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February 12, 2019

Why More Millennials With Student Debt Are Qualifying for Mortgages

student debt mortgageIt used to be that graduating students with large amounts of student loan debt were told to forget purchasing a home until after they’d paid down their debt. Still others were told to wait until they’d built up years of work history, delaying the initial purchase of a home for years. Today, however, more and more millennials are finding it possible to qualify for a mortgage while paying off student loan debt. How?

They Have Good Credit

Credit scores range anywhere from 350 to 850, with anything below 600 considered a poor score. Most mortgage lending programs, even those that are federally funded for first-time buyers, look for scores of at least 620. Those with excellent credit, above about 750, will stand an even higher chance of securing a mortgage with student loan debt.

If your credit score may be an issue, follow these steps to move toward improving it:

● Check your score – you can’t fix your score unless you know what it is. Examine your report and notify the credit bureau of any errors immediately.

● Address any delinquencies – it’s important you address delinquencies immediately. If possible, pay the account off entirely.

● Set up auto-pay – setting up auto-pay features for all your debts will ensure each payment is made on time. Building a lengthening history of paying every debt on time each month makes you much more attractive to lenders.

● Avoid applying for new credit that may go unused – applications are typically a ding on your credit, so even if you don’t intend to use the upper limits of a new card, it may hurt your score.

● Don’t close paid accounts – credit cards you’ve paid off can positively affect your credit score. If you are not using all of your available credit, open, empty credit cards can be helpful.

They Have a Lower Debt-to-Income Ratio

Debt-to-income (DTI) ratio is calculated as your monthly debt payments compared to your monthly income. If you are paying off a student loan in addition to credit card debt, you’ll need a relatively high monthly income to offset the amount of debt you’re carrying. Lenders will focus on your debt-to-income ratio to determine if you can afford another debt – your mortgage – in addition to what you’re already carrying. Paying off credit cards or student loans and maximizing your earning potential can help on both fronts.

You can also consider consolidating debt with a personal loan. If you have a great deal of credit card debt, you likely have a variety of higher interest rates. A personal loan is a stable debt rather than revolving debt like a credit card, and reflects positively on your credit history. You’ll likely receive a lower rate in addition to freeing up available credit.

They’ve Secured Employment in Their Field

Lenders will consider your employment history to determine if you have the steady income required to continue to make mortgage payments. If you’ve recently graduated, you may not have the recommended two years of steady employment. However, underwriters will often consider a move from college straight into gainful employment in your chosen field a substitute for part of your employment history.

They’ve Refinanced or Restructured Student Loans

When lenders look at your debt-to-income ratio, student loans are among the debts they’ll consider. If your payments are unwieldy, consider applying for an income-driven repayment plan through the U.S. Department of Education. These plans consider your income and often provide a lower payment than the typical graduated repayment program. If your income increases, you can increase your repayment to ensure you continue to pay down your loans.

Another solution that can lower your monthly payments is refinancing your student loans. Loans refinanced through banks or other institutions typically carry lower interest rates and lower monthly payments than the original federal loans. As with other loans, you’ll need to consider your creditworthiness, income, and debt-to-income ratio.

They’ve Qualified for Down Payment Assistance

Though the traditional down payment is 20% or more, several programs exist to reduce your down payment in order to speed up the homebuying process for those with student loan and other debt. For example, FHA loans by the Federal Housing Authority offer a much lower percentage – 3.5% for those with credit scores in the 600s and above, and 10% for those in the 500s. HomeReady loans targeted at first-time home buyers offer even lower down payment terms of around 3%.

Find a lender that works with these and other first-time home buyer and down payment assistance programs. Many lenders do not offer zero down payment, but still offer a variety of other loan types that could meet your needs. Obviously, if you have the means to provide a 20% down payment, you’ll lower the principal on your loan, but these assistance programs can put buying your first home within your grasp.

Today’s millennials with student debt are qualifying for mortgages, and chances are, you can too. Overall, pay close attention to your credit score and making your payments on time. Keep your other debt low, and ask your lender about assistance programs that may be available to you. Finally, if you’re in the market for a home, get pre-approved first to see just how much home you can afford. Then, if you find the home of your dreams, you’ll know you can move forward, even while you’re paying off your student loan debt.

Information is provided by Sammamish Mortgage, a Premiere Mortgage Company in Pacific Northwest including WA, ID, OR, CO.

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January 12, 2019

Borrowing money when you’re retired – Knowing your options

retirement money needThere are several retirees who are of the opinion that they won’t be able to obtain a loan just because they don’t get a salary any longer. Although it is true that it can be tougher to qualify for loans during retirement, yet it is not at all impossible. You must have been saving in your retirement accounts like your Roth IRA or 401(k) accounts but something that you should avoid is borrowing from these accounts. This can have an adverse impact on your savings and also on the income that you fall back on during your retirement. There are several kinds of online loans and offline ones which can save you from a financial setback even during retirement. Read on to know more on this.

Borrowing during retirement – How do you qualify?

When you’re self-funded, lenders will typically decide the monthly income utilizing 2 different procedures which are as follows:

  • Asset depletion: In this technique, the lender will subtract the down payment from the entire and sum total of the value of your fiscal assets and then take 70% of the remainder amount and then divide by 360 months.
  • Drawdown of assets: The regular monthly amount that you withdraw from your retirement accounts in the form of income will be taken into account.

Retiree loan borrowing options

Secured loans are still easier to borrow as you can set collateral against the loan but as long as unsecured loans are concerned, they’re tough for a retiree to borrow as there is no collateral to assure timely payment and hence the interest rates will also be pretty high. Here are few loan options combining secured and unsecured.

MORTGAGE LOAN

The most common kind of secured loan is definitely a home loan which carries your home as collateral. However, the income of the retiree is a major setback, more so when most of your income comes from savings or investment earnings.

CASH-OUT REFINANCE LOAN

When you refinance your existing loan with an amount that is more than what you owe and less than the value of your home, this is called cash-out refinance loan. The extra amount that you make is the secured cash loan. This will also extend the time that it take to repay your mortgage loan.

DEBT CONSOLIDATION LOAN

As the name suggests, a debt consolidation loan is only designed to consolidate debt. It is more like refinancing your current debt. This will mean paying off the debt throughout a longer period of time with lower payments. The new interest rate that you pay may be lower than your present rate or may not be.

PAYDAY LOANS

Anyone including retirees can qualify for unsecured short term loans like payday loans. You may check out websites like www.PaydayMe.com to get short term loans during an emergency when you’re sure that money will come in again with which you can repay the existing payday loan on time.

Therefore, when you’re a retiree who is thinking of ways in which you can fund your emergencies, you can take into account the above mentioned options.

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December 18, 2018

Own a Home, Not a Mortgage

time for no mortgageOwning a home is one of the biggest dreams of almost every adult, especially when they have a family. Mortgage arrangements come in handy to make this desire a reality. Nevertheless, homeowners are left with another big question on their minds: What strategies can I employ to pay off my mortgage as quickly as possible? Well, it is natural to want to be free of any debt commitments, and to know that you own your home and that no one has a claim on it. This is because owning a home will allow you to work on other financial goals, like saving for retirement, saving for your children’s education, and so on.

Paying off your mortgage in a shorter period is not too difficult or unachievable, but it calls for slight adjustments in your payment plan, or changing a few things in your mortgage terms. Here are some things you can do:

Increase the frequency of your regular repayments

The normal terms are monthly payments, but you can choose bi-weekly or weekly payments. Such an arrangement will significantly enable you to save on interest and it will set you free from mortgage sooner than if you only do it monthly. The goal is to make more monthly payments each year without realizing it.

Go for the shortest amortization period and the biggest repayment amount you can afford

Opting for a larger monthly payment, which means it will be paid off quicker, will cause you to consider it as a budget item, thereby shaving several years off your mortgage. While still clearing out your mortgage, a good and consistent mortgage repayment history will enhance your credit score, because mortgage is one of the trade lines (credit accounts) that contributes to your score. You can work with experts to boost your credit score to access more credit at better rates. You need not look further than https://www.boostcredit101.com/ to boost your score and find more advice.

Increase your monthly payment amount when possible

If you have had a mortgage for some time, you have most likely set a plan to make uniform payments each month. It is time you consider increasing the amount, if you can manage. Additionally, if you have experienced an increase in your income, be it from a new job, a pay raise, or any other source, it would be prudent to increase your mortgage payment with the increased income.

Pay lump sum amounts

Mortgage arrangements come with some privileges or additional options that the borrower can use to their advantage. For example, any chance to make lump sum payments should be utilized, especially an annual lump sum payment, against the mortgage. Based on the options you choose for your mortgage, you can pay amounts equal to 10%, 15%, or 20% of the initial principal figure of your mortgage at any time for each year of the mortgage term.

Diversify your mortgage

You need to weigh the various options and choose the mortgage arrangement that offers savings and flexibility.

Conclusion

It is such a relief to pay off your mortgage as fast as possible; thus, you need to work out how to save on other things and repay your mortgage in larger, more frequent payments. Also, you should do lump sum payments when possible.

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October 3, 2018

How you can invest in an appropriate term insurance

term insurance coverageYou can get an unexpected happiness or some sudden mishaps in life can lead to never-ending grief and sadness, one can never be sure. In the unfortunate events like the untimely death of an individual who is the bread earner and head of the family, everything seems to be so scattered and hard to manage for the rest of the family. Term insurance is one of the insurance that can be availed for a certain period of time. Term insurance helps the family of the policyholder to meet the various financial needs like education of a family member, household expense and etc in absence of the policyholder. With the assistance of Term Insurance plan, a family of policyholder can maintain their lifestyle and do not need to beg other people in this world of inflation. There are many benefits of term insurance cover. The coverage of term insurance plan also differs from one plan to another, so one need to be aware of his/her various expectations and requirements from the term insurance while buying a term insurance policy.

Term Insurance Policy-

There are different types of term insurance plans like Standard Term Life insurance Plans, Term Return of premium plans, Group term insurance plan, Term insurance plan by number of years, Decreasing and Increasing term Insurance Plans, Convertible Term insurance plans, Single life and joint life term insurance plans, Offline and online term insurance plans in India. One can choose one term insurance plan as per the age, tenure, cover requirements, tenure and premium amount. Various companies offer a wide range of Term insurance policies in the market but, you should read terms and conditions and understand different types of term insurance policy before buying any.

Even to enhance the beauty of term insurance plans, there are various additional riders that can be enjoyed by the customer at a little more premium amount such as Critical Illness Rider, Total and Permanent Disability Benefit Rider, Accidental Death Benefit Rider, Hospital Cash Rider, Waiver of Premium Rider and etc. Riders can play a vital role in protecting our money if choose wisely.

Pointers to look for the best insurer-

There are various factors that one needs to check before getting a term insurance plan and some of the pointers are as follows –

1. Claim Settlement Ratio – This is the most important pointer. The number of claims settled against the total claims received by the insurer. An insurer with the highest claim ratio is more preferred than other. One can find this data in the annual report that is published by IRDAI for each life insurer.

2. Featured products – it is not necessary that all insurers offer all insurance products. One need to keep an eye on the various products featured by the insurer and filter which insurance policy is actually needed.

3. Customer service quality – Valuing a customer is the most important pointer. A number of queries resolved against the total reported complaints/ queries show the mirror to the customer handling status of any insurer.

Objective –

Right from shoes to clothes we want to give our family the best we could afford. Term insurance is the best thing that you can do for your family, as it offers Maximum cover in minimum investment. The main motive of a term insurance is to help an individual’s family to meet their regular expenses and normal lifestyle in their absence during all future needs. Ideal term insurance helps an individual to wave a web to cover all necessity of his/her family. Eventually, it is your responsibility to prepare you and your family to face any unforeseen event. Don’t wait, use an online insurance web aggregator like PolicyX.com, compare quotes on the basis of benefits, premium, cover and choose the right one accordingly.

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October 2, 2018

DIY Investing with Peer to Peer Loans

another loan optionAre you a hands-on investor who enjoys evaluating investment opportunities and finding a diamond in the rough? If so you may want to consider investing in peer to peer lending. As a peer to peer lender you have the opportunity to review individual borrower applications and select the ones that you think are going to repay their loans.

What is Peer to Peer Lending?

For those of you not familiar with peer to peer lending (also know as P2P lending), let’s take a moment for a quick introduction. In the past ten years several websites (known as platforms) like LendingClub and Prosper have sprung up offering personal loans to individuals. This is certainly not unique but what makes them different is that they are not banks or financial institutions in the traditional sense. These websites get funding for the loans they provide from individual investors in amounts as small as $2,500. In a sense, anyone can be a banker with just a small amount of money. The signup process is quick and easy, and as soon as you transfer the funds you can start investing.

How Do You Invest in Peer to Peer Loans?

The process for P2P lending investing is pretty simple. Once you have opened and funded your account you will be able to see all of the loan applications that the platform has approved. These loan applications have been evaluated based on industry standard underwriting techniques and many are rejected. The ones that are approved are rated and the highest rated borrowers get the lowest interest rates.

Lenders review the approved loan applications and decide which loans they would like to invest in based on their comfort level with risk and their desired return. Investment in a loan can be as little as $25 and most experts recommend investing the minimum amount and spreading your portfolio over as many loans as possible in order to minimize risk through diversification. This is where you get to Do-It-Yourself. The platform provides dozens of pieces of information from the loan application and the borrower’s credit history. You get to determine which factors matter, how much to weigh them and what a good borrower profile looks like. To some people this may sound boring and tedious but for many investing junkies this is the fun part. You can look at data like length of employment, debt-to-income ratio, home ownership vs. renting, late payments, outstanding debt, bankruptcies and so much more.

There are a limited number of filters available on the platforms that allow you to quickly find loans that meet certain criteria, then you can review them in the more detail individually. Or, for the really hardcore investment analysis junkies, the information for all available loans can be downloaded to a spreadsheet for study and review. There are approximately 50 to 250 loans available at any given time and there are approximately 80 pieces of information available so, as you can imagine, this can be an enormous amount of data to review. However, with some simple sorting and filtering in your spreadsheet you can pretty easily identify the loans that meet your criteria.

There is also room for intuition and past experience in the analysis process. There may be more loans that meet your criteria than you have funds to invest. Ultimately, you may have to ‘go with your gut’ in order to select the loan or loans that you think are most likely to be paid back.

For those who want passive income or do not feel they are savvy enough to select quality loans there is also an auto invest feature that will choose the loans for you based on your desired risk/return level. But for the investment analysis enthusiast the DIY approach is the way to do. All in all, this can be a fun way to achieve a great return on your investment.

Cody Smith is the founder of PeerLoanAdvisor.com which provides information and advice to peer to peer lending investors.

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