant speaking over the PA offering a "special deal" for the passengers: an airline MasterCard with 40,000 bonus frequent flyer miles. If you're in the process of applying for a mortgage, remember that anything that changes your credit score could very well result in you getting denied. That includes opening new credit card accounts.
What happens in Vegas should probably wait. Additionally, your lender will be going over your bank statements with a fine toothed comb. You do not want any abnormal expenditures or income showing up in any bank account from the 3 months prior to your home purchase. Travel that requires major unpredictable spending, like casinos and cruises, should be delayed until after closing. If you have to go to Vegas, Atlantic City, Monte Carlo, etc. while you're in the process of buying a home, stick with the shows and the buffets.
If possible, take only one Credit Card. A whole lot of identity theft happens to travelers. The worst possible occurrence would be a case of ID theft when you're about to apply for a mortgage. Stem your losses by taking only one credit card - the one you used to purchase your airline tickets. Leave the rest at home, and make a note of the card number and emergency phone number for the one card you're bringing with you. Better to lose that one card and know exactly how to shut it down than to lose your entire identity.
Travel safely this holiday season, dear piggies. I'll be here the whole time. Friday we'll be talking about leasing in languages other than English. See you then!