The Truth about Credit Counseling Agencies

Credit counseling agencies, debt relief services, consumer credit help--these are but a few of the names that companies claiming to help consolidate consumer debt go by. As a former mortgage and credit specialist, I've had an up close and personal view of how consumers turning to these companies for help can also receive a big fat mortgage denial.

Why?
The answer is rather simple. A lender or a creditor gets an uneasy feeling when they see that you couldn't manage your finances on your own, but had to turn to a "credit counseling" agency to do it for you. Lenders would rather see that you took control of the situation yourself and took the steps necessary to get out of debt on your own.

The truth is that everything you can pay a credit counseling agency to do for you, you can do for yourself. Yes, it will take some of your time, but you put yourself in debt so it is your responsibility to get yourself out of it too.

Take Control

First, contact each of your creditors and lenders. Explain you're having problems paying your bills but you want to work out an arrangement that is mutually beneficial. Most companies would rather work out a payment arrangement than not get paid at all, so you may be surprised at how many of your creditors work with you.

Second, get all of your agreements in writing. Get the name and contact information for the person you speak with at each lender. Follow-up your phone call with a written description of the agreement. Most companies will send you something more formal via email or in the mail, but you need to be proactive about the situation and document everything.

Stick to it. Once you establish an arrangement with your creditors, make sure to hold up your end of the bargain by making the agreed upon payments and making them on time--always.

Credit counseling agencies saw a need (or more of an opportunity) in the market to make money and they took it. Working with a credit counseling agency can solve your debt problems in the short-term, but can be damaging to your ability to obtain new credit in the future and in the long-term. Avoid this problem by acting as your own credit counselor. It resolves your debt problems and shows creditors and lenders that you are in full control of your finances and you have the ability to manage your own finances.

When a Fixed Rate Mortgage is the Best Option

Mortgages are not one-size-fits all financing options. The type of mortgage that is right for your neighbor may be disastrous for your personal financial situation. Also, there is a major misconception that fixed rate mortgages are always the best option. Always is a strong term and there aren’t many things in this world that are “always.” The same is true with fixed rate mortgages.

So when is a fixed rate mortgage the way to go?

Personal Situation

The first aspect of your life you to need to review is your financial situation. Ask yourself the following questions to gain a better understanding of where you stand.


o How long will I realistically live in or own this home? No matter how many years you say, see if there is a mortgage that matches or comes to close to the number of years in your answer. For example, if you say five years then a mortgage fixed for five years may afford you a lower interest rate than a 30 year fixed.

o Do I live on a fixed income or will it stress me out if my monthly mortgage payment fluctuates? If you need to know exactly how much your monthly mortgage payment is going to be at all times or it stresses you out to think of your payment changing, then a fixed rate mortgage is the most beneficial one for you.

o Did I have my past mortgage(s) for the entire time I lived in the home or did I refinance or sell before the end of the mortgage? The national American average reveals that homes are refinanced or sold in five to seven years. This means that it’s rare, if not non-existent, to hold a mortgage for a 15 or 30 year period. So if you can get a lower interest rate and lower monthly mortgage payment with another type of fixed rate or variable rate mortgage then it may be worth looking into it.

Interest Rate Environment

The other major item you need to consider before deciding on a fixed rate mortgage is the current interest rate environment. If the current interest rates are low, then locking in on the low rate with a fixed rate mortgage probably is the best way to go. If interest rates are high and are expected to drop in the near future, then a fixed rate mortgage may not be the best option as part of your long-term strategy.

When is a fixed rate mortgage the best option? It depends on your personal financial situation, emotional state and current interest rates. Long-term and short-term considerations can also affect your decision, so keep all of these things in mind when choosing your next mortgage.

5 Things to Do Before You Apply For a Mortgage

Applying for a mortgage, whether it's for a purchase or a refinance, is a major financial undertaking. It's a financial step that should be taken very seriously. You should also go into the process with your eyes wide open and with enough knowledge to understand what it is happening and you move through the mortgage process. Before you start submitting your mortgage application, there are some things you need to do to prepare for the process.

1. Decide on a mortgage amount. The amount you want or need to mortgage versus how much of a mortgage you can afford may be two different numbers. You need to have a realistic idea of the mortgage amount you can afford. One of easiest ways to figure out how much a mortgage payment is going to be based on the mortgage amount you want is to use a mortgage calculator or refinance calculator. You can input the amount of the mortgage and the current interest rate to see what the monthly payment comes out to be. You can then compare the monthly payment with your budget to sit if the two fit. You can continue to adjust the mortgage amount or type of mortgage to see how this changes the monthly payment until you create an affordable scenario.

2. Decide how long you'll live in the home. People often have the misconception that if the current interest rate is less than what they are paying now that they should run out and refinance. Since there are closing costs involved in a refinance, getting a lower interest rate may not be enough to truly save you money. In order to determine if you will recoup your closing costs in a refinance, you should do a break even analysis, which will tell you how long it will take you to recoup your closing costs. If you're planning on being in the home longer than it takes you to break even then it is usually beneficial to refinance.

3. Include the cost of homeowners insurance and taxes. You may be able to afford the monthly mortgage payment, but it's also important to consider the other costs involved in owning a home. Find out the estimated taxes and insurance for the home and be sure to add this cost to your monthly payment. This will provide a full cost view as to whether or not you can afford to buy a home.

4. Check your credit report. Especially during the economic downturn, a high credit score is more important than ever to get approved for a mortgage. Generally speaking, lenders are looking for credit score of 720 or higher. You'll want to get a copy of your credit report from each of the three credit agencies (TransUnion, Experian and Equifax) to make sure that all of the information is correct. If you find any incorrect information on your credit reports, correct it by contacting the agency or opening a dispute with the credit bureau reporting the negative information.

5. Get pre-approved. If you're purchasing a home, you may want to get pre-approved for a mortgage before you start house hunting. Not only will a pre-approval letter from a mortgage lender allow you to look at homes in your price range, but it may also be a bargaining tool for negotiating the purchase price of the home.

Applying for a mortgage, especially in today's economy, isn't always an easy task. You may be able to streamline the process by doing some preparation ahead of time. Before you apply for a mortgage, take a look at your financial situation and go through these seven steps to make sure that obtaining a purchase mortgage or refinancing your current one is a viable option for you.

How to Become Mortgage Loan Officer

According to the Mortgage Banker's Association, approximately 99 percent of the homes purchased in the U.S. are financed with a mortgage. With such a demand for mortgages, becoming a mortgage loan officer may be a career option worth looking into.

Check job postings. The Bureau of Labor Statistics states that nine out ten loan officers in the United States work for institutions such as banks, credit unions and other related financial institutions such as mortgage lenders. Look at the websites for local banks in your area to see which career positions are available. You can also look at job posting websites such as Monster, CareerBuilder and Hot Jobs.

Qualification match. See how your experience and background lines up with the job requirements for the position you're interested in applying for. Typically, a loan office has a bachelor's degree in business, finance, economics or a related field. Experience working in a bank or for a lending institution can be beneficial, but is not always required. This type of experience may be substituted for the education requirements as well.

Licensure. Loan officers working in banks or credit unions typically are not required to obtain a mortgage broker license. Working as a loan officer for another type of institution may require you to obtain your mortgage broker license. It may be a state requirement where you'll be processing loans for you to obtain a license. Mortgage News Daily breaks down the licensing requirements by state, so you can follow the guidelines for the state you'll be working in if you need to obtain a license.

Salary range. Working as a mortgage loan officer can be a salaried position, a commission position or a combination of the two. Some institutions pay loan officers a salary based on experience. Other institutions pay for each mortgage file that the loan officer processes and closes. Finally, some companies pay the loan officer a salary (which is typically lower than a straight salaried loan officer) and then pay a commission for each mortgage file that is processed and closed.

The Role of an Attorney in Your Home Purchase

As is the case with most major purchases, buying a home is a multistep process. It also typically requires the involvement of several different parties including your real estate agent, real estate attorney, mortgage lender, title company and more. By using professionals such as real estate agents and attorneys from the beginning of the process, you can save yourself from making mistakes that can cost you time and money in the end.

What a Real Estate Attorney Does

A real estate attorney can help you with a home purchase before you even start looking for a new home.

Some of the roles your attorney play include:

• Advising you on the best way for you take title of the home, financing issues that may arise and helping you to make the right decisions based on your overall financial picture
• Reviewing your purchase offer price and terms before you submit it to the seller
• Reviewing or drafting the purchase and sale agreement, the terms of the agreement and who will hold the deposit
• Providing you advice in terms of mortgage financing so that the purchase and sale terms of the contract can be tailored to fit your lender’s requirements
• Obtaining an abstract of title for the property from the seller
• Examining the abstract for title defects
• Establishing an escrow account
• Recording the legal documents in the public records and paying the applicable taxes and recording fees after the mortgage closes
• Issuing title policies upon receipt of the recorded documents

You wouldn’t build a house without consulting an architect and builder, so you shouldn’t enter into a home purchase without first consulting a real estate attorney. The knowledge and experience a real estate attorney has can save you from irreversible mistakes that can cost you money or kill a real estate deal completely.

Understanding Homeowners Insurance

When you own a home, you’ll want to protect it from loss or damage with a homeowners insurance policy. In fact, if your home is financed, then the mortgage company probably requires you to carry a certain amount of coverage. There are different options for covering the loss of or damage to the home itself and coverage options against loss or damage to your personal property. Then there is personal liability insurance, which covers you if someone is injured on your property that can be added to your policy.

Types of Coverage

Dwelling coverage. This type of coverage provides you with the money you need to cover the cost of rebuilding your home, which includes the interior and exterior. The square footage of the home is used to calculate the amount of coverage you should carry. You may also want to inquire with your insurance carrier to see if the policy has guaranteed replacement cost, which covers the cost to rebuild your home, even if the costs exceeds your policy amount.

Personal property coverage. This type of coverage insures the contents of the home. Personal property coverage typically amounts to 50-75% of the amount of dwelling coverage.

Liability insurance. If someone is injured while on your property, this type of coverage helps you to cover their medical expenses and the legal fees of a lawsuit. The amount of the policy is usually double the amount your personal assets are worth.

Master policy. If you own a co-op or condo, a master insurance policy typically covers damage to or injuries incurred in the common areas of the complex such as the pool, roof, exercise facility and walkways. This policy does not protect individual tenants for damage to the interior of their units or their personal property. You can ask your association for the details on what the master policy covers, but dwelling, personal property and liability insurance for your is still necessary.

Types of damage usually covered by a homeowner’s insurance policy:

• Fire or lightning
• Explosion
• Windstorm or hail
• Aircraft or vehicle crash damage
• Smoke
• Theft
• Vandalism
• Volcanic eruption
• Snow, sleet, or ice weight damage
• Water or steam damage from an internal problem like a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance leak

Buying a Policy

You can do some online comparison on policies or contact your insurance agent for more information on homeowner policies. Since insurance needs vary by the person, you should base your needs on your personal situation rather than what a neighbor, family member or friend has. Organizations such as the Insurance Information Institute (www.iii.org) offer more information and resources on homeowner policies.

5 Ways to Earn Money and Get Out of Debt

When you are burdened with debt, it can make you feel like you are trapped under a heavy weight. Debt can wreak havoc on your life and even your health--causing stress, loss of sleep and loss of an appetite to name but a few side effects. One of the easiest ways to get out of debt is to increase your income and here are five ways you can earn some extra money. Focus on applying all of the extra money you earn to paying down your debt. You'll be amazed at how quickly you can earn extra money to get out of debt.

1. Sell your stuff online. While sites such as ebay may charge you a small fee to sell items online, there are other classified sites such as Craigslist where you can list items for sale for free. It's like having a virtual garage sale where you sell items you no longer want or need. Depending on what you have to sell, virtual garage sales can rake in some big bucks.

2. Sell what you grow. If you have a green thumb and grow beautiful flowers or delicious fruits and vegetables, turn it into a moneymaker. Sell at the local farmer's market, flea market or if your town permits on the side of the road. Even selling your goods on the weekends may provide you with enough extra income to take a big chunk out of the amount you owe.

3. Have a garage or yard sale. While selling your stuff online allows you to reach a wider audience, a one or two day garage sale can attract quite a gathering of locals. How much you make can vary, but it's not unheard of to rake in a couple hundred bucks or more from a decent size garage sale.

4. Babysit. Offer babysitting services to friends, family members and neighbors. This is an easy way to rake in $10-$20 an hour without ever having to leave the comfort of your own home.

5. Sell your crafts. If you're creative or artsy, you can also turn your hobby into a side business to earn extra income. Whether you make handmade greeting cards and invitations or furniture and jewelery, there are craft markets where you can list items for sale online. You can also build and sell from your own website or attend local craft fairs and church bazaars.

Is Investing in Real Estate Still Wise?

With a tumultuous housing market and economy as a whole, you may be wondering if real estate is still a good investment. As part of a long-term investment strategy it is still an investment that is considered to build wealth. The dip in the price of homes and other pieces of real estate may mean that you have the opportunity to earn an even greater return. Because you can buy real estate now at bargain pricing, you may be able to earn more of a profit when you sell it later, when the real estate market returns to normal.

Fellow finance writer Rayce Banner answers the question, "Is Real Estate Investing Still Evergreen?"

Investing in real estate is another time-tested method for building wealth. Over the generations, real estate owners and investors have enjoyed rates of return, comparable to the stock market. The best place to start with real estate ownership is to buy your own home. The equity, which is the difference between the market value of the home and the loan owed on it, in your home that builds over the years can become a significant part of your net worth. Among other things, this equity can be tapped to help finance other important financial goals such as retirement, college and starting or buying a business.

In addition to building wealth through home ownership, you can also consider investing in real estate that you rent out, often referred to as investment property. If you wish to invest directly in real estate, residential housing (such as single-family homes or small multiunit buildings) is a straightforward and attractive investment for most people.

Before you venture into real estate investing, be sure that you have sufficient time to devote to it. Also be careful not to sacrifice contributions to taxdeductible retirement accounts in order to own investment real estate.In the early years of rental property ownership, many investors find that their property's expenses exceed its income. This "negative cash flow" can siphon off money that you could otherwise direct into your retirement accounts to earn tax benefits. When selecting real estate for investment purposes, remember that local economic growth is the fuel for demand for housing.

In addition to a vibrant and diverse job base, a limited supply of both housing and land on which to build is another factor that you should take into consideration. When you identify potential properties in which you might invest, run the numbers to understand the cash demands of owning the property and the likely profitability.

If you don't desire to be a landlord (one of the biggest drawbacks of investment real estate) consider investing in real estate through real estateinvestment trusts. REITs are diversified real estate investment companies that purchase and manage rental real estate for investors. You can invest in REITs either through purchasing them directly on the major stock exchanges or through a real estate mutual fund that invests in numerous REITs. Because REITs tend to pay fairly healthy dividends, it's best to avoid investing in them outside of tax-sheltered retirement accounts during your working years or if you're in a high tax bracket.

Most diversified U.S. stock mutual funds invest a small portion of their assets in REITs. If you'd like REIT-focused mutual funds, among better such funds are Fidelity Real Estate, Cohen & Steers Realty Shares and Vanguard REIT Index.

Rayce Banner is a freelance writer on financial topics. Check out the learning "game" that has had a huge positive impact on his career direction: http://www.best-online-golf-game.com/cash-flow-game.html.

Teach Your Kids about Adult Bills

In the final tip about teaching your kids how to be responsible money managers, you'll learn how to give your kids a realistic view of bills. Bills are a fact of life and now is the time to teach them what their future holds when it comes to expenses.

The easiest way to do it is to open bills when they come in the mail or hit your inbox. Sit down with your child and make a list of the monthly household bills. This helps them to gain perspective on what things cost and how much they can expect to pay for things when they become adults. You can use this as a guide to teach older children how to create a budget.

Teach Your Kids about Investing

In spite of what has taken place in the history of the stock market, investing today for tomorrow is an important lesson to teach your children. The point can easily be illustrated by taking them to open their own ROTH IRA account when they start to earn money of their own.

You can illustrate the same point by sharing your own retirment accounts or that of your spouse. If you have a 401k or IRA of your own, explain to your child how investing works, where the money comes from that goes into the accoun and how the money grows and changes over time.

Consolidation Definition

The term consolidation has several different meanings, depending on the context in which it is used. Consolidation may be used in the business or corporate world or it may be used to refer to a financial situation.

Business

As a business term, the term consolidation is used to describe a situation in which two different companies, lines of business such as product lines or different areas of the company become one. This is different from a merger, Which is when a new business is formed when the two businesses come together. In a consolidation, one company is left standing. Examples are the 1999 takeover of Nabisco by Kraft Foods and the acquisition of Best Foods by Unilever.

Shakeout

In a mature business market, consolidation is the process of natural selection in which successful businesses grow bigger and begin to acquire smaller businesses. In the process, this also shuts down some smaller companies. In the end, this leaves only the strongest and biggest of the companies left standing. The consolidation process is also referred to as a shakeout.

This is exactly what happened in September 2008 when bank failures hit the news on a daily basis. Merrill Lynch was soon acquired by Bank of America, which did away with Merrill Lynch but left Bank of America standing as a financial giant.

Debt

When referring to debts, consolidation is the term used when several loans are replaced with one single loan. When this occurs, it usually creates a lower loan payment and a longer loan term.

Some consumers use debt consolidation companies to assist them in working with their creditors to turn several loans or credit accounts into one loan or credit account and one monthly payment. Typically, this includes paying a lower interest rate on the consolidated loan than what the consumer was paying for each loan individually.

Other consumers take out a new loan (such as an equity line of credit) to pay off and consolidate higher interest rate debt (such as credit cards). This type of consolidation helps the consumer to pay less interest in the long run and turn several loans or credit accounts into one loan and payment.

British Government

In Britain, this is also the term given to the process of combining two or more acts, bills or statutes before they are presented to Parliament. This typically occurs for legislation that is related in some way so that it makes sense to combine two or more pieces into one.

Teach Your Children about Money Tip #5

Tip #5 for teaching your child about money involves teaching them how to bail themselves out of financial jams. It may be hard to resist the urge to help bailout your child, but when you don't always come to their rescue, your child learns to save themselves. So if your child wants to buy an expensive toy or item, have them take a good look at the amount of money they have in their own account. If they do not have enough money to buy the item then do not give a cash advance to your child so they can buy the item. Instead, brainstorm with your child to see what ways they may be able to come up with the extra money they want to buy the item.

For college aged children that run up their credit cards, do not offer to pay them off. Again, spend some time talking with your child to see how she can come up with the extra money needed to pay off the credit card bill. These types of lessons teach your children that they have to work for their money and manage their debt themselves because there isn't always going to be somebody (like Mom and Dad) to bail them out all the time.