Developing a Plan to Get Out of Debt Once and For All

Debt is one of the biggest problems facing Americans today. One reason it is so difficult is because it can be challenging to get out of debt once you find yourself buried in it. It is often paralyzing and prevents you from ever recovering. But, by developing a solid plan to get of debt, you will have a road map out of financial impairment and be well on your way to recovering from the possible financial devastation.

Calculate Your Total Debt

The most important aspect of getting out of debt is to fully understand exactly how much debt you are in. To do this, you need to add up the total amount you owe to each creditor so you have a tangible number to work with.

One easy way to summarize your total debt is to get a copy of your credit report. It will contain a list of your financial obligations to institutions who report to the major credit bureaus. There are a number of websites who offer free credit reports and make this a pretty simple process. To double check that all of your obligations are on the report, examine recent statements from your creditors to make sure your list is accurate. Also take into consideration any informal debts you might have, such as to friends or relatives, and add it to your total, as well.

Prioritize Your Debts

All debts are not created equal. For example, the mortgage you owe on your home is certainly not the same as the credit card debt you ran up over the holidays. When trying to determine which debts to pay off first, choose the one with the highest interest rate.

Or, another alternative to eliminate the sheer number of debts you have weighing you down is to pay the smallest debt off first. If your higher interest debts also have high balances, it can take years to pay one debt off. Smaller debts are repaid quicker and might be preferable to pay off first. Ultimately, however, you need to examine your unique debt situation and determine what is right for you.

Determine How Much You Can Pay

A thorough examination of your income is crucial to determine how much you can pay on your debt. This is not a situation where you want to find a few extra dollars. In fact, you will need to make some hard decisions to really work to pay down your debt. (Check out my last blog post, “Living Below Your Means- Can It Be Done?” for excellent ideas.)

Add up your earnings from your regular income. Subtract any essential money you must spend each month, including your mortgage or rent, utilities, food, medical expenses, as well as any current debt payments. The amount that is left is your disposable income, and a vast majority of it should go to pay down your debt obligations.

Create a Manageable Plan

Put all of the money you have allocated for debt reduction toward your highest priority debt, whether it is the largest interest rate or lowest debt. Don’t neglect any minimum payments on other debts, however. These should be considered more financial obligations, rather than debt reduction since the small amount does little to reduce the overall debt.

Once the first debt you targeted is paid off, move to the next one on your list. Use the extra amount you’ve allocated for the first debt and transfer it to that second debt. Continue with this cycle until each debt is paid off. This process can take years in many cases, but the benefits far outweighs the sacrifice of a few years.

It’s difficult to take any journey without an adequate road map. The same can be said for paying off debt. Without a full understanding of the problem and a way to alleviate the issue, it can seem nearly impossible to ever be in the black again. With some forethought and planning, however, getting out of debt truly is truly achievable with a great deal of persistence and patience.

Living Below Your Means - Can It Be Done?

We often hear about people living above their means, but did you know one of the quickest ways to get ahead financially is to seek to live below your means each month? This means spending less than you make with each paycheck. By saving the extra money, you will have a nice savings account, and over time, a substantial nest egg that can sustain you for years to come.

Spending less than you earn is really the only way to get ahead with money. During an economic time when it seems like it is nearly impossible to only spend what you make each month, how do you actually live below your means?

Save Money on Food

It might seem like food is one area you cannot cut back on when you spend money. In fact, this one area you can save you a tremendous amount of money each month if you are wise with how you spend your money on food. There are a number of things you can do to cut back when it comes to food but it is not a one size fits all approach. What works for one person may not work for another. The goal is to find a way you can can accomplish cutting back on food costs that you can stick with.

A few areas you can look at trimming your food budget are:

Buy Generic. Many times the store brands are the same quality as the name brand and they can save a tremendous amount a money.

Avoid Prepared Food. Buying food, such as frozen dinners and other store bought food that is already prepared can be a needless waste of money. They are overpriced and less healthy. Sticking to a simple meal, such as meat, salad, and bread is nearly as easy and substantially cheaper than their inferior overpriced counterpart.

Don't Eat Out Often. Many people eat out multiple times per week. While completely cutting the restaurant experience may be unreasonable. significantly cutting back can make a big difference in saving money.

Keep Your Car

While there certainly is truth to the fact that cars dramatically lose value over time, keeping a car for a long period of time can greatly lead to excellent financial health. When you are without a car payment, living below your means becomes much easier. Instead of finding a new car and creating a new car payment, save the money you would have put toward a car. This is a great way to regularly use less money than you earn each month.

Make Hard Cuts in Your Budget

There are certainly some areas of your budget that are easier than others to make cuts. Cut out the easy things but also take a hard look at things that may not be so easy. Are there areas of your budget that are more of a want than a need? Are you willing to give it up in order to accomplish your financial goals? A hard look at your budget today with tough cuts will pay great dividends tomorrow.

Limit Credit Card Spending

Credit cards almost make money seem like a fantasy. There is nothing physical that permanently leaves your presence. Using cash and greatly limiting your credit card use does two things: it reminds you of just how much you are spending each week and it forces you to live at a level that is congruent to your income. Ultimately, the goal would be to surpass the amount of your income versus your spending.

Clarify Your Purpose

Anyone who sees the value of living below your means has a reason behind it. Whether you are saving up for a big purchase or just pursuing a comfortable retirement, reminding yourself regularly of why you are doing it can be a very powerful motivator to help you accomplish your goals.

There are a number of ways you can save money to live below your means. Get creative in how your strive to decrease your spending each month so you have money to put away to save towards your future goals. When you spend less than your bring in each month, you are well on your way to great financial health.

The Steps to Building an Emergency Fund

Building an emergency fund is one of the most important things you can do for your finances. It can literally mean the difference between complete financial devastation and being prepared with a workable plan to build a sustainable bridge for your household budget.

Financial experts often tell consumers to have an emergency fund but few tell you exactly how to create and maintain one. However, next to getting out of debt, nothing is more valuable for your financial future. Here a few steps you need to consider as you look to build an emergency fund for your household.

Start Small

Building an emergency fund can seem like an insurmountable mountain to climb. It is doable, however, even on an extremely small budget. The key is to start small. If you are only able to put aside $10 a week, do it. In fact, that $10 will build up to $520 in a year’s time. What looked like measly pocket change can turn into a big chunk of change in a short time.

The goal early on in this process is not as much the amount, as it is to just start the process and develop the habit. As you make other cuts in other areas or raises roll in from work, you can increase this amount later. At this point, sit down and figure out what you can reasonably afford each week at this point in time.

Automatic Deduction

Let’s face it: even the most self-disciplined person in the world would be tempted by unused cash sitting in their bank account. That’s why it’s important for the amount you determine, big or small, that goes towards your emergency fund be taken out each week without question. Do it before you pay your bills or go grocery shopping. Even better, set up a payroll deduction that automatically goes into a savings account for your emergency fund. You will not miss the money, but it will be waiting for you when you need it.

Reduce Expenses and Save the Extras

Do a thorough examination of your budget. Chances are, if you look very hard at each place you spend money each week, you will find one or several places you can eliminate or greatly reduce your expenses. Don’t just let that money slip into a budget black hole. Take the extra money and apply it to your emergency fund.

Pay Your Debt…Even After It Is Paid Off

Getting out of debt is an important part of good financial health. While putting a small amount towards an emergency fund is still important, you should focus most of your financial effort on getting out of debt. When your focus is there, it will be reduced much more quickly.

When the debt is finally is paid off, don’t stop! If you were spending $300 a month towards debt, transfer that same amount to your emergency fund once your debt is completely paid off. It is all too easy to funnel that money into another expense once the debt is gone. Resist that temptation and focus your efforts on your emergency fund until you get it at a level you wish.

Set a Lofty, Achievable Goal

You will get as many suggestions of what an ideal amount for an emergency fund should be as people you ask. But the general rule of thumb for your long term goal for the fund should be at least 3 months worth of your income. Even better would be 6 months or 12 months of your income. However, in the beginning a small goal is best. Once all of your debts are paid off, a loftier goal is in order.

Setting up an emergency fund can be done even on the smallest of incomes and budgets. With a little dedication, even in the midst of debt, an emergency fund can be set up and easily maintained. By setting small goals and gradually increasing them, an emergency fund is achievable.

Biggest Budget Blunders: Keeping the Pulse on Your Financial Goals

Setting up a budget can be a bit of a complicated process when you don’t follow the correct steps. Last time we talked about the proper steps to set up a budget that works best for you and your household. Now, we will examine a few pitfalls you want to avoid. By eliminating these common budget blunders, your budget will give you the financial boost you need.

Not Practicing Your Budget Faithfully

While this principle might seem obvious, it is also one that is sure to sabotage your budget. A few dollars here and a few dollars there which are not budgeted for add up to a great deal of money over time. This is money you should have a designated spot for in your budget that you are neglecting. This will spell trouble in the long term for your budgeting goals. Make a plan for each and every dollar that enters and leaves your home and follow it religiously.

Not Putting Money Aside for Emergencies

It might seem impossible to have income each month that does nothing but sit in the bank, but it is an integral part of any personal budget. If you don’t have it, you are just one job loss or illness away from complete financial ruin.

Most financial experts agree you should attempt to save between three and six months’ worth of living expenses in a savings account to which you have immediate access. For the self-employed or those who work in a high turnover industry, you emergency fund should be closer to a year’s worth of expenses.

Buying on Impulse Instead of Checking the Pulse of Your Budget

Impulse buying is one sure way to destroy any progress you’ve made on your financial goals. Yet, this type of buying can be difficult to cut out until you figure out what impulse buying is and what buying purely based on need is. Instead, make a rule that you will only buy things that are on your list before you enter a store. Or, you will only purchase an item online after you have given yourself 24 hours to think about it and examine your budget .

While impulse buying might seem to only apply to the larger items in your life, the same principle applies to small items like buying a coffee every morning before work or a shopping spree at your favorite mall after a bad day at work. The simple way to stop impulse buying is to never buy anything that is not budgeted for.

Cut Out All Fun Things

If your budget does not allow for anything “fun,” it will almost certainly fail. Why? No one can adhere to something that does not allow for entertainment and fun. That’s why it’s important, both financially and mentally, to have some space in your budget focused purely on your enjoyment. Even if the amount is small, it will go a long way to help maintain your budget.

Pay Only the Minimum on Credit Cards

While completely paying off your credit cards may not be a reality for years to come, gradually paying down your debt is a goal you can achieve each and every month. That will not happen, however, if you only pay the minimum payments on your credit cards. In fact, making only the minimum monthly payments will cost you thousands in interest fees that could otherwise be applied toward savings or something else your family wants or needs.

Budgets are a valuable tool to help you reach your financial goal. There are, however, several obstacles that can completely derail your budget if you are not careful. Be mindful of your budget in all of your purchases and you will be well on your way to budgeting success.

6 Steps to Creating a Budget

The word “budget” is often met with resistance and avoidance. However, a budget can be the single best tool to make the most impact on reducing your spending and stretching your dollar further than you thought possible. With a budget in place, your money has a purpose and gives you boundaries when it comes to your spending.

There are several steps to follow when building a budget that works for you and your family.

Step One: Gather All Financial Statements for X-ray Analysis

The more financial information you have on your past spending history, the better. This includes bank statements, investment accounts, utility bills, credit card statements, and any other information that helps you get a clear picture of how much you spend each month.

Step Two: Examine All Income Sources

Closely examine all of your forms of income over the previous year expected to be recurring and record those. Be sure to include extra income other than just your regular paycheck. This would include interest payments and any other outside income. If you have a year’s worth of these records, you are able to get a full picture of your annual income. Divide this amount by twelve for your average monthly income.

Step Three: Prescribe a List of Monthly Expenses

Create a list of all the expenses you anticipate each month. These would include items like mortgage payments, car payments, auto insurance, groceries, utilities, retirement savings, and anything else you spend money on regularly. For assistance and a clear idea of what you spend each month, refer to the financial statements gathered in step one.

Step Four: Extract Expenses into Two Categories: Fixed and Variable

Your fixed costs are expenses that stay relatively the same from month to month. These would include house payments, car payments, utilities, and anything else that is a recurring regular expense. These expenses are essential and are not an optional expense.

Variable expenses are things that change from month to month. These can be things like food, gas, eating out, entertainment, and gift giving. Some of these items are optional (like entertainment) and others are not (like food). These are the items will allow you to make adjustments in your budget.

Step Five: Diagnose Monthly Expenses: Income or Monthly Expenses

Figuring out exactly how much you are earning each month, as well as how much you are spending will give you a clear picture of your financial situation. If you are spending more each month than your income, drastic cuts in nonessential areas are in order for a successful budget.

If, however, your monthly income is greater than your expenditures, you are off to a great start. You will then determine which area of your budget is the biggest priority, such as credit card debt, retirement savings, or a building up an emergency fund. This is where you will funnel your excess money each month. The ultimate goal in this exercise is to make your income and expenses equal each month.

Step Six: Give Your Budget a Regular Checkup

A budget is a process and not an ending point. As your life changes, so will your expenses and income. It is important to review your budget regularly to make sure the income/expenditure areas are still equal. If one area of your budget seems to exceed your allotted amount, make an adjustment. This means allowing more money in one area while taking money out of another area. Particularly with a new budget, even a monthly review is crucial to build a successful budget.

Creating a budget does not have to be a difficult process. With a thorough examination of your financial situation, both what you are bringing in each month, as well as spending, you can set up a budget that works for you and your family.

FHA Loans: What They Are and What’s Changing

If you are purchasing your first home or considering a refinancing of your current home mortgage, an FHA loan may be the best type of home loan for you. It offers some unique features that other home loans do not. There are, however, a few changes coming that should be noted by those who are considering this type of loan.

What is an FHA Loan?

An FHA loan is a home loan that is insured by the U.S. Federal Housing Administration. The goal of this loan is to help potential homeowners who are purchasing a home for the first time or another set of unique circumstances, such as a lower income.
FHA loans are not just for those purchasing a new home, however. They can also be used for certain repairs on your home. In fact, the cost of acquisition and the cost of repairs can all be compiled into one FHA loan.

Eligibility requirements

FHA loans are one of the easiest types of home mortgage loan for which to qualify. The FHA guidelines for loan qualifications are extremely flexible. There are a few basic FHA loan qualification guidelines that you need to keep in mind if you are considering applying for one of these types of loans.

• Two years of consistent employment
• Last two years of income should be the same or rising.
• If you’ve had a bankruptcy, it should be at least 2 years old and with excellent credit since filing
• Foreclosure should be at least 3 years old with perfect credit since filing
• Your new mortgage payment should be approximately 30% of your gross income and your total debt ratio should not exceed 45% of your gross income

How Does an FHA Loan Work?

An FHA loan guarantees a payment to the lenders if the borrower defaults on the loan. To provide the funds for this type of loan, the FHA charges the borrower a fee. Home buyers who use FHA loans pay an upfront mortgage insurance premium (MIP). In addition, the borrower also pays a regular monthly mortgage insurance fee with each payment.

Advantages of FHA Loans

• In a purchase transaction, most closing costs, prepaids & escrow fees included in the loan can be paid by the seller
• Certain borrowers who do not qualify for a conventional loan will qualify for an FHA loan
• Available for refinance of fixed and adjustable-rate mortgages
• Easier to use gifts for down payment and closing costs

Coming Changes in FHA Loans

Although FHA loans will still be an excellent option for many home buyers, the federal government is making some changes to this unique loan. Here are a few things you can expect to see that differ from previous FHA loans:

• Many lenders have increased their minimum credit score of 620, now requiring a minimum 640 credit score. FHA has lower credit score limits but lenders have implemented stricter guidelines
• Upfront Mortgage Insurance Premiums (MIPs) will decrease from 2.25% to 1%
• Monthly Mortgage Insurance Premiums (MIPs) will increase from a .55% factor to .9% factor depending on down payment and loan program

The new FHA loan rules will decrease closing costs but may increase your monthly payment. This amount may be about $30 to $50 extra a month. The decreasing upfront premiums may offset some of the increased monthly payment amounts, however.

A FHA loan is a perfect solution for many home buyers, particularly first time home buyers. They offer much more lenient rules for home loans than traditional home loans. There are a few changes that the federal government is making that should be noted. Only time will tell the impact of these rule changes. Most likely, this type of loan will still be an excellent choice for the consumer.

Debt Do’s and Don’ts

With the economic woes of recent days, it’s nearly impossible for many consumers to live completely debt free. There are, however, different types of debt. Some will benefit you in the long term, while others will do nothing but harm you for years to come.

The average U.S. household with at least one credit card carries nearly a $10,700 balance, according to CardWeb.com. This leaves the question of whether debt is a good or bad. The answer is it depends.

Good Debt

There are times when a debt can actually be a good thing. Good debt improves your life in the long run. While bad debts can improve your life only for a short time, good debt can actually improve it for years to come.

Example of good debt:

* Your home. The key to a home being a good debt is that it is a home you can actually afford. In many cases this simply isn’t the case. When you can afford the monthly mortgage payments, taxes, insurance, and other fees that go along with owning a home, an affordable home is a good investment.

* Education. The value of a college education cannot be stressed enough. This investment will pay for itself tenfold. Accruing debt to get an education is worth it. This investment will pay for itself over time and, if you manage your money properly, will permit you to pay back the debt rather quickly.

* Rental or investment real estate. Real estate has always been a sound investment and probably always will be. If you wisely purchase real estate and charge more in rent than your payments are, your investment will paid back quickly and you will then reap a profit.

* A car. Some mistakenly believe since a car depreciates quickly in value that it’s not a sound investment. This simply is not true. Cars are essential in our society today and can be a wise investment, provided you purchase a car you can easily afford. Owning a car allows for you to get a job, go to school, and do other things that permit you to make more money than the car’s lost value.

Bad Debt

While there are some debts that are not a bad idea, there is a type of debt that can leave you strapped for cash and financially devastated in the long term. These types of debt leave you little or no return of your investment in the future. In simple terms, a bad debt is anything you consume or loses value over time.

Some examples of bad debt include:

* Vacation. While a vacation is certainly nice for refreshment, it does nothing for you in the coming years. It is not wise to go into debt for something that is really more of a luxury than a necessity. Vacations, particularly costly ones, are appropriate for those who can afford to pay for them immediately.

* Food. Eating is a vital component of life, however, it is not wise to accrue debt for. The simple reason is that food is immediately consumed and offers nothing for you or your money in the future.

*Toys. Items used for play are not just for kids! Anything purchased for sheer amusement is not a wise purchase to go into debt for. These items offer no long term value and can cause problems in the long run. This includes items like TV’s and video games. Not only do these items not accumulate value, they also frequently lead to even more entertainment purchases. For example, a new video game player requires video games.

Debt is a common phenomenon in society today. In fact, in many cases it’s inevitable. There are some things that offer a long term investment and return on your money that make them a much better debt option. Items that lose value and don’t offer any potential return on your money simply are debts that should be avoided.

Rising Mortgage Rates: Is Now the Time to Buy Your Next Home?

If the last couple of weeks are any prediction, the housing market could be on the verge of making some dramatic changes. With all of the news of the shifting prices of stocks and bonds, it’s hard to know exactly how this affects the housing market and you. However, there are a few things to take note of so you are prepared for what might possibly lie ahead, particularly if you are in the market for a new home.

What’s Happening in the Markets and How Does it Affect Me?

In recent months, the bond market has been strong, which led to record low mortgage rates. Recently, however, money started shifting more in the direction of the stock market. This is due, at least in part, to financial reports that were better than expected. These reports include the jobs report for the month of August, as well as a report on consumer confidence.

This is great news, right? It depends on where you choose to invest your money today. Good financial reports often lead investors to move their money out of the more secure bonds and put it in the less predictable stock market to take advantage of any possible gains. This shift leads to a lower demand for bonds and a subsequent decrease in price.

Are Home Mortgage Rates Going Up?

What do bond prices have to do with home mortgage rates? When bond prices go down, home mortgage loan rates go up. Improvements like this to the overall economy greatly impact home loan rates. They begin to increase in anticipation of increased consumer spending. Consequently, when home loans start to increase, they usually do so dramatically. The falling prices of bonds and rising prices of stock could mean a rebound in the housing market and an end to the low rates we have enjoyed for the last several months.

How Can I Determine How Much House Payment I Can Afford?

When you buy a new home the amount of the monthly payment is certainly one of the most important factors to consider. Experts say you should allocate no more than 30% of your gross income towards a house payment.

Interest rates are the riskiest aspect of home affordability today. Home loan rates are the lowest they have ever been but will not stay low forever. Some believe home loan rates are lower than they should be. What this means for the home buyer is you can purchase more home than you may recognize. Do the proper amount of research to see just how much of a home loan you may qualify for before the rates go up and you miss out on some great home deals.

Is There a Simple Formula to Help Me Know How Much I Qualify For?

The only way to know for sure how much of a home loan you can receive is to consult a lending institution or a mortgage broker. Once you are qualified, you can watch the interest rates and adjust your amount accordingly.

For every 1% increase in home loan rates reduces your buying power by 10% in your home price. Simply, this means that if you qualify for a home priced at $200,000 today and home loan rates go up by just 1%, the loan amount you are eligible to receive drops to $180,000 to keep the same payment amount.

The housing market is an exciting place to be today. But, it’s important to understand exactly how much home you can afford so you don’t buy more or less house than you need. While interest rates are at an all time low, there are predictions it won’t stay that way for long.

Avoid a Debt Settlement Scam

Frauds and scams are increasing at an alarming rate in the financial sector today. When your finances are in disrepair, it’s easier to fall victim to scams that target people who want to restore your debt to a manageable level.


There are several firms to help you settle your debts. However, in some cases, these companies turn out to be frauds. As a result, it is crucial that you make an educated decision to make sure the company you choose provides you with ethical services. Many companies advertise themselves, claiming to be non-profit; but do not get mislead by that tag, as it can be deceiving, as well.

How Debt Settlement Companies Work

Debt settlement is a process where you negotiate with your creditors to pay off (or settle) all of your credit card bills at a reduced amount, often at a savings of 40 to 60% from your original balance.

The settlement company will generally require you to sign a limited power of attorney, so they can negotiate the debts on your behalf. You will then need to set aside money to build up a settlement fund. Once you have saved enough money to make a reasonable settlement offer, the debt negotiator will negotiate with the creditor for a reduced payoff amount. This amount is typically between 25% and 50% of the outstanding balance.

Once the creditor agrees to the settlement amount, you make payment until the account is paid off. You then continue putting money into the settlement fund to accrue enough money for negotiating the next settlement. Basically, the process is a cycle of saving up and setting aside money, negotiating a settlement and paying the settlement until all of your accounts and settled and paid off.

Steps to Avoid a Debt Settlement Scam

Debt settlement scams are commonplace today. Here are a few tips to make sure the company you choose is a legitimate company to help you settle your debts.

• Ask for references. Check references on any potential debt settlement company. By talking with previous clients, you can help determine if the company is legitimate or not and if they have your best interests at heart.

• Read all the fine print. Often, the details will contain the questionable elements of a debt settlement scam. Read everything to make sure you fully understand the program before you sign anything.


• Ask lots of questions. In an effort to fully understand how the company works, ask a lot of questions. If a company does not want to reveal all of the answers, it is best to stay away from that particular company.


• Check with the Better Business Bureau. The BBB strives to keep consumers safe from fraudulent business practices. Check with them to make sure you go with a legitimate debt settlement business.


• Remember the old saying: “If it’s too good to be true, it probably is.” This ancient piece of advice holds true throughout the generations. Remember a company is always seeking a profit. That’s the point of business, isn’t it? If someone tries to convey a practice that does not benefit them in some way, they are likely trying to trick you. It’s best to stick with companies that appear legitimate.


Debt Settlement Scam Example

To fully understand how complex and deceiving a debt settlement scam can be, here is an example of a common scam in action:

A company claims that they can make your debt go away overnight. They then ask you to pay high fees, perhaps $3000 to $5000, or higher, depending on the size of your debt. This fee is for their "services" and after you pay them, they will do nothing but offer you advice to “not to pay your bills.” They claim this is the right way to go. They always have convincing explanations about the federal law and they appear to know everything about legal matters. They are, however, deceiving you.

The end result of this scam is your debts will continue to accrue until the creditors sue you and you have no option but to hire an attorney to defend you. You will have a legal battle with your creditors while the company who promised you to clean-up your debts has disappeared with your $3000 to $5000 fee.

To avoid a debt settlement scam, the first step is to completely understand what a debt settlement is and how it works. Then, it is wise to make sure that you stick with a company you have researched and find to be a legitimate means to settle your financial situation.

Understanding Deflation

The term “inflation” is something that we commonly hear in the news. We often hear of the woes it creates. But did you know that there is something that is actually worse than inflation? “Deflation” is not something we frequently hear about but it is something we should all be concerned with, particularly if we are in the market for a new house.

What is Deflation?

Deflation is a decrease in the general price level of goods and services over time. In fact, deflation is the opposite of inflation. When the inflation rate is negative, the economy is experiencing a deflationary period. Deflation often has the side effect of increasing unemployment and other economic woes in an economy, since the process often leads to a lower level of demand in the economy.

What Causes Deflation?

While the concept of deflation can seem rather complicated, when broken down, deflation occurs as a direct result of one or more of the following four factors:

• The supply of money goes down
• The supply of other goods goes up
• Demand for money goes up
• Demand for other goods goes down

Deflation usually occurs when the supply of goods rises faster than the supply of money. This is consistent with these four factors mentioned above. These factors clarify why the price of some goods increase over time while others decline.

Deflation is a result of complex economic forces. Ultimately, deflation is a result of the reduction in the supply of money or credit. It is can also be caused by direct contractions in spending, either in the form of a reduction in government spending, personal spending, or investment spending.

Why Deflation is Worse Than Inflation

Since deflation is partly triggered by prices decreasing due to a lack of demand, it might initially seem like a good thing. However, when the price of everything falls it can harm everybody and the economy as a whole.

Falling prices means lower revenue and profit margins for companies. This leads to layoffs, less hiring, stagnant wages, and outright pay cuts. The consumers with lower incomes have less money to spend. This starts a vicious cycle of: sales being down and cutting prices to get more business. Once this occurs, everybody realizes that prices are falling and nobody wants to buy something today if it will be cheaper tomorrow. As a result, they stop spending even more. Thus, a vicious cycle becomes even worse.

Inflation, in moderation, is a natural part of a healthy economy. It can actually ease the burden of debt over time because the real value of fixed debt goes down. Deflation wreaks havoc with this normal economic cycle and causes even more problems. It’s almost as if the cycle of supply and demand goes in reverse.

The complexity of dangers deflation presents run deep. One risk comes from a rush to keep interest rates low to increase consumer spending. Initially this might seem like a foolproof method to curb deflation. However, this creates even more problems.

One such problem is called “hyperinflation.” The danger of hyperinflation lies in a dramatic increase in the velocity of money due to a loss of confidence. In this case, money increases in value so rapidly that the currency actually loses its value. This problem would usher in new and even possibly worse problems than the deflation that triggered it.

What Deflation Does to Mortgages

Deflation can have a negative impact on your mortgage. It can actually increase the burden of your mortgage debt over time. In the normal life span of a mortgage, inflation will progressively reduce the real value of your mortgage interest payments. High inflation thus makes a mortgage more attractive. Over time, it increases the disposable income of mortgage owners.

However, with deflation, your mortgage payment becomes a larger percentage of your disposable income. Debt becomes an increasing burden, reducing spending and economic growth.

Economic problems can vary greatly and create more complex problems over time. Deflation, the opposite of inflation, creates an economic condition that devalues money over time. It can be a tricky event to reverse as other problems like hyperinflation threaten to have a strong backlash that creates even worse problems.

These economic conditions can all have a direct impact on your mortgage. By staying on top of current economic trends, you will be in a much position to understand how the current economy is directly impacting you and your mortgage.

Top 4 Questions You Should Ask Yourself if You are Considering a Divorce

* I am not a lawyer or an attorney - just in full disclosure. Before you listen to or take action on purely my opinion, please consult your own legal council. This SHOULD NOT BE used as legal advice. So, with that being said, please enjoy the article below.....

Divorce can be a devastating event. No matter who is touched by divorce, the toll can be overwhelming both emotionally and physically. The financial aspects can be devastating, as well, if you do not make sure you have things in order before the event occurs.

There are four questions you should ask yourself before and during a divorce to create as favorable of a financial situation as possible when the dust settles.

What Do We Do with the House?

The home mortgage can be a complicated matter when the family residing in the home experiences a divorce. Since finances and living arrangements will change as a result of the divorce, there are three options a couple has to split up this valuable asset.
Split the equity. The easiest way to split the equity in a home is to sell it and split the proceeds. This is a common option with many divorcing couples, particularly when another option cannot be agreed upon. When the mortgage principal is too high, selling the home is usually the best option.

One spouse buys out the other spouse’s equity. One way to accomplish a buyout is to refinance the home. During closing the selling spouse receives their share of the equity of the home. At this time, the selling spouse can remove their name off the home. It should also be noted that there are several different costs associated with refinancing. These should be taken in consideration when negotiating a divorce settlement.

Maintain the status quo. This option does not sell or refinance the home. One spouse simply moves out of the home and waits until a future date when the home is sold. This is advisable when there are children involved. This is a good option if the children are older, such as in high school. When the children move out, the house can be sold and the equity split at that time.

What are the Laws on Divorce, Child Custody, and Property/Debt Division Laws in Your State?

There are many factors involved in a divorce. Rarely is the actual divorce the only legal matter the separating couple will need to deal with during the divorce process. In most cases there are either children or debt involved. In many cases, there are both.

Each state deals with these matters differently. If you are considering a divorce, make sure you fully understand the laws on the matters that have a direct impact on your divorce (child custody and/or property/debt division) so there are no unexpected surprises at the end.

Two good sources to determine what the laws are in your state are DivorceNet and DivorceSource.

Nebraska is an "equitable distribution" state. This does not mean that property is necessarily divided equally, but rather what is fair in each circumstance. In addition, child support is determined by parental income.

What are My Assets and Debts?

One of the more complicated aspects of a divorce is the division of both the assets and the joint debt. It can difficult to know exactly how much you have of each without a thorough examination of each item.

Make a list of all of assets in the marriage. While including large things like the house and cars are relatively easy, you must not overlook some of the seemingly smaller items that can add up. Don’t forget less than obvious things like the contents of a safety deposit box or collector’s memorabilia. These items may add very real value to your overall worth.

Being knowledgeable of exactly what type of debt you and your soon-to-be ex spouse is extremely important. Examining items like your mortgage, credit card debt, car loans, and related information helps create a level playing field for both parties. Nothing would be worse than discovering you are totally responsible for a debt you forgot to disclose during divorce proceedings.

Do I Need a Lawyer?

While many may argue that a divorce lawyer is not a necessity in every divorce, it is hard to deny the benefit they bring during a difficult time. Selecting the lawyer that is right for you is not as difficult as it might sound.

First, select a qualified and experienced divorce lawyer. Also take into consideration what the lawyer will charge. In the end, these fees will only increase the cost of the overall divorce process.

A divorce lawyer is skilled in the laws as it relates to the laws that govern the process and is necessary for that reason. However, they are not vital for ironing out the fine details of the divorce. When issues like custody or unique financial matters are involved in a divorce, mediators often make the process smoother and much cheaper than your divorce lawyer would.

There are a number of rather complicated questions that should be asked and eventually answered if you are considering a divorce. By thoroughly examining all the issues early in the process, you can potentially save everyone involved with your divorce a great deal of frustration during your proceedings and well into the future.

Benefits of Using a Local Lender for Your Home Loan Needs

If you are looking to purchase a new home or refinancing your current home loan, finding a mortgage banker that has your needs as their top priority can be a daunting task. Large mortgage companies with slick ads can be tempting. However, local lenders frequently offer a personalized service based on your specific needs that the larger lending institutions simply cannot offer.

Unique Needs – Unique Perspective

All lenders are not created equal. Your local lender brings a common sense approach to lending that the larger lending institutions don’t offer. A mortgage loan officer that works and lives within your community knows your unique circumstances and bases their recommendations on that.

Since you are dealing with a “real person,” rather than a large institution when you approach your local lender about a possible real estate investment, their customized approach to underwriting gives you exactly what you need for making a well-informed decision.

When looking to underwrite a conventional, FHA, or VA loan, a local lender is able to help you examine all factors pertaining to your loan, such as the appraised value, credit scores, debt ratios, assets, among other important loan related factors.

Different Loan Parameters

Local lenders are allowed to use their own “common sense” underwriting guidelines and are not restricted by the government regulated Fannie Mae and Freddie Mac institutions. This opens up more options and competitive rates that large lenders simply cannot compete with in the current “Square Peg Square Hole” lending environment.. In the new housing economy, this is where a local lender makes all the difference. Competitive interest rates and in-house underwriting are more important than ever.

“Hands On” Involvement

The active participation of the local mortgage banker allows them to be intricately involved in each aspect of your lending experience. Make sure your local lender prepares their own closing documents and funds their own loans. The fact that they fund their own loans allows them to secure the most competitive interest rate possible.

They also offer superior customer service that cannot be matched by a large, faceless firm. Phone calls can quickly be returned, as well as email answered quickly, by the local lender. In addition, they aren’t confined by local business hours. If you have a question after business hours, you can get in contact with a real person who is as flexible as you need them to be.

Customized Approach

Local mortgage lenders give each customer a customized approach. What may be right for one customer may not be right for the other. A local mortgage banker recognizes this fact and presents information according to the customer’s needs, not based on what is best for the larger institution.

Once you decide you are ready to buy, who wants to get bogged down in lengthy paper work and other corporate red tape? Keeping your entire real estate investment with a local firm offers timely processing of your loan. From application to closing time, the time investment is typically 3 weeks or less.

Consider using a local lender on your next home loan, the largest liability and asset you have, is a wise choice. A local mortgage banker will provide you with the best service to help you meet your long term financial goals.

How to Take a Luxury Vacation on a Budget

With the current crunch of the economy, taking a luxury vacation might seem impossible. But, this is just not true! No matter what your financial constraints are, there are a few things that you can do to create a vacation that your family will not soon forget.

A “luxury vacation” is really more about what it means to you than each detail of the trip. There are ways you can cut a few corners to give you and your family the vacation they want without an exorbitant price tag. 

Focus on What’s Important

Everyone has their own idea of what true “luxury” is. Determine what part of your vacation is the most important to you and focus your time and money in that area. Ask each family member what their idea of a “perfect vacation” is and make sure you allot a certain amount of money for that particular aspect of your trip.

Just as you focus on particular areas, you should determine what areas are simply not all that important to you and your family. These are the areas that you can easily cut back on or completely eliminate and save a bundle of money.

A few key areas that you can focus on focusing on or eliminating:

- Food. Is gourmet or specially prepared cuisine at the top of your list of great things? If not, focus on low cost meal or renting sleeping quarters with a kitchen to prepare the food yourself.

- Transportation. If you are renting a car, rent a smaller car. You can also call your credit card company and ask if they offer “loss and damage” coverage. If so, you can waive your car rental insurance fees and save $10-$15 a day.

- Hotel. If you plan to just sleep in your hotel, this is an easy area to cut back on since you won’t be using it much. Also, consider renting a home from a local, it is usually cheaper than a hotel.

- Activities. Spend money on the places that really are important and cross the other “non essentials” from your list. Spend time where you know you will make the best memories.

- Travel. Buying discounted plane tickets is a great way to save money but the airline’s ability to bump your flight time also increases with this “deal.” Determine if time or price is more important and make your reservations accordingly.

Start Saving Today

The time to start financing your family’s dream vacation starts long before you ever take it. Make a habit of regularly saving for your family vacation. Work a fixed amount into your monthly budget and continually add to it so there is money available when the time rolls around.

Do not fall into the trap of using credit to finance your trip. While this might seem like an easy fix initially, it becomes difficult to pay it off. Then you quickly watch your “dream vacation” turn into a financial nightmare. Now, you are not only paying for the trip itself, but also related financing fees. Suddenly traveling on a budget flies out the window and you are faced with debt.

Not only is saving today a great idea to avoid the credit trap, you can also make easy changes all year round that creates more money for vacations down the road. For example, if you eat out every day at lunch, take your lunch two days a week and put that lunch money towards your future vacation.


Reconsider the Destination

While vacations like Disney World or a Caribbean cruise are popular family vacations, they also come with a hefty price tag. Their popularity gives them the ability to charge outrageous prices on the simplest of conveniences.

Consider visiting a destination that most people don’t think of when they dream up a great vacation. Visit state websites in the travel section and see what suggestions they offer. These type of hidden vacation gems offer more affordable luxurious options at a dramatically reduced price. While you might not be able to afford the “finer things” on a higher end vacation, those same things may be well within your reach off the beaten path.

Visit During the Off Season

Prices reflect the demand of luxury vacation spots. During times like summer and Christmas vacation, you can expect your ideal vacation spot to be willing and ready to charge you a much higher fee because they know that many will pay it for the convenience of this time slot.

Consider taking a vacation during a non-peak time. Times like Easter or Thanksgiving might give your family a special time to get away without breaking the bank.

Vacations are an important part of life and family traditions. A luxury vacation is not completely out of your reach if you cut a few corners to spend your money and efforts on the things that are truly important and you will create a vacation that you will not soon forget.

4 Ways to Sabotage Your Personal Savings

Has a personal savings account has lost its appeal in an age of credit cards and second mortgages? In a culture where instant gratification is king, setting aside a chunk of money for the future is not the “cool” thing to do. Yet, this one thing alone can determine your financial success or failure health in the future.

If fiscal fitness is not important to you, here are a few rules to follow that are certain to lead to the end of any financial security:

Rule #1: Do Not Have an Emergency Fund

Sadly, most Americans today do not see the importance of a set amount of money in the bank simply waiting for something that may never happen. A sudden illness. A job loss. A flood that leaves your home as nothing but your life preserver.

Sure, you never plan these things. They just happen. They are a little something called “life” and they are just lurking around the corner, threatening to steal your economic freedom.

Here are a few simple guidelines to help you set up an emergency fund:

- Save 3-6 months worth of living expenses. This amount will not only help you in a personal crisis, it also serves as insurance if you unexpectedly lose your job.

- Create up a separate account to isolate this money so that it is not easily used the next time you impulse buy with your debit card.

- Make automatic deposits into your emergency fund so the temptation to “forget” saving each month vanishes.

Rule #2 Nix the Budget

Few things guarantee a poor savings account. A lack of a budget, however, pretty much promises that your saving account will never reach its full potential. The act of using a budget forces you to live within your means and creates an automatic habit of saving monthly.

Tips to creating a budget include:

- Track your monthly expenditures for 6 months. This gives you a clear picture of how much you need to allot to each category in your budget. It also shows you how much surplus you really have that you can put towards your savings.

- Record all sources of income. It’s easy to just think about your weekly pay check your employer gives you, but what about that $20 Grandma gives you when you see her each month? Look over each amount of income you have during the course of a year and figure it into your budget.

- Make a list of monthly expenses. Break them down into fixed, non-negotiable expenses (mortgage, car payment, etc) and variable expenses (occasional doctor visits, car repair, etc) and set your monthly budget up to reflect these expenses.

Rule #3: Ignore the Habits of the Wealthy

Studying the habits of the well to do actually can teach you a thing or two about how to get where they are. One common denominator that many of the wealthy have is a stash of cash in a bank account. In reality, it does not matter how much you earn that makes you wealthy, it’s how much you have in your bank account.
If you spend untold amounts on disposable items such as fancy dinners and clothes that have no lasting value, you are not truly “rich.” If you spend time setting aside money for things like investing in real estate or stocks, wealth takes on a whole new dimension.

Here are a few common traits of the wealthy:

- They invest or build a business. This grows their money exponentially.

- Being innovative is the name of the game of for the elite. They are always looking for a way to increase what they already have.

- They give back. The rich recognize the concept of the more you give, the more you receive. Of course this is difficult if you do not have anything to give!

Rule #4: Don’t Let Your Money Work for You

The fact of the matter is having money sitting a savings account can actually make you more money. But, how is that possible? The most obvious answer is interest. If you find a good savings account with a stellar interest rate, your money will actually work for you. You do absolutely nothing while your money works away multiplying itself.

Some other ways to make your money work for you:

- Invest in things like stocks and bonds with considerable research beforehand and watch your money multiply.

- Take a leap into real estate by investing property. If done right, this investment can take a small amount of money and turn it into an insane amount more in a short time.

- Research money market accounts and CD and maximize your interest rate.

Maybe a secure financial future is not bad of an idea, right? There are a few simple pitfalls to avoid and be among the economically secure rather than the fiscally devastated. A little help from someone who knows how to help you stay as fiscally healthy as possible is not a bad idea either. Contact me at terry@terrywilliams.com if you have any questions.

Refinancing - No, Low and Full Closing Costs

Tough economic times deeply affect all market areas, one of which is real estate. Luckily, I, the “Mortgage Doctor,” am here to work with you while you regain control of your finances, especially when it comes to your home.

Most people may feel lost when it comes to finding functional and affordable solutions to their home ownership, but I am here to offer direction and guidance in an effort to get you the best deal when it comes to closing costs.

With interest rates at historic lows, many homeowners are considering refinancing. One question that seems to come up often is, should I pay closing costs or not? Here is a list of options to consider when looking at refinancing. Each option has its benefits, so there's no one size fits all answer.

1. No Closing Cost Refinance

Like the title says, it means you the borrower do not pay closing costs. The next question is who is paying them? Indirectly you are. By taking an interest rate slightly higher than the market rate, the broker can use the "Premium" in the interest rate to pay all your costs. For the purposes of this example, let's take a look at how this “no cost refinance” works.

For this example only, let’s use 4.875% as lowest rate 30 Year Fixed Rate Loan available today and 5.125% as lowest 30 Year Fixed Rate Loan offered with no closing costs and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me the broker, to pay all your closing costs of approximately $2,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

2. Low Closing Cost

This is a combination of the “No Closing Cost” & “Full Closing Cost” options. By taking an interest rate slightly higher than the market rate, the lender or broker can use the "Premium" in the interest rate to pay a “portion” of your closing costs.

For this example only, lets use 4.875% as lowest 30 Year Fixed Rate Loan available today and 5.0% 30 Year Fixed Rate offered with low closing costs of $1,000 and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me the lender, to pay a “portion” of your closing costs of approximately $1,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

3. Full Closing Costs

Like the title says, it means you the borrower pay closing costs of approximately $2,400. For this example only, let’s use 4.875% as lowest 30 Year Fixed Rate loan available today and you the borrower will pay the $2,400 in closing costs.

Now look at the monthly payments:

$400,000 Loan Amount * payments exclude taxes and insurance

30 year fixed rate loan program (same criteria works for 15 & 20 year fixed rate programs)

4.875% = $2,117 monthly P&I

5.0% = $2,147 monthly P&I

5.125% = $2,178 monthly P&I

Compare: 4.875% v 5.125% (No Closing Costs)

monthly savings: - $2,117 – 2,178 = $61 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $2,400/$61 = 39.3 months or 3.28 years to break even. That means after 3.28 years, the lower rate and paying the closing cost would have paid off.

Compare 4.875% v 5.0% (Low Closing Costs)

Monthly savings: $2,117 – $2,147 = $30 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $1,400/$30 = 46.7 months or or 3.88 years to break even. That means after 3.88 years, the lower rate and paying a “portion” of the closing cost would have paid off.

Another factor to take into consideration is the loan to value ratio of the new loan to your home's value. If for example, adding closing costs to your loan puts you into a higher loan to value bracket, you may opt to go with the lower closing cost or no cost option. Or if you have to pay private mortgage insurance by adding in closings cost, you may opt to go with the low or no closing cost option.

After all is said and done, you don’t want to walk away from a closing and regret your decision, or fear that it will negatively impact your pocketbook in the long run. Therefore, precautions and future planning must be executed to ensure you receive the best deal possible.

Not everyone grasps the “closing costs” concept very well, and there are lots of other elements of your home financing that can add up quickly, but I am here to help. If you have any questions about your home or are looking to purchase in the near future, contact me at 402.301.4500 or email me anytime at terry@terrywilliams.com.

How to Raise Your Credit Score

Register to be entered to win one of three amazing College World Series ticket packages. Fill out form in box to the right. Your email address,  first name and last name are required fields. 

Once you learn how to improve your credit score, you will begin down a road that will give you a lifetime of opportunities to create wealth and build a healthy nest for you and your family. In our FREE TELESEMINAR, we’ll show you how to save up to $1200 a month by taking the steps to learn how to build credit.

Do you feel trapped? Are you just scraping by, living paycheck to paycheck?

You aren’t alone. About 80 percent of the population is getting more and more into debt each month, feeling captive because they do not know how to build credit so they can start creating wealth. Some of them do not understand the rules of credit and wealth creation. Others have an artificially low credit score due to errors or a history of derogatory items. Still others need to learn the bankruptcy facts so that they can establish credit repair after bankruptcy. And others need help with their “credit card score,” a tool I created to help people leverage their credit cards to improve their credit score.

One way or another, if you learn how to improve your credit score, you:

- Master the rules of how to build credit
- Discover how to apply these rules, and finally
- Create wealth and peace of mind

Once you learn how to improve your credit score, you can:

- Save money each month
- Afford to send your children to college
- Pay your bills without feeling financially strapped
- See your savings grow each money as your debt is wiped away
- Stop worrying about whether you will survive as you wait for your next paycheck to arrive

Perhaps more importantly, if you learn how to improve your credit score, you can stop the creditors from charging you higher interest rates!

Creditors, banks, and lenders across the country charge consumers higher rates based on the convoluted credit system, taking advantage of their artificially lowered credit score to increase fees and interest charges.

If you have a history of making late payments, creditors might not tell you how to improve your credit score. But they will gladly sit by and watch you struggle to pay high interest rates

SIGN UP FOR OUR FREE TELESEMINAR and learn how to improve your credit score and start saving hundreds of dollars each month!

Let’s Get or Keep Your Credit Score High!

You know, I’ve always had one question: How do credit bureaus figure out credit ratings and how are those scores affected by late mortgage payments, foreclosure, etc.?

I’ll bet you had the same question as well! Part of the reason the question arose was because the bureaus seemed so secretive about the process.

Well, as it turns out, another part of the reason was because it’s difficult for Fair Isaac and other credit reporting agencies to explain the rating process because they have to consider so many variables!

That is, the ratings all depend on factors like:

• Length of credit history
• Payment history
• Number of credit card accounts open
• Number of negative reports on credit card accounts, etc.

Generally speaking, negatives in any of the above areas will drop your credit score to one degree or another, depending on your history! However, it’s when your mortgage payments start getting past the 90-day due mark, that your score really falls.

The reason for the drop is that the bureaus know people are much less likely to pay their overdue mortgage obligations after the three month period! That’s when it’s possible to be heading into foreclosure and bankruptcy territory.

The, result, as you can see in the list below, is a big drop in a credit score:

• 30 days late: 40 - 110 points*
• 90 days late: 70 - 135 points
• Foreclosure, short sale or deed-in-lieu: 85 - 160

• Bankruptcy: 130 - 240

*Source: Fair Isaac

Now, how much your credit score drops depends on your particular situation.

For example, if you have a long, solid credit history with no really serious blemishes on it, then you’ll probably take a smaller hit because lenders see you as, overall, a reliable borrower.

However, if you have a short credit history with a few blemishes, then you’ll take a bigger hit since they see you as a bigger risk.

Conversely, those individuals who have very high credit scores have more to lose than borrowers with low scores.

For example, one black mark on the record of a person with an 800 score has a greater impact than that of an individual with a score in the 500 area. In other words, high-credit-score individuals have farther to fall than low-credit-score borrowers.

So, here’s my question: how much credit do you have and how well do you manage it?

If you’re a person with credit challenges, then I can help you improve that score with proven methods. And I’ll be able to do that through a highly effective credit-education program called 720score.com that I’ll be bringing to the Omaha market very soon!

Hey, if you’d like to talk about methods of improving your credit score or on any topic related to real estate, call me today at 402.301.4500 or contact me at terry@terrywilliams.com.

Get Your Mortgage Approved!

Of course, I’m all about mortgages – I’ve been doing them for a long time – and I absolutely know the things that can hinder you from getting the home mortgage you deserve!

So, below, I’ve listed 8 “Do not” rules that are a result of the tightening of guidelines in the market. Follow these rules, and you’ll get that mortgage (or get one refinanced) when you expect to! Here we go…

“Do Not” Rule 1:

Don’t go out and buy big-ticket items (cars, boats, etc.) that will affect your credit score. Lenders frown on too much debt since it makes you look like a greater credit risk in their eyes.

“Do Not” Rule 2:

Don’t quit your job or change to a new industry or become self-employed. Again, this says “big credit risk,” to lenders because it won’t look like you have job stability in your life.

So, for example, if you switch from, say, being a nurse to outside sales, you can bet an underwriter will frown on it.

“Do Not” Rule 3:

Don’t switch from a salaried job to a commissioned job. Again, for lenders, this is an issue of risk.

By nature, commissioned jobs are less reliable in producing income than salaried positions. Lenders will want to a minimum two-year history of success in a commissioned position.

“Do Not” Rule 4:

Don’t transfer large amounts of money between bank accounts. This can raise suspicions as to where the money originated.

If you have to do transfers, have a complete history of how they were transacted; that is, deposit slips…canceled checks…wire transfers… and two months’ documented history of how the money came to be in the account.

“Do Not” Rule 5:
Don’t forget to pay your bills! This may sound like an obvious rule, but people often forget or are late in making payments due to various factors in their lives. Lenders don’t like a history of non-payments or late payments.
And, even if you have a dispute with a company’s bill, I recommend you pay it and then resolve the problem after the fact so no history of non-payment shows up on your credit report.

“Do Not” Rule 6:
Definitely, definitely, don’t open new credit cards! This action will likely drop your credit score because it means you’re adding more debt – something that lenders really frown on in terms of granting mortgages.

“Do Not” Rule 7:
When you get a gift from a relative, document the deposit and don’t co-mingle that gift with other funds. If a parent or other relative wants to contribute gift money for a down payment, then you must be prepared to show where that money is coming from.

You must include the provision of investment account or bank statements. And gifts above $13,000 are taxable, according to Internal Revenue Service rules for 2010.

“Do Not” Rule 8:
Don’t make random, untrackable deposits that could be seller-induced expenses. So, be sure to document every deposit you make!

So, there you have it – eight “Do Not” rules to follow when applying for a mortgage. Of course, I can’t guarantee that you’ll get a mortgage; however, I can guarantee that the whole process will be made a whole lot easier and smoother than if you didn’t follow the rules!

If you want to learn more about today’s mortgage process (and I know you do), give me a call today at 402-301-4500 or contact me at terry@terrywilliams.com

P.S. It’s April 15th – get those taxes filed now!!!!!!

3 Great Things to Do with Your Tax Refund!

I’ve got three financially-sound ideas for making the most of your tax refund!

First, I wanted to let you know about an item related to the home mortgage market. FHA upfront mortgage insurance premiums are rising from 1.75% to 2.25%.

That means, for example if you’re buying a $100,000 home, you’ll be paying an extra $500. You have until April 5 to get the contract submitted, so get cracking!

Now about that tax refund and the three financially- sound strategies for using it! Hopefully, you’ll get that average $2,800 refund or even higher!

First, if the recession has depleted your savings, then it’s time to use that tax refund money to rebuild your emergency fund! Remember, you should always have enough money in savings to pay all your bills for six months in the event of an emergency, layoffs, etc.

Now, this is money you may need to get at quickly, so you don't want to take any risks with it. Therefore, you want to stay with highly-stable investments. This includes insured savings accounts, short-term CDs, or high-quality money market funds.

Second, high-interest credit card debt sucks the life out of your financial well-being, so you want to make paying that debt off a very high priority.

Let me make this point clear. Remember that average $2,800 refund I mentioned above? Well, for the sake of an example, let’s assume you have that same amount on a credit card.

And you’re paying 16% interest on a yearly basis. The card requires a minimum payment of 4% of the balance. If you make that minimum payment, do you know how long it will take you to pay off the debt? 105 months!

But if you applied your $2,800 tax refund to the account, it would eliminate the balance right away and save you $1,297 in interest. You could then invest that money to…make more money!

The best way to eliminate high-interest credit card balances is to take your lowest debt and pay it off. Then, take the savings from paying off that debt and apply it to the next smallest debt…and so forth. Psychologically, this is easier to do, and it makes the whole process less painful.

Now, here’s the third thing you can do with your tax refund – invest it! You need to look to the future as well as the past in order to create financial security for you and your family.

The wisest strategy is to create a mix of investments (“diversified portfolio”) so you spread risk around. This usually includes stocks, bonds, or mutual funds. And, if you don’t have a diversified investment portfolio yet, then it’s time to begin one with your tax refund!

In other words, use a wise investing method to plan for the future and build your net worth! Use money to make money! Remember, if you don’t measure and track your income, how can you be successful?

I hope you enjoyed – and will implement – these three methods of using your tax refund wisely.

If you’d like to talk more on this topic or on any topic related to real estate, call me today at 402.301.4500 or contact me at terry@terrywilliams.com.

Tax Credits and Refinancing Options

I want to help you out in two ways with this message – with the home tax credit and refinancing options. But, the only way to do that is by diagnosing the conditions first.

Tax Credit Program – The Deadline’s Drawing Near!

As I’m sure you’re aware, the government has a wonderful program whereby new home buyers can get an $8,000 tax credit and qualified current owners can get a $6,500 tax credit when they purchase another home.Well, if you want to take advantage of this program (and who wouldn’t?), it’s time to “get your rear in gear!”

That’s because you have to have a contract signed by April 30 and close by June 30! So, stop messing around! Get out there and find a house and a realtor!

Is Refinancing Right for You?

Recently, because interest rates are at historic low, I’ve had many people asking, “Terry, is refinancing a good option for me?” Well, I’m like a doctor in some ways. That is, a doctor can’t make a diagnosis without knowing your current and past health record.In the same way, I can’t make a diagnosis without knowing your current and past financial situation. Everybody’s different!

Topics to address in order to make a proper recommendation :

1.Your credit status
2.The amount of the loan
3.Your overall financial position

4.Current interest rate
5.Private mortgage insurance

(Is it an FHA – can we do a streamline, etc.)

All I need is 10 minutes of your time to make the right “diagnosis” for your situation. And, depending on that situation, there can be several options.For example, if I can lower your rate or your term, it may be beneficial for you to incur closing costs.

Or, on the other hand, if the loan amount is the right size, it may be beneficial to do a low-cost or no-cost refinance. That’s right – you can do a low-cost or no-cost refinance if the situation is right. I do them all the time!

What I’m saying is that there’s no “one size fits all” answer! You have to come in so I can give you a proper recommendation.Whatever your mortgage situation, you still need to follow the Four Laws of Debt Free Prosperity I’ve described before:

Law 1: Track your expenditures.
Law 2: Set new target goals.
Law 3: Trim your budget/live within your means.
Law 4: Train yourself to live within your means.

So, what are you waiting for? Because mortgage guidelines are stricter than ever, it’s important for you to come in to see me right now so we can get you the tax credit or refinancing you need!

Call me today at (402) 301-4500 - Dr. Mortgage is ready to diagnose and treat your tax and refinancing problems.