Why Payoff Your Mortgage

Fairfax, Virginia: Homeowners have been arguing this point since the invention of mortgages many years ago. Should a homeowner payoff their mortgage faster in order to save interest? Or should the homeowner invest that money into 401-K and other retirement vehicles to accumulate more money for retirement? The true answer lies in what is the right choice for your financial situation. Below I have tried to present both sides of the equation equally. Please let me know what you think. Once you are finished with the article check out some great information on my other site:

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There are several advantages to paying off your mortgage early.

Freedom- Not much more needs to be said about this. The freedom from monthly mortgage payments can be huge both psychologically and emotionally. What would it feel like to not have a mortgage payment each month?  If you paid off the mortgage and eliminated your other consumer debt, you could live debt-free. Well maybe – no mortgage would allow for more consumer spending, which could mean more bad debt. But it could leave additional money for basic necessities such as: food, heat, electric, gas (car and home). Not having a mortgage would certainly cut your monthly expenses.

Safety: Once you’ve paid off your mortgage debt, you own your home. Taxes and insurance must still be maintained even after the mortgage is paid-off. Believe it or not, homeowners actually lose their home for not paying their property taxes on homes owned free and clear of any mortgage. Your home is always a liability as long as it costs you money each month. Never forget that. Here is a nice article from AARP writer Jonathan Pond.

Reduced Stress: No monthly mortgage obligation would certainly be nice! You wouldn’t have to worry as much about losing your job, for instance.

Liquidity: Less spent on paying down the mortgage allows more money for other investments. But no mortgage allows for more money to be allocated for other investments also. But the real question has to do with the opportunity cost of money. Where is the biggest bang or investment opportunity for your money and will it grow faster now or later.  You could invest your monthly payment in a financial product, or build up a large rainy day / emergency fund.  Cash is still king and it is very liquid.

Why Have A Mortgage

Taxes: Interest and taxes are deductible up to your income tax bracket. Not having a mortgage means that you can’t deduct your interest payments off your federal income taxes.  But that alone is not enough of a reason to keep a mortgage. Here is one recent NY Times article on why it might not be a great idea to pay off your mortgage.

Investing: This nice article by Ric Edelman on having a mortgage where he puts forth that it makes better financial sense to pay your mortgage payments regularly, and invest the extra money instead. Theoretically, you make more in the long-term with this method; after all, average returns on stocks over the past 60 years are in the 9-10% range. But the recent fall in the stock market make it hard to stomach investing sometimes.

Liquidity: Yes – this again.  It works both ways. Todd Ballenger at Kendall Todd also says that keeping your money in liquid form (ie: stocks, bonds, etc.) might be a better option until you are ready for retirement.  If you pour all your money into your house, then the question is can you access your money again? If yes, how easy is it to get to? How fast do you need the money? With the drop in home values across the country and in Fairfax, Virginia your equity (money) might not be their or you might not qualify for the mortgage program. Staying liquid means that you can access your money quickly when you need it.

Fairfax, Virginia: Do you realize that your biggest expense every month is TAXES?  If you don’t believe me, just look at your paycheck and see how much you earned versus how much you are actually bringing home!  As you strive to save more money, eliminate debt, and build a successful financial future, minimizing your tax expenses each year can make a huge difference in your financial success. 

The Internal Revenue Code is more than 67,000 pages!  Once you determine the proper forms you must complete, it can take hours to complete them properly.  Mistakes can be costly, leading to you paying more taxes than you should, or underpaying which can lead to penalties and interest. 

Fairfax, Virginia taxpayers who do their own taxes often refrain from claiming deductions, exemptions and credits they are entitled to out of fear of making a mistake or not understanding. The result: They pay far more in taxes than they actually owe. And tax-preparation software is of debatable help. If you skip or misunderstand a question, the software will produce the wrong forms or complete them incorrectly.  (*According to the Treasury Department, 56% of all the returns prepared in 2007 by volunteer tax preparers contained mistakes!)

It’s much better to have a certified public accountant (CPA), enrolled agent (EA) or tax attorney prepare your return for you. With narrow exceptions, these are the only people who can represent you in matters pertaining to the IRS. 

As a tremendous insurance policy, if your CPA, EA or attorney makes a mistake that causes you to owe additional tax, you’ll pay only the tax. They will pay any interest or penalties owed. (It’s unreasonable to ask preparers to pay the tax itself; that’s always the taxpayer’s responsibility.)

Ric Edelman, author and top financial planner says, “If you are concerned about the costs of using a professional tax preparer, think of if from a different perspective. According to the latest statistics released by the IRS, the typical married couple in 2005 with an adjusted gross income between $75,000 and $100,000 per year paid $7,300 in federal income taxes. That’s an effective tax rate of approximately 8.4%.”  If the CPA, EA or tax attorney’s fee is $600, that’s just 0.7% of their income. Considering all the time and aggravation saved, plus interest and penalties resulting from errors you might make, this relatively small fee can be well worth it.

By the way, the fee you pay your tax preparer is tax-deductible. If you don’t already have one and need a referral, contact us at jeff@lendingsolutions.net or 571-482-8301.

Fairfax, Virginia – Bankruptcy is an uncomfortable subject for a variety of reasons. I have been talking with clients since the economy and housing crisis began over two years ago about bankruptcy. But because I am in the mortgage business and filing for bankruptcy affects one’s ability to get a mortgage I get tons of calls.  The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy in Fairfax, Virginia becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy in Fairfax, Virginia, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit in Fairfax, Virginia:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

When we think of Valentine’s Day, we usually think of flowers, a box of chocolates and a romantic dinner with the one we love.  Those are very nice ways to show the special people in our lives just how much we love them.

But I want to share with you a way that you can show your love, perhaps one you’ve never thought of.  But before I do, let me share a couple of stories I have heard over the years from clients and other professionals.

“About a year ago, I received a call from a very dear friend of mine.  Her husband of 20+ years had suddenly and unexpectedly passed away.  I dropped everything to be at her side and help her through the agonizing weeks to follow.  Her husband loved her very dearly; there was no doubt about that.  But he had not taken the time to change the beneficiary of his life insurance policy from his ex-wife to the love of his life.   He always meant to, they had even discussed it many times.  But he just never got around to it.”

“Just two days before this past Christmas, I received a call from a loved one that his fiancé had passed unexpectedly in her sleep at the age of 56.  I flew out Christmas Day to be with him during his time of sorrow.  I stayed with him for about a week.  Our time together was spent crying and offering comfort in any way I could.  Together, we accepted the task of trying to find her will and other important paperwork.  But to no avail.  My loved one and his fiancé had co-mingled their finances but now those monies are inaccessible until the will and other important paperwork are found.  It’s been over a month now and nothing has been found.”

You may ask “What does this have to do with Valentine’s Day?”  I’m glad you asked.  I would like to share with you what my wife and I have done to show our love for each other and our families long after we are gone.

We have created what we call “Life Box”.  We took a couple of hours one Saturday morning and went to Staples and bought a small plastic box with lid that holds hanging file folders.  Together, we assembled the contents of the box with all the information one of us would need….leaving nothing to memory or chance.

This time together was very special to both of us. The hardest part of this was actually setting the appointment with the estate attorney. Very few people like to talk about death and taxes. But when done in a way to protect and provide for the future, it can have a lasting affect. But if it does, a lasting sign of our love will be found in “Life Box”.   

I would like to encourage each of you, my friends, my family and my clients, to take a couple of hours and put your “Life Box” together. 

Life Box Contents

• Copy of Will(s) with a note as to where the original can be found.  It is a good idea to provide a copy to the executor of your Will.  
• Provisions for Children:  be sure they are clearly identified.  It is especially helpful for a guardian to leave a note regarding younger children and any special needs or desires they may have.  Keep school info up to date, name, phone and location of doctors, etc. 
• Copy of Life Insurance Policies with a note as to where the originals can be found 
• Copy of Beneficiary page from Life Insurance Policies 
• List of all Banks with account numbers, location, phone number and name of personal contact at the bank.  (Note:  if you are only an account signer, you will not be authorized to sign after the account owner has passed.  Check into a “Payable on Death’ form at your bank. 
• List of Investment Accounts, name and phone number of personal contact 
• Copy of Beneficiary Page for Investment Accounts 
• Location of Safe Deposit Box and the location of the key (many states will lock you out of the safe deposit box once they are aware of the death.  In this situation, they generally will accompany you to the box and only allow the Will to be taken out of the box.  Ask your bank how this is handled and make appropriate plans.) 
• Copy of Health Directive (if you do not have one, go to your local hospital and obtain a blank one and complete it) 
• Copy of Durable Power Of Attorney (can be obtained at local hospital, please note that all Power of Attorney’s cease upon death) 
• Important papers for pets, vet info 
• A personal note that could eliminate stress about other things, for example:  where is the key to the lawn mower, how the gas and oil is mixed for the weed eater, where is the check book kept,
• Any other important info a loved one would need 
• Military Veterans:  please contact us for additional information you will need

90-Day Seasoning Waiver Expanded

Fairfax, Virginia: This update from FHA Virginia Loans was released on Friday January 15th, 2010, as an excerpt from the CFR (Code of Federal Regulations) without a corresponding Mortgagee Letter and contains information about FHA’s policies regarding the waiver of the 90-day seasoning required for sellers.

Here are the 6 things you need to know about these changes:

1. Waiver takes effect February 1st, 2010 for a period of one year unless extended.
2. Investors are now exempt from the 90-day seasoning rule.
3. All transactions must me arms-length.
4. No identity of interest can exist between buyer and seller.
5. If sale price is 20% or more of the seller’s acquisition cost, the lender must:

            a. provide supporting documentation and/or a second appraisal and
            b. order an inspection of the property and provide it to the buyer.

6.  The waiver is limited to forward mortgages only. 

To read the text of this waiver and specific details: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

This is going to help a lot of home buyers get into a home. The seasoning rule was essentially locking people of bidding for certain homes. The next item that must be addresses is sellers and listing agents from eliminating all government loans (FHA, VA and UDSA loans) from submitting purchase bids.

Fairfax, Virginia

From Dr. Martin Luther King Jr.

In honor of Dr. Martin Luther King, I decided to dedicate this post to the incredible speech he gave on August 28, 1963. The speech gives you the opportunity to see compassion, enthusiasm, and the opportunity to inspire others into action, just as Dr. King did during his short time on earth.  Here is a portion of Dr. King’s speech.

“I Have a Dream” from Dr. Martin Luther King Jr.

I say to you today, my friends, so even though we face the difficulties of today and tomorrow, I still have a dream. It is a dream deeply rooted in the American dream.

I have a dream that one day this nation will rise up and live out the true meaning of its creed: “We hold these truths to be self-evident: that all men are created equal.”

I have a dream that one day on the red hills of Georgia the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood.

I have a dream that one day even the state of Mississippi, a state sweltering with the heat of injustice, sweltering with the heat of oppression, will be transformed into an oasis of freedom and justice.

I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.

I have a dream today.

I have a dream that one day, down in Alabama, with its vicious racists, with its governor having his lips dripping with the words of interposition and nullification; one day right there in Alabama, little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers.
I have a dream today.

I have a dream that one day every valley shall be exalted, every hill and mountain shall be made low, the rough places will be made plain, and the crooked places will be made straight, and the glory of the Lord shall be revealed, and all flesh shall see it together.

This is our hope. This is the faith that I go back to the South with. With this faith we will be able to hew out of the mountain of despair a stone of hope. With this faith we will be able to transform the jangling discords of our nation into a beautiful symphony of brotherhood. With this faith we will be able to work together, to pray together, to struggle together, to go to jail together, to stand up for freedom together, knowing that we will be free one day.

This will be the day when all of God’s children will be able to sing with a new meaning, “My country, ’tis of thee, sweet land of liberty, of thee I sing. Land where my fathers died, land of the pilgrim’s pride, from every mountainside, let freedom ring.”

And if America is to be a great nation this must become true. So let freedom ring from the prodigious hilltops of New Hampshire. Let freedom ring from the mighty mountains of New York. Let freedom ring from the heightening Alleghenies of Pennsylvania!

Let freedom ring from the snowcapped Rockies of Colorado!
Let freedom ring from the curvaceous slopes of California!
But not only that; let freedom ring from Stone Mountain of Georgia!
Let freedom ring from Lookout Mountain of Tennessee!
Let freedom ring from every hill and molehill of Mississippi. From every mountainside, let freedom ring.

And when this happens, when we allow freedom to ring, when we let it ring from every village and every hamlet, from every state and every city, we will be able to speed up that day when all of God’s children, black men and white men, Jews and Gentiles, Protestants and Catholics, will be able to join hands and sing in the words of the old Negro spiritual, “Free at last! free at last! thank God Almighty, we are free at last!”

What a speech—what a speaker!!

I hope you get the chance to watch the You Tube Video of Martin Luther King’s—“I Have a Dream”. Here is the link: http://www.youtube.com/watch?v=PbUtL_0vAJk.

Look at the video closely when Dr. King gets to the part “I have a dream”. The emotion that comes from his heart, not reading any notes shows why on August 28, 1963 the perfect example of how inspiring and uplifting Dr. King was as a speaker and a person.

With over 1,000 changes to FHA programs since 2000, it is important to work with someone that understands how the “new” FHA loan works.  In the last 5 years there have been significant changes made to FHA guidelines designed to make it much easier to originate these loans. but that has not actually been the case. Some changes make it more costly for the consumer. The Upfront MI charge has changed, the streamline progam has been altered and it could cost the consumer more money to refinance. Please call it you have any questions about FHA, VA or conventional loans.

The Senate voted to extend the $8,000 first-time home buyer tax credit. Additionally, the new bill also includes a $6,500 credit for existing homeowners who have been in their current residence for at least five years.

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Summary:

The Refurbished Home Buyer Tax Credit Details

Current

• Existing $8,000 tax credit is through November 30, 2010. (10% of sales price, up to $8,000 credit.)
• Original tax credit has $8K credit had income limits of $75,000 for singles and $150,000 for married couples filing jointly.

New

• Extension of the existing $8,000 tax credit is through May 1, 2010. (10% of sales price, up to $8,000 credit.)
• To claim the credit you must enter into a valid written contract by May 1, 2010. Must close before July 1^st 2010.
• NEW for long-time residents of same principal residence. 10% of sales price, up to $6,500 credit. Basically a credit for current homeowners that have at least 5 consecutive years in the same home. (This is over simplified version)
• Max sales price of $800,000, Applies to primary residences only.

Military

• Armed Forces – deployed on duty outside the United States. Extensions to May 1, 2011 and must settle before July 1. 2011). Deployment must be for at least 90 days between Dec 31, 2008 – May 1, 2010.

Fraud

• As with every gift, there are those that want to take more than their fair share. So the government has added some fraud prevention measures.
• Must be at least 18 years old to apply for the credit
• Properly executed settlement statement used at closing of home must be included with the tax return. Completed Form 5405.