Category Archives: Homeownership

Protect Yourself! Protect Your Credit!

Posted on by
Reply

In the movie, War of the Roses, Danny DeVito cautions, “When a couple starts keeping score, there is no winning…only degrees of losing.”   There is a lot of work involved to avoid the score keeping, not to mention to protect yourself and secure your future.  But it doesn’t have to turn into the knock-down drag-out like that between Michael Douglas and Kathleen Turner.

Once you and your spouse have determined whom will be responsible for each account, the next step is to notify the creditor and begin to take action.  As I mentioned in my previous post, just because the divorce decree says you aren’t responsible for an account any longer…it is meaningless to the creditor.  The divorce decree does not relieve either party of financial responsibility.

Here is a list of some typical joint accounts many married couples share and tips on what you need to do with each .

Home Mortgage: This should be your first priority of business.  A mortgage is the strongest weighted credit reported to the credit bureaus, and it is important to safeguard your history. You have a couple of options to split the marital property – that are far better than splitting the square footage as in the movie.

  • Sell the home
  • Have one spouse refinance the home into his/her name only
  • Pay off the remaining balance from investment accounts

Note: Don’t take your name off title if the home has not been sold, refinanced, or paid off.  If you sign a quit claim deed, you are removing yourself from an ownership position…not altering your financial responsibility.


Car Loans: Another big monthly payment and also the second most important type of credit that appears on your credit report.  This should be your next order of business.  As with a home loan, auto loans can be handled the same way:

  • Sell the car
  • Have one spouse refinance the car into his/her name


Credit Cards: This is where business tends to get sticky.  Most people think that as long as they close the existing cards, all is well.  Unfortunately this is where the nightmare could easily begin.  Here’s why:  while the card is no longer available for charging, it is still active until the balance is paid in full.  And if your spouse takes the financial responsibility – you have to blindly trust he or she will pay on time and protect your credit rating until the card is completely paid off.  Here are some solutions to avoid a potential ugly mess without having a War of the Roses knock-down drag- out:

  • Pay the card off with your settlement from the divorce, then close the account.
  • Sell a joint asset to pay off the debt, then close the account.
  • Apply for a separate credit card for each account and transfer the agreed upon balances to the new card.  This new card is a sole and separate account from the joint debt accounts.
  • If one of you cannot qualify,  explore having a relative co-sign on a new card, then transfer the balances.

For any other type of accounts that don’t fit into the categories above, use the same basic rule:  pay off or transfer all the existing joint indebtedness to a separate sole account, then close the joint account.  No exceptions.

Taking care of business will give you a little peace of mind and set you on the path for a smooth financial new beginning.  Don’t delay!

Here’s to new beginnings…

Elizabeth Rose

Breaking Up is Hard To Do…Key Steps to Get Organized

Posted on by
Reply

Breaking up is never easy and going through a divorce is especially tough – even more so if you are going through it alone.   It is important to surround yourself with a team who can help you navigate the many decisions ahead, primarily legal and financial. (And a few good friends to lean on is always a plus!)  Getting organized, protecting yourself and your assets, and creating a good strategy are key.

I run into people every day who are experiencing separation and divorce.  Yesterday I met with Sandra, who is just beginning the process of divorce and she shared her feelings of being overwhelmed with me.  ”So many big decisions to make, where do you start?” she asked.  And of course, tons more questions surround the decision process.

Divorce is emotional, no doubt…but there is business to tend to… so if you are in a coma, it’s time to pull yourself out and get to work.   Where do you start?  Here are some first steps in a series:

  • Get organized! Pull all your files and financial information together.
  • Have your credit pulled so you are able to resolve any disputes prior to the divorce being final.
  • Place a fraud alert on your credit profile to prevent unauthorized credit to be obtained.
  • Open new individual checking, savings, credit card, and investment account in your name.
  • Notify and close all joint credit cards upon filing.
  • Ensure access to children’s college funds.
  • Create a household budget that includes your future PITI, school tuition, transportation, food, utilities, entertainment, etc.
  • Protect your health care coverage.
  • Protect your home/auto insurance.
  • Change your cell phone to an individual plan…yikes! you don’t want to discover it has been disconnected.
  • Obtain the last 3 years of filed tax returns (all schedules and pages) and have them audited by a CPA to prevent any future tax audits. If no joint return has been filed or is in the process, consider filing separately to avoid penalties. Document all tax payments.
  • Change your beneficiaries on any policies owned by you.
  • Keep separate property separate.
  • Request that temporary support be given to you via check and acknowledged for what purpose.
  • Negotiate up front how costs associated with the divorce will be paid.  Consider requesting they be paid from the estate and not family cash flow or savings.

The decision of divorce may be one that was long in the making or completely unexpected. In order to protect yourself and your assets, coming up with a plan of action can provide organization in the chaos divorce typically brings.  You don’t have to go it alone, surround yourself with a team who can provide wise counsel.  Ask for help!

Power to Prosper!

Elizabeth Rose

A Little Help for the Monkey Business of Mortgage Modification

Posted on by
Reply

Many homeowners today are faced with some difficult decisions in their finances.  And many of these decisions involve the mortgage payment.  One place to turn for help is the Home Affordable Modification Program (HAMP) for a mortgage modification.

Making Home Affordable is the federal program initiated in 2009 by the Obama administration in an effort to help homeowners avoid foreclosure.  HAMP  is the option designed to help financially struggling homeowners reduce their mortgage payment. This program is designed for individuals who are experiencing financial hardship unrelated to unemployment.  It is reported that this program  will help 3 to 4 million American’s avoid foreclosure.  In short, the program reduces your mortgage payment to 31% of your pretax monthly income, which for many people is no small bananas.

On the surface, this sounds good…after all, extending a hand to those in need is the heart of America’s generosity. Reducing the monthly mortgage payment sure sounds like a swing in the right direction.  The homeowner keeps their home, the bank keeps the note and their balance sheet in order, and neighbors avoid falling prices around them.  Everyone’s happy.

HAMP’s goal was to put homeowners in a three month trial modification before making a decision. These three months can stretch to six months or longer, just depends on the backlog.  During this trial, the homeowner would have the reduced payment.  (Still sounding pretty good).

Up until June 2010, banks were enrolling homeowners into the trial program without verifying whether they qualified for the program.

Wait a second…qualified?  Yep, a bit of Monkey Business – there are qualification guidelines.

Homeowners are enrolled into the trial and they think it’s pretty much a “done deal”.  Later, once someone checks their eligibility, homeowners who are enrolled but not eligible are turned down for a permanent mortgage modification.  Here’s the big bite…if  turned down for a permanent mortgage modification, the bank demands the homeowner repay the difference between their regular mortgage payment and the modified mortgage payment for every month enrolled in the trial!  Ouch!

Just over one third of households enrolled in trial modification through HAMP have been granted a permanent modification as of November 2010.  That leaves a lot of folks hanging from the trees waiting for an answer or having already received a denial.  That’s a lot of folks.

If you or someone you know is considering a mortgage modification, be sure you grasp the stakes:

  • Your credit rating will drop – the fact you are paying less than your full mortgage payment will be reported to the bureaus which will hurt your score.
  • It will likely take longer than three months to learn if you have been approved.
  • Making your reduced payments on time during the trial period is not assurance of being granted a permanent modification.
  • The biggest stake – If you are turned down for a permanent modification, the bank will demand you pay the difference between your normal payment and the reduced payment for every month you were enrolled in the trial modification.  If you are unable to make that payment, you could face foreclosure.

If you decide to enter into a trial modification, be prepared with patience and understand the guidelines for eligibilty.  They can be found online at Making Home Affordable.  Don’t forget to set aside the monthly difference in a savings account so you don’t have to swing through the trees to come up with the balance due should they tell you “no”.  To learn more, visit Making Home Affordable.

Global Events Impact Home Loan Rates

Posted on by
Reply

Times have changed and today we live in a global economy.  An inter-connected world where goods and capital move freely at lightning speed across countries.  The widely accepted view is that globalization not only benefits all countries across the world but lends itself towards the betterment of the economy as a whole.

As we have seen, globalization can also have a negative impact with a domino effect in times of turmoil and unrest.  This impact affects the financial markets both in the US and abroad.

Flight to Safety

When there is political unrest, which sparked recently in Egypt and has continued to spread like wildfire throughout the Middle East, global investors get nervous and shed their risky assets like Stocks and flee to the safe haven of the US Dollar and US Bond market.

This geopolitical unrest can often create a buying binge, which helps Bond prices improve.   However, there are growing concerns that, in the financial markets,  trump the disturbing news coming from the Middle East, which will be a guide force for interest rates in the times ahead.  What might that trump card be?

Inflation, Inflation, Inflation

Inflation is the arch enemy of Bonds, even if it is across the pond.  The increase in global unrest, not just in Egypt but in other parts of the world as well, is mostly attributed to economic factors – primarily runaway inflation in commodities and food.

The People’s Bank of China has raised interest rates a couple of times, most recently by 0.25% in an effort to head off a continued rise in consumer prices in China.  The culprits?  Soaring food prices and higher raw material cost lead the pack.

China has also tightened lending standards by requiring Banks to raise their capital reserve requirements.  In their latest reporting, China’s inflation rose by 4.9% year over year.  This was lower than their expectation however still marked their highest reading in a couple of years.  China may have to tighten their belt some more.

Brazil is appearing on the scene with the hottest rates of inflation in six years. They are attributing this to a rise in food costs and increased bus fares.  Yep, bus fares! It is anticipated the central bank will raise the benchmark interest rate for a second straight time in March in an effort to contain the spike in inflation.

The British are grappling with inflation as well.  Their year over year reading struck a hot nerve with 4% which is twice the rate of the Central Bank’s target.  The UK has yet to address this with rate hikes because their economy is in such bad shape that any hike would make matters worse.

Inflation is beginning to become a problem in Europe where it has risen to 2.4%.  This is super hot and well above the European Central Bank’s (ECB) comfort zone of beneath 2%.

With an inflation problem in Europe, the ECB will eventually have to raise interest rates to fight it.  When they do, the Euro will strengthen against the dollar, making European Bonds more attractive than US Bonds.  This attraction will likely put a damper on US Bond purchases, causing interest rates to rise.

Many of these countries within Europe have a high number of union workers.  They could very well demand pay increases to offset the higher cost of living, the result of this inflation. Which would exacerbate matters.  Could this be a recipe for more protests and unrest?

As we see signs of inflation around the world, the US isn’t immune.  With the second round of quantitative easing, known as QE2, (here’s a refresher on QE2) The Federal Reserve’s stated goal is to boost Stock prices, create inflation and lower the unemployment rate.  These are all unfriendly to Bonds and will cause interest rates to move higher.  As the old trading saying goes…“Don’t Fight the Fed” - it’s a bit like the Golden Rule … “he with the Gold, rules.” If the Fed wants to accomplish these goals at the expense of Bonds,  they probably will.

Some good news…

Despite inflation rising around the world, the global economy will continue to recover and growth will continue to expand even it if feels a bit like your teenager learning to drive a stick shift…uphill, with plenty of stops and starts.  It’s not so smooth, and often a bit unnerving.  And it will require a touch of patience.  Here at home, consumer confidence has picked up and touched the highest level since February 2008.  With continued confidence as the economy picks up speed, housing may begin to show signs of improvement as well.

These are unprecedented and very interesting times.  Historically speaking,  interest rates are still extremely attractive and remain close to the historic lows.  As I mentioned in a recent Post as a percentage of total income, the cost of owning a home is less expensive that it’s been at any time since 1963.  so ifyou, or someone you know has been thinking about purchasing or refinancing…this is the time to get started!

First Time Home Buyers Benefit from New Credit Reporting

Posted on by
Reply

Finally, there is something about the credit bureaus we can cheer about!  Experian has recently rolled out RentBureau® which could help first time home buyers and people who may have no credit history, a skinny credit file, or need some additional positive information to boost their credit scores.

If you are a first time home buyer – this is great news!  In the past, only negative rental payment information – such as collections and evictions were reported to the bureaus.  On-time payment histories were not reported and included in a credit file.

When a renter applies for credit, creditors require a verification of rent.  This may include a phone call to the landlord, copies of cancelled checks, and a written verification signed by the landlord.  While this is just a small task and it does satisfy the requirement, it really doesn’t serve the first time home buyer very well.  Since payment performance is not being reported to the bureaus, those who have a perfect payment historyaren’t benefiting from the possible boost to their credit score.

All that is changing!  Experian will help renters build their credit file by receiving updated rental payment data from their national network of property management companies, putting them in a better position to become a first time home buyer.  Here’s the trick – your property management company must furnish their data to Experian RentBureau®.

For first time home buyers, this could be a home run…and perfect timing as this is a great time to buy a home.  I highly recommend you contact your property management company and request they begin reporting their data.  This will help you when you are ready to transition from renter to first time home buyer.  And hey, you could be the hero of the community as this would benefit your neighbors too!

Is This a Good Time to Buy a Home?

Posted on by
1

Is this a good time to buy a home? That question is being asked right and left. And it is a valid question – after all, a lot has changed in the housing market. That change has created a perfect storm to buy a home. But is homeownership right for you?

Here are a few reasons why NOW is a great time to buy:

Home Prices are Lower
The Case-Shiller Index is a widely recognized index and measures price changes by markets. Their most recent report, which was released in December indicated home prices are 8% lower from the previous year for the 20-city composite. The report lags behind the time period measured with Decembers report representing sales data thru October.

Mortgage Interest Rates are Lower
We’ve been beating this drum for a while, but the beat still holds true.  Mortgage interest rates continue to trend just slightly above the lowest point in history. However, as the economy improves, mortgage interest rates will begin to creep higher.

Cost of Owning is Lower
Overall the cost of homeownership is now less expensive than it’s been at any time since 1963…whoa! Let me explain. The graph below shows the principal and interest payment on a median priced home as a percentage of individual income for each year.
Here are the assumptions:

  • 20% down
  • Prevailing 30 Year Fixed Rate loan


During the 1970’s as interest rates took off along with inflation, so did the cost of the monthly loan payment. Rates peaked in 1981 and began to decline. As they did, payment came back in line over time to the previous historic lows in 2002. As you can see from the graph, today we are at new all-time lows. The cost of homeownership is far below the historical average and lower than 1963.

The real question is…is this a good time to buy a home for you? Buying a home is a personal decision and there are many factors to consider. So it’s impossible to say that it is the perfect time for you. Here are a few questions to ask yourself:

Will buying a home hinder your lifestyle?
Although 70% of Americans still view homeownership as being part of their American Dream, owning a home isn’t for everyone. If you happen to move often, it probably isn’t for you. If you don’t like responsibility, it probably isn’t for you. It is a lifestyle decision.

How is your credit?
Lenders will look to your credit score as part of the qualifying process for a mortgage. They will use your score to determine the answer to two questions: 1) do you qualify?; and 2) at what rate? Guidelines have tightened and the bar for minimum credit score requirements have been raised. Find how where you stand with your credit.

Have you saved for a down payment?
Aside from a VA or USDA loan, long gone are the days of 100% financing. Today you must have a minimum down payment of 3.5% for FHA loans (government insured) or 5%, or maybe even 10% for conventional loans (non-government insured) depending upon your qualification. If you have saved, or can obtain some help from relatives in the form of a gift, this may be a great time for you to buy.

Have you saved for closing costs?
This step is one that is often over looked. It is important that you understand all the costs associated with buying the home – from the lender fees, title company and attorney fees, to appraisal and other third party fees. In addition, be sure to inquire about any Home Owner Association related expenses. Depending upon your loan you may request that the seller pay a certain percentage of the closing costs on your behalf. The percentage allowed is determined by the type of loan.

Do you have a housing budget?
Whoops! Don’t forget this part. Make sure you have budgeted for the mortgage payment, which includes principal, interest, taxes, (homeowners) hazard insurance, mortgage insurance and homeowner association (HOA) dues. While the lender will determine how much house you qualify for, they are not responsible for your ability to budget. You should have a monthly amount in mind – one that you are comfortable with. Make sure you don’t strap yourself and end up house poor – a nice house with no furniture and no life!

For many buyers, the familiar phrase “get in while the gettin’s good” may hold true! If you have the American dream of homeownership, have saved for a down payment and closing costs, have decent credit, and can manage the responsibility…this is probably the perfect time for you to buy a home.