Tuesday, June 28, 2016

15 Ways to Pay Off Defaulted Student Loan Debt

 Student loan debt
Student loan debt is one of the hardest debts to pay off. Many Americans pay on their student loans well into their adult life some adults continue to pay student loans well into their retirement years. If your student loans go into default, it can take a while to get them into good standing. 

You risk having your tax refund taken, your paycheck garnished or being taken to court. Federal student loans have more regulations and programs to help borrowers pay their student loan debt.  Private loans are not as regulated and offer very few programs or none at all depending on the company to help borrowers pay their student loan debt. Here are 15 ways to get current on defaulted student loans. 

Private loans
  1. Offer a good faith payment or a lump sum payment to use as negotiation to request that any fees or finance charges be waived.  Also, request that your payment history is updated on your credit report. 
  2. Refinance.  After paying your loan on time for at least two years you can comparison shop and sell the loan to another loan servicer or bank for a better interest rate.
  3. When private loans go into default they are usually forwarded to a collection agency which may not be as willing to work with you to setup a payment plan.  Negotiate and offer a payment plan that you know you will be able to afford each month.  If they refuse to accept your payment plan you may have to provide documentation such as a budget or paystub to support your payment plan.
  4. You may be charged fees by the collection agency but no more than 18.5% of the outstanding principal and interest.
  5. If you are in the military and are on active duty there are limits on interest accrual.
  6. If the collection agency is not adhering to the Fair Debt Collections Practices Act file a complaint against the company with the Federal Trade Commission.
  7. You can consolidate loans to use the student loan forgiveness (or public service forgiveness) programs.
  8. Ask for a copy of the collection agency's business license, proof that they have a legal right to collect on the student loan and proof that you owe the amount stated on the letter you received.
  9. If the school you attended closed or you withdrew from school you may be eligible for a partial refund by completing an unpaid refund discharge application form.

Federal loans
  1. After making payments on time for 9-10 months, your loan will be placed in good standing (rehabilitated) and you will be eligible for various programs such as deferment, forbearance and student loan forgiveness.
  2. Determine how much you can afford to pay each month.  This may require that you create a budget and reduce some expenses to ensure you make the payments each month.
  3. If your loan has not been sent to a collection agency, send a payment to the Department of Education's Payment Center. 
  4. You can consolidate your loans into one loan which will put your loan in good standing.
  5. Don't consolidate federal loans into private loans because you will no longer be eligible for deferment, cancellation, forbearance or income-based payment plans.
  6. You can consolidate your federal loans into the Direct Loans government consolidation program.
  7. If you default on a Direct Loan you must make 3 payments or agree to pay the loan using the Income Contingent Repayment Plan (ICRP) or Income Based Repayment Plan (IBR).  If you sign up for the ICRP or IBR you do not have to make 3 payments before applying for consolidation.
  8. You can only consolidate a Direct Loan once.

Friday, June 24, 2016

9 Steps to Help You Get Approved for A Mortgage

... Services | 4 Factors That Shouldn’t Affect Mortgage Loan Approval 
June is Homeownership Month.  One of the happiest times in my life was when I became a homeowner.  I feel a great sense of accomplishment and have been blessed to remain in my home despite the economic woes of the country and many other homeowners. 

The best time to buy a home is during with fall and winter season when demand is low.  However, many Americans purchase homes during June, the start of the summer season.  Owning a home is one of the best ways to generate wealth.  However, owning a home requires financial discipline and sacrifice.  Create a budget or spending plan to help manage your finances to make sure you can stay in your home for as long as you like and to help reduce the chances of filing for bankruptcy or foreclosure. 

Your monthly mortgage payment should be no more than 32-38% of your total monthly income.  This will ensure that you have extra cash to pay for unexpected expenses and will reduce the chances of using a credit card and going into debt. The advantages of owning a home are:  it increases your credit score, proves that you are a responsible spender, provides stability, provides a tax write-off, increases your financial worth, and provides you with an asset that will appreciate over time.

Renting should be a short-term option not a long-term solution.  Although becoming a homeowner may not be an option for everyone, owning something of value should.  You can:  become an entrepreneur, invest in a profitable business or purchase investment property.

The advantages of renting are:
1.      Easier to maintain
2.      No costs associated with maintenance except for condo owners
3.      Reduced financial responsibility

The disadvantages of renting are:
1.      No equity
2.      No tax benefits
3.      No say in rental increases

Before you buy a home you need to prepare for the home buying process.  Estimate your monthly mortgage payment. Subtract the difference of the estimated monthly mortgage payment and your current rent (if you pay rent).  Start reducing your spending at least 3 months prior to looking for a home and use the money to save towards downpayment and closing costs and to save the difference between your current payment and your estimated mortgage payment.   Here are 8 tips to help you buy a home:

1.      Fix any errors on your credit and pay down debt
2.      Find a real estate agent
3.      Get pre-qualified
4.      Find the best loan
5.      Use home buying programs
6.      Find a home  and make an offer
7.      Get a home inspection, home energy audit, lead and radon tests
8.      Shop for homeowners insurance
9.      Prepare for settlement and closing and confirm in writing all dates, dollar amounts and what is needed from you

Monday, June 20, 2016

Why Homeownership is Important

June is National Homeownership Month. When owning a home you need to create a budget to help manage your finances and debt to make sure you can stay in your home for as long as you like and reduce the chances of filing for bankruptcy or foreclosure. 

Before you buy a home you need to prepare for the home buying process. Estimate your monthly mortgage payment. Subtract the difference of the estimated monthly mortgage payment and your current rent (if you pay rent).  The first month add $100 to a savings account.  The second month add $200 to the savings account, the third month add $300 and keep doing this until you save the entire amount of the difference from what you currently pay for rent and your estimated monthly mortgage payment. 

This will ease the burden of having to adjust to paying your first mortgage payment because you will have already budgeted your money to accommodate for the mortgage payment.   Your mortgage payment should be no more than 38% of your total monthly income.  This will ensure that you do not live above your means and hopefully have extra cash to pay for unexpected expenses and plan for retirement. The advantages of buying a home are:

1.      Build equity
2.      Generate wealth
3.      Access to equity for unexpected expenses
4.      Tax benefits
5.      Access to protection such as insurance and warranties

The disadvantages of buying a home are:

1.      Maintenance costs
2.      Increase in payments due to insurance or tax increases
3.      Insurance and tax payments
4.      Protection costs for insurance and warranties

Here are 9 tips to help prepare you for buying a home:

Step 1. Know Your Limit. The amount of home (sale prices) you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate.  There are many options for owning a home such as:  buying a condo, townhome or single family home.


Step 2. Know your rights. There are several government acts that protect borrowers’ rights.  The Fair Housing Equal Opportunity for All act prohibits discrimination and intimidation of people in their homes, apartment buildings, condominiums and all housing transactions including rentals and sales. 

The Real Estate Settlement Procedures Act (RESPA) act relates to closing costs and settlement procedures. The act requires consumers receive disclosures during the home buying process and outlaws kickbacks.


Step 3: Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates and negotiate to get the best deal possible. To show you are a serious buyer and to have a competitive edge over other buyers get pre-approved for a loan and use the pre-approval letter when shopping for a home.  Shop around with several lenders and get at least 4 quotes on loans to make sure you are getting the best price and terms. Contact a loan officer or mortgage lender instead of a broker to assist you with buying a home.  Ask for a list of current mortgage interest rates, if the rate is fixed or variable and the loan’s annual percentage rate (APR) which includes the interest rate as well as points on the mortgage loan and may include broker or lender fees. 

Step 4. Use programs. Several companies offer home buying programs such as Home Free and NACA as well as state governments to assist with down payment and closing costs.  Visit www.hud.gov/buying/localbuying.cfm to find home buying programs in your state. 


Step 5. Look for a home. Check the crime statistics, quality of schools, location of police and fire department, grocery stores and pharmacy when looking to purchase a home. Select a real estate agent and make a list of items and features you wish to have in the home.  Also ask if the home has lead paint.


Step 6. Make an offer. Work with your real estate agent to make an offer on the home you wish to buy. Make sure the real estate agent is working for you only and not working for you and the seller.  You need a real estate agent who has your best interest in mind. 


Step 7. Get a home inspection. Make your offer on the home you wish to buy dependent on a home inspection. Hire your own inspector who is unbiased and who will tell you the condition of the home (inside and out) and any potential problems that could happen in the near future.  Be sure to ask the inspector any questions that you may have or if you need further explanation.  Request a pest and lead inspection.


Step 8. Shop for homeowners insurance. All lenders require that you purchase homeowner’s insurance. Shop around to find the best deal possible.  Try to get a bundled package to include your car and home insurance to get discounts and ask what other discounts are available. 


Step 9. Settlement/Closing. Make sure you plan at least 2 hours in your schedule for the settlement.  Bring your Good Faith Estimate with you and compare fees – the fees will be different from the final paperwork but should not be too much more than the good faith estimate. Read all the settlement paperwork before signing it and don’t let the settlement attorney rush you. If there is a mistake on the form ask the settlement attorney to make the adjustment and give the forms back to you to sign during settlement.