College Grads, Get Ready for Real World Finances

grad

The party’s over, you’ve graduated and it’s time to get ready for your financial future. Don’t wait. Start growing your financial future now. You’ll be glad you did. Here are some steps every graduate should take the first year out of college.

Establish credit.
A great credit score doesn’t just happen. You have to build it. Get in the habit of paying your bills on time every time and spending below your credit limit. When the time comes to finance a car or a house, your credit score can help you get a lower interest rate and save money.

Live with a little less luxury.
Your parents worked hard to finance their home, buy their cars and pay for some of life’s luxuries. You’re not there yet. Spend a little less on going out to dinner, fancy coffee, and expensive movies. Cut the cable cord and find other ways to save some cash. Luxury can come later.

Create a budget.
And stick to it. Determine how far your paycheck can go and find ways to put a little aside for emergencies. The more you earn, the more you can add to your savings. Every time you get a raise or earn a little extra cash, add some to your emergency fund.

Take advantage of employee benefits.
If your company has a retirement plan, take advantage of the tax-free savings option. At the very minimum put in the amount your employer will match. The employee match is part of your benefits and it’s a big one. If you can, contribute 10 percent each pay period. This money adds up quickly. And if your insurance program has a health savings account, add to that, too. This money builds up as savings but also is there for you if you have unforeseen medical expenses.

Set up a ROTH IRA or another savings plan.
If your company does not have a retirement plan, check into a ROTH IRA. You can contribute up to $5,500 a year, and it can serve as a great savings account, as well. Talk to a financial planner about your options.

Pay your student loans on time.
Student loans will come due six months after you graduate. Check out payment programs to see if there are any that can help you pay your loans off efficiently and effectively. Like other bills, do not miss a student loan payment.

Find a side gig.
Need more money, want to pay off bills faster, or want to save more faster? A job waiting on tables, bartending, working at a carwash on weekends, or walking dogs can help. Don’t let your new 9-5 job limit your financial aspirations.

Get a roommate or two.
Life’s expensive. Share living expenses with a roommate or two. Even if you can afford to pay the rent on your own, having a person to share costs with will help you to save for your future. Take the money you are saving in rent and put all or some of it into your savings account.

These are just a few ways to put yourself on the path to financial success after college. Have a goal in mind for what your future looks like. Do you want a house? A new car? To pay off your debts faster? To build your savings? Keep this in mind and you’ll be well on your way to reaching your success. Journey on, graduate!

Spring Clean Your Financial Paperwork

Couple managing the debt

If you’re spring cleaning, you might be ready to go through your entire house and get rid of anything that doesn’t bring you joy. While your financial paperwork likely isn’t something that brings you joy, that doesn’t mean you can toss it into the trash. Learn about what you should be saving, how long you need to keep it, and how you can organize it, so it fits in with your newly tidy house.

Tax Returns: Keep for three years from the date you filed. If you filed a claim for a loss, keep for your return seven years.

Receipts: Keep receipts for itemized deductions on your tax return with your tax records for three years.

Paycheck Stubs: Keep until the end of the year.

Medical Bills: Keep for one year. If you deduct medical expenses on your taxes, keep with the returns for three years.

Utility Bills: Keep for one year. If you claim a home office tax deduction on your taxes, keep with the returns for three years.

Bank Statements: Keep for three years.

Credit Card Statements: Keep until you can confirm the charges and have paid the bill. Keep for three years if you need them for tax deductions.

Paid Off Loans: Keep for seven years.

Active Contracts, Property Records, Insurance Documents, and Stock Certificates: Keep as long as they’re active. Once they’re complete, you can discard.

Marriage License, Birth Certificates, Adoption Papers, Wills, Death Certificates, and Paid Mortgages: Keep forever.

Once you have all your financial papers in order, purchase a few storage boxes to hold everything. Label the outside with what’s in the box so you always know where your important financial documents are located.

Source: Her Money

Q&A about VA Loans

Military Father and Son

VA loans are $0 down payment mortgage options available to veterans, service members and select military spouses. VA loans are issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs (VA).

Since its inception in 1944, more than 22 million VA loans have helped veterans, active duty military personnel and their families purchase homes or refinance mortgages.

How does a VA loan compare to a traditional/conventional home mortgage? Read on.

What is the down payment?

  • VA loans: 0% down.
  • Conventional loans: Up to 20% down.

Do I have to pay mortgage insurance?

  • VA loans: VA loans do have a form of mortgage insurance, the VA Funding Fee. It is usually 3.3% and financed into the loan up front. If the borrower separated from the military with a qualifying disability, the funding fee is waived to 0%.
  • Conventional loans: If buyers do put down less than a 20% down payment, they must pay for private mortgage insurance.

Are the interest rates for VA loans competitive?

  • VA loans: The VA backing gives lenders a greater degree of safety, which means the interest rates can be more competitive than non-VA loans.
  • Conventional loans: Without government backing, banks take on more risk with conventional loans, which can result in less-competitive interest rates.

How easy is it to qualify for a VA loan?

  • VA loans: Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA loans, making them easier to obtain.
  • Conventional loans: Conventional loans require stricter qualification procedures that can put homeownership out of reach for some homebuyers.

Can I do a cash out refinance? 

  • VA loans: Borrowers can do a cash out refinance up to 100% of their home’s value.
  • Conventional loans: Borrowers with conventional loans must leave some equity in their home when doing a cash out refinance.

What else should I know about VA loans? 

  • VA eligibility is re-usable. A lot of people think they are only eligible for a VA loan one  time, but they are able to get VA loans more than one time.
  • You can have more than one VA loan at a time. It’s a myth that you can only have one at a time.
  • VA loans are assumable.

 You or someone you know may be the perfect fit for a VA loan. Contact a loan officer today to learn more about VA loans and other types of home loans that may be a good fit for you.

Do you want more information about VA loans or grants? Find it here or call us today.  

 

Mend Your Credit by Rehabilitating a Defaulted Student Loan

Student loan

If you’ve defaulted on your student loans, you’re not alone. According to CNBC, more than 1 million people default on their student loans each year, and approximately 22% of student loan borrowers default at some time. But joining the crowd won’t help your credit or open opportunities for you in the future.

Here are some ways you can work to repair a federal student loan that you have defaulted on. For more details visit the Federal Student Aid Office’s website. If you have defaulted on a private student loan, you will need to contact your loan holder for information.

Repay the Loan in Full
The most obvious way to get your loan out of default is to pay it in full, but for most borrowers, that is not an option.

Loan Rehabilitation
To start the loan rehabilitation process, you must contact your loan holder. If you’re not sure who your loan holder is, log in to “My Federal Student Aid” to get your loan holder’s contact information.

To rehabilitate a William D. Ford Federal Direct Loan (Direct Loan) Program and Federal Family Education Loan (FFEL) Program loan, you must

  • agree in writing to make nine voluntary, reasonable, and affordable monthly payments (as determined by your loan holder) within 20 days of the due date,
  • and make all nine payments during a period of 10 consecutive months.

Your loan holder will determine a reasonable monthly payment amount that is equal to 15 percent of your annual discretionary income, divided by 12. You must provide documentation of your income to your loan holder in order to determine the amount you will pay.

If you can’t afford the initial monthly payment amount, you can ask your loan holder to calculate an alternative monthly payment based on the amount of your monthly income that remains after reasonable amounts for your monthly expenses have been subtracted. Depending on your individual circumstances, this alternative payment amount may be lower than the payment amount you were initially offered.

To rehabilitate your loan, you must choose one of the two payment amounts. Once you have made the required nine payments, your loans will no longer be in default.

To rehabilitate a defaulted Federal Perkins Loan, you must make a full monthly payment each month, within 20 days of the due date, for nine consecutive months. Your required monthly payment amount is determined by your loan holder. Find out where to go for information about your Perkins Loan.

Benefits of Loan Rehabilitation
When your loan is rehabilitated, the default status will be removed from your loan, and collection of payments through wage garnishment or Treasury offset will stop. You’ll regain eligibility for benefits that were available on the loan before you defaulted, such as deferment, forbearance, a choice of repayment plans, and loan forgiveness, and you’ll be eligible to receive federal student aid.

Also, the record of default on the rehabilitated loan will be removed from your credit history. However, your credit history will still show late payments that were reported by your loan holder before the loan went into default.

If you rehabilitate a defaulted loan and then default on that loan again, you can’t rehabilitate it a second time. Rehabilitation is a one-time opportunity.

Loan Consolidation
Consolidating your loan into one Direct Consolidation Loan allows you to pay off one or more federal student loans with a new consolidation loan.

To consolidate a defaulted federal student loan into a new Direct Consolidation Loan, you must either

• agree to repay the new Direct Consolidation Loan under an income-driven repayment plan, or
• make three consecutive, voluntary, on-time, full monthly payments on the defaulted loan before you consolidate it.

If you choose to make three payments on the defaulted loan before you consolidate it, the required payment amount will be determined by your loan holder but cannot be more than what is reasonable and affordable based on your total financial circumstances.

There are special considerations if you want to reconsolidate an existing Direct Consolidation Loan or Federal (FFEL) Consolidation Loan that is in default.

Getting Help with Your Defaulted Loan
If you need help with your defaulted loan, you will need to contact the holder of your defaulted loan. Find out who holds your loan by logging in to “My Federal Student Aid.

Buying a Home this Spring? Make Sure You Get the Details Right.

Front Door Flowers

Spring marks the beginning of the selling season and is often considered the busiest and best time to purchase a home. As more people look to purchase a home in the coming months, it’s important to understand the buying process. Here are some tips from DORA (Department of Regulatory Agencies) and the Division of Real Estate.

Talk to your lender early in the process. Meet with your lender before contacting a real estate agent to simplify the home buying process. Getting prequalified for a mortgage gives you a solid price range for homes to consider.

Determine your working relationship with your broker. Many homebuyers don’t know that Colorado has two options when it comes to your relationship with your broker – a Single Agency broker (an agent for the buyer OR seller) or a Transaction Broker (for the buyer or seller OR both). A single agency broker will advocate for and work solely on a single client’s behalf. A transaction broker facilitates the sale by fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction without being an agent or advocate for any of the parties.

Understand the real estate contract. An offer for the purchase of real estate must be in writing to be valid. The Colorado Real Estate Commission requires every real estate broker licensee use a contract form approved by the Real Estate Commission, unless the contract is drawn by either the seller or buyer or the attorney for the buyer or seller.

Recognize contingencies in the contract. The contract approved by the Real Estate Commission allows for the buyer and their licensed broker to make the contract contingent on certain items. Contingencies can be items such as the property appraising for the purchase price, approval of financing, a satisfactory home inspection, or the sale of their current residence. It is critical for a buyer to include those contingency items in the contract to eliminate misunderstandings about what circumstances will allow for a successful execution of the transaction.

Meet all deadlines and put down your earnest money. Once your offer has been accepted by the seller, you will put down a good faith deposit, often called earnest money. Both the buyer and seller will need to meet specific deadlines before you close on your home. As a buyer, if you miss a deadline, you might not be able to cancel or withdraw your offer unless you are willing to forfeit your earnest money. Your offer allows you to make decisions regarding when to close on your new property, when you can take possession of that property, and what remedies are available if the contract dates are not met.

This is a lot of information. If you’re ready to get started on the homebuying process, contact us to start with step one and get you pre-qualified today.

Protect Your Nest Egg from Quick Cash Offers

Visiting grandparents bend and kneel to hug grandchildren

The Division of Real Estate recently issued this consumer advisory – “Take 5 to get wise and learn how to protect your real estate nest egg.”

Colorado residents owning a home for 20 years or more are being targeted for the equity in their property. An offer may include a cash transaction, a quick sale, no inspection, and the freedom to leave your problems behind.

In Colorado’s hot real estate market, a lot of homeowners might not know the market value of their property, which is what unscrupulous investors want. They are trying to drive down your property value with misleading and confusing information. Their goal is to make a profit by turning around and selling your property at true market value.
This can happen to anyone because people who perpetrate fraud are good at what they do – separating you from your money.

Protect your nest egg when considering an offer on your property:

  • Go to www.dora.colorado.gov/dre to research licensed professionals.
  • Go to your local county government website and look up property values for you and your neighbors.

Other tips to protect your nest egg when considering an offer include:

  • Be wary if you weren’t thinking about selling.
  • Always keep someone you trust in the loop.
  • Do research on real estate brokers working in your neighborhood.
  • Always seek legal advice.
  • Know the value of your property and understand the motivations of why an investor wants to buy your property.

By taking a few steps you can protect your home, your finances and your future. If you have questions, please contact us.

Is Now the Right Time to Consider a Cash Out Refinance?

Paper with words cash out refinance.

You may have considered moving to a new home but have not found the perfect one for you and your family. Home renovations may make your current home feel like new. Or perhaps you want to pay off credit card debt and better position yourself financially.

Those are two reasons that a cash-out refinance may be a smart financial move for you.

If you have equity in your home, a cash out refinance may be an option for you. This type of refinance would allow you to replace your existing mortgage with a higher loan amount, allowing you to get cash back. You would receive cash for the remaining amount after paying off your existing loan amount.

Here’s how a cash-out refinance works:

  • It pays your current mortgage and allows you to apply for a higher loan amount.
  • A cash out refinance has a limit to the amount of equity that can be received in cash. This is normally between 70% to 80% depending on the loan program.

The pros of a cash-out refinance:

  • A mortgage refinance typically offers a lower interest rate than a home equity line of credit or home equity loan.
  • You can make home renovations with a cash-out refinance, potentially adding value to your home.
  • You can save money in interest and increase your credit score by paying off your debt in full.

A note about private mortgage insurance:

If you have a lot of equity in your home, there’s a good chance you are no longer paying for private mortgage insurance, or PMI. If you borrow more than 80% of your home’s value, you’ll have to pay private mortgage insurance.

A cash-out refinance can make sense. Using the money to fund a home renovation or consolidate debt can rebuild the equity you’re taking out or help you get on a sounder financial footing. As with any mortgage loan questions, we would be happy to discuss this with you further.