30 Year Mortgages Beginning at 4.35 Percent

The best deals on 30 year fixed rate mortgages in the US these days can be found at AimLoan.com.  You can get a 30 year fixed mortgage rate for as low 4.375% with 1.973 discount points and $1,995 in fees.  Each point is equivalent to 1% of the total amount borrowed, and is regarded as prepaid interest.

No point loans are also available from AimLoan.com at 4.75% interest, and a monthly payment of $521.

While the rates may not seem particularly low, considering the national average of 5.12% for the same type of mortgage, they really are quite attractive.

AimLoan.com mortgages are available to borrowers in most states; New Jersey, New York, Nevada, Pennsylvania and Kansas are the exceptions.

The rates apply to those borrowing between $417,000 to $729,500 and who have a credit score of at least 700.

The Skinny on Adjustable Mortgage Rates

Many people are unaware that taking on an adjustable mortgage rate can significantly lower mortgage rates. These loans, otherwise known as ARMs, are basically special types of mortgage loans. Often, homeowners can find lower rates on mortgage payments in the beginning years of their loans.

Fixed Rate vs. Adjustable Rate Mortgages
Most mortgages operate as fixed rate mortgages. This means the interest rate stays the same for the duration of the mortgage. You’ll pay the same amount every month on your premium, unless you refinance or pay off your loans early.

The interest rates on ARMs will change depending on prevailing interest rates. Many adjustable rate mortgages are tied to the LIBOR index, the Treasury Securities Index, the Cost of Funds Index, or a variety of other indexes.

Term Fluctuation
Your rate will adjust depending on the terms of your adjustable rate mortgage. These rates are adjustable every six months, every year, or even every several years.  Adjustable rates are usually good for people who are paying off a condo or a short term home.

A Good Short Term Option
Remember that adjustable rates will benefit you in the short term, but if interest rates rise, you could end up paying more than you bargained for.

Analyze all your options to determine if a fixed rate mortgage or an adjustable rate mortgage would be better for you.

Credit Card Legistlation to start February 2010

Debt seems to define the American population, and in many cases, it is the sole problem most Americans are facing financially, economically, emotionally, mentally. Credit card companies and their high credit card rates do not seem to be helping either. In February 2010, the Credit Card Accountability, Responsibility and Disclosure Act became active in hopes of helping this credit card debt problem.

In May 2009, a bill was passed on credit card limitations to be set into action in February 2010. The bill’s details can be summarized into the soul purpose of eliminating extreme penalty fees from serious credit card owners. In opposition, avid credit card users could be in trouble of some of these regulations.

As a result, many credit card companies are threatening to take away rewards programs to make up for the loss of ROI on the distribution of fees.

The Credit Card Accountability, Responsibility and Disclosure Act covers the following:

Banks must wait 60 days after due dates before charging late fees on late bill payments. This could be a good thing for people who are usually prompt in paying bills right on time. However, if you’re not very good

at meeting the date, this could mean an extra 60 days grace to you, but a higher fee in the end if you miss the date.

Credit card companies now must give a 45 day notice to cardholders before they change the interest rate fees.

Banks and credit companies are required to send a bill 21 days in advance of the due date, to ensure holders have an ample amount of time to get their bill paid on time.

Bill payments counted the day after due to holidays and weekends will not be counted on time to credit card companies and banks.

Payments on multiple bills with different interest rates will now be applied to the bills with the highest interest rates.

Banks now must issue ‘permission’ before ‘allowing’ you the privilege of spending more than your issues amount on your credit card.

Credit card users now must be 21 to issue a card, otherwise a parent or guardian must be the primary cardholder. This can be appealed based on the amount of independent income of an individual under 21.

Dormancy fees on credit card gift cards now must be clearly stated from the issuer to the buyer the day of the purchase, which includes a 10 point font rule on the card and documents.

Credit History & Your Loan Rate

Understanding credit and how it affects you in financial situations is very important. Credit is one of the biggest determining factors in getting a loan of any kind. Lending institutions and banks that loan you money want to know that you are willing and able to pay them back. They call this risk. The less risk it is to them the better. The thing about credit is that you can have too little credit as well. These institutions want to know that you have the ability to have credit and manage it.

They evaluate how much you already owe, how much you have available that is unused, how current and timely you are in paying your debts and whether you have recently applied for and received new credit.

You will most likely be asked to explain recent late payments, new inquiries and / or public records on your credit report. There are many pieces to a credit report. You have revolving, installment and mortgage debts. They usually read R, L or M next to the specific debt. Revolving debt is a debt that can be different amounts each time such as a credit cards based on the amount of the balance each month. An installment debt is usually a fixed debt such as an auto loan or furniture loan which is always the same payment each month. Mortgage debts are little more complicated. They can be either fixed or adjustable payments according to the type of loan you received when purchasing or refinancing your home.

Revolving debt does not have as much weight on your score and loan risk as an installment or mortgage debt. Inquiries can affect your score if they are in excess or if they have been pulled over a 30 day span. Public records definitely have a lot of weight on your score. A public record can be a collection, a tax lien, or even a bankruptcy or foreclosure. Collections can usually be paid in full and the lender will not think too much about it. A tax lien weighs a bit more on the risky side, not only because it can affect your title if you are refinancing your home, but also they tend to be a higher amount than collections. These will need to be released or satisfied in full.

A bankruptcy all depends on when it was released or discharged. Most lenders want 7 years since a bankruptcy, but they have become a lot more lenient on that rule in the last couple years. Now it can be a little as 2 years out of bankruptcy. Foreclosures are not so easy to get around. They need to be at least 3 years out and some institutions still say 7 years. All of which usually needs to have re-established credit afterwards in order to look as though you are trying to turn things around.

Lenders look at your credit overall, but they weigh a lot of their decision on your credit scores or fico scores as they refer to them in the business. You have 3 different credit bureaus that report your credit. They are Experian, Equifax and Trans Union. They all give you a score according to there standards which differ a little bit between bureaus. A good score is anything 720 and above, an average score can be 680 and above, if you are below a 620 it is considered sub-prime.

There are steps you can take to show you how to increase your credit score for the better over a short amount of time. The better your score the better rate a lender can give you or is willing to give you. Keep paying those bills on time and remember not all debt is bad debt. You can have good debt as well.

Cash Assets & Your New Home

In applying for a loan, assets are an important contributing factor. Lenders want to see that you have enough cash assets in order to make the loan workable. Some base the amount of assets they require off of your income, some just base them on the months in reserves for the loan they are looking to give you. Most would like to see at least 2 months in reserves. This means if your new proposed mortgage payment is going to be $1200, they want to see that you have at least $2400 in the bank.

When you are applying for a stated income loan, which are few and far between these days, lenders can require you to have at least 3 times your monthly income in the bank for reserves. This is not as common, but not unheard of either.

Your broker will ask you to provide 2 months bank statements which consists of 60 days assets. They will need all pages of these bank statements which are required by the lenders. If you have more than one bank account that you want to use for either down payment, reserves or closing cost you will need to provide those statements as well. If it is a 401-k or IRA quarterly statement they will only ask you for the last statement you received. Lenders only consider 60-70% of the money in a retirement account depending on which type of loan you are getting.

If you are purchasing a home you will be required to provide assets showing you have enough money for the down payment (3-20%) or more if you have it. You will also need enough for your closing cost and reserves. On refinances, you normally only need the closing cost and reserves.

Closing Cost
The “closing” or the “close of escrow” is the last stage in the transfer of title of real property from one person to another. Closing cost are fees that are charged by the broker, lender, attorney and third party vendors such as the credit agencies, a courier service and an appraiser of the property. These non- reoccurring fees associated with closing do not include all costs needed to complete the transaction. Closing costs do not include down payment, real estate taxes, insurance fees, and several other expenses.

If you have large deposits showing on your bank statements which are not income related the lender will require an explanation of the deposit. They want to know that the money put into your account is your money and not a gift from someone else. Certain types of loans allow gifts. Gifts are usually ok as long as it comes from a family member. They will ask you to provide documentation for the gift such as: a gift letter signed by all parties, a copy of the gift check and the donor’s ability to give the gift. If the money is not a gift, you will need to provide a paper trail of where it came from. For instance, if you sold a car and received a lump sum of money you will need to provide a “bill of sale” showing that amount.

An important thing to remember in applying for a loan is not to move money around. Keep your money where it is. Lenders like seasoning on assets. They want to see that the money has been in your account for at least 60 days. Save your money and do not make any large purchases right before or during a loan transaction.

How Much Home Can You Afford?

In determining your maximum mortgage amount, lenders use guidelines called debt to income ratios. This is simply the percentage of your gross monthly income (before taxes) that is used to pay your monthly debts. They use two separate calculations in figuring the percentages. You have a front end ratio and a back end ratio.

Front End Ratio

This is your proposed monthly housing expenses divided by your monthly gross income. Your proposed housing expense includes your principal and interest payment as well as taxes, insurance, mortgage insurance (if applicable) and homeowners association dues (if applicable). This percentage should be between 28 and 31% depending on the loan.

Back End Ratio

This is a percentage based upon your consumer debt you owe monthly as well as the proposed housing and your gross monthly income earned. For example: If you debts are $1800 a month and your income is $5000 a month your DTI would 1800/5000 which equals a 36% DTI. Anything below 42% is usually acceptable to a lender for a conventional or an FHA (Federal Housing Administration) loan, but some consider DTI’s all they way up to 50% depending on the type of loan you are receiving.

When you are applying for a loan you need to consider that there are some debts that will not always show up on your credit report, but a lender will require you to disclose these debts. Debts or expenses such as food, entertainment and utilities do not show up on your credit report and are not required in calculating your debt to income ratio. They do although require such expenses as alimony, child support or a private loan or mortgage you have received to be disclosed. When I say disclosed I mean they require these expenses to be listed on your application along with your debts already posted from your credit report.

These specific payments also work in reverse for considering more income. If you are on the receiving end of alimony or child support from someone you can add that to your monthly income as long as you have been receiving it for at least 2 years and it will continue for at least 3 years. You would list it under other income on your application.

Most mortgage loans today are run through an automated underwriting engine specific to the lender your mortgage broker has chosen for you. They consider many factors, but your DTI or debt to income ratio is of significant importance. Your DTI tells them whether you can afford the home loan you are applying for.

If your DTI is in excess of the lenders guidelines, compensating factors can sometimes be used to justify approval of the loan. Compensating factors are supporting documentation or additional resources that will make the loan be of less risk to the lender.

An Introduction to CD Laddering

Certificates of Deposit (CDs) have long been considered a popular investment option for conservative investors as well as those who are seeking a current income stream. CDs pay interest at their maturity rather than throughout the life of an investment as is in the case of many other fixed income investments. For investors seeking current income, one of the most widely used strategies is called CD laddering. Understanding how to leverage this technique will enable those investors seeking current income and long term preservation of capital to build a suitable portfolio.

What is CD Laddering?
A CD ladder by definition is establishing a portfolio of multiple CDs, with varying interest rates and maturity dates. When an investor establishes a CD ladder, they are seeking an income stream that is both consistent and ongoing.

For example, an investor who has $24,000 to invest into CDs may establish 12, $2,000 CDs that they will purchase over the next 12 months. After the 12 month, one CD will become mature each month with its original principal amount plus interest. At that time, the investor could choose to liquidate the entire CD, to take the interest and reinvest the principal into another 12 month CD or to allow the entire CD to roll over into a new CD if they did not need the current income presently.

Investors select when they would like the laddering to take place; whether it’s monthly, quarterly or semi-annually and then they establish both an investment pattern and a withdrawal pattern when leveraging CD laddering. Also, it is important to investors to choose the best CD rates, enabling them to receive the greatest income return on their investment when the CDs mature.

Why CD Laddering?

There are a variety of other investment benefits to CD laddering, including:

• The ability to customize both the CD interest and cash distributions for when they are personally needed. Investors may select when they would like to have the CDs become mature, often selecting monthly or quarterly to generate regular income streams.
• CDs are guaranteed by FDIC insurance in the event of a bank default, giving many investors peace of mind.
• CD laddering works to assist investors to create greater CD rates than individually purchasing them without a long term strategy. By laddering, investors are able to dollar cost average their cash investments over time, taking the opportunity to have a variety of CD rates rather than a single rate with a single purchase.

Deciding Whether CD Laddering is for You
Many CD investors are seeking both preservation of capital and income from the interest on an ongoing basis. As with any investment, it is important to make sure that the risk tolerance and expected rate of return are in alignment with an investor’s personal goals. CD rates will fluctuate regularly, but are considered to be a safe investment and relatively simple to understand and to use within a portfolio. When creating a CD laddering strategy, it is advised to seek the advice of an investment professional.

Understanding CD Rates

You may have noticed the sign for CD rates at your local bank, but were unsure of the investment type of how the CD rates were determined. If that is the case, you are not alone. While many investors take advantage of CD rates every year, there are just as many that are unsure of the mechanics behind this investment choice. Understanding the basics behind how the rates are determined will be the beginning steps of determining whether this is the best investment selection for you and your financial needs.

Factors Affecting CD Rates
There are two primary factors that affect CD rates, including the length of time that it will be until the CD matures and the current interest rate environment of the national economy.

In general, the longer that the maturity date is away from today, the higher the CD rate will be. The primary reasons for longer term CDs offering higher interest rates is that they are compensating you for the risk that you are taking. Longer term investments, especially when it comes to interest rates, means that there is a possibility that rates will change while an investor is in the CD. Also, investors are also making a commitment to the banking institute to keep the investment there for a longer period of time.

However, this is a major exception to this and it occurs when the yield curve becomes inverted. When this event happens, short term CD rates become higher than longer term CD rates. When this happens, it is generally a precursor to a recession and an indication that investors believe that the longer term economy will be poor.

Another factor that affects CD rates is the competition between banks. There are banks on what seems like every corner, the same as in gasoline stations. Banks must compete with each other for CD business by offering investors the most competitive CD rates. So, keep this in mind when you are searching for the most competitive CD rates available at the time you are looking to make your investment.

Other Misc Factors
Another common factor that affects CD rates is bonus programs that may be offered by financial institutions or banking institutions. In many cases, these financial institutions are looking to retain current customers as well as to upsell current customers into new products, so they offer a bonus rate for adding to a customer’s existing financial portfolio. These bonuses can mean tremendous points added onto the CD rates, ultimately helping the investor to earn additional capital growth and/or current income over the life of the CD.

In addition to these bonuses, you may find that credit unions offer higher CD rates than traditional banks. This is often due to the difference is their profitability models, giving credit unions a slight financial edge.

So, searching for the best CD rate involves more than just choosing off of a list; it is about making the most informed decision possible about both short term and long term CD rates.

A Look at Fixed Investments

Fixed investments are an important component of an investor’s portfolio, both while they are building wealth and while they are generating income from their investment portfolio. Some of the primary forms of fixed investments include fixed annuities, individual bonds, bond funds, CDs, and investment certificates and each of them fulfill an important role when developing an investment portfolio.

Fixed Annuities

The two primary forms of fixed annuities that are important to become familiar with are deferred fixed and immediate fixed. A deferred fixed annuity is one in which the investment value contributed into the annuity will grow on a taxed deferred basis over time, upon which a fixed payment stream will be designated at a later date. The withdrawal periods may be designated as 5 years, 10 years or even lifetime. An immediate annuity is a contract in which the investor will contribute an amount, upon which they will gain a fixed payment stream for the designated time frame immediately, unlike the deferred fixed annuity which will begin paying in the future.

Individual Bonds

A bond in its simplest terms is a debt instrument issued to raise capital for a corporation or organization. The bond will have a fixed payment rate, a payment date and a maturity when they are purchased. There are a variety of bond types, including municipal, international, corporate, and mortgage to name a few. Investors often purchase individual bonds as a way to generate current income or to provide stability within their portfolio. CDs are rated by individual agencies based upon their overall risk, making it easier for investors to select the best individual bonds for their investment objectives and risk tolerances.

Bond Funds

Bond funds are professionally managed funds, comprised of individual bond securities. Many investors turn to bond funds for their simplicity and their professional management. Bond funds, similar to individual bonds, can be found in virtually every asset class. This flexibility allows investors to build their ideal portfolio, in alignment with their personal financial goals and objectives.

CDs

A CD is a certificate of deposit, paying a fixed interest rate at its maturity to the owner. CD rates will often vary based upon their length to maturity, their issuers and the current interest rate market. In most cases, the CD rates for longer term CDs will be greater than those of CDs with shorter maturity dates. CDs are most commonly issued by banks and are insured by FDIC.

Investment Certificates of Deposit

In addition to traditional CDs offered by banks, there are also alternative forms of investment certificates offered by investment institutions. These certificates have an annual interest rate tied to things such as the S&P 500 Index, other indexes, or even a conglomeration of CDs that are put into what resembles a mutual fund. Investment certificates are attractive to investors who are interested in a cash investment with liquidity that pays a greater rate of interest or return than a standard CD, checking or savings account.

Creating Income in Retirement

If you are preparing for retirement, one of the largest adjustments that you will face is that your regular paycheck will stop, causing you to rely on other income sources. While you will not being paid from your employer, you will have the opportunity to create your own paycheck from investments. Understanding some of the basic rules and concepts for creating retirement income will make this transition easier.

Understanding Asset Classes

The first thing to grasp a full understanding of for creating retirement income is that of how to allocate your investments by asset class. Asset classes refer to how an investment is classified and how it behaves in relationship to other types of asset classes. Asset class examples are large cap, mid cap, small cap, international, municipal bonds and cash. There are 22 asset classes in total, of which a portion will appear in your portfolio based upon your risk tolerance and investment objectives. Spend time to evaluate your own personal income needs, your risk tolerance and your time frame with a portfolio generator or with a financial professional to develop your own ideal asset class breakdown.

One of the most significant things that you will notice when creating your retirement income portfolio is that your ratio of equity to fixed income investments will shift. Most investors when they are in retirement are more concerned with generating income and preserving capital rather than generating capital returns on an annual basis. You will likely have over 50% of your portfolio in fixed investments such as CDs and bonds. You will be concerned with filling these percentage allocations with the best CD rates and best paying bond rates within each asset allocation category.

Understanding When to Take Withdrawals

Once you have developed the ideal portfolio mix, you will need to determine when and where to take your income withdrawals from. The perfect scenario would be to establish an automatic method where the income or dividends from the different asset classes would be deposited into your cash account. Then, on a quarterly basis, you could withdrawal the cash portion without disrupting the other portions of your portfolio.

Make Portfolio Adjustments

You will need to adjust your portfolio either semi-annually or annually as it changes or as your personal income needs change. For example, some asset classes will outperform others. When this occurs, an asset class will end up at the end of the year having a higher percentage weighting that you desire. You will need to take those earnings and redistribute to the asset classes that did not do as well, causing their weighting to decline. Making these adjustments will help to give you the best possible annual returns possible.

You will also need to made adjustments to your income stream as needed. If your portfolio does not generate the projected return, you may need to adjust your income downwards until the portfolio rebounds. And, if your portfolio is showing a return in excess of your projection, you will be able to take a large income stream for the year than originally projected, giving yourself a raise.

Next Page »