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  • Why 2016 is a Good Time to Buy and Sell a Home

    Earlier this year, I wrote about how 2016 is still a great time to buy a home, even though the U.S. Federal Reserve raised the interest rate one-quarter of a percent in December 2015 and could possibly raise the rate incrementally again some time this year. When I wrote that article in February, 2016, rates were hovering just shy of 4% for those with good credit which was still historically low, and I concluded that 2016 was still a great year to buy a home.

    Mortgage interest rates continue to fall

    Well, this past April, Freddie Mac released the results of its Primary Mortgage Market Survey, showing mortgage rates have reached their lowest point since this time 2015.

    In fact, the 30-year fixed-rate mortgage (FRM) averaged well under 4% at 3.58% compared with 2015 at this time when the 30-year FRM averaged 3.67%, and is now at its lowest point since 2013, according to Freddie Mac chief economist, Sean Becketti.

    If you can afford the higher monthly mortgage payment, or buy a lesser-priced home to where you can afford the monthly payments of a 15-year FRM you can shave more than another half a percentage point off the current 30-year FRM interest rate. The 15-year FRM now stands at 2.86% compared with 2015 at this time when the 15-year FRM averaged 2.94%.

    For those looking to buy now and make a move in 5 years, you can snag a low 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) which averaged 2.84% compared with 2015 at this time when the 5-year ARM averaged 2.88%. Be careful in considering this type of loan for a home you plan to live in for more than the 5 years because you will likely find yourself refinancing when interest rates could possibly be much higher than they are now for a 30-year FRM.

    Should you buy or should you sell?

    That all depends on whether home prices have risen or fallen in the last year where you are selling or where you may be thinking of moving.

    According to the latest quarterly report by the National Association of Realtors, increases in home prices throughout 2015 and 2016 are holding in most metro areas of the U.S. because of low supply levels.

    If you live in one of these metro areas where prices have increased double digits above 10% in the last year, now might be a good time to sell and not the best time to buy, even though interest rates are historically so low. If you have good or excellent credit you may be offered the very lowest mortgage rates possible which may make up for some of the higher pricing (compared to last year) in these areas this year.

    • Zip codes with the largest price gains compared to 2015

    10420 Akron, OH

    19380 Dayton, OH

    19660 Deltona-Daytona Beach-Ormond Beach, FL

    20500 Durham, NC

    22180 Fayetteville, NC

    22540 Fond du Lac, WI

    23844 Gary-Hammond, IN

    28100 Kankakee-Bradley, IL

    28420 Kennewick-Richland-Pasco, WA

    29460 Lakeland-Winter Haven, FL

    36100 Ocala, FL

    36740 Orlando, FL

    38940 Port St. Lucie, FL

    38900 Portland-Vancouver-Beaverton, OR-WA

    39460 Punta Gorda, FL

    40420 Rockford, IL

    41420 Salem, OR

    42680 Sebastian-Vero Beach, FL

    43300 Sherman-Denison, TX

    45300 Tampa-St. Petersburg-Clearwater, FL

    45780 Toledo, OH

    49660 Youngstown-Warren-Boardman, OH-PA

    But if you’re looking to get a better deal (even though inventory might still be tight), check out these cities where prices have declined greater than 1%:

    • Zip codes and cities with the largest price declines compared to 2015

     12100 Atlantic City, NJ

    12700 Barnstable Town, MA

    14060 Bloomington-Normal, IL

    16300 Cedar Rapids, IA

    19060 Cumberland, MD-WV

    21500 Erie, PA

    24020 Glens Falls, NY

    30780 Little Rock-N. Little Rock, AR

    35620 New York-Northern New Jersey-Long Island, NY-NJ-PA

    35980 Norwich-New London, CT

    37460 Panama City, FL

    43780 South Bend-Mishawaka, IN

    44140 Springfield, MA

    45060 Syracuse, NY

    45940 Trenton-Ewing, NJ

    46140 Tulsa, OK

    The national median existing single-family home price in the first quarter was $217,600, up 6.3 percent from the first quarter of 2015 ($204,700).

    Looking to buy cheap? Check the five lowest-cost metro areas this year

    When the National Association of Realtors economists crunched the numbers, they found, that to purchase a $217,600 single-family home, a buyer making a 5% down payment would need an income of $47,819. But home prices in these metro areas is way below that:

    • Cumberland, MD $67,400
    • Youngstown-Warren-Boardman, OH, $77,500
    • Decatur, ILL., $83,300
    • Wichita Falls, TX $95,200
    • Rockford, ILL, $95,800.

    The better your credit is, the better chances you have of snagging a mortgage loan with the lowest interest rates and fees, bypassing the Federal Housing Administration (FHA) loans with all their extra insurance premiums.

    If you’re a borrower with a larger down payment and a higher credit score (700 or higher) you may qualify for a conventional mortgage loan with the lowest interest rates possible, no points and fewer closing costs than someone applying for FHA loans with worse credit. Keep working your credit repair plan.

  • Student Loan Myths Debunked

    April Fool’s has come and gone, but the financial “pranks” of education debt have the potential to stretch over years of April 1sts. The student loan crisis is a trillion-dollar problem in the United States, and a lack of basic knowledge is one of many contributing factors. Review the myths below before you embark on the path to higher education. What you learn will prevent you from suffering from years of foolish consequences.

    • Myth #1: Lenders cannot charge more than X% of my income per month during repayment. This myth is true for some loans, false for others. For example, suppose you apply for two loans during college:
      • Loan A: Federal Direct Subsidized: $10,000
      • Loan B: Private loan: $25,000


    Loan A is backed by the federal government and may qualify for an income-sensitive repayment plan, limiting your monthly burden to 10 percent of your income. (Learn more about the different types of federal repayment plans here.)

    Loan B is funded by a private company, which, like a credit card lender, has the ability to adjust interest rates and charge high monthly payments based on loan balance, regardless of your income. Many private lenders offer reduced payment options for qualified applicants, but like so many new grads learn, the law does not limit their ability to gouge borrowers at will.

    • Myth #2: Income-sensitive repayment will protect me from overwhelming debt. Many borrowers believe income-sensitive payments make student loans more affordable. While they may provide temporary budget relief, you’ll pay more interest on your private and federal loans over time. According to the U.S. Department of Education:

    “Income-driven repayment plans usually lower your federal student loan payments. However, whenever you make lower payments or extend your repayment period, you will likely pay more in interest over time — sometimes significantly more. In addition, under current Internal Revenue Service (IRS) rules, you may be required to pay income tax on any amount that’s forgiven if you still have a remaining balance at the end of your repayment period.”

    • Myth #3: All federal student loans have the same fixed interest rate. False. Federal loans vary by type and borrower (e.g., student vs. parent) and while all interest rates are fixed, they aren’t identical. For example, the current rate for a Direct Subsidized undergraduate loan is 4.29%, while the rate for a Direct Plus loan for graduate students or parents is 6.84%, drastically increasing the interest due over time.
    • Myth #4: I can’t afford school without student loans. True, higher education comes with a steep price-tag. According to a College Board survey, the average price of tuition for the 2014-2015 school year was $31,231 for private universities, $9,139 for in-state students attending public universities, and $22,958 for out-of-state students. These numbers don’t include room and board, books, food, utilities, transportation and other living expenses. The average family isn’t equipped to handle 100% of these costs, and many believe student loans are the only answer. Don’t jump to loans right away. Consider alternative funding in the forms of:
      • Scholarships
      • Grants
      • Work-study
      • Part-time employment
      • Online resources, e.g., free books
      • Reduced tuition for core classes through your local community colleges
    • Myth #5: Education debt won’t affect my credit that Millions of student borrowers are learning the hard truth about this myth. Graduating with mortgage-sized student loans is sure to affect your finances, especially with an entry-level salary. Let’s break it down in terms of how credit scores are calculated. The Five Factors include:
      • Payment history (35 percent). The ability to pay your bills has a significant effect on your credit score. Overwhelming loans can hinder your post-grad budget before your career is established.
      • Debt utilization (30 percent). Student loans are considered installment debt, which means they don’t impact credit utilization (amount owed vs. total credit limit) in the same way as consumer credit cards. On the other hand, student loans will affect your debt-to-income ratio, a key factor that qualifies you for home loans, auto-financing etc.
      • Credit length (15 percent), new accounts (10 percent), and diversification (10 percent). Limiting your ability to secure new loans is a major risk of student lending. If your loans exceed your income, lenders aren’t likely to offer funding for housing, cars, personal expenses and more. This consequence can damage your credit score by up to 35 percent.

    The bottom line: Don’t begin your education with a lack of financial knowledge. Utilize our e-book and other available resources to pursue a degree deliberately and safely.

  • What If A Family Member Steals My Identity

    What If A Family Member Steals My Identity

    Identity theft is the ultimate violation of privacy and safety, affecting millions of Americans each year. If that weren’t bad enough, nearly one-third of identity theft victims later discovered that a family member committed the crime, according to a TransUnion study. Dealing with the emotional and practical implications of identity theft is never easy, especially when the thief is — or was — a trusted relative. Keep your cool by taking the following steps to minimize the fallout. While your relationship may be damaged forever, your credit shouldn’t suffer the same fate.

    1. Confirm your suspicions. If you suspect identity theft, the first thing to do is confirm it. Order free copies of your credit reports from TransUnion, Experian and Equifax. Review each document carefully and highlight information that points to fraud.
    2. Freeze the activity. Identify the affected accounts and contact your creditors immediately. Be prepared to list the items that were purchased fraudulently in order to help your creditors repair your account.
    3. Alert the credit bureaus. Alert the credit bureaus after putting an end to ongoing fraud. Your creditors may offer to do this on your behalf, but it is important to follow up to ensure that no damage remains on your credit report because it could affect your credit score. Ask the bureaus to place a fraud alert in your file for the maximum amount of time. A fraud alert requires verbal or written confirmation before new accounts are opened in your name, thus preventing future cases of ID theft.
    4. Take precautions. Family members have easier access to sensitive information like credit cards and account files—access you must prevent in the future. Take precautions by storing your birth certificate, Social Security card and passport in a safety deposit box at your bank. Keep credit cards secure by locking them in a safe when you aren’t using them. Change the passwords to your online accounts and lock your username to prevent cyber crimes.

    Once you have secured your accounts, perhaps the most challenging part of the process is deciding how to respond to your family member’s betrayal. You have a few options:

    1. Confront your relative. Airing the truth could be the best solution for everyone. Confront your relative with proof of theft and ask them to explain. Tell them that you have contacted your creditors and the bureaus to end the fraud. Discuss how they plan to repair the damage they have done including repaying you for stolen funds.
    2. Contact the police. Whether you feel unsafe or simply do not want to discuss the issue with your family member, contacting the police is another valid option. Keep in mind that filing a police report will likely result in the arrest and charging of your family member, an outcome you should prepare for if it occurs.
    3. Repair your credit. Whether or not you involve the police, it’s imperative to repair any damage done to your credit. While most credit card charges are reversed in cases of identity theft, stolen cash is another story. Talk to our team of professionals about your options. We can help you navigate the days ahead.

     

  • Fraud Alert vs. Credit Freeze: What’s the Difference?

    Fraud Alert vs. Credit Freeze: What’s the Difference?

    Every consumer has three reports, managed by credit bureaus TransUnion, Experian and Equifax. As the source of all credit information, credit reports contain a variety of sensitive data, including:

    • Full name, address, and Social Security Number
    • Current and past employment information
    • Current and past account names, numbers and balances
    • Public records such as judgments and liens
    • Collections, charge offs and bankruptcies

    When identity theft occurs, a scammer may use your information to make additional purchases or even open new accounts in your name. The result is credit damage that often leads to lost reputation, higher interest rates, inability to gain new credit, and long-term issues.

    Whether identity theft is suspected or materialized, there are ways to minimize credit damage and prevent future problems from occurring. You have the option of placing a fraud alert or credit freeze in your credit reports. So, which one should you choose?

    What is a fraud alert? 

    As a free service, a fraud alert is a 90-day protective measure offered by the credit bureaus. Placing a fraud alert in your file prevents anyone from opening a new account or acquiring a loan in your name. Lenders must contact you directly before approving credit applications as well. For example:

    Suppose an identity thief is attempting to open a new credit card in your name. Before approving the new account, the lender is instructed by the fraud alert to contact you for verification of the application. You inform the lender that you did not apply for a new credit card, blocking access to the scammer and protecting your credit in the process.
    In addition to credit protection, fraud alerts have the following benefits:

    • They are free for a 90-day period
    • You must only apply for one fraud alert; the credit bureau you choose will contact the others and notify them of the change.
    • A fraud alert entitles you to free copies of your credit reports

    Drawbacks include:

    • A mandatory 90-day alert period
    • Inability to make other changes while the alert is in place. This means you cannot remove credit report errors until the fraud alert is lifted
    • Inconvenience when applying for new credit

    What is a credit freeze? 

    As an added measure of protection, a credit freeze prevents even lenders from accessing your credit file without permission. For example:

    Suppose you decide to buy a new car while a fraud alert is active in your file. The dealership must run a credit check during the financing process, but their request is denied while a credit freeze is in place. You must grant the dealership access to your file using a PIN number provided by the credit bureau.

    Benefits of a credit freeze include:

    • Access to existing creditors
    • PIN number or password system, allowing you to grant personal access to specific parties or to temporarily lift the freeze when you plan to apply for credit
    • Greater safety related to credit report access
    • The credit freeze remains in your file until you ask to have it lifted
    • Peace of mind for consumers who do not use their credit regularly, have been victims of identity theft, and parents who want to protect their minor children from financial crimes

    Drawbacks include:

    • While there is usually no cost for victims of identity theft and senior citizens, fees for other consumers usually range from $5 to $10 and vary by state and are assessed when placing and lifting a freeze. Refer to Consumers Union’s guide for more information about the regulations in your state.
    • Unlike fraud alerts, you must contact all three credit bureaus to place a freeze on each individual report. This means you’ll also pay a fee for each freeze.
    • Lifting a credit freeze can take time—15 to 30 days—which could hinder applying for a new loan or other credit-related action.

    The bottom line: The credit bureaus have come a long way when it comes to helping consumers recover from theft and safeguard their credit files. Consult a professional when deciding which measure of protection to use.