Thursday, March 31, 2016

Mortgage Pre-qualification


Q: Every ad for mortgage companies I read talks about pre-qualification or pre-approval. Is that something I need to do before I start house shopping?

A: There are two phases to securing a mortgage.

Imagine the lending market as sort of trying to set up a friend on a date. You tell your friend about the partner you have in mind for them, and based on what you tell them, they decide if that person is worth a date. They're considering the possibility of the date, assuming everything you say is true. If you tell your friend about the potential date's persistent body odor problem, they might choose to say no. If you tell your friend about their beau-to-be's interesting job, sense of humor or winning smile, they'd probably set up a date to see for themselves. That's part 1.

Of course, your friend doesn't go immediately from your description to wedding bells. First, they have to actually date and get to know each other. Your friend has to see if the qualities you described are actually true and make sure there's nothing hiding beneath the surface that would rule them out. That's part 2.

While it does make for some confusion, lenders may refer to either part 1 or part 2 as pre-approval, and the other as pre-qualification. Rather than focusing on the labels, focus on the steps involved and what the steps mean. We'll keep calling them "part 1" and "part 2."

What do I need for part 1?

In part 1 of the process, you describe your financial situation to a potential lender. Usually, this information includes salary, savings and current debts. The lender may or may not pull your credit score at this point. Based upon that information, the lender will make a determination about the kind of loan you might qualify for, assuming everything you've said is true.

You don't need to prove anything at this point. It can be done over the phone, over the Internet or in person and no documentation is required.

During Part 1, you might want to compare possible mortgage rates. There's a lot less paperwork involved, so it's much easier to ask a lender to run through a variety of scenarios. You can look for a loan situation that combines the monthly payment, interest rate, term and down payment where you have the most comfort.

Part 1 can be completed early in the house shopping process. In fact, it makes sense to do this before you view the first house. That way, you won't fall in love with a house you can't possibly afford or convince yourself to settle for a house that doesn't really meet your needs. This also gives you the chance to straighten out any potential kinks in your financial situation before starting part 2. Don't worry about multiple checks on your credit if necessary. Credit bureaus lump mortgage inquiries within 30 days together as 1 inquiry, so they won't adversely affect your credit score.

It's important to note that pre-qualification is not a guarantee of a loan. To continue our example from above, your friend agreeing to a first date does not mean you get to start planning a wedding! Completing part 1 is a way to get an idea of how much you can afford to spend during your house hunting, as well as a way to show potential sellers that you're serious. Completing part 1 illustrates to a buyer that you are already part of the way through the lending process, and it's less likely that your financing will fall through.

What do I need for part 2?

Part 2 is where the paperwork starts to fly. At this point, a lender is deciding whether or not to issue you a loan. Successfully completing part 2 means a lender is ready and willing to provide you with a loan up to a specified amount.

To navigate this step, you'll need to prove everything you claimed in part 1. This means you need to provide tax forms to substantiate your income and account statements to verify your savings. You'll also need to sign a variety of forms giving your lender or their agents the power to talk to employers, landlords and the IRS about your financial security.

Generally, lenders will want tax returns for the past 2 years, including supporting documents like W-2 forms. If you've switched jobs a few times in that span, you may need to go further back to demonstrate consistent employment. If you're an independent contractor or own a small business, documentation requirements are significantly steeper. You'll need to provide enough financial disclosure to show lenders that you can make the payments.

Completion of part 2 is a conditional approval for a loan. If the house you're buying passes appraisal, you will get financing on the terms you've agreed upon with your lender. The paperwork is a bit more cumbersome, so you don't want to do this multiple times. Only complete this step with a lender you're going to borrow from.

Part 2 is best to complete before you make an offer, especially in competitive markets. A letter of prequalification or preapproval that shows your financing is in place does a lot to reassure sellers that your offer will survive until closing. If you're on the fence about what house you'll put an offer on, this process can still be completed with the property identified as "to be determined".

Don't worry if this process seems confusing. You'll be working with a qualified mortgage professional who deals with it every day and can answer all your questions. One of the benefits of working with Destinations Credit Union, an institution you trust, for your mortgage is that it clears your mind to focus on the important stuff, like where to put the sofa!

Friday, March 25, 2016

Your Real Net Worth



For accountants, your personal net worth is one of the simplest calculations they might be asked to perform. Add up your assets in column A, add your debt in column B, then subtract B from A to find your net worth. It's a number you should know, or at least be able to estimate, and it's good to check it every year.  Since it's March, which is the sweet spot between New Year's resolutions, January credit check-ups and tax time, there might not be a better time to figure out your net worth than right now.  When you do, don't forget all of the value that might not translate into worth. We've got a short breakdown for you, along with a way to maximize the value in your life while minimizing how much it costs you: 

Your education increases your net worth, even though it may not look like it. Very few investments offer the rate of return that continuing education does. Those who finish their college degree earn, on average, about twice as much as those with a high school diploma over the course of their lifetimes, and the gap has been widening for at least 35 years. Still, your future earning potential doesn't show up on your net worth, even though your student debt does. If you're trying to decide whether to go back to school, take a few extra classes or get a new certification, the cost may seem intimidating since there's no immediate benefit. Don't let that fool you. 

An education can also increase the value you get out of your life, helping you find a job that makes you happier or getting that promotion you've been wanting at your current employer.  Outside of work, going back to school can help you learn a new language or skill you've always wanted to learn, get you up-to-date on current technology and trends in your field, and model good life choices for your children.  Just wait until they see you doing homework on a Friday night!

It also doesn't have to cost an arm and a leg, and you don't have to try for federal financial aid.  We have a variety of products designed to put some money in your pocket now, whether it's a home equity loan, a personal loan, or any of our other financial plans.  If you're thinking to yourself, "But I'll be 40 (or 50, or 60) by the time I finish," remember, you'll be 40 (or 50, or 60) anyway.  

Find out information about our loans that could make it happen.

Your kids are a drain on your net worth, but a blessing in your life.  Let's face it, kids are expensive. The Department of Agriculture estimates that raising a child born this year to the age of 18 will cost about $250,000.  While a quarter of a million dollars is a lot of money, that only gets them to age 18, but with tuition prices skyrocketing and kids staying at home longer than they have historically, the actual figure of raising children today gets much higher much faster.  Financial analysts predict the average four-year tuition for a public university in 2030 will be $250,000, or about the same as it cost to raise that child from birth to dropping them off at the dorm.  If you have two children, you could easily spend one million dollars on them before they leave college.  In your net worth, this is only reflected as a constant drain on your savings, a net negative.

The value of children is probably pretty obvious to you, but there has to be a way to lower the cost of raising them, right?  First, let's cut down those college costs, because that's half the battle.  We've got a Coverdell IRA college savings programs that offer good returns while also being tax-deductible.  Getting to $250,000 might seem like a pipe dream, but saving even a little every month can add up quickly, thanks to compound interest.

Next, let's find a way to save money on school while helping your child now. There are a lot of ways to encourage a gifted child, from tennis camp to musical instruments.  If your child wants to stare at the Internet all day, maybe you should talk to them about a new laptop and some software engineering classes for kids.  If they like the outdoors (or you'd like them to go outside occasionally), try a digital camera.  All of these ideas cost money now, but could result in scholarships down the road, all while giving them a head start on a career or passion they can follow their whole life.  If you're wondering how you can pay for all of that, check out our savings accounts.  You can contribute a little money every month, and you'll have enough for those classes or that camera before you know it.

Your home is your biggest investment.  When was the last time you checked up on it?  When you bought your house, it might have been the best available house in the neighborhood for the price. After all, if it weren't, you would have bought some other house, right?  Is it still the best in the neighborhood for the price?  Is the neighborhood still regarded the same way by home buyers?  How do you know? This weekend, it's time for window shopping. Take the value of your home from your last appraisal and check the Internet for houses in your area in the same price range.  How does your house stack up? Make a list so you can compare between houses.  Next, check your decor. When you moved in, did the house feel a little dated?  Did you do anything about it? How many of the houses you saw online seemed newer or more fashionable? 

After you finish your house hunting, you've got three options:  If you saw a house that you like as much as the one you're in now, but it's going for less money, you could think about moving there.  After all, mortgage rates are incredibly low for the time being, and if you could be just as happy in a less expensive house, then that's money you could use on something else.  If your house is as good or better as the others in the neighborhood, but could use a facelift, you might want to think about remodeling.  Remodeling your home can increase its value and make it easier to find a buyer, so part of what you spend now may come back to you when you sell, with the added benefit of living in a nicer house in the meantime. Finally, if your house is still the best around, think about refinancing while rates are low.  You're probably not going to find fixed rates this low for a long time (if ever), so locking in that lower rate now can save you tons of money going forward, while cashing out some equity can help knock down any pesky credit card debt you need to take care of, so you only need to write one check every month, while paying far less in interest.

Brought to you by Destinations Credit Union

Wednesday, March 23, 2016

The 'Pink Tax': Does Shopping Like A Girl Cost You Money?

Several economic studies have confirmed the existence of a so-called "pink tax," an inflated price attached to goods and services specifically marketed to women. While theories abound to explain the pricing discrepancy, its existence seems clear. On everything from razors and deodorant to car repair and haircuts, women are expected to pay more for products marketed directly to them. In many cases, marketing is where the differences stop.

It may seem like pennies, but across the board, these pennies add up. One study by the University of Florida found that women end up paying about $1,400 more per year. This invisible tax is taking money out of your pocket. Want to get it back? Here are some ways you can avoid the pink tax. 

Go Scentless 

Personal hygiene products are among the biggest contributors to that $1,400. Items like lotion are rebranded as "facial moisturizer" and packaging with floral designs. The "moisturizer" sells for 7-8% more than the "lotion." The functional difference between the two products? In most cases, absolutely none. When there is a difference, it's usually in perfume.

The worst culprit of the flowery-smelling foul play is deodorant. Men's and women's deodorants all have the same active ingredients, usually in the same ratios between brands. A stick deodorant is a stick deodorant until it comes time to scent it. Floral-scented deodorants sell for as much as a dollar more than their muskier counterparts.

No one wants to smell like a man (even many men). So what's the answer? Look for scentless or perfume-free personal hygiene products. Not only are they cheaper, but the lack of chemical perfumes can be better for your body in the long run, too.

If you miss the floral aromas of your old products, consider purchasing essential oils in similar scents. You can add them to lotions and deodorants yourself at home for a fraction of the cost and keep a closer eye on what you're putting on your skin.

When in doubt, check the ingredients. Compare your usual to a comparable male product. If there's a reason for a gender difference, it'll show up here. In most cases, the active stuff is all the same. 

Ignore the packaging 

The most flagrant example of the "pink tax" has to be in razors. No difference exists between razor cartridge replacements for men and women except the color of the packaging. Yet, a 4-pack of Venus razors costs $4 more than a 4-pack of Fusion razors. They're the same razor, made by the same company. The only difference is the more expensive one is pink and the cheaper one is blue.

It's not just razors, though. Toys, like scooters that are marketed to children, can vary wildly in price depending upon their paint job. One retailer listed blue childrens' scooters for $24.99 and an identical pink scooter for $49.99. Incontinence aids marketed to men contained twice as many pieces as the same product marketed to women. Either in quantity or in cost, pink packaging costs quite a bit!

Women frequently encounter what one economist calls the "pink expectation." Most products for men are imagined to be the default, so products for women must be modified in some way to make them more acceptable. Even when there's no difference in the product, the expectation is used to justify the increased cost. Manufacturers have been exploiting that expectation to make money on the backs of women for years.

Where possible, look for gender-neutral or generic brand products. For razors, especially, the only possible differences are number of blades and level of lubrication. If it has the same number of blades as the razor you're currently using, you can use more shaving cream or soap (another popular target for the pink tax!) to increase your comfort. 

Online services 

Perhaps the most surprising place for price differences to occur is in the service industry. Dry cleaners, auto mechanics and hair stylists are getting away with charging more to women than to men. What can be done here?

For some industries, justifications may exist. Dry cleaners may need to take more care around adornments on women's clothing, and stylists may have more hair to deal with. In these instances, it's best to take the justification head on. Women with short hair should ask for the men's price and cut. Bring a mixture of men's shirts and women's shirts to the dry cleaner and ask the counter staff to explain the pricing difference. In many instances, service providers value your business more than they value an artificial markup.

Where possible, though, remove gender from the equation altogether. Buying cars via email using a gender-neutral signature, like the first letter of your first name, can result in more fair haggling practices. Getting quotes and estimates from mechanics via text message can discourage them from attempting to artificially inflate their bills.

Finally, if you see an instance of biased pricing like this, let others know. Let businesses that do these things know that it'll end up hurting their bottom line in the long run. By frequenting establishments that don't practice this kind of discrimination, you can help end the "pink tax" for everyone.

SOURCES:
http://www.news.cornell.edu/stories/2013/01/gender-equality%E2%80%99s-final-frontier-who-cleans

Brought to you by Destinations Credit Union 

Monday, March 21, 2016

How To Keep Your Guard Up Against The Newest Scams


It seems like there's a new data leak or identity theft trick to be worried about every week. If you're not informed, you risk becoming a victim. Sitting back and waiting for news about scams to come to you may not be enough. In an ever-changing security climate, you need to stay on top of new threats in personal information security. 

Why the landscape changes so fast 

The bad news is that humans have become the weak link in the information chain. Breaking modern encryption algorithms takes high-powered supercomputers months, if not years. Information you intended to send online or over the phone being hijacked by nefarious people is a slim chance. The biggest danger is sending information to people you don't intend to be the recipients.

That's why scams crop up so quickly. Humans can be tricked in any number of ways. Scammers can appeal to fear, greed or sentimentality in different forms to trick information out of you. They can also rely on inattention to detail or carelessness. This is because humans have a number of built-in vulnerabilities.

Unlike a computer, you can't just download the latest anti-virus software to your brain. You can, however, do the next best thing: stay current on evolving cybercrime situations. 

Websites to visit regularly 

The FTC regularly updates its website with phone, email and web-based scams. Its website,  https://www.consumer.ftc.gov/scam-alerts, features several articles a week. As one of the strongest consumer watchdog agencies, it investigates illegal or fraudulent business communications with zeal.  It publishes the results of these investigations in hopes that fewer people will be victims in the future.

You can also pitch in and be a good cyber citizen by reporting scams you see to the FTC. You can report it online using the FTC's form at this website: https://www.ftccomplaintassistant.gov or call their toll-free number at 1-877-FTC-HELP.   1-877-FTC-HELP It's one way you can make sure scammers are stopped before they really get started. 

The Better Business Bureau (BBB) also maintains a list of scams from criminals posing as businesses here: http://www.bbb.org/council/news-events/lists/bbb-scam-alerts/.  The BBB is a helpful place to look if you've received an offer that seems too good to be true. For identity-theft specific scams, the Identity Theft Resource Center maintains a list of schemes to steal personal information. Their website is located at http://www.idtheftcenter.org/ID-Theft-Blog/Scams-Alerts/. 

Games to play 

Keeping up with the latest threats isn't all work. There are also fun, interactive games you can play! The FTC's weight loss challenge game tests your knowledge of common weight loss scams. It can be a fun way to start talking with kids about the dangers of online ads. You'll find it here: https://www.consumer.ftc.gov/media/game-0026-weight-loss-challenge.

If you're feeling advanced, you can check out Admongo at www.admongo.gov. This creative, sci-fi themed platform introduces the hidden dangers of advertisements. It can also make a great stepping stone into a conversation with kids about caution around advertisements. 

News to follow 

You're not alone in the effort to protect yourself against fraud. The National Consumer League is a not-for-profit organization with over 100 years of history helping to protect consumers from scammers.It maintains a list of scams and monitors old ones. It also interacts with law enforcement where possible to try to bring scamming groups down.

One of the services the National Consumer League provides is an email list. It sends out alerts whenever a new threat to consumer well-being emerges. In addition to covering scams, it also monitors product recalls, food safety conditions and truth in advertising concerns. It's a great resource in helping you make smart consumer choices in a market crowded with information. To join the mailing list, just visit their website: www.nclnet.org 

Remember, the computer age brought us wonderful improvements in our quality of life. We can seek entertainment, educate ourselves, and stay in touch with friends and family using a device that fits in your hand. With that greater connectivity comes the need for constant and careful scrutiny of the information that comes across our screens. In this struggle, too, knowing is half the battle.