Ever since the financial crash in 2008, this hasn’t necessarily been the case and now, in 2014, scapegoating for problems seems to be worse than it ever has been before. Banks and large trading institutions may have caused some of the problems that ultimately led to the crash, but small scale investors were also causing issues.

Here we will look at ethical trading and how the concept of social trading allows us to trade in a manner that allows us to keep a clear conscience.

What Do We Mean By Ethical Trading?

Ethical Trading

When the financial crash happened, many banks and institutions were punished for unethical trading. This means that they invested money in areas where they shouldn’t have, gambling money that wasn’t theirs to lose.

Ethical trading on such a large scale would mean that a bank will only spend money that is theirs, or will only use your money if you’ve given them explicit permission to do so (as you can with some types of account). Even then, when a bank invests this money, they should look to invest in products and projects that are perceived to be ethical.

As well as this, as was the issue in 2008, banks must also be seen to be staying within the banking code of conduct, observing rates rather than trying to manipulate them.

How Can Ethical Trading Be Practiced On A Small Scale?

Although many banks have had issues with the law and unethical trading in the past, single, small-scale investors have fared much better and, the majority of the time, they are trading well within the code of conduct.

If you trade at home on a trading platform, it is highly likely that you’re already what is considered to be an ethical trader; staying within the rules and only trying to make an honest living.

Issues with individual traders generally only arise when people are given access to insider information; something that is both illegal and immoral.

Passing On The Word: The Benefits Of Social Trading

Social trading acts as an online forum for investors, where people can meet, chat and discuss trades. Because of the fact that brand new investors can speak to those with far more experience, this is the perfect place to spread the message of ethical trading to those who are inexperienced and likely to succumb to pressure.

[How much can you rely on social media in your investing?]

Social trading looks as though it could very well be the future of forex trading, and it’s available through almost any ECN broker. With this in mind, now is the perfect time to learn from the lessons of 2008. So, consider the way you trade, ensure it is ethical and spread the word. Together, we can make the world a better, fairer place.

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Up until about 2006, buying a home was a relatively low risk proposition, even for first-time homebuyers. But now that mortgage underwriting guidelines are more difficult, and property values are bouncing up and down like a yo-yo, you need to be more informed before making a purchase.

Here are six money-saving tips that will make the process easier, and remove at least some of the risk involved in purchasing a home as a first-time home buyer.

6 Money Saving Tips For The First Time Home Buyer

First Time Home Buyer

1. Buy Beneath Your Means

This first tip is one where you will have to push back against your real estate agent. The conventional wisdom – which will be strongly advanced by members of the real estate community – is that you should buy the most expensive house you can afford. The idea is that you will be able to more easily afford it as the years pass and your financial situation improves. There may be merit to this, but it’s bad advice for a first time home buyer, especially in today’s market.

It will be better for you to buy at least a little below your financial means. This will leave more room in your budget to pay for everything else in your life. When you buy above your means, you’re flirting with being house poor. No matter how much you love the house, being house poor gets old fast.

2. Buy Below Market

To the best of your ability, try to buy house at a price that is below the going market price. You should aim to buy a house at least 5% to 10% below the prevailing market value. If the house is reasonably worth $200,000, you should try for a settlement price of between $180,000 and $190,000.

This will give you some extra equity upon closing on the house. More important, it will provide some insulation in the event property values should fall.

It’s easier to do this in some markets than others, but you should always try. You never know how anxious seller is to make a deal. Those are the kind of properties that you want to buy – the ones you can get at least a bit of a deal on.

3. Get A Home Inspection

Many times a first time home buyer will resist this idea, because it means coming up with an extra $300 or so before closing. But this can be the very best money you can spend in the entire transaction.

A home inspection can provide the following benefits:

  • It can alert you about needed repairs; if you know about these upfront, you can have the seller fix them before closing, saving you a major headache later.
  • You can use repairs and other deficiencies to negotiate a still lower price on the property. A home inspection often provides you with a list of bargaining chips.
  • It can reveal that the property is a complete disaster, allowing you to get out of the deal before closing.

Spend the extra money for the home inspection, you’ll be glad you did.

4. Use A Real Estate Agent

Property sellers sometimes like to work without real estate agents, so that they can avoid having to pay the real estate commission. As a buyer, there’s no real advantage to not having the services of real estate agent.

The agent acts as a third-party negotiator between you and the seller, and that tends to be more effective than face-to-face negotiations. This is especially true if there are significant issues that develop along the way to the closing table. The agent acts as both a go-between and a shock absorber, helping to work out mutually agreed upon terms.

In addition, since real estate agents work in the business all the time, they know how the process works. They can present a written offer, handle negotiations, schedule the closing and home inspection, and even help you select the mortgage lender and closing agent. If you are a first-time home buyer, you will have enough on your plate without having to worry about all of that.

5. Save Up More Than The Minimum Down Payment

It’s natural for first-time home buyers to want to buy with as little money as possible, but that’s not how the real estate business works these days. The minimum down payment with an FHA mortgage is 3 ½% of the purchase price. If you are using conventional financing, the new normal will be more like 10%, or even 20%.

[What is private mortgage insurance, and is it really necessary?]

You should have your down payment saved in advance, but that’s not all. You should have at least a few thousand dollars saved up in excess of your down payment requirement. There are at least three reasons for doing this:

  1. On conventional mortgages, lenders require that you have “reserves” in excess of the down payment, equal to anywhere from 3 to 6 months of the new house payment.
  2. The extra money will come in handy with incidental and unexpected expenses related to the purchase, such as moving, establishing utilities, making minor repairs, and last-minute purchases.
  3. It’s never a good idea to be broke immediately after purchasing a new home. Save some extra money to give yourself some breathing room after the closing.

6. Clean Up Your Credit Before Applying For A Mortgage

Some first-time home buyers don’t bother reviewing their credit before applying for a mortgage, but it’s to your advantage if you do. If you wait and let the mortgage lender run your credit, and there are credit problems, your loan could be declined. But if you obtain a copy of your credit report in advance, and fix any issues that show up, your credit report will be “clean” by the time the lender pulls it. That will improve your chances of getting a mortgage approval.

[See why a 15yr mortgage may not be the best choice for you!]

The underwriting guidelines for mortgage loans are still quite a bit tougher than they were a few years ago. You will need to enter the process in the best financial shape possible. Determining the quality of your credit is something you can and should do in advance.

Follow these steps, and not only will buying your first home be easier, but you’ll find the entire transaction – and subsequent ownership – to be a much more pleasant experience.

What kind of problems did you encounter as a first time home buyer?

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April 6, 2014

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Have You Committed Financial Infidelity?

April 2, 2014

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