Archive for the ‘Mortgages’ Category

True Cost of Homeownership

With “For Sale” signs appearing on lawns in the Boston area this spring, you may decide to take the plunge. In your favor are ultra-low interest rates,  but don’t forget to take a close look at how much it actually costs to live in a house.

Homebuyers are usually aware that they will have to pay property tax and insurance, but those costs are just the beginning of a long list.

Kiplinger.com article, The True cost of Owning a Home,  lists expenses incurred over a 4-year period of homeownership including items you might overlook, such as asphalt driveway sealing, garden tools, leaf blowers, and pest control.

Your actual  list may be longer. Additional expenses such as a security alarm, central air conditioning, chimney maintenance, snow removal, and a sprinkler system are found in the New York Times article, Estimating Expenses Before Buying Your First Home.

Remember to budget for repair and maintenance needs when preparing your home buying plan.

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Secured Borrowing Basics

Financial Literacy at the Library welcomed back Julie Soforenko, Community Outreach Coordinator, American Consumer Credit Counseling for a presentation on Financing Fundamentals: Car loans, Home loans and Equity Lines of Credit.

Cars and homes represent the most expensive purchases most people make.  It is important that one’s money matters be in tip-top shape before seeking financing for them.

Julie covered the pros and cons of buying vs. leasing cars.  Monthly payments are generally lower on leases than car loans, but insurance payments can be higher.  Leases often come with restrictions on mileage and on the degree of wear and tear that is acceptable. At the end of the lease term, the vehicle must be returned to the dealer unless a separate purchase option is negotiated.

When borrowing to purchase a car, it is wise to ask the financing company how your personal information such as your social security number will be protected.  Make sure you know all associated costs before signing any documents and avoid loans with a balloon payment or prepayment penalty.

When considering whether to purchase versus rent your next home, Julie advised looking at the following factors:

  • Is this a short-term or long term housing need?
  • Are you looking at a home as an investment or inheritance for your children?
  • Are your savings substantial enough to cover a 20% down payment plus closing costs?
  • Is your income enough to cover property maintenance/repairs, taxes, insurance and association fees?

Julie recommended Renter’s Insurance for those renting a home and suggested that favorable rates may be obtained by combining the policy with your car insurance.

In addition to commercial institutions, home loans are available through several government agencies such as the VA, FHA, HARP (refinancing only) USDA and First Time Home Buyers  programs.

When shopping for a mortgage, it is best to complete your research within 30 days.  Multiple inquires on your credit history for this purpose will not affect your credit report if concluded in a short time frame.  If however, several inquiries are spread out over many months, it will have a negative impact on your credit report.  Remember for a free credit report, visit annualcreditreport.com.

First Time Home Buyers should educate themselves by enrolling in a home buying fundamentals class.

Homeowners aged 62 and older experiencing cash flow problems may want to consider a Reverse Mortgage.  Rather than making monthly payments to a financial institution, under reverse mortgages the bank pays you.  Due to its unique terms and risks, it is required that borrowers consult with a HUD Certified Housing Counselor to become eligible. Read more about reverse mortgages here.

Do not miss the final installment of the FDIC Money Smart Series, Financial Recovery: How to recover financially and rebuild your credit after a financial setback, to be presented by Julie Soforenko on Wednesday, June 20.

Free Classes at AAA

AAA Southern New England offers free informational sessions on financial topics.  This month’s schedule:

Reverse Mortgage Seminars

  • June 14 at 6-8 p.m. at the Waltham office
  • June 28 at 6-8 p.m. at the Peabody Office

Homebuyer’s Seminar

  • June 15 at 7-9 p.m. at the Newton office

College Financial Aid webinars  are also being offered. Visit aaa.com to register and for more information.

Know Before You Owe

This week’s Color of Money column in the Boston Globe alerted us to the proposed revamping of  mortgage loan disclosure forms.

The current law mandates that lenders provide two documents to mortgage customers:

  1. The Truth in Lending Act Disclosure Statement
  2. Real Estate Settlement Procedures Act (RESPA) Good Faith Estimate

Since the collapse of the mortgage market, these documents are getting a long overdue review. Neither one satisfactorily fulfills its purpose of providing borrowers with a clear, easy to understand description of loan costs and repayment obligations.

The new Consumer Finance Bureau under the initiative, Know Before You Owe,  recommends replacing  the existing documents with a single, two-sided form that clearly states loan terms.

Is the new form an improvement?  The Consumer Finance Bureau is soliciting feedback from citizens.  Take some time to review the exisitng forms, then compare them to the proposed replacement. Let Uncle Sam know which you think  is better by submitting your opinions on the Know Before You Owe page.

Confused by some of the language?  Look up definitions of unfamiliar mortgage banking terms in the Housing and Urban Development (HUD) Glossary.