Tuesday, December 30, 2008

Two Common New Year Resolutions: Finance and Fitness

The New Year is almost here, barely a few hours left for the grand celebration to begin. This is the time when people make a number of resolutions. However most of us fail to accomplish them and forget about it as the days pass by.

Now this year most of us are worried about the financial future after the major downfall of the finance market. So everybody might be thinking of improving their own financial condition in the coming year. Together with this, since nowadays people have become much more health conscious, the fitness factor will also be there at the corner of their minds too.

We all probably know that finance and fitness go hand in hand. Many research has also been done to prove the relationship between finance and fitness. A healthy and fit person is bound to be more productive - he will miss lesser days, work hard for longer period and make more money. Similarly, the other way round is very obvious. A financially stressed person will be suffering more from headaches, sleep disorders, ulcers and many more side effects, that would restrain him from performing to his capability.

However some of us are really bad at maintaining a balance with our expenses, we tend to spend much more than what we can afford. Creating a monthly budgeting plan would be a useful strategy in such cases which would as a result reduce some stress and help us to be mentally as well as physically fit. Try to save whatever you can, be it a very negligible part of your income. For example, instead of thinking to save say 30% of the income and fail to accomplish it, just save around say 4,5, or 6 percent. This would turn out to be quite a good amount in future.

By the way, I came across a very innovative and different way of representing financial fitness using mathematical formula. That was something like this:

Spend less + Extra Income - Debt * (Savings & Interest)/Monthly Budget

So, let this be your prime resolution for the coming year.

Happy New Year!

Wednesday, December 17, 2008

Real Estate Predictions for 2009

We know that not even a fortnight is left for the New Year to arrive. People are busy with their preparations to celebrate Christmas and welcome New Year in a grand way. But at the back of their minds there are several queries and thoughts regarding the financial scenario in the coming year: What will be the effect on Real Estate market? Whether banks will pursue foreclosure? Will they modify the existing loans?...

These are some of the real estate predictions for the year 2009 as predicted by some of the realtor experts and news channels.

  • There will be a rise in the number of foreclosures. Banks will prefer to foreclose rather than revise or modify the loans, which will result in increase in the number of tenants than home owners.
  • The existing home prices will highly depend on foreclosures. As the foreclosures start going down, the home prices will go down as well, and vice versa.
  • Continuation of slow down in homes sales. According to the statistical records provided by National Association of Realtors (NAR), 2008 proved out to be the third consecutive year in which the home sales have fallen.
  • There will be a decline in the number of Real estate agents and brokers. This is mainly due to the downfall of real estate market and also nowadays internet makes it easier for people to do any real estate transaction.
  • The experts predict that the mortgage rates will definitely increase but won’t be more than 8%.
  • The increase in demand will affect the rental rates. It will go up drastically since new constructions will grind to a halt. A perfect time for all the landlords.
  • More and more agents will increase their commission rates. Due to the availability of lesser homes to be sold, they will take the benefit of buyer’s market.
  • Last but not the least the Internet will become much more effective than the agents. More and more people will opt for buying or selling a property through internet, instead of relying on the agents.

Please do give your advises or any suggestions that you think will be helpful here, or if I have missed out on any important factor.

Thursday, December 11, 2008

Basic Tips to avoid the Nightmare of Mortgage Fraud

The number of Mortgage fraud cases is increasing rapidly in US causing financial as well as emotional damage to homeowners. You have to be cautious especially if you are a first time home buyer, belong to minorities or you are a senior citizen. They are the main targets for the fraud scam. However that does not mean that the rest of them will turn a blind eye.

Listed below are some of the tips to avoid mortgage fraud:

  • Shop around and gather the sufficient real estate knowledge so that you are aware of your needs and requirements.

  • Do not make any hasty decision regarding the mortgage agents. Check out the background and previous records of the professionals, and whether they are licensed or not.

  • Figure out your own finances – how much you can afford, your credit score and credit report, the total debt you have till now and other such related factors that affects your personal finance. Never borrow more than your limitation.

  • Check properly the history of the property you are going to buy. Confirm whether the seller actually owns the property from your local tax assessment office.

  • Never ever give false or incorrect information about your income, debt, credit history or your employment, etc. Otherwise this can prove out to be a nightmare of foreclosure in future.

  • Do not sign any document without properly understanding all the particulars filled in or which has some blanks left unfilled. Check for the minute details, and if something which is not important is written, don’t sign before correcting them.

  • Avoid any third party involvement when you are arranging for loan. Work directly with the mortgage broker or the lender.

  • Do not allow any other person, however friendly you are with him/her, to use your name and Security number for the purchase of property.

  • Insist on getting all the closing documents and check that each and every necessary detail is mentioned appropriately. Keep a copy of all such papers and documents.

Hopefully I am able to provide you with the basic steps that you need to be cautious about to avoid mortgage fraud. Please do give your suggestions or comments so that I can cover up whatever I have missed out here.

Saturday, December 6, 2008

Effect of Credit Scores on Mortgage Rates

To talk about credit scores, it's one of the most important factors which needs to be considered for almost every kind of loans. Nowadays, most of the people are aware of this number thing. Let me just give you an idea of the term 'Credit Score' for them who are new in this field. It is a 3-digit number calculated using a mathematical formula based on the credit report information. And this report contains the history of whether you have paid your bills on time, your willingness to repay your debts, any open credit, your employment record and all such information that will affect your credit worthiness.

The basic concept of credit score is to determine who will qualify for a loan. When qualified the next two crucial factors will be the interest rate and the credit limits. Based on this score, you will be judged by the lenders for any future investments. A high credit score means that the chance of getting the mortgage loan approved is much more, and possibly with lower rate of interest. They are more likely to get prompt responses from the lenders, who could also propose low down payments. You can also get an offer of a higher loan amount, provided you have a bit of luck too. Naturally, with low credit score you are prone to rejection than approval. Here the risk factor involved increases a lot which in result affects the mortgage financers and refuse to approve the loan, to be on a safer side.

The credit scoring system is decided by the three major credit bureaus, namely Equifax, Experian and TransUnoin. The credit scores can be categorized as low or high as defined by the mortgage industry. Generally, the range of 760 and above is considered the highest tier. You are well placed here in the market of getting loans and need not worry. If your score lies in the 600 to 700 range, you won’t be having any problem in getting the loan but the interest rate would be higher. But a score around 500 has the least possibility of loan approval. You have to work hard and shop around in order to qualify for the mortgage loan.

As you know, this three figured digit not only affects the mortgage rates but also other factors like applying for a car loan, getting a student loan, how much you have to pay credit and the insurance policies. So it’s a wise decision to keep checking your debt, do the payments and update your credit score for better loan opportunities.

Please feel free to give your comments and valuable suggestions to cover up whatever I have missed out here. All comments will be highly appreciated.

Tuesday, December 2, 2008

Some Basics on Mortgage Refinancing

Refinancing is a process of replacing your current mortgage loan, usually at a reduced interest rate, to gain better use of equity. That is to pay off your existing debts with another new loan, based on more suitable terms that you can afford to manage. It is also known as 'Loan Consolidation' and is generally done to improve the overall cash flow.

In recent years, the graph representing the idea of refinancing your mortgage among Americans, is showing a considerable rise of its usage. If you go by the statistical analysis done by the Mortgage Bankers Association of America, refinancing hit an all time high in 2003 which maintained its position in both 2004 and 2005. However you need to consider certain steps to make sure you get the better deal. Some of them are:

  • Check Whether you should refinance your mortgage.
  • Get to know about the various kinds of mortgages available and try to understand them.
  • Be aware of the disadvantages of mortgage refinancing.
  • There will be some closing costs and fees associated with the new loan, you need to consider them as well.
  • Find a mortgage broker and pick the right, rather the best one for you.

So its recommended to go, shop around and get the updated information on refinancing. Also there are a number of Refinance Calculators available online that are easy to use and you can estimate the total costs and savings, according to your needs and requirements.

Monday, December 1, 2008

Did you know about the Tax Benefits of HomeOwnership?

"Owning a home is a keystone of wealth...both financial affluence and emotional security"
Probably, one of the biggest dreams of an American is to own a home. And this is one of the most important decisions in terms of investment. But are you aware of the fact that borrowing to pay for one is a Taxpayer's dream? This is because home ownership is associated with many tax benefits.

Let me brief you with some of the tax benefits. However you are advised to consult a tax professional for further details.

Deduction of Mortgage Interest
For most people, the biggest incentive from owning a home is that the mortgage interest is tax-deductible. This deduction, which is applicable up to a limit of $1 million, applies to any type of home - like a new one, a second home or if you are refinancing. In case your mortgage loan exceeds the limit, then some of the interest will not be deductible. In addition to this, there's also "Home Equity Loan" exception, where you are allowed to deduct interest on an additional $100,000 debt for any purpose. But do remember that the loan is secured by your home, failure to pay the payments could make you lose your house to foreclosure.

Real Estate Tax Deduction
Homeowners are also provided with the facility of deducting their real estate taxes, irrespective of taxes imposed by the state, county, township or any other local government body. The only condition being that the person who owns the house can claim the deduction.

Deduction of Closing Cost
When you buy a home, you usually pay "points" to the lender. These 'points' are nothing but the fees charged by them when you are taking a loan secured by your home. Together with points, there are generally a number of closing costs. For example, the fees associated with attorney, title search, documentation, etc., all belong to the list of closing costs. You can also deduct points and the closing costs as mortgage interest, provided you meet certain requirements.

For further details and information on tax benefits do check out the favorable treatment of home ownership by Internal Revenue Service (IRS).