For many this year has been the first they have experienced financial hardship. If you have been experiencing a tough time financially this year you're probably thankful the decade is over and longing for better times in 2010.
But all is not lost. Don't dwell on all that went wrong in 2009. Capitalism is still alive. Not every corporate CEO is a sociopath. Saving regularly and investing in the stock market is still a good way to accumulate wealth over the long term.
In 2010, Financial Elite will continue to answer your questions regarding financial matters. We are bringing back our daily dose of "Financial Motivational Quotes" to keep you financially inspired. We are also going to start out the year with a series of answers to your questions regarding organization and budgeting to start the year off right.
We learn from our mistakes. Remember to keep moving forward it can only get better. 2010 is here and the best is yet to come. For all our readers I'd like to wish you a happy and safe New Year's Eve and a healthy and prosperous 2010. Thanks for all your e-mails and comments this year and I look forward to interacting with you more in the coming months.
For answers to your financial questions check us out.
Thursday, December 31, 2009
Wednesday, December 30, 2009
Bank of America Makes Sure Mortgage Modifications Are Crystal Clear
Bank of America Home Loans has begun providing its exclusive "Clarity Commitment(TM)" to customers entering permanent mortgage modifications under the government's Home Affordable Modification Program (HAMP). The Clarity Commitment, an easy to understand, one page summary of key terms, will be offered with loan modifications made under any non-government program in the coming weeks.
Responding to consumers seeking simplified explanations of credit products, Bank of America introduced the Clarity Commitment for customers taking out new first mortgages in April, leading the industry in providing clarity, simplicity and transparency to customers. The bank later extended the concept to home equity loans and reverse mortgages, and recently launched a Clarity Commitment for credit card customers.
"Our Clarity Commitment for new mortgages has been very well received as a demonstration of our dedication to responsible lending and the creation of successful homeowners," said Rebecca Mairone, national servicing executive for Bank of America Home loans. "Modified mortgages may have considerably different terms than the original contract. As our customers transition to their new affordable payment, it is important that they have this simple and concise explanation of the terms of their modified loan."
The Clarity Commitment for loan modifications summarizes:
- The new principal balance and all charges included in it.
- The Interest rate
- The total monthly payment at the outset of the loan and, if applicable, at each point that the rate and payment will adjust through the life of the loan.
- The initial amount of any escrow payment included for such things as taxes and insurance, with an explanation that these charges may change during the life of the loan.
- On eligible HAMP modifications, the incentive payments homeowners may earn toward reducing their principal balance if they make timely payments over the first five years.
Homeowners participating in HAMP will receive a Clarity Commitment statement with their modification documents. Their modification package is sent after they successfully complete a trial payment period. Those who are being offered assistance under other programs will receive the Clarity Commitment with the documents to be signed for their modification.
Bank of America services 14 million residential mortgages, more than any other financial institution. Since January 2008, the bank's commitment to keeping more than 160,000 trial modifications through HAMP and more than 450,000 completed modifications through non-government programs and individualized solutions.
Responding to consumers seeking simplified explanations of credit products, Bank of America introduced the Clarity Commitment for customers taking out new first mortgages in April, leading the industry in providing clarity, simplicity and transparency to customers. The bank later extended the concept to home equity loans and reverse mortgages, and recently launched a Clarity Commitment for credit card customers.
"Our Clarity Commitment for new mortgages has been very well received as a demonstration of our dedication to responsible lending and the creation of successful homeowners," said Rebecca Mairone, national servicing executive for Bank of America Home loans. "Modified mortgages may have considerably different terms than the original contract. As our customers transition to their new affordable payment, it is important that they have this simple and concise explanation of the terms of their modified loan."
The Clarity Commitment for loan modifications summarizes:
- The new principal balance and all charges included in it.
- The Interest rate
- The total monthly payment at the outset of the loan and, if applicable, at each point that the rate and payment will adjust through the life of the loan.
- The initial amount of any escrow payment included for such things as taxes and insurance, with an explanation that these charges may change during the life of the loan.
- On eligible HAMP modifications, the incentive payments homeowners may earn toward reducing their principal balance if they make timely payments over the first five years.
Homeowners participating in HAMP will receive a Clarity Commitment statement with their modification documents. Their modification package is sent after they successfully complete a trial payment period. Those who are being offered assistance under other programs will receive the Clarity Commitment with the documents to be signed for their modification.
Bank of America services 14 million residential mortgages, more than any other financial institution. Since January 2008, the bank's commitment to keeping more than 160,000 trial modifications through HAMP and more than 450,000 completed modifications through non-government programs and individualized solutions.
Monday, December 28, 2009
Will a Mortgage Modification Hurt My Credit Score?
Financial Elite receives lots of emails from readers asking how to go about getting a mortgage modification, but this is a new one, "Does a mortgage loan modification hurt my credit score."
It's a question we've never really thought about before, but still it is a very good question. Since you are looking for a loan modification you are probably already having a problem making payments or about to start. Hence your credit is probably already suffering battle damage.
But like most troubled homeowners you are probably thinking that a loan modification is probably your best foreclosure rescue plan and the best way to put an end to your financial troubles. And like most you don't realize that getting a modification can actually hurt your credit.
Like us, CNNMoney reported today that they received a flood of emails from readers complaining about the impact of trial modifications on their credit reports.
As we stated earlier, several people applying for modifications are already delinquent or are heading in that direction. Most feel that a modification shouldn't hurt their credit score, but the reality is, it should. Getting a modification shows that you could not pay your obligation as agreed.
CNNMoney talked to Jason Axelrod, a homeowner, who learned the hard way, that loan modifications will hurt your credit score.
Jason did not fall behind on his mortgage payments, but it was getting harder for him to make ends meat, as his property taxes went up and he was forced to cut back on his overtime. Jason was told that his credit would not be damaged by having his payment reduced by $565 a month.
When he secured his payment reduction his credit score was 750. After eight months of trying to make his trial modification permanent, his score had dropped to 644.
"It's completely destroyed my credit." said Jason. "If I had known it would affect my score, I would have never entered the program."
Even though his credit score declined, Jason did find some light at the end of tunnel as JPMorgan Chase made his modification permanent.
It is under debate what banks are reporting to the credit bureaus. Many servicers are inconsistent with following the guidelines. They are not always reporting that their borrowers have a modification.
Servicers are required to report all information about their borrowers, that includes modification plans. Borrowers may see improvement in the scores as they get brought current and they start making payments again.
Chances are over the initial three month trial period you will improve your financial situation, but give some thought where you are exactly before accepting a modification plan.
It's a question we've never really thought about before, but still it is a very good question. Since you are looking for a loan modification you are probably already having a problem making payments or about to start. Hence your credit is probably already suffering battle damage.
But like most troubled homeowners you are probably thinking that a loan modification is probably your best foreclosure rescue plan and the best way to put an end to your financial troubles. And like most you don't realize that getting a modification can actually hurt your credit.
Like us, CNNMoney reported today that they received a flood of emails from readers complaining about the impact of trial modifications on their credit reports.
As we stated earlier, several people applying for modifications are already delinquent or are heading in that direction. Most feel that a modification shouldn't hurt their credit score, but the reality is, it should. Getting a modification shows that you could not pay your obligation as agreed.
CNNMoney talked to Jason Axelrod, a homeowner, who learned the hard way, that loan modifications will hurt your credit score.
Jason did not fall behind on his mortgage payments, but it was getting harder for him to make ends meat, as his property taxes went up and he was forced to cut back on his overtime. Jason was told that his credit would not be damaged by having his payment reduced by $565 a month.
When he secured his payment reduction his credit score was 750. After eight months of trying to make his trial modification permanent, his score had dropped to 644.
"It's completely destroyed my credit." said Jason. "If I had known it would affect my score, I would have never entered the program."
Even though his credit score declined, Jason did find some light at the end of tunnel as JPMorgan Chase made his modification permanent.
It is under debate what banks are reporting to the credit bureaus. Many servicers are inconsistent with following the guidelines. They are not always reporting that their borrowers have a modification.
Servicers are required to report all information about their borrowers, that includes modification plans. Borrowers may see improvement in the scores as they get brought current and they start making payments again.
Chances are over the initial three month trial period you will improve your financial situation, but give some thought where you are exactly before accepting a modification plan.
Sunday, December 27, 2009
What is Mortgage Insurance?
If you don't have enough money to put a 20 percent down payment on your new home, your mortgage loan will almost always require mortgage insurance. Mortgage insurance helps protect the lender if the buyer fails to repay a loan. Loans that are insured by the government or private mortgage insurer enable the homebuyer to purchase a home with a lower down payment than would otherwise be acceptable to the lender. Mortgage insurance on government loans is known as Mortgage Insurance Premium (MIP); the term Private Mortgage Insurance (PMI) is used for all other types of loans.
So, with PMI, lenders generally reduce the down payment requirements from 20 percent of the purchase price to as low as 3.5 percent. For example, on a $100,000 home, instead of putting down $20,000, you might be able to make a down payment as low as $3,500. The PMI cost will be added to your monthly mortgage payments and your closing costs.
Loans That Require Mortgage Insurance
Mortgage insurance is also available through three federal government programs: the Federal Housing Administration (FHA) mortgage insurance program operated by the U.S. Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA) loan guarantee program, and the Rural Housing Service (RHS) loan program. To obtain one of these loans you need to apply for a loan through a lender that is approved to do them.
FHA Loans
With FHA insurance, you can purchase a home with a very low down payment (from 3.5 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower). FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. To learn more visit www.hud.gov/buying/loans.cfm.
VA Loans
The VA guarantee allows qualified veterans to buy homes with low or no down payment and with less strict guidelines than FHA or conventional loans. If you are a qualified veteran, this can be an attractive mortgage program. To determine whether you are eligible, check with your nearest VA regional office. To learn more visit www.homeloans.va.gov/veteran.htm.
Rural Housing Service (RHS) Loans
The Rural Housing Service, formerly known as the Farmers Home Administration and a branch of the U.S. Department of Agriculture, offers low interest rate homeownership loans with no down payments to low and moderate income potential homebuyers living in rural areas. Check with your local RHS office or a local lender for eligibility requirements. to learn more visit www.rurdev.usda.gov/rhs/common/indiv_intro.htm.
Teacher/Officer Next Door Programs
HUD operates teachers and law enforcement officers housing programs where these community servants can purchase HUD housing at a reduced cost. There are strict residency requirements for this program. To learn more visit for teachers and officers visit http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm.
State and Local Loan Programs
A number of states sponsor programs to help first time homebuyers qualify for mortgages. Local housing agencies also offer attractive loan terms to eligible homebuyers in some areas. These loan terms often include low down payments or low interest rates to first time homebuyers that meet specified income guidelines. Check with your state or local housing agency. The phone numbers usually can be found in the government "blue pages" of the phone book.
So, with PMI, lenders generally reduce the down payment requirements from 20 percent of the purchase price to as low as 3.5 percent. For example, on a $100,000 home, instead of putting down $20,000, you might be able to make a down payment as low as $3,500. The PMI cost will be added to your monthly mortgage payments and your closing costs.
Loans That Require Mortgage Insurance
Mortgage insurance is also available through three federal government programs: the Federal Housing Administration (FHA) mortgage insurance program operated by the U.S. Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA) loan guarantee program, and the Rural Housing Service (RHS) loan program. To obtain one of these loans you need to apply for a loan through a lender that is approved to do them.
FHA Loans
With FHA insurance, you can purchase a home with a very low down payment (from 3.5 percent to 5 percent of the FHA appraised value or the purchase price, whichever is lower). FHA mortgages have a maximum loan limit that varies depending on the average cost of housing in a given region. To learn more visit www.hud.gov/buying/loans.cfm.
VA Loans
The VA guarantee allows qualified veterans to buy homes with low or no down payment and with less strict guidelines than FHA or conventional loans. If you are a qualified veteran, this can be an attractive mortgage program. To determine whether you are eligible, check with your nearest VA regional office. To learn more visit www.homeloans.va.gov/veteran.htm.
Rural Housing Service (RHS) Loans
The Rural Housing Service, formerly known as the Farmers Home Administration and a branch of the U.S. Department of Agriculture, offers low interest rate homeownership loans with no down payments to low and moderate income potential homebuyers living in rural areas. Check with your local RHS office or a local lender for eligibility requirements. to learn more visit www.rurdev.usda.gov/rhs/common/indiv_intro.htm.
Teacher/Officer Next Door Programs
HUD operates teachers and law enforcement officers housing programs where these community servants can purchase HUD housing at a reduced cost. There are strict residency requirements for this program. To learn more visit for teachers and officers visit http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm.
State and Local Loan Programs
A number of states sponsor programs to help first time homebuyers qualify for mortgages. Local housing agencies also offer attractive loan terms to eligible homebuyers in some areas. These loan terms often include low down payments or low interest rates to first time homebuyers that meet specified income guidelines. Check with your state or local housing agency. The phone numbers usually can be found in the government "blue pages" of the phone book.
Wednesday, December 23, 2009
How to Keep Your Spending Under Control During the Holidays
With the holidays come endless to do lists, a non-stop shopping frenzy, and not enough time to stop and enjoy the cheer. A little technology can go a long way to help stay in control and organized, save time and reduce stress. Omar Wasow is a frequent on-air technology analyst and has been featured on NBC's "Today" show, CNN's "American Morning," "Live with Regis and Kelly," and Public Radio's "Tavis Smiley Show." He is also the co-founder of BlackPlanet.com.
Wasow recently appeared on "The Martha Stewart Show" to share his tips with the nationally syndicated show's audience and here are some of his tips:
Tip #1: Make Your List, and Check Your Deals Twice
When you find yourself trying to check off all the items on holiday list, make sure you're staying within your budget and getting the best possible deal, Apps such as Red Laser and Yowza can help you get the most from your purchases. Red Laser is a barcode scanner that allows you to scan an item and instantly have access to online prices and information. You can also scan movies at the store and beam them to your TiVo, scan a book and check for online reviews, or scan a food item and add it to your grocery list. Yowza Mobile Coupons is a free app that finds deals in your geographic area from as close as within a mile of you and as far away as 15 miles. When you arrive at the store, present the coupon on your device and let them scan the barcode. No clipping and stashing coupons necessary.
Don't let your holiday shopping list overwhelm you! The Santa's list app allows you to create, store and secure your holiday shopping list with pictures right on your iPhone! Also, you can store your own personal wish list to send to your friends and family via email. This handy app will keep you organized so that you don't forget that perfect gift for your friend or family member.
Tip 2: Power Walk While You Power Shop
Burn the calories from that extra piece of pumpkin pie by exercising while shopping! Now with some practical technology, pedometers can be integrated into your holiday rush through your shoe or iPod. The new iPod Nano doubles as a pedometer by using a built in accelerometer to keep track of your steps. You can crate a daily step goal or set it to Always On so it counts all the steps you take, all the time. This means that even an extra trip to the mall can be a fun way to burn a few more calories!
The Nike + iPod combo is another simple gadget that allows your running shoes to communicate to your iPod or iPhone and track your running speed, time and distance. By putting a little transponder in your Nike+-enabled sneakers or in a small pouch on non-Nike shoes, every run can be recorded and easily uploaded to an online running log at the nikeplus.com site. At the Nike Plus site, you can set goals, compete against friends, get virtual coaching for races and push yourself to achieve personal milestones. By monitoring your progress and staying motivated, you can help beat those extra holiday pounds!
Tip #3: Stick to Your Budget to Avoid a Holiday Hangover
While you're standing in line and running from store to store, be sure to keep a bank branch in your pocket. Use a mobile banking service, such as Bank of America's mobile banking app, where you can check your balances and transactions, pay bills, transfer money, locate ATMs and more. This easy to use technology ensures your financial life fits seamlessly into your holiday rush.
And, with enhanced security features, and with no financial information ever being stored on your mobile phone, you can transact with confidence. Utilizing this convenient banking tool gives you immediate access to your finances throughout the day. And with holiday budgets top of mind, it has never been more important to have control of your money whenever, wherever you need it.
Tip #4: De-clutter Your Space to De-clutter Your Holidays
Clutter and mess around your house and in your wallet can be a recipe for unnecessary stress and cause you extra time and hassle. Don't spend another minute rummaging through holiday receipts, or trying to find a place to keep all those holiday cards. First, de-clutter by keeping all your holiday gift receipts organized and put away. The Doc Scanner app enables your iPhone camera to act like a scanner so that important documents, like receipts, can be stored in your phone or on your computer. With Doc Scanner you're also just a couple of clicks from being able to email important papers or receipts while on the go. Now, you won't ever have to search through a mess pile of papers again to find that important receipt.
Keep a record of which friends and family sent youa holiday card this year - without saving the cards! Evernote allows you to easily store and search your text, photos and audio notes. Everything you capture is automatically processed, indexed, and made searchable. If you like, you can add tags or organize notes into different notebooks. So this year, as the holiday cards pile up, take a picture and store them out of sight!
Tip #5: Skip the Line Shop Online
Make the most of your time by shifting your shopping, whether for gifts or groceries, online! Online grocery stores now offer great service, selection and time savings, especially when you're getting ready for your annual holiday party. Not only will online grocery shopping save time, it can also save money by helping you avoid impulse buys, giving you discounts as a "preferred" customer, allowing easy bulk buying and giving free shipping with larger orders.
And these days, holiday shopping discounts can be found in unexpected places - even from your bank. Bank of America, for example gives its online banking customers access to their on shopping portal, Add It Up, where online banking customers can earn up to 20 percent cash back on purchases from more than 400 online retailers. This tool allows you to take advantage of time savings, online discounts and cash back, all while shopping!
And, shoppers can take advantage of the double cash back holiday promotions and Add it up retailers such as Apple online Store, BestBuy.com, and Gap.com, among other stores.
New Home Sales Foreclose In November
Well, yesterday we reported that existing homes sales were up causing the stock market to rise, but today there was a different story for new home sales.
Unexpectedly, new home sales fell like a rock in November according to a disappointing government report released today.
New home sales came down hard in November dropping 11.3% to 355,000 compared to the prior month. This was the lowest since April.
The new decline is said to be caused by the changes in the $8,000 home buyer's tax credit. Since buyers now have until April 30, 2010 to shop around, sales have dropped.
Even though the modified tax credit has been extending, the upcoming new wave of resetting adjustable rate mortgages are on the horizon. When this happens there will undoubtedly be foreclosures, which in turn will once again hurt the new home market.
Since builders have to make a profit and more and more home buyers look for better deals, new home sales will continue to suffer as a new flood of foreclosures hit the market next year.
Unexpectedly, new home sales fell like a rock in November according to a disappointing government report released today.
New home sales came down hard in November dropping 11.3% to 355,000 compared to the prior month. This was the lowest since April.
The new decline is said to be caused by the changes in the $8,000 home buyer's tax credit. Since buyers now have until April 30, 2010 to shop around, sales have dropped.
Even though the modified tax credit has been extending, the upcoming new wave of resetting adjustable rate mortgages are on the horizon. When this happens there will undoubtedly be foreclosures, which in turn will once again hurt the new home market.
Since builders have to make a profit and more and more home buyers look for better deals, new home sales will continue to suffer as a new flood of foreclosures hit the market next year.
Tuesday, December 22, 2009
Stock Prices Higher on Home Sales, But Prices Have Further to Fall.
Stocks rose Tuesday after an industry group said sales of existing homes rose more than expected in November. The advance comes despite government data that showed U.S. economic activity was weaker than expected in the third quarter.
Sales of existing homes jumped again in November, after surging 10% in October, growing 7.4 percent compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.
Lawrence Yun, NAR's chief economist said, "This clearly is a rush of first time homebuyers not wanting miss out on the tax credit."
Originally November was going to be the last month in which first time homebuyers would qualify for a federal tax credit of up to $8,000. That deadline however, was extended and expanded for buyers and they now have up until June to purchase a home.
Because of the tax credit's plug originally scheduled to be pulled in November, buyers pushed up their closings to November from December causing industry experts to expect home sales to slacken this month.
But with all the glimmers of hope we've had this year, Mark Zandi, chief economist for Moody's Economy.com, has some not so bright predictions. Home prices are going to fall 5% to 10% more and over 30% in cities like Miami from now and this time next year. In 2011 they might turn around. The keyword here is "might."
Studies show that most consumer markets won't begin to see an increase in home prices until 2011. Any bright side to this? "It's clear we're closer to the end of this crash than the beginning," says Zandi. Housing is more affordable, and construction is still low, so sales will eat up excess inventory. "We're moving in the right direction, and that's reason for optimism," he says.
Some say another plus is: He says there's almost zero possibility of another U.S. housing bubble anytime soon. We say, how about just a little one?
Who thinks we need another housing bubble, at least a little bit of a push, to get us out this hole?
Sales of existing homes jumped again in November, after surging 10% in October, growing 7.4 percent compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors.
Lawrence Yun, NAR's chief economist said, "This clearly is a rush of first time homebuyers not wanting miss out on the tax credit."
Originally November was going to be the last month in which first time homebuyers would qualify for a federal tax credit of up to $8,000. That deadline however, was extended and expanded for buyers and they now have up until June to purchase a home.
Because of the tax credit's plug originally scheduled to be pulled in November, buyers pushed up their closings to November from December causing industry experts to expect home sales to slacken this month.
But with all the glimmers of hope we've had this year, Mark Zandi, chief economist for Moody's Economy.com, has some not so bright predictions. Home prices are going to fall 5% to 10% more and over 30% in cities like Miami from now and this time next year. In 2011 they might turn around. The keyword here is "might."
Studies show that most consumer markets won't begin to see an increase in home prices until 2011. Any bright side to this? "It's clear we're closer to the end of this crash than the beginning," says Zandi. Housing is more affordable, and construction is still low, so sales will eat up excess inventory. "We're moving in the right direction, and that's reason for optimism," he says.
Some say another plus is: He says there's almost zero possibility of another U.S. housing bubble anytime soon. We say, how about just a little one?
Who thinks we need another housing bubble, at least a little bit of a push, to get us out this hole?
Duh, Lower Mortgage Payments Means Fewer Re-defaults
It's only common sense that troubled homeowners who have their loan payments reduced with a modification are less likely to re-default.
According to a banking regulators' report released Monday, only 18.7% of borrowers who had their loans modified in the second quarter were delinquent three months later.
Regulators attribute the nearly 40% drop in re-defaults to their March directive that urged financial institutions to make sure the loan modifications they do are affordable and sustainable.
According to the report issued by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, the percentage of loan modifications that decreased payments shot up to 78.3% in the second quarter, up from 53.5% in the first quarter.
In the past loan servicers were really of no help to homeowners. Many of them would just add late fees to loan payments and past due interest on the end of the loan and not lowering the actual amount owed. So homeowners who couldn't make their mortgage payment weren't able to make their modified payment either. The difference now is servicers are not only lowering interest rates, but extending the terms of the loan and even reducing the principal balance making the loan more affordable.
Are better loan modification terms the answer to improving the economy? Leave us a comment and let us hear what you think.
According to a banking regulators' report released Monday, only 18.7% of borrowers who had their loans modified in the second quarter were delinquent three months later.
Regulators attribute the nearly 40% drop in re-defaults to their March directive that urged financial institutions to make sure the loan modifications they do are affordable and sustainable.
According to the report issued by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, the percentage of loan modifications that decreased payments shot up to 78.3% in the second quarter, up from 53.5% in the first quarter.
In the past loan servicers were really of no help to homeowners. Many of them would just add late fees to loan payments and past due interest on the end of the loan and not lowering the actual amount owed. So homeowners who couldn't make their mortgage payment weren't able to make their modified payment either. The difference now is servicers are not only lowering interest rates, but extending the terms of the loan and even reducing the principal balance making the loan more affordable.
Are better loan modification terms the answer to improving the economy? Leave us a comment and let us hear what you think.
Some Homeowners Are Lucking Out With 2% Mortgage Modifications.
CnnMoney.com reported some lucky homeowners are getting loan modifications with 2% interest rates.
According to the latest figures available from Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, nearly 80% of all loan modifications resulted in lower payments in the second quarter. That figure is up 50% higher than it was three months earlier. The sad part is, only 4% of all homeowners who need the workouts are actually getting them.
Borrowers who are made loan modifications that are affordable are less likely to default. According to the OCC report, a year after receiving a modification just 34% of borrowers whose loan payments were reduced 20% or more had re-defaulted compared with the 63% of borrowers whose payments had been left unchanged.
Homeowner Rodney Wynn is a great example of a borrower who was drowning in a $1,800 per month, 13.4% interest rate mortgage one day and a 4.7% loan with a $970 monthly payment the next.
You can read more about Rodney and other homeowners who received modifications that saved their homes here.
Has a loan modification helped you to save your home? Were you declined for a modification? Feel free to comment and tell us your story.
According to the latest figures available from Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, nearly 80% of all loan modifications resulted in lower payments in the second quarter. That figure is up 50% higher than it was three months earlier. The sad part is, only 4% of all homeowners who need the workouts are actually getting them.
Borrowers who are made loan modifications that are affordable are less likely to default. According to the OCC report, a year after receiving a modification just 34% of borrowers whose loan payments were reduced 20% or more had re-defaulted compared with the 63% of borrowers whose payments had been left unchanged.
Homeowner Rodney Wynn is a great example of a borrower who was drowning in a $1,800 per month, 13.4% interest rate mortgage one day and a 4.7% loan with a $970 monthly payment the next.
You can read more about Rodney and other homeowners who received modifications that saved their homes here.
Has a loan modification helped you to save your home? Were you declined for a modification? Feel free to comment and tell us your story.
Was Darth Vader the Cause of Our Economic Woes?
The geek in me had to post today's opening bell on Wall Street rung by Star Wars Alumni Darth Vader. Of course you knew all the foreclosures, high unemployment rates, and the Great Recession were all part of the Sith Lords plan, didn't you?
In this YouTube video posted by News on ABC, you can see the Dark Lord ringing the bell supported by a squad of Clone Troopers.
In this YouTube video posted by News on ABC, you can see the Dark Lord ringing the bell supported by a squad of Clone Troopers.
Monday, December 21, 2009
How Can I Increase My Borrowing Power to Buy a House?
Would you be disappointed if you didn't qualify for the house you tried to pre-qualify for? Maybe you have found your house buying options are fairly limited. You may have to lower your standards and realize that you have to buy a less expensive home. But all hope is not lost. There are ways to increase your borrowing power. It may take some time to do these options, but here are some ways to increase your borrowing power:
- Reduce your existing long term debt
- Wait to apply for a mortgage until your income increases
- Find a financing option that results in a lower down payment and lower monthly mortgage payments.
We have previously discussed that if your existing debt is too high in relation to your income, you can qualify for a larger home by paying off some of your debt before you apply for the mortgage. When buying a home it is not the time to go out and purchase expensive items like a car or furniture. If the problem is your income and it is limiting your borrowing capacity, you may need to try something else. You may have to wait before you can apply for a mortgage loan until your income increases or your expenses decrease.
- Reduce your existing long term debt
- Wait to apply for a mortgage until your income increases
- Find a financing option that results in a lower down payment and lower monthly mortgage payments.
We have previously discussed that if your existing debt is too high in relation to your income, you can qualify for a larger home by paying off some of your debt before you apply for the mortgage. When buying a home it is not the time to go out and purchase expensive items like a car or furniture. If the problem is your income and it is limiting your borrowing capacity, you may need to try something else. You may have to wait before you can apply for a mortgage loan until your income increases or your expenses decrease.
Sunday, December 20, 2009
How Is My Credit Score Determined?
We previously discussed how to pre-qualify yourself for a mortgage loan, but as part of the pre-qualifying process you need to get a copy of your credit report. Knowing exactly what's on your credit report can help your loan application process go more smoothly. Whatever lender you choose, they will also pull your credit report as part of the application process, but you should pull a copy of it for yourself every year.
You can get a free copy of your credit report from annualcreditreport.com, or for a small fee you can get a copy of your credit report from a credit reporting agency like myfico.com. FinancialElite.com recommends that you get what is called a tri-merge credit score, which is a combination of all three credit reporting bureaus: Experian, Trans Union, and Equifax.
What is Credit Scoring?
Credit scoring is a statistical method used to predict the likelihood that a potential borrower will repay debt, such as a mortgage loan.
A credit score is based solely on information in a credit report:
- Previous credit performance
- Current level of indebtedness
- Amount of time credit has been in use
- Pursuit of new credit
- Types of credit available
Your credit score in NOT based on factors prohibited under the Equal Credit Opportunity Act (ECOA), such as race, gender, color, religion, national origin, and marital status. Excluded from the credit score formula are income, employment, and residence.
The FICO score is developed by the Fair Isaac Corporation and is the most common credit score used in mortgage lending. These are the five main components of determine your FICO credit score:
- Payment history accounts for 35 percent of your FICO score.
Are you late on paying your bills? How long ago did these late payments occur? How long were you delinquent on any of your bills at one time? What was your highest level of delinquency you had in the last year? How many months have gone by since the most recent negative item on your credit report (such as a judgement, lien, bankruptcy, etc.)? Generally, the worse off your credit performance, the worse the credit score. Recent bad credit has more of a negative impact on your score.
- Amounts Owed account for 30 percent of your FICO score.
How many loans and open credit cards do you have? What is ratio of your revolving debt to your total revolving limits available to you? What is the percentage outstanding on your installment loans? Generally, the higher the percentage of utilization of credit, the higher the risk. Do Not max out your credit cards!
- Length of credit history accounts for 15 percent of your FICO score.
How long ago did you establish credit? Usually, the longer you have had credit and have successfully paid your debts on time, the better the score. However, if you have fairly new
credit or only one or two traditional accounts, you can still obtain high scores too.
- New Credit accounts for 10 percent of your FICO score.
Are you applying for new sources of credit, like an additional credit card or auto loan? The credit score calculation will only take into account inquiries you initiated into account.
The score takes into account inquiries over a 12 month period. Any inquiries related to auto loans or mortgage loans that have taken place over the past 30 days are excluded. Also, any multiple inquiries for auto loans or mortgage loans that occur in any 14 day period are considered as a single inquiry.
There are types of inquiries that the score does not take into account. These are inquiries that you did not initiate yourself by applying for credit. For instance, banks mail promotions to consumers to whom they would like to issue a credit card. These types of inquiries appear on your report as PRM or promotional inquiries and do not affect your credit score.
- How you use your credit accounts for 10 percent of your FICO score.
How many different types of credit do you have? Bank issued Visa or MasterCards? Department store credit cards? Installment credit with which you used to purchase furniture? Usually, the types of credit you have available are not as important when determining a credit score as the previously mentioned categories.
How do I establish credit?
If you don't have an established credit history, whether it's good or bad, there is no time like the present to get one established. If you don't have an established credit history with traditional credit source such as, credit cards, auto loan, or student loan, it is always possible to establish one. You can establish a credit history by documenting your monthly rent payments, your utility payments (electric, gas, water, telephone service, cable television, insurance for your medical, auto, and life insurance).
How do I repair my bad credit?
From time to time you may be surprised you that your credit is not as clean as you might like. If you currently have credit problems you may not be able to buy a home until you get your credit cleaned up. If your payment problems are in the past, your recent payment history of payments being made on time may help your situation. It is law that your most derogatory credit information must be dropped from your credit report after seven years. A bankruptcy will remain on your credit for 10 years.
If you are behind on your bills you may want to consider contacting the National Foundation for Credit Counseling (NFCC). They can help you develop a plan for improving your credit. You can contact them at (800) 388-2227 or visit nfcc.org.
How do I correct wrong information on my credit report?
Every now and then there may be incorrect information on your credit report which may give a false impression of past credit issues that have been resolved.
To keep aware of what's happening with your credit, you should obtain a copy of your credit report every year. You never want to be declined for a mortgage because of a erroneous credit report. If you find incorrect information on your credit report, the credit reporting agnecy showing the incorrect information must include your explanation of the situation in future credit reports. Get into the habit of checking your credit report every year. If you haven't done so this year, do it now. After January 1, do it again.
You can get a free copy of your credit report from annualcreditreport.com, or for a small fee you can get a copy of your credit report from a credit reporting agency like myfico.com. FinancialElite.com recommends that you get what is called a tri-merge credit score, which is a combination of all three credit reporting bureaus: Experian, Trans Union, and Equifax.
What is Credit Scoring?
Credit scoring is a statistical method used to predict the likelihood that a potential borrower will repay debt, such as a mortgage loan.
A credit score is based solely on information in a credit report:
- Previous credit performance
- Current level of indebtedness
- Amount of time credit has been in use
- Pursuit of new credit
- Types of credit available
Your credit score in NOT based on factors prohibited under the Equal Credit Opportunity Act (ECOA), such as race, gender, color, religion, national origin, and marital status. Excluded from the credit score formula are income, employment, and residence.
The FICO score is developed by the Fair Isaac Corporation and is the most common credit score used in mortgage lending. These are the five main components of determine your FICO credit score:
- Payment history accounts for 35 percent of your FICO score.
Are you late on paying your bills? How long ago did these late payments occur? How long were you delinquent on any of your bills at one time? What was your highest level of delinquency you had in the last year? How many months have gone by since the most recent negative item on your credit report (such as a judgement, lien, bankruptcy, etc.)? Generally, the worse off your credit performance, the worse the credit score. Recent bad credit has more of a negative impact on your score.
- Amounts Owed account for 30 percent of your FICO score.
How many loans and open credit cards do you have? What is ratio of your revolving debt to your total revolving limits available to you? What is the percentage outstanding on your installment loans? Generally, the higher the percentage of utilization of credit, the higher the risk. Do Not max out your credit cards!
- Length of credit history accounts for 15 percent of your FICO score.
How long ago did you establish credit? Usually, the longer you have had credit and have successfully paid your debts on time, the better the score. However, if you have fairly new
credit or only one or two traditional accounts, you can still obtain high scores too.
- New Credit accounts for 10 percent of your FICO score.
Are you applying for new sources of credit, like an additional credit card or auto loan? The credit score calculation will only take into account inquiries you initiated into account.
The score takes into account inquiries over a 12 month period. Any inquiries related to auto loans or mortgage loans that have taken place over the past 30 days are excluded. Also, any multiple inquiries for auto loans or mortgage loans that occur in any 14 day period are considered as a single inquiry.
There are types of inquiries that the score does not take into account. These are inquiries that you did not initiate yourself by applying for credit. For instance, banks mail promotions to consumers to whom they would like to issue a credit card. These types of inquiries appear on your report as PRM or promotional inquiries and do not affect your credit score.
- How you use your credit accounts for 10 percent of your FICO score.
How many different types of credit do you have? Bank issued Visa or MasterCards? Department store credit cards? Installment credit with which you used to purchase furniture? Usually, the types of credit you have available are not as important when determining a credit score as the previously mentioned categories.
How do I establish credit?
If you don't have an established credit history, whether it's good or bad, there is no time like the present to get one established. If you don't have an established credit history with traditional credit source such as, credit cards, auto loan, or student loan, it is always possible to establish one. You can establish a credit history by documenting your monthly rent payments, your utility payments (electric, gas, water, telephone service, cable television, insurance for your medical, auto, and life insurance).
How do I repair my bad credit?
From time to time you may be surprised you that your credit is not as clean as you might like. If you currently have credit problems you may not be able to buy a home until you get your credit cleaned up. If your payment problems are in the past, your recent payment history of payments being made on time may help your situation. It is law that your most derogatory credit information must be dropped from your credit report after seven years. A bankruptcy will remain on your credit for 10 years.
If you are behind on your bills you may want to consider contacting the National Foundation for Credit Counseling (NFCC). They can help you develop a plan for improving your credit. You can contact them at (800) 388-2227 or visit nfcc.org.
How do I correct wrong information on my credit report?
Every now and then there may be incorrect information on your credit report which may give a false impression of past credit issues that have been resolved.
To keep aware of what's happening with your credit, you should obtain a copy of your credit report every year. You never want to be declined for a mortgage because of a erroneous credit report. If you find incorrect information on your credit report, the credit reporting agnecy showing the incorrect information must include your explanation of the situation in future credit reports. Get into the habit of checking your credit report every year. If you haven't done so this year, do it now. After January 1, do it again.
Friday, December 18, 2009
How Do I Pre-Qualify Myself For a Mortgage Loan?
Generally, you should let a lender pre-qualify you before you buy a home. But you can basically do it yourself so you can determine the price range that you should shop for a home in. You can get your credit report yourself too, but the lender will know best if you will have any credit issues that need addressing before buying a home.
Your Gross Income. When calculating your gross income, which is your pre-tax income, you can use all your income that you receive on a regular basis. This could include:
- Gross pay (pre-tax and other deductions)
- Overtime, part-time, seasonal, commissions
- Bonuses, tips
- Dividends, interest earnings
- Business or investment earnings
- Pension, Social Security benefits
- Veterans Administration benefits
- Unemployment compensation
- Public assistance
- Alimony, child support, or separate maintenance income
Your Debt Payments. Determining your debt is also essential in figuring how large a mortgage you can obtain. Lenders will be interested in your long-term debt, which is any debt that will take 10 months to pay off. Long-term debts typically include:
- Installment loan payments with 10 or more monthly payments remaining (car loan, furniture, appliances, etc.)
- Average monthly credit card payments
- Student Loans
- Medical/health care payment
- Alimony/child support payment
If your monthly debt payments are excessive for the level of income you have, it may reduce the amount you can get for a mortgage loan so you can buy a home. For every $50 of excess debt you have, you can expect about a $5,000 reduction in the amount of mortgage loan you qualify for. If you have excessive debt, think about paying off some your debt in preparation for buying a home. You may qualify for a larger mortgage, which may in turn allow you to afford a bigger home with your income.
Your Gross Income. When calculating your gross income, which is your pre-tax income, you can use all your income that you receive on a regular basis. This could include:
- Gross pay (pre-tax and other deductions)
- Overtime, part-time, seasonal, commissions
- Bonuses, tips
- Dividends, interest earnings
- Business or investment earnings
- Pension, Social Security benefits
- Veterans Administration benefits
- Unemployment compensation
- Public assistance
- Alimony, child support, or separate maintenance income
Your Debt Payments. Determining your debt is also essential in figuring how large a mortgage you can obtain. Lenders will be interested in your long-term debt, which is any debt that will take 10 months to pay off. Long-term debts typically include:
- Installment loan payments with 10 or more monthly payments remaining (car loan, furniture, appliances, etc.)
- Average monthly credit card payments
- Student Loans
- Medical/health care payment
- Alimony/child support payment
If your monthly debt payments are excessive for the level of income you have, it may reduce the amount you can get for a mortgage loan so you can buy a home. For every $50 of excess debt you have, you can expect about a $5,000 reduction in the amount of mortgage loan you qualify for. If you have excessive debt, think about paying off some your debt in preparation for buying a home. You may qualify for a larger mortgage, which may in turn allow you to afford a bigger home with your income.
Thursday, December 17, 2009
Merry Christmas From Citi...No Foreclosures for a Month
CnnMoney.com reported today that Citigroup announced that they will suspend foreclosures and evictions for 30 days, giving 4,000 at risk borrowers a break during the holiday season.
Citigroup said Thursday that distressed homeowners with first mortgages owned by CitiMortgage or CityFinancial North America will not be subject to foreclosure sales or notifications from December 18 and January 17.
"We hope that with this suspension we can make the holidays a little less stressful for our customers who are going through a very difficult time," said Sanjiv Das, chief executive of CitiMortgage, in a statement.
All banks should be doing this. Not only for homeowners, but credit card holders or auto owners struggling to make their payments. Isn't what this season is about, giving and forgiveness?
Citigroup said Thursday that distressed homeowners with first mortgages owned by CitiMortgage or CityFinancial North America will not be subject to foreclosure sales or notifications from December 18 and January 17.
"We hope that with this suspension we can make the holidays a little less stressful for our customers who are going through a very difficult time," said Sanjiv Das, chief executive of CitiMortgage, in a statement.
All banks should be doing this. Not only for homeowners, but credit card holders or auto owners struggling to make their payments. Isn't what this season is about, giving and forgiveness?
Tuesday, December 15, 2009
Can You Afford to Buy a Home?
The standard rule of thumb used to determine how much of a home you can afford to buy is one that costs up to two and one-half times your annual gross income (gross income is the amount you make before taxes are deducted). If you are buying a home with a co-borrower such as a: spouse, parent, child over 18, partner/companion, a family member, etc. you can figure your co-borrowers annual gross income too when deciding how expensive a home you can buy. Keep in mind your co-borrowers debt's and credit history also will determine how much you can afford to borrow. The co-borrower is also responsible for the repayment of the mortgage. Using these estimations, if you and your co-borrower have a combined annual income of $80,000, you should be looking to purchase a home priced no more than $200,000, if your combined on income of $40,000, your new home should cost no more than $100,000.
This gives you a rough estimate of what you can expect to pay for a home. There are plenty of mortgage calculators on the Web to help give you a better picture.
Your ability to buy a home will also depend on three things:
- How much you have available for the down payment.
- How much a financial institution will agree to lend you.
- Your credit situation.
We will look at ways you can can come with your down payment and closing costs, as well as guidelines lenders follow to determine how much they will loan you to buy a home.
Your Down Payment
The amount you can afford pay for a home may be limited by the amount of your down payment and closing costs. If you are a first time homebuyer, your savings may be your principal source of your down payment. If you don't have a substantial amount saved, you may need to start putting money aside from each paycheck before you consider buying a home.
The amount of your down payment will determine how much money you need to borrow for your mortgage loan.
$200,000 purchase price
-10,000 5 percent down payment
--------
$190,000 mortgage amount
$100,000 purchase price
-5,000 5 percent down payment
-------
$95,000 mortgage amount
Your Ability to Borrow
Your down payment is only part of the equation when buying a home. The next factor is how much you can borrow. When you are applying for a loan, the lender will be looking at three factors in determining how much of a loan they will approve you for:
- Earnings
- Existing debt level
- Credit and payment history
Guidelines Lenders use to Qualify You
Lenders use two main guidelines to decide whether you qualify for a loan or not.
- Your monthly housing expenses, which are: mortgage payment, property taxes, insurance, and condo or homeowner association fees (if applicable) should be no more than 28 percent of your monthly gross (before-tax) income.
- Your monthly housing costs plus other long term debts should total no more than 36 percent of your monthly gross income.
Not only do lenders, but financial advisers will also recommend that you spend no more than 25-28 percent of your income on housing and not more than 33-36 percent on your total debt (housing, credit cards, and other debt). If you exceed any of these ratios the lender may be able to make some exceptions with qualifying factors like: substantial savings reserves, high credit score or being on on your job for a considerable time. So it is possible to still qualify for loan exceeding the ratios, but it is probably not a good way to start out. You may find that some local, state, or federal programs have limits on the percentage of debt you have and may disqualify you from participating as well.
There are many excellent resources online that can help you find what size mortgage is right for you.
Bank Rate
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
Fannie Mae
http://www.fanniemae.com/homebuyers/index.html
Freddie Mac
http://freddiemac.com/corporate/buyown/english/calcs_tools/
When you apply for your mortgage, the lender will review all the necessary data: your income, your existing debt, the purchase price of the home, your down payment, the interest rate on the purposed loan, and the cost of your property taxes and insurance. They will then calculate if you you qualify for a loan in the amount you need to purchase the house.
Qualifying for a loan is only the beginning. During the approval process the lender will determine how much of a mortgage you would be eligible for if your loan application is approved.
This gives you a rough estimate of what you can expect to pay for a home. There are plenty of mortgage calculators on the Web to help give you a better picture.
Your ability to buy a home will also depend on three things:
- How much you have available for the down payment.
- How much a financial institution will agree to lend you.
- Your credit situation.
We will look at ways you can can come with your down payment and closing costs, as well as guidelines lenders follow to determine how much they will loan you to buy a home.
Your Down Payment
The amount you can afford pay for a home may be limited by the amount of your down payment and closing costs. If you are a first time homebuyer, your savings may be your principal source of your down payment. If you don't have a substantial amount saved, you may need to start putting money aside from each paycheck before you consider buying a home.
The amount of your down payment will determine how much money you need to borrow for your mortgage loan.
$200,000 purchase price
-10,000 5 percent down payment
--------
$190,000 mortgage amount
$100,000 purchase price
-5,000 5 percent down payment
-------
$95,000 mortgage amount
Your Ability to Borrow
Your down payment is only part of the equation when buying a home. The next factor is how much you can borrow. When you are applying for a loan, the lender will be looking at three factors in determining how much of a loan they will approve you for:
- Earnings
- Existing debt level
- Credit and payment history
Guidelines Lenders use to Qualify You
Lenders use two main guidelines to decide whether you qualify for a loan or not.
- Your monthly housing expenses, which are: mortgage payment, property taxes, insurance, and condo or homeowner association fees (if applicable) should be no more than 28 percent of your monthly gross (before-tax) income.
- Your monthly housing costs plus other long term debts should total no more than 36 percent of your monthly gross income.
Not only do lenders, but financial advisers will also recommend that you spend no more than 25-28 percent of your income on housing and not more than 33-36 percent on your total debt (housing, credit cards, and other debt). If you exceed any of these ratios the lender may be able to make some exceptions with qualifying factors like: substantial savings reserves, high credit score or being on on your job for a considerable time. So it is possible to still qualify for loan exceeding the ratios, but it is probably not a good way to start out. You may find that some local, state, or federal programs have limits on the percentage of debt you have and may disqualify you from participating as well.
There are many excellent resources online that can help you find what size mortgage is right for you.
Bank Rate
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
Fannie Mae
http://www.fanniemae.com/homebuyers/index.html
Freddie Mac
http://freddiemac.com/corporate/buyown/english/calcs_tools/
When you apply for your mortgage, the lender will review all the necessary data: your income, your existing debt, the purchase price of the home, your down payment, the interest rate on the purposed loan, and the cost of your property taxes and insurance. They will then calculate if you you qualify for a loan in the amount you need to purchase the house.
Qualifying for a loan is only the beginning. During the approval process the lender will determine how much of a mortgage you would be eligible for if your loan application is approved.
Sunday, December 13, 2009
What Are the Costs Involved in Buying a Home?
Buying a house isn't as simple as just getting a loan. There some expenses involved. There are generally two types costs involved when buying a home: upfront costs and ongoing costs.
Up Front Costs-Up front costs include your down payment, closing costs also known as settlement costs, and moving expenses. It can also include your down payment or the deposit you put down to show the seller you are earnestly intending to purchase the home.
Down Payment- Usually a homebuyer needs a loan or mortgage from a lending institution. The majority of mortgage products require you to contribute some portion of your own money (amount of your down payment). Lenders believe you are less likely to walk away from your home if you invest some of your own money towards the purchase.
At one time lenders expected borrowers to make down payment towards the purchase price of at least a 20 percent. For example a homebuyer would need a down payment of $30,000 to buy a house that was selling for $150,000. FHA loans allow a buyer to purchase a home for as little as 3.5 percent down, but you will have to have private mortgage insurance (PMI), which helps the lender in case you fail to repay your loan. The PMI however may add another $100 to the monthly payment.
Closing Costs-Not only do you need to have a down payment, you need to be ready to pay other up front costs that come with buying a home. Together they are known as Closing costs. These costs can range from 3 percent to 6 of the mortgage. Sometimes these fees can be even higher.
For example buying a $150,000 house with a 5 percent down payment of $7,500, you can expect to pay anywhere from $4,275 to $8,550 in closing costs on your mortgage of $142,500. Your lender or real estate agent may be able to suggest to you different ways you can obtain down payment assistance programs for first time or low income homebuyers.
Moving in Costs-You may also need to consider what it will take to move into your new home. If the house you are buying is need of repair, you will need money for that. You may also need to buy appliances like a stove and refrigerator. Be sure you have money put aside for these items.
Continuing Costs-If you currently rent, you are probably used to just paying your rent every month. But as a homeowner, your costs will include: mortgage payment, property taxes, homeowners insurance, possible mortgage insurance, utilities, and maintenance and repairs. You may also have to pay, as most condominium owners do, an association fee.
Monthly Mortgage Payment-If you are renting you are probably already used to having to making a monthly payment towards your housing. Mortgage payments include the repayment of principal (the amount you actually borrowed) and the interest (the cost of borrowing money) Lenders refer to payments for principal and interest as "P&I".
The amount of your mortgage payment is dependant on the amount you borrow, your interest rate, the repayment period or term of your loan, and whether your mortgage is fixed or an adjustable rate. For instance:
A $100,000 mortgage at a rate of 8 percent for 30 years will have a monthly payment of P&I only would have a payment of $734. On the other hand the same loan amount of $100,000 at a rate of 8 percent for 15 years will have a P&I only payment of $956.
The bigger your loan amount and the higher your interest rate, the larger your monthly payment will be. So how are monthly payments calculated? Most mortgages are fully amortized. This means that at the end of the loan term, usually after 30 years of making the same monthly payment, you will have paid the entire amount of the principal and all the interest owed the the lender. After that, the house will be yours free and clear.
Taxes and Insurance (T&I)-Most of the time a monthly mortgage payment will include not only the principal and interest (P&I), but also property taxes, homeowners insurance, and private mortgage insurance. The lender will hold these additional amounts in a separate escrow account and then pays the tax and insurance bills when they come due. This way the lender is able to ensure these expenses are paid on time. Think of it as a forced saving account for these items. If lenders did not do this, homeowners may not be prepared to pay these bill when they are due.
Taxes and insurance are an essential part of of a homeowner's housing costs, lenders refer to all the items included in a mortgage payment as PITI, or principal, interest, taxes, and insurance.
Additional Costs-Your other ongoing costs will include utilities (gas, electricity, water), as well as trash, homeowners dues, and maintenance costs. First time homebuyers often experience sticker shock and are often surprised by the high cost of basic upkeep. Utilities costs can vary greatly (your gas bill will probably increase in the winter and your electric bill in the summer). Repairs are often an expected expense. For that reason, homeowners should have an emergency fund.
All of these fees may seem like a negative to homeownership. But remember the plus side. Homeowners receive significant federal income tax benefits.
Homeowners Need More Help.
The Obabma Administrations foreclosure prevention program isn't really doing much. According to Treasury officials, only about 4% of troubled borrowers have received long-term help under the program.
The report released last Tuesday shows that loan servicers have converted 31,382 borrowers from trial modifications to permanent ones as of November 30.
Since the program began last Spring, a total of 759,058 trial modifications have been issued. The amount of troubled homeowners who have received trial assistance has rose from 697,026 up from 650,994 the previous month.
Concerns have risen by the low number of permanent modifications. It is looking like the $75 billion plan is falling short of its goal to help 4 million delinquent homeowners.
The main reason that more modifications are not becoming permanent is the paperwork required to be completed for the long term modification.
Some 375,000 borrowers should be eligible to receive long-term help by the end of the year. Only one-third of homeowners who have made at least three trial payments have submitted all the forms necessary to complete the modification.
Treasury officials have reported that only 20% of homeowners have not submitted the paperwork. Banks are hiring third parties to assist borrowers complete the paperwork.
Although, the paper work may be completed, borrowers can still be denied permanent help if they are not meeting the program's criteria.
Have you tried to have your mortgage modified? Have you completed the necessary paperwork? Did you get permanent relief?
The report released last Tuesday shows that loan servicers have converted 31,382 borrowers from trial modifications to permanent ones as of November 30.
Since the program began last Spring, a total of 759,058 trial modifications have been issued. The amount of troubled homeowners who have received trial assistance has rose from 697,026 up from 650,994 the previous month.
Concerns have risen by the low number of permanent modifications. It is looking like the $75 billion plan is falling short of its goal to help 4 million delinquent homeowners.
The main reason that more modifications are not becoming permanent is the paperwork required to be completed for the long term modification.
Some 375,000 borrowers should be eligible to receive long-term help by the end of the year. Only one-third of homeowners who have made at least three trial payments have submitted all the forms necessary to complete the modification.
Treasury officials have reported that only 20% of homeowners have not submitted the paperwork. Banks are hiring third parties to assist borrowers complete the paperwork.
Although, the paper work may be completed, borrowers can still be denied permanent help if they are not meeting the program's criteria.
Have you tried to have your mortgage modified? Have you completed the necessary paperwork? Did you get permanent relief?
Where Can I Get Help to Maintain a Budget?
I have planned my budget on paper many times, but there are resources that you can turn to if you need a little more help. One source is SimplePlanning.com. You can find a program here that is downloadable for $9.95. If you use Microsoft Office you can look at the financial templates that come with the program. Or shop around for a financial planning tool that helps you organize your spending and makes the chore of planning a budget less time consuming.
Saturday, December 12, 2009
How to Save Money For Holiday Purchases Online
With the holiday season in full swing, shoppers will be looking to save money, but they are also busy and searching for convenient and easy ways to do so. Michelle Madhok is founder of SheFinds.com and MomFinds.com, websites that help busy women get the best deals on online.
She recently appeared on "The Martha Stewart Show" to share her tips with the nationally syndicated show's audience. Here is some of the shopping wisdom she had to share.
Michelle's tips:
1. Shop Online Only. Avoid the holiday mayhem entirely. Schedule time to cybershop-most stores will save the contents of your shopping cart for a few days, so you can revise according to your budget when you are don e. This will give you more control over what ultimately ends up in the cart.
2. Pare Down Your Search. If you have some idea of what to buy but aren't totally sure, Pronto is a great place to start. The shopping search engine is accurate and user friendly, and with photos and price ranges for all the results.
3. Set Yourself Up For Deals. Know where you'll do some of your shopping already? Sign up that retailer's e-mail newsletter list and you'll be the first to know about sales, spend-and-save offers, and free shipping - sometimes they'll even throw in a coupon code.
4. Visit Deal-Specific Sites. SheFinds.com Deal of the Day is http://www.shefinds.com/tag/sales-and-deals/ and offers the best buys for fashion and beauty. Woot.com offers a huge discount on limited quantity one day deals.
5. Pinpoint Seasonal Items. Keep an eye out for whether they go on sale. If you're getting all of your girlfriends gloves, for example, it might be worth waiting, since they may be marked down by mid-winter. Same goes for anything wintry - sweaters, pine-scented candles, peppermint bark, et cetera.
6. Visit Sample Sale Site! Everyone at SheFinds.com loves these sites right now - they feature great brands and often have a pretty decent selection of products for up to 70% off during sales that last a few hours. We keep a calendar of the all sales up at Shefinds.com, and send out a list of our favorites each Monday morning.
7. Shop Safe. Be wary of ordering from a merchant that you've never heard of. For a quick check, Google the name of the site and "fraud"scam" and do a quick search of http://www.ripoffreport.com/ to see if anyone else has reported a scam. Shop with companies located in the U.S. because you're protected by state and federal consumer laws. Use a credit card when you buy online since unauthorized charges of $50 or more are covered by federal law.
8. Get Smart with Social Media. Follow your favorite retailers on Twitter and join their Facebook fan pages that frequently give subscribers early access to sales and additional discounts.
9. Ask for an after-the-fact markdown. If the item you bought goes on sale within in the week or the month, many stores will pay you back the difference. Keep your receipts! Some retailers offer a price guarantee over 100%- that means if you find the item cheaper anywhere else, prove it to the retailer and they'll beat that price.
10. Get Cash Back. A no-brainer for saving during a big shopping season: shop through a cash back service like Bank of America's Add It Up Program which gives Bank of America customers up to 20% cash back on purchases from participating retailers. Add It Up has over 300 retailers and you can even take advantage of double cash back offers from retailers like Apple Online Store and BestBuy.com.
Thursday, December 10, 2009
Bank of America Attempts to Help Howeowners Highlighted on Capitol Hill
Bank of America's home retention efforts were highlighted in a testimony before the House Financial Services Committee on Tuesday December 8. Representing the bank, Credit Loss Mitigation Strategies Executive Jack Schakett underscored the bank's achievements in assisting distressed homeowners through loan modification and refinance efforts:
- Enrolling more than 160,000 customers in a trial modification through the Administration's Home Affordable Modification Program (HAMP) - leading the industry in the number of active trials and offers extended as of the most recent Treasury report.
- Helping another 450,000 Bank of America customers over the last two years through Bank of America's own proprietary loan modification programs.
- Leading the industry with more than 100,000 customers assisted through the Administration's Home Affordable Refinance Program (HARP).
Challenges Converting HAMP Trial Modifications to Permanent
A key component of the HAMP programs is a three month trial period. During the trial phase, customers prove they can successfully make their new payment and provide required documentation. Recent scrutiny has focused on the success servicers like Bank of America are having in making trial modifications permanent. Schakett said the bank fully shares the Treasury's commitment to convert successful trial modifications to permanent as quickly as possible. In addition to customers making three timely trial payments, the servicer must fully underwrite the permanent modification by obtaining all required documentation. This includes verifying income, occupancy status and tax returns. Schakett said the single biggest obstacle to a quick and successful conversion is obtaining all required financial information.
Schakett shared the bank's focus to encourage customers to complete their documentation before the end of their trial modification period. For these customers, the bank will have made about 10 reminder phone calls and sent,a t least twice, a summary of required documents with a postage paid express mail package through which customers can return their documents.
Schakett said there is a high rate of success converting the modification to a permanent one when customers have provided all the required financial information.
Schakett also discussed how HAMP could be improved to help more borrowers, explaining that Bank of America believes it is necessary to provide solutions for customer segments that fall outside HAMP's target reach, such unemployed. While Bank of America is working proactively to create programs for these borrowers, Schakett encouraged Treasury to take the lead on expanding HAMP and creating an industry standard to help more customers.
"Toward the goal to keep as many customers in their homes as possible, Bank of America will exhaust every available option," he said "We will continue to pursue initiatives that increase the number of customers receiving assistance, enhance the sustainability of the loans and improve the experience for customers throughout the process."
Emphasis on Improving the Customer Experience
- Bank of America has taken major steps to reach eligible homeowners and improve the level of service they receive, including:
- Expansion of default management staffing to 13,000 and reassignment of hundreds of mortgage loan officers to serve as case workers to assist customers in the conversion from trial to permanent modifications.
- Launch of a home loans assistance website for customers.
- Implementation of a door to door campaign to reach borrowers who have not responded to trial modification offers or provided necessary documentation.
- Participating in more than 200 community outreach events in 30 states.
- Sponsorship of the Alliance for Stabilizing Our Communities, the first national multicultural outreach and home retention collaboration with the National Council of La Raza, National Urban League and National Coalition for Asian Pacific American Community Development.
- Piloting the company's first Customer Assistance Center in Brea, CA providing face to face counseling on mortgage and home equity loans, credit card accounts and personal loans.
- Enrolling more than 160,000 customers in a trial modification through the Administration's Home Affordable Modification Program (HAMP) - leading the industry in the number of active trials and offers extended as of the most recent Treasury report.
- Helping another 450,000 Bank of America customers over the last two years through Bank of America's own proprietary loan modification programs.
- Leading the industry with more than 100,000 customers assisted through the Administration's Home Affordable Refinance Program (HARP).
Challenges Converting HAMP Trial Modifications to Permanent
A key component of the HAMP programs is a three month trial period. During the trial phase, customers prove they can successfully make their new payment and provide required documentation. Recent scrutiny has focused on the success servicers like Bank of America are having in making trial modifications permanent. Schakett said the bank fully shares the Treasury's commitment to convert successful trial modifications to permanent as quickly as possible. In addition to customers making three timely trial payments, the servicer must fully underwrite the permanent modification by obtaining all required documentation. This includes verifying income, occupancy status and tax returns. Schakett said the single biggest obstacle to a quick and successful conversion is obtaining all required financial information.
Schakett shared the bank's focus to encourage customers to complete their documentation before the end of their trial modification period. For these customers, the bank will have made about 10 reminder phone calls and sent,a t least twice, a summary of required documents with a postage paid express mail package through which customers can return their documents.
Schakett said there is a high rate of success converting the modification to a permanent one when customers have provided all the required financial information.
Schakett also discussed how HAMP could be improved to help more borrowers, explaining that Bank of America believes it is necessary to provide solutions for customer segments that fall outside HAMP's target reach, such unemployed. While Bank of America is working proactively to create programs for these borrowers, Schakett encouraged Treasury to take the lead on expanding HAMP and creating an industry standard to help more customers.
"Toward the goal to keep as many customers in their homes as possible, Bank of America will exhaust every available option," he said "We will continue to pursue initiatives that increase the number of customers receiving assistance, enhance the sustainability of the loans and improve the experience for customers throughout the process."
Emphasis on Improving the Customer Experience
- Bank of America has taken major steps to reach eligible homeowners and improve the level of service they receive, including:
- Expansion of default management staffing to 13,000 and reassignment of hundreds of mortgage loan officers to serve as case workers to assist customers in the conversion from trial to permanent modifications.
- Launch of a home loans assistance website for customers.
- Implementation of a door to door campaign to reach borrowers who have not responded to trial modification offers or provided necessary documentation.
- Participating in more than 200 community outreach events in 30 states.
- Sponsorship of the Alliance for Stabilizing Our Communities, the first national multicultural outreach and home retention collaboration with the National Council of La Raza, National Urban League and National Coalition for Asian Pacific American Community Development.
- Piloting the company's first Customer Assistance Center in Brea, CA providing face to face counseling on mortgage and home equity loans, credit card accounts and personal loans.
Monday, December 7, 2009
How Do I Know If I Can Afford to Buy a House?
If you really want to buy a house, you need to really determine whether you can afford it or not. You don't want to make yourself house poor and not have any money left for savings or an emergency. You can end up over extending yourself and not be able to make you mortgage payment and risk foreclosure.
Analyze Your Current Expenses
Most new homeowners grossly underestimate the expenses of homeownership. All the costs involved with owning a home (monthly mortgage payment, cost of moving, possible repairs, other monthly costs of taxes, insurance, and property maintenance), are higher than the amount you were previously paying in rent. If these expenses are going to be higher than what your current rent payment is, ask yourself this question, can you afford to pay more for housing? With your current rent payment, do you have extra money left over every month? Do you have money left over from your paycheck? If not, you need to change your spending habits or you cannot not afford to buy a home. You may want to consider a smaller or less expensive home that fits into your budget.
Have you ever planned a budget? If not, you probably have no idea how you spend your money. If this is true for you, you need to determine your spending habits. You need to start planning a budget.
There are two types of expenses, fixed and discretionary. Fixed payments are payments such as your car payment, taxes, and day care. Discretionary is spending money on things like entertainment and clothing and are items you control how much you spend on them.
It basically comes down to how important it is for you to buy your own home? Are you willing to cut back on your spending and put off some of your purchases? You can practice meeting your expenses by calculating your mortgage payment and put the difference you paying now for rent in a savings account. If you can manage to do this you might be ready to actually buy a home.
You should never think about buying a home unless you can handle the mortgage payments and any other related costs. If you do not pay your mortgage as agreed you can end up in foreclosure.
Bank of America Provides Relief to Homeowners With Mortgage Modifications
Bank of America has provided mortgage relief through concluded and trial modifications to more than 600,000 homeowners since January 2008.
"At Bank of America, we remain focused on providing long-term solutions to help distressed customers sustain homeownership," said Jack Schakett, Credit Loss Mitigation Strategies executive of Bank of America Home Loans. "Through the government's Home Affordable Modification Program (HAMP) and our own programs, we are moving aggressively to assist as many homeowners as possible."
The Treasury Department's most recent Making Home Affordable Program Servicer Performance Report, reflecting activity through October, indicated that Bank of America was responsible for about one in five HAMP trial modifications--leading the industry with highest number of trial modifications and offers extended. As of the end of November, Bank of America Home Loans had increased to more than 160,000 customers active in a HAMP trial modification.
"As we focus on assisting our customers to successfully convert to permanent modifications, we are making extensive efforts--through phone, mail and face-to-face contact to help our customers know exactly what documentation is required and the risks of not responding by the government's program deadlines," said Schakett.
Bank of America will continue to work with borrowers who cannot meet the requirements for a Hamp modification using its own modification programs, short term relief or other foreclosure-prevention tools that may address their individual situations. Through its established homeownership retention programs, Bank of America has concluded non-HAMP loan modifications for more than 450,000 customers since January 2008, including about 225,000 modifications so far this year.
Bank of America is also the industry leader in the Home Affordable Refinance Program (HARP), the second key component of the Making Home Affordable initiative. Since becoming the first major lender to originate HARP loans last spring, more than 100,000 Bank of America customers who are current on their mortgaeg payments have benefited from enhanced loan-to-value ratios or streamlined processes of the HARP program.
In total, through HARP and other programs, Bank of America has provided $215 billion to refinance existing mortgages, helping 949,000 customers save money on their mortgages so far this year.
"At Bank of America, we remain focused on providing long-term solutions to help distressed customers sustain homeownership," said Jack Schakett, Credit Loss Mitigation Strategies executive of Bank of America Home Loans. "Through the government's Home Affordable Modification Program (HAMP) and our own programs, we are moving aggressively to assist as many homeowners as possible."
The Treasury Department's most recent Making Home Affordable Program Servicer Performance Report, reflecting activity through October, indicated that Bank of America was responsible for about one in five HAMP trial modifications--leading the industry with highest number of trial modifications and offers extended. As of the end of November, Bank of America Home Loans had increased to more than 160,000 customers active in a HAMP trial modification.
"As we focus on assisting our customers to successfully convert to permanent modifications, we are making extensive efforts--through phone, mail and face-to-face contact to help our customers know exactly what documentation is required and the risks of not responding by the government's program deadlines," said Schakett.
Bank of America will continue to work with borrowers who cannot meet the requirements for a Hamp modification using its own modification programs, short term relief or other foreclosure-prevention tools that may address their individual situations. Through its established homeownership retention programs, Bank of America has concluded non-HAMP loan modifications for more than 450,000 customers since January 2008, including about 225,000 modifications so far this year.
Bank of America is also the industry leader in the Home Affordable Refinance Program (HARP), the second key component of the Making Home Affordable initiative. Since becoming the first major lender to originate HARP loans last spring, more than 100,000 Bank of America customers who are current on their mortgaeg payments have benefited from enhanced loan-to-value ratios or streamlined processes of the HARP program.
In total, through HARP and other programs, Bank of America has provided $215 billion to refinance existing mortgages, helping 949,000 customers save money on their mortgages so far this year.
Sunday, December 6, 2009
What Are the Drawbacks to Owning a Home?
We first took a look at the many advantages of owning your own home, such as: stabilized housing costs, tax deductions, building equity and place you can call your own. But just like everything else in our lives there is a downside.
With all the good things, owning a home is not for everyone. Buying a home can be a complicated, time consuming, and costly process that can bring headaches along with it.
The Cost of Homeownership
When you are buying a home you may find that it is putting a strain on your financial situation. It may be that the principal and interest on your mortgage payment is less than what you were paying rent, but don't forget that you will have to pay property taxes, homeowner's insurance, utilities, and maintenance expenses.
Foreclosure Can Always Threaten to Show It's Ugly Face
A foreclosure is the sale of a mortgaged property, such as your home, by the lender when the borrower fails to make monthly mortgage payments on a timely basis or completely defaults on the mortgage. A mortgage is a large financial obligation that generally extends over 15 to 30 years.
Lenders can foreclose on a home when the borrowers fail to make their payments. This will result in the loss of your home, but will also cause the loss of your good credit.
Loss of Freedom
Homeowners experience a loss of freedom that renters don't. When you rent you can wait to lease is over or you may be able to break your lease and you can move. As a homeowner you typically have to wait until your home sells or if you are upgrading and renting your old home you will have to find a renter. Remember, you are responsible for the mortgage payments until someone else buys your home. If you think you may be transferred with your job any time soon, it may not be the time to buy a house.
Upkeep expenses and repairs
Some people don't buy a house because they don't want the responsibilities that come with it. Maintenance requirements like: mowing the lawn, touch up painting, and landscaping may be unpleasant for some. For this reason you can always look into buying a condominium. Condo's are basically homeownership without repair and maintenance expenses and responsibilities.
With all the good things, owning a home is not for everyone. Buying a home can be a complicated, time consuming, and costly process that can bring headaches along with it.
The Cost of Homeownership
When you are buying a home you may find that it is putting a strain on your financial situation. It may be that the principal and interest on your mortgage payment is less than what you were paying rent, but don't forget that you will have to pay property taxes, homeowner's insurance, utilities, and maintenance expenses.
Foreclosure Can Always Threaten to Show It's Ugly Face
A foreclosure is the sale of a mortgaged property, such as your home, by the lender when the borrower fails to make monthly mortgage payments on a timely basis or completely defaults on the mortgage. A mortgage is a large financial obligation that generally extends over 15 to 30 years.
Lenders can foreclose on a home when the borrowers fail to make their payments. This will result in the loss of your home, but will also cause the loss of your good credit.
Loss of Freedom
Homeowners experience a loss of freedom that renters don't. When you rent you can wait to lease is over or you may be able to break your lease and you can move. As a homeowner you typically have to wait until your home sells or if you are upgrading and renting your old home you will have to find a renter. Remember, you are responsible for the mortgage payments until someone else buys your home. If you think you may be transferred with your job any time soon, it may not be the time to buy a house.
Upkeep expenses and repairs
Some people don't buy a house because they don't want the responsibilities that come with it. Maintenance requirements like: mowing the lawn, touch up painting, and landscaping may be unpleasant for some. For this reason you can always look into buying a condominium. Condo's are basically homeownership without repair and maintenance expenses and responsibilities.
Saturday, December 5, 2009
What Are the Advantages of Owning a Home?
The first thing you have to consider is, do you really want to own your own home? Think about what is it you find appealing about owning your own home. When comes to buying a home there should be some serious thought involved because owning a home is a serious investment that takes time, energy, and money. So the next step is to take a look at what to expect from homeownership and what it takes to own your own home implies. First up: The Good Reasons.
Advantages of Homeownership
Most people have a good reason in mind when they decided to buy a home. It can range from the very personal to very practical, but most people want a place to call their own.
The saying goes, a persons home is their castle. Why do you want to buy a home? Have you decided you need to settle down and you want a feeling of permanency that you get from owning your own home? Maybe you are getting ready to raise a family and need more space. Or could it be you want to be able modify your living space like paint or remodel to meet your individual taste and needs?
The motivation for homownership can also be a financial one. Owning your own home can offer financial benefits as it is a sound investment and can be a way to reduce your tax obligations.
In a way your monthly mortgage payments can act like a savings account. Normally, you accumulate what is known in lender vernacular as "equity", which with ownership interest in the property you are often able to borrower against or gain a cash profit when you sell the house. As a renter you must continue to pay rent to a landlord for as long as you continue to rent and you are building equity for the landlord instead of yourself.
Stable Housing Costs: The biggest advantage of owning rather than renting is, rent typically goes up every year, while the principal and interest of a "fixed rate"mortgage remain unchanged for the entire repayment term of the loan, which would be 30 years for a 30 year fixed rate mortgage or 15 years for a 15 year fixed rate mortgage and so on. So this means you would pay the same amount over the years with ever cheaper dollars because of inflation. Remember though, with an adjustable rate mortgage payments may increase when interest rates increase. Your taxes and insurance may fluctuate, as well and your monthly mortgage payment will adjust accordingly. You can choose to pay those items on your own, but typically they are held in an escrow account for the lender to pay on your behalf every month.
Increased value: Usually, houses increase in value over time. In most parts of the country, you can find homes that sold for $100,000 15 years ago that are worth more today. The increased value or "equity", which discussed early, can be as good as cash for the homeowner.
Tax Benefits: As a homeowner you will get significant tax breaks that renters don't get. Interest paid on a home mortgage is most often tax deductible. Just the interest deduction on its own can save you a substantial amount of money on federal and state income taxes on a yearly basis.
So does owning your own home sound pretty good? Stay tuned...Next up we'll be looking at the disadvantages 0f owning a home.
Advantages of Homeownership
Most people have a good reason in mind when they decided to buy a home. It can range from the very personal to very practical, but most people want a place to call their own.
The saying goes, a persons home is their castle. Why do you want to buy a home? Have you decided you need to settle down and you want a feeling of permanency that you get from owning your own home? Maybe you are getting ready to raise a family and need more space. Or could it be you want to be able modify your living space like paint or remodel to meet your individual taste and needs?
The motivation for homownership can also be a financial one. Owning your own home can offer financial benefits as it is a sound investment and can be a way to reduce your tax obligations.
In a way your monthly mortgage payments can act like a savings account. Normally, you accumulate what is known in lender vernacular as "equity", which with ownership interest in the property you are often able to borrower against or gain a cash profit when you sell the house. As a renter you must continue to pay rent to a landlord for as long as you continue to rent and you are building equity for the landlord instead of yourself.
Stable Housing Costs: The biggest advantage of owning rather than renting is, rent typically goes up every year, while the principal and interest of a "fixed rate"mortgage remain unchanged for the entire repayment term of the loan, which would be 30 years for a 30 year fixed rate mortgage or 15 years for a 15 year fixed rate mortgage and so on. So this means you would pay the same amount over the years with ever cheaper dollars because of inflation. Remember though, with an adjustable rate mortgage payments may increase when interest rates increase. Your taxes and insurance may fluctuate, as well and your monthly mortgage payment will adjust accordingly. You can choose to pay those items on your own, but typically they are held in an escrow account for the lender to pay on your behalf every month.
Increased value: Usually, houses increase in value over time. In most parts of the country, you can find homes that sold for $100,000 15 years ago that are worth more today. The increased value or "equity", which discussed early, can be as good as cash for the homeowner.
Tax Benefits: As a homeowner you will get significant tax breaks that renters don't get. Interest paid on a home mortgage is most often tax deductible. Just the interest deduction on its own can save you a substantial amount of money on federal and state income taxes on a yearly basis.
So does owning your own home sound pretty good? Stay tuned...Next up we'll be looking at the disadvantages 0f owning a home.
Wednesday, December 2, 2009
Owning an "Affordable" Home is the American Dream.
Owning your own home is the American dream, but that saying is missing the adjective "affordable." If owning your own home is your dream, too, you can make it a reality, but don't make the mistakes people made a few year ago. You need realistic goals, sound advice (like here at The Debt Free Advocate), careful planning, and clear understanding of the costs involved in owning a home.
Just like anything else, the more you know about homeownership, the more successful you'll be at obtaining you dream.
Our new series will help you decide if homeownership is right for you and whether you can truly afford to buy a home at this time. We will also help you decide how much of a home you can afford and what mortgage lenders are looking for when approving a loan. We will also show first time homebuyers and low to moderate income borrowers how they can stretch their borrowing power with various types of loan products. Mortgage products that make potential homebuyers dreams come true.
People in debt may have heard of or may be using the National Foundation for Credit Counseling (NFCC). What you may not is the NFCC is also approved by the U.S. Department of Housing and Urban Development (HUD) and is a national intermediary for local housing counseling agencies. Some loan programs will require you to contact them, but regardless of the loan program a good way to get started on your journey is to have a counseling session with a HUD approved agency. You can contact the NFCC for a referral to a HUD approved, NFCC member agency at (866) 846-2227.
People Aren't Stupid, They're Just Financially Uneducated.
I recently wrote an article entitled, "I'm as Mad as Hell About the Economy and I'm Not Going to Take This Anymore." I am mad at what has happened to our economy, but it has happened and looking back isn't going to fix it. We need to look forward at what we can do to get out of the hole.
Actually, we might have to look back in order to go forward. Yes, there were mistakes made, but a lot of those mistakes could have been avoided. We like to blame the banks or the government, but really we all are to blame.
I guess I've thought this before, but I have come to the realization that people aren't really stupid, they are just not educated financially.
We go to school for at least twelve years(at least we're supposed too) and take the same subjects over and over, year after year, day after day. The same old curriculum: math, science, history, and English. All of which are subjects we need to know. Granted you usually have some electives, but I think a finance class should be a required class in order to graduate. Even our early college years require those core requirements. Throw in a financial management class as a requirement too.
How did you learn to balance your check? Even after being in banking for twenty years I am still amazed at how many people don't know how to balance their check book. When you bought your home, how did you know the best loan to apply for? Did you do what the loan officer thought you should do? After all he is the professional, but were you able to make an educated decision?
The goal of The Debt Free Advocate is to educate people on finance. Everything from credit related issues, such as: credit scores, debt, taking out loans for buying a home to saving and investing.
One of our most searched topics on this blog is, "How Did This Economic Crisis Start?" We have explored exactly what happened before, but we never really looked at the lack of education aspect.
The biggest part of our economic meltdown was the mortgage situation. So we are going to make mortgage credit education our main focus over the next few weeks. Spread the word to those you know buying a home for the first time and send them our way. We'll leave the light on for them.
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