Personal Finance Archives - Page 2 of 2

11 09, 2012

Simple Tips To Keep Your FICO High

FICO recipe For today’s home buyers and refinancing households, the value of “good credit” has never been higher.

Mortgage approvals hinge on your FICO score, as does your final mortgage pricing.

If you’re shopping for a home , therefore, or contemplating a refinance, be aware of how everyday credit behaviors can affect your FICO. Even small events can make a big impact.

Here are some common-sense steps to help improve your credit score.

First, keep a “cushion” on your credit cards.

30 percent of your credit score is linked to “Amount Owed” and a big part of Amount Owed is a raw calculation of (1) What you owe in dollar terms, against (2) How much credit you have at your disposal. The credit bureaus want to see at least 70% of your credit “available”.

If you can keep your cards at least 70% available, your credit scores should improve.

For example, if all of your credit cards give you access to a combined $50,000 and you are using $10,000 of that available credit, you have 80% of your credit available to you and this is “good”.

Raise your balances to $30,000 and this is “bad”.

Second, don’t make major purchases on credit prior to making a mortgage application. This includes opening a store charge card to save 10 percent or more on a washer/dryer set, for example; or for any other appliance or furniture piece.

The reasons why are two-fold. One, store charge cards are often opened with a limit matching your initial charge, rendering them 100% utilized. This is bad for a FICO, as discussed above. And, two, opening a new charge cards has a negative FICO impact anyway.

Charge cards are associated with high default rates.

Third, make all of your monthly payments on time — even the ones in dispute. You may not want to pay that $80 wireless phone bill, for example; the one that you think you owe, but remember that Payment History accounts for 35% of your credit score. Even one late payment — or payment in collection — and your credit score can drop.

It’s often less expensive to pay a bill in dispute than to be relegated to a higher mortgage rate. The payment is dispute is remedied today. The payment on that mortgage rate lasts for 30 years.

5 09, 2012

Making Coupon-Free Savings At The Supermarket

The average family puts 10-15 percent of its monthly spending toward food, according to the Bureau of Labor Statistics and Department of Agriculture, with most of that food purchased at a supermarket.

The amount spent on food is less than the typical amount spent on housing each month but what makes food costs different from housing expenses is food costs are not “fixed”.

How much you spend on food each month is up to you and, using savvy shopping tactics plus coupons, you can lower your monthly food spend. Saving money on food leaves money for other purposes including savings, clothing and transportation.

In this 4-minute piece from NBC’s The Today Show, you’ll learn several easy-to-implement methods which can reduce your supermarket bills, as well a few “common sense” tactics you may have overlooked.

Among the topics covered in the video :

The importance of shopping with a list, and of avoiding “the inner aisles”
The value of generic brands, which are often near-copies of “brand name” products
Why you should buy toiletries at a drugstore instead of at a supermarket
Using “per unit” prices to compare different-sized packaging of the same product
Buying fruit that’s in-season versus fruit that’s out-of-season

Another shared money-saving tip is to shop at grocery store without children. It can be fun for the family to shop together, as noted in the interview, but bringing children to the supermarket is a sure-fire way to raise your grocery bill.

Recent inflation data shows that the typical cost of food is rising nationwide. With these tips, perhaps you can lower your bill.

22 08, 2012

States With The Highest And Lowest Closing Costs, 2012

Closing costs by state, 2012

Mortgage rates have been on steady decline since the start of 2012 as uncertainty for the future of the Eurozone and questions about the soundness of the U.S. economy have led investors into mortgage bonds in droves, lowering the 30-year fixed rate mortgage to its lowest point in history.

But it’s not just mortgage rates that are down. Closing costs are, too.

According to Bankrate.com’s annual Mortgage Closing Cost Survey, the average mortgage applicant paid seven percent fewer closing costs in 2012 as compared to 2011, on average. The year prior, costs had increased thirty-seven percent, on average.

A “closing cost” is any fee paid in conjunction with a mortgage settlement that would not be payable if the home was financed with cash. Closing costs for purposes of the Bankrate.com survey include such items as underwriting fees and appraisal costs. County transfer stamps, where required, however, were not included.

Like everything in real estate, closing costs vary by locale. There are some states in which closing costs tend to be high, and other states in which closing costs tend to be low.

The five states with the lowest closing costs for 2012, on average, are :

Missouri : $3,006
Kansas : $3,193
Colorado : $3,199
Iowa : $3,257
Arkansas : $3,325

By contrast, the two most expensive states in which to close a mortgage this year are New York ($5,435) and Texas ($4,619). All figures assume a $200,000 loan size with 20 percent equity and excellent credit.

The good news is that, as a home buyer or refinancing household, you’re often not required to pay the closing costs which are itemized by your bank. When asked, many lenders will offer a low-closing cost or zero-closing cost option.

With low- and zero-closing cost programs, qualifying mortgage rates are raised by a small amount, which increases your monthly mortgage payment. Up-front settlement costs, however, are reduced or eliminated.

Opting for a low- or zero-closing cost mortgage is a trade-off between upfront costs and ongoing costs. Talk to your loan officer about your options to see which path is best for you.

View average closing costs for all 50 states at Bankrate.com.

14 08, 2012

Should You Lease Or Buy Your Next Car? It May Affect Your Mortgage.

Should you lease a new car, or should you buy one? Like most financial questions, the answer depends on your situation. For some people, leasing a car presents distinct economic advantages. For others, buying a car is the way to go.

There’s plenty of online material to help you choose your optimal path, but this 3-minute piece from NBC’s The Today Show serves as an excellent summary. In it, you’ll learn about the basics of leasing a car, and for whom leasing can be a great fit. You’ll also hear reasons to avoid a lease completely.

The NBC interview makes all of the following points :

Leasing allows you to drive a car that may be “too expensive” to purchase
Leasing puts you in a new car, with the latest safety features and gadgets, every few years
Buying a car means that you have no mileage limits, and can sell at any time

For many people, it concludes, buying a car is preferable to leasing one, with a notable exception being those people who can claim their car or truck as a tax deduction. Be sure to check with your tax advisor if you plan to take that route.

However, for another group — homeowners and active home buyers — leasing a car can invite mortgage approval trouble. This is because a car lease payment is assumed by a mortgage underwriter to be a perpetual debt; one that never reduces or gets extinguished. When a lease is complete, it must be replaced with a new lease, and so on.

Therefore, no matter how many payments remain in a lease, mortgage applicants must use the full car lease payment for purposes of a mortgage approval.

By contrast, for people whom are owners of their automobiles, car payments must only be added to debt ratios if more than 10 car payments remain until the car’s loan is paid-in-full. For homeowners and buyers , this can improve debt-to-income ratios and support a higher purchase price on a home.

There is no firm rule for whether it better to lease a car or to own one. The arguments for both sides are compelling and reasonable. Start with the video, then do your own research.

7 08, 2012

Closing At The End Of August? Plan Ahead For Labor Day Weekend.

Labor Day Closing Planning to make a late-August purchase closing? Keep an eye on your calendar. The last Friday of this month coincides with Labor Day Weekend, which may make for a complicated, end-of-month closing.

If you’re planning to close on, or around, August 31, 2012, plan ahead. Leaving anything to the proverbial last minute could delay your closing by hours in a best-case scenario, and by days in a worst-case.

This is because Labor Day is among the most popular vacation times of the year in the real estate, title and mortgage industries and, as Labor Day approaches, it’s increasingly hard to resolve “issues” related to settlement — not all parties are readily available for resolution.

A small closing issue, therefore, can spiral into a major one when you can’t reach your attorney; or, when the title company is short-staffed, for example.

For home buyers currently under contract, and for homeowners with a refinance in-process, the best defense at a time like this is a good offense. Get proactive with the mortgage process.

These steps can help your end-of-month closing go more smoothly this month :

Prepay your first year of homeowners insurance, effective your closing date. Provide proof of payment to your lender.
Document and deposit all gifts and retirement withdrawals to be used in conjunction with your closing as early in the process as possible.
If applicable, get Power of Attorney forms signed by all parties, and lender-approved in advance. Don’t leave this for the last week.
When your lender makes requests for paperwork, fulfill the requests within 24 hours, when possible.

In addition, if you’re a home buyer, consider scheduling your home walk-through for as early as can be reasonable. That way, if there’s an issue to resolve, there’s ample time to address it among all parties.

Furthermore, if you have planned vacation time between today and your closing date, make it known to all parties, and make sure to be reachable in the event of emergency by phone and/or email.

Real estate brokerages, title companies and mortgage lenders are notoriously short-staffed as Labor Day approached. Routine tasks take longer than usual. Plan ahead for August 31, therefore. It would be foolish not to.

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