Personal Finances

Personal Finance

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Get your Ducks In A Row!

Time to tune up your personal finances?

It's Never Too Late To Get Your
Financial House In Order

With all the noise regarding home mortgages in
the media, it's easy to conclude our country is
deep trouble when it comes to its lending
practices. The truth is, only a very small percent
of the total outstanding mortgages are in
foreclosure. This is in spite of the "record" level
of foreclosures we read about. It's important to
remember that the business of our national and
local media is to increase market share and
what better way to do that then peddle fear. So
is there really a problem? That depends.

Sadly, there are many homeowners who are in
over their heads. It may or may not be their fault.
It's hard to make blanket statements in this area.
Some lenders have clearly pushed the limits of
common sense in the past few years peddling
extremely low payment, "reverse amortization"
mortgages. While these mortgages do serve a
purpose for some, there are real risks to
homeowners. Home buyers or those interested
in refinancing their homes should consider the
conditions of the local real estate market as well
as their personal financial situation whenever
applying for a loan. If your income is unstable
and the market is slow, it's more certain you'll
have a difficult time meeting your obligations with
this type of loan (or for that matter any loan).

The assumptions of a couple years ago that
made a low payment mortgage work are 1) real
estate prices will continue to rise, 2) your
personal income will rise, 3) the local economy is
in good shape. Isn't it sort of funny, how
assumptions don't always meet changing reality?
Oh, sure, if prices rise enough, sometimes you
can offset the increase in loan balance that
comes about from not paying enough each
month to even cover the interest due on your
loan. Or, if prices aren't rising, but your income
is, then as time goes by you can still increase the
amount you pay as you go along (providing there
is no prepayment penalty). And if the local
economy is good enough you can probably still
get another job even if your company is laying off
workers.

There's another truth to consider: Our lives are
complicated! Stable jobs are outsourced
overseas, a family member suffers a health care
crisis, you and your partner divorce and the list
goes on. Suddenly, the low payment mortgage
is just like any other bill: no matter how much it
is, it's still too much. If you're already in trouble
with your debt, don't wait to seek help.

Take Steps To Avoid Problems

The best way to avoid a problem is to not get
into it in the first place. Sometimes it is easy

If You're Already In Trouble

If you are already in trouble financially, you
know it. Perhaps you've had a late notice or
two. Perhaps you're a couple payments
behind. Or maybe you know your company is
planning to lay you off in the next couple
months. Whatever your situation, all the
experts say the same thing. First step: Talk to
your lender! The fact is lenders don't want to
foreclose on your loan. It's expensive for them,
but the longer you wait the harder it will be to
dig yourself out. Often, a lender will be able to
work with you. Sometimes they can arrange to
skip or postpone a payment, or perhaps even
adjust your interest rates, but here's the key:
They will be much more willing to work with you
if you work with them! Second step: If you've
done what you can with your lender and still
need help seek out a Credit Counselor ,
accountant, attorney or seek out the advice of a
trusted friend. Let's face it, putting it off never
makes it go away. Get help now. What are
you waiting for?

Get started
planning for
your future
today!

Free Budgeting
Seminar:

BECU: Budgeting 101

Know your credit score.
Find out from these
Credit Agencies:
Experian
Equifax
Trans Union

Good sources for
additional information
on personal finances:
Forbes
CNN Money
Yahoo
Kiplinger
Motley Fool
Morningstar

to forget the obvious, or overlook common sense.
Here's a list of ideas to help you keep your financial
house in order:

1) Keep a constant watch on your credit history.
Your credit score will determine how much you pay
on your loan, or on your insurance, for that matter.
Even if you plan to rent, instead, it's still very
important to know where you stand. It's the first way
companies judge you. Find out your score and find
out how you can protect it.

2) Like you'd tune up your car, talk to your mortgage
broker once every year or two for a free
no-obligation "mortgage review." Make sure you
have the best loan program to achieve your financial
goals. Loan programs change often. Rates change
constantly. If you don't talk to an expert, you could
lose thousands of dollars in unnecessary interest
payments over the course of a loan.

3) Sitting on home equity may feel like having
money to burn in your pocket, but it's best to keep a
reserve. If real estate prices go down this year, will
your house be worth less than the loan on it? The
best bet is to maintain at least 20% equity in your
home. In times of home deflation, having more
equity is better. In case you weren't clear, your
equity is your homes current value minus your debt
on it. Conventional financing requires mortgage
insurance for less than 20% home equity which
means extra dollars out of pocket for you each
month.

4) Have at least six to nine months income in
savings in case of emergencies. If you don't have
any savings, it's a good sign you need help
establishing a family budget. It's never too late to
start and there are lots of resources for help.