FINANCIAL HEALTH FAQs
Please refer to this page to answer some of the most commonly asked questions about Lake Tahoe Mortgages and North Lake Tahoe Real Estate.
7 Ways to Improve your Financial Health
Do the Financial Markets Affect Mortgage Rates?
How Do My Credit Scores Affect My Rate?
How do I improve my credit scores?
With Today’s Gas And Utility Prices So High, How Can I Save Money At Home And On The Road?
7 Ways to Improve your Financial Health
1) Monitor your Credit Report:
You can now obtain 3 free credit reports a year(one from each credit bureau). This is a great way to prevent against identity theft and will provide the information you need to quickly correct any mistakes you may find. It’s a good idea to space your requests out about every 4 months so you can get a picture of your credit through the entire year. Go to annualcreditreport.com or call toll-free 1-877-322-8228.
2) Create or update your Budget:
This is a good time to review how you’ve spent your money over the last year and hopefully find ways to easily cut spending and increase savings. Start by reviewing checkbooks and statements for the past year to get an idea of where your money is going. Don’t forget the large items that only come around a couple times a year. Then track every dime you spend for the next week to learn where the rest of your money goes.
3) Review Auto & Home Insurance policies: This is an expense you may be able to cut in half! Review your policies with your current providers to see if there is any way to reduce the premiums, whether by lowering unnecessary coverage, increasing deductibles, or putting all of your policies with one company. While you’re at it, consider getting quotes from other insurance providers, and review your ‘declaration page’ to make sure you are comparing ‘apples to apples’.
4) Review your investments: Have an annual review with your financial advisor to make sure your investments are on track to meet your goals. Make sure you are maximizing your monthly 401(k) and IRA contributions. Consider reallocating your investment assets based on your long-term goals and increasing your regular contributions. Also be sure to review and update your beneficiary designations.
5) Review your Adjustable Rate Credit: Review recent statements on Home Equity Lines of Credit(HELOCs), Credit Cards, and adjustable rate mortgages. Using a HELOC (rates ~7.5%) to pay down some credit card debt (rates ~20%) can save you hundreds, even thousands of dollars a year. Be sure to keep making aggressive payments on the HELOC and not to run the credit card balances back up. If you plan to keep the HELOC balance for a couple of years consider consolidating it into a new first mortgage at a fixed rate.
6) Review Life Insurance: This is an area often under-funded or overlooked completely. If you or your spouse were to die tomorrow will the surviving-spouse have enough coverage to replace the lost income & benefits? If you have kids will your spouse have enough to pay for their education and daily expenses thru college? Will the surviving spouse be able to pay off the mortgage and other debt or be forced to move? These are just some of the questions you should consider. You might be surprised how cheap Life Insurance is today. In fact, if you have old policies you might be able to get the same coverage for less now, even if you are older. Talk to an experienced Insurance Agent.
7) Review & Update your Wills & Trusts: Make sure you have a current Will for starters. Talk to an experienced Estate Planning Attorney about the benefits of creating a Trust or Trusts as well. Use these documents as planning tools to make sure things happen the way you want and to alleviate as much stress as possible for your surviving loved ones. Be sure to review these documents every year to make sure they are current; updating the terms as needed.
For more information on these topics or to discuss ways to improve your Financial Health through your Mortgage(s), give me a call.
Do the Financial Markets Affect Mortgage Rates?
Absolutely. Rates are influenced by both stock and bond markets. Rates can change daily or sometimes more than once within the same day, depending on how the markets move.
Generally, the supply and demand for Mortgage Backed Securities will dictate mortgage rates. A good barometer to watch is the yield on the 10 Year Treasury Note. If the yield moves up by .25, mortgage rates will usually increase by .25% and the opposite is true if the yield moves down.
The Federal Reserve Board can also manipulate short term interest rates based on the present economic health of the country, which will impact adjustable rate mortgages.
Rate changes by the Fed do not directly affect loans where the rate is fixed for more than a year. The Fed raised short term rates by .25% on 1-31-2006, with almost no impact to longer term fixed rates.
Bottom Line: Work with an experienced Mortgage Professional who understands the markets and has a system for tracking market movement. This alone could save you thousands of dollars.
How Do My Credit Scores Affect My Rate?
In the mortgage industry sophisticated computer programs are now deciding if someone can borrower money, how much they can borrow and at what rate.
The most important factor in this process is your credit scores. Each of the 3 credit bureaus will give you a score between 450 and 850. These scores numerically define your credit history and were created to help lenders determine your credit worthiness. The higher your score the better.
A middle score of 680 is considered average and will allow you access to the majority of loan programs available. A score above 720 will usually result in a better rate and more flexibility in qualifying. A score below 620 is considered sub prime and will generally result in a higher mortgage rate with more restrictions.
Managing your credit scores can save you thousands of dollars and countless hours of aggravation. Work with an experienced mortgage planner who knows how to improve your scores and manage them into the future.
How do I improve my credit scores?
A credit score is a number that is calculated based on your credit history to help lenders identify the level of risk they assume when deciding to lend. Scores typically range from 350 to 850. The higher the scores the lower the rate a lender will offer you.
To improve your scores…
· Review your credit report and correct any errors you find.
· Settle any collection account or outstanding judgments. Normally, these will stay on your report until you resolve them.
· Reduce your balances on credit cards to 40% or less of your available credit limit (30% is preferable).
· Pay your bills on time. (This is probably the most important of all!)
· Don't let anyone make an inquiry on your credit report unless you absolutely have to. The more inquiries, the lower your score.
To avoid surprises when applying for a loan, I suggest running your credit report every year to see where you stand.
With Today’s Gas And Utility Prices So High, How Can I Save Money At Home And On The Road?
Gas & Utility prices have been a hot media topic during the past year and are predicted to rise over the upcoming summer months. Here are some suggestions for saving money at home and on the road.
At Home:
- Gradually replace all light bulbs with long-lasting energy savers.
- Replace shower heads with low-flow versions.
- Keep electrical appliances like lights, TVs, computers, and computer monitors turned off when not in use. The idea that it uses more energy to turn on an appliance is false.
- Caulk and weather-strip windows and doors to keep the outside-air out and the inside-air in.
- Set your water heater to 120 degrees.
On the Road:
- Clean out your trunk and the rest of your car. Excess weight will cause your vehicle to burn more fuel.
- Avoid long idles. Idling burns more gas than restarting an engine.
- Drive the speed limit. Your car will use more gas at higher speeds.
- Quick starts and stops are a killer when it comes to burning fuel. Drive slow and steady to pinch your gasoline pennies.
- Keep your tires inflated and aligned and perform regular maintenance for maximum vehicle efficiency.
Overall, moderation at home and on the road will save you money. You may even consider carpooling. Walking or riding your bike is also an option. Not only will you save on gas—it’ll keep you healthy!
How can I teach my college student basic money management skills?
Each year, millions of young Americans go off to college with a shiny credit card and a new sense of freedom. Unfortunately, this isn’t always the best combination. According to the L.A. Times, between college loans and credit card debt, the average student owes $18,000 by the time graduation rolls around. Here are some ways to achieve a better outcome:
- Discuss a monthly budget which incorporates living expenses, beyond books and tuition. Establish what you will be paying for and what you expect your child to cover. Agreeing on a budget will help you and your child form a partnership to conquer college costs.
- Provide the money at the beginning of each month rather than paying for a whole semester’s expenses at the beginning of the term. Only give out additional money for emergencies. This will teach your child to pay bills and live on a budget.
- If you give your student a credit card, consider adding him onto your account so that you can monitor the charges. Or if your child obtains a student credit card, be sure that the limit is low, perhaps $500.
- Encourage your child to save money by purchasing discounted items such as used books.
Teaching your student money management basics will provide him with life-long skills to make positive financial decisions.
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