Improve your financial fitness

By Marcie Geffner -

Did you know financial fitness can save your life?

Well, maybe not literally. But being well informed about money can reduce stress and help you live a healthier and happier life. Here are three tips to get you started:

Did you know? The U.S. has one of the lowest personal savings rates among the world’s economically developed countries. In February 2008, people in the U.S. saved only 0.3 percent of their disposable income, on average, according to the U.S. Department of Economic Analysis.

Saving money is crucial to financial well-being. Savings can help you cope with a financial emergency, make a major purchase and even get ready for retirement.

Saving is easier if you start early and make a habit of it. One good practice is to sign up for an automatic savings plan that deducts money from your paycheck or checking account and sets it aside before you have a chance to spend it. Stash your savings in a savings account, certificate of deposit (CD), investment account or retirement account to meet your future needs.

Did you know? Nearly 40 percent of adults have a budget and keep close track of how much they spend on food, housing, entertainment and other categories, according to a survey conducted
for the nonprofit National Foundation for Credit Counseling.

Approximately half of the adults surveyed said they had a good idea of how much they spend or tried to stay within certain limits. Seven percent had no idea and no set limits.

A budget is an important tool to plan and track how much you’re spending and saving each month. To make a budget, start with your monthly income and then allocate specific amounts for each expense. Try to set aside at least 10 percent for savings and no more than 30 percent for housing, 25 percent for living expenses and 15 percent for transportation.

Did you know? Nearly 70 percent of young adults have a credit card and 64 percent worry about their debts at least occasionally, according to a survey conducted for the National Endowment for Financial Education.

Paying credit card bills and other debts on time is essential because a history of on-time payments strengthens your credit score, which measures your creditworthiness. It’s much better to build your credit record slowly and patiently than to take on more credit cards than you can handle or spend more than you can repay.

© 1998 - 2008 LendingTree, LLC. All rights reserved. This story, Improve your financial fitness, is reprinted by the author with written permission of LendingTree.

Real estate should rethink affordable housing

By Marcie Geffner - Inman News

There's no doubt that the current mortgage crisis has caused a lot of pain. Lenders and investors have lost their shirts. Realtors and mortgage brokers have lost their livelihoods. And home buyers, many of them first-timers or minorities, have lost their homes.

But will the lessons of toxic mortgages, blind-eyed regulators, irrational borrowers and inflated appraisals be learned this time? Or will the problems again repeat themselves and will the pain that so many have endured come again to naught?

One absolutely vital lesson that simply must be learned to turn this crisis into new opportunities is that the affordability of housing, whether it is owned or rented, should be a higher public policy priority than the rate of home ownership. That means affordable housing should be part of the solution to the current crisis.

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Property taxes trip up naive homebuyers

By Marcie Geffner -

Longtime homeowners may be willing to accept property taxes as an unavoidable fact of life, but homeownership newbies could be surprised or even shocked to discover just how costly these annual government assessments can be.

Homebuyers need to plan ahead for property taxes, which can easily amount to thousands of dollars each year. Yet it's not always easy to figure out how much to budget for this expense.

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Conforming-jumbo loans still playing hard to get

By Marcie Geffner and Holden Lewis -

Higher loan limits, set by the federal government as part of an economic stimulus package early this year, were supposed to make jumbo loans more affordable in expensive housing markets. Rates finally have come down on these so-called "jumbo conforming" mortgages, though these loans likely will remain hard to get for most borrowers.

Jumbo-conforming loans range in size from $417,000 to nearly $730,000 and are especially important in expensive housing markets. A small condominium or modest first home can cost upward of $500,000 in markets such as Los Angeles, San Francisco, Alexandria, Va., New York and other costly locales.

Depending on the buyer's credit score, the appraised value of the home and the condition of the real estate market in the area, there are three types of jumbo-conforming loans to consider.

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How To Buy Short-Sale Properties

By Marcie Geffner -

Weak housing markets create new golden opportunities for property investors. One classic opportunity is a "short sale," so-called because the owner has agreed to sell the property for less than he or she owes on the first and possibly second mortgages. The seller usually intends to leave the lender "short" on the sale, and that's why the lender's approval is required for such sales to close.

Here are some tips for investors who want to purchase short-sale properties:

Get to know the sellers. A successful short sale typically is predicated on the seller's financial hardship, which is the impetus for the lender's approval of the deal. Savvy buyers look for sellers who are behind on one or more of their mortgage payments and who aren't in a strong enough financial position to catch up the payments they've missed.

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Fed cuts key interest rate

By Marcie Geffner -

As expected, the Federal Reserve has trimmed a key bank interest rate by one-quarter of a percentage point from 2.25 percent to just 2 percent. The Fed has now lowered the federal funds rate 3 percentage points in the last seven months.

In its statement, the Fed noted that turmoil in the financial markets, tougher requirements for new loans and weak housing markets have put pressure on the U.S. economy.

"Tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters," the Fed said.

One of the Fed’s primary objectives is to protect the U.S. economy from inflation. That means the Fed has to find a balance between lower interest rates and higher prices. This week’s statement said the Fed would "continue to monitor inflation developments carefully."

The Fed doesn’t directly control interest rates on home loans, credit cards or other consumer debts. But this week’s rate cut could still be a positive development for many borrowers since the Fed’s actions can indirectly influence the interest rates on some loans.

The Fed’s previous rate cuts were especially welcome for borrowers who were facing resets on adjustable-rate mortgages (ARMs) tied to certain indices. Interest rates on ARMs often are tied to the U.S. Treasury or the London Interbank Offer Rate (Libor) rate, both of which have dropped this year.

As an indirect result of the Fed’s rate cuts, some ARM adjustments and resets have been much smaller and less painful for borrowers than they otherwise would have been. The savings due to smaller ARM rate adjustments could amount to hundreds of dollars a month for some homeowners.

The Fed’s rate cuts also influence the prime rate, which is the rate banks offer their best customers. This means short-term interest rates on home equity lines of credit, ARMs tied to the prime rate, auto loans, and some credit cards may move lower as well.

© 1998 - 2008 LendingTree, LLC. All rights reserved. This story, Fed cuts key interest rate, is reprinted by the author with written permission of LendingTree.

House Offers: How Low Can You Go?

By Marcie Geffner -

Homebuyers are looking for a steal; home sellers are looking for an out, and homebuilders and banks are selling homes at cut-rate prices. Combined, these conditions have triggered a wave of lowball offers to buy homes in distressed U.S. housing markets.

Conventional wisdom claims that lowball offers don't work. Homebuyers are warned not to "insult" sellers, who are counseled not to counter offers from "disrespectful" buyers. Real estate salespeople are stuck in middle, oftentimes unwilling to engage in prolonged negotiations that might not earn commissions.

But conventional wisdom doesn't always hold true. With a severe slowdown in sales, some experts now offer new advice.

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Judges should have say in mortgage modifications

By Marcie Geffner - Inman News

The Mortgage Bankers Association recently fought off federal legislation that would have allowed bankruptcy judges to modify residential mortgages. The MBA's victory was a huge success for lenders, but an unfortunate loss for homeowners who have declared bankruptcy.

Lenders had good reason to dislike the proposal, which would have shifted some of the power over mortgages from lenders' loss-mitigation departments to bankruptcy judges, who might have imposed modifications that the lenders wouldn't have liked.

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