Monday’s need-to-know money news

crop380w_istock_000009258023xsmall-dbet-ball-and-chainToday’s top story: Mortgage application forms will look different next year. Also in the news: 5 times you shouldn’t use a credit card, why you should say no to 72-84 month auto loans, and why you need to stop being delusional about debt.

It’s Coming: The First Change to Mortgage Application Forms in 20 Years
An easier to understand application is on the way.

5 Times You Shouldn’t Use a Credit Card
High interest rates could leave you in a debt spiral.

5 Reasons to Say No to 72- and 84-Month Auto Loans
Long term loans set you up for years of negative equity.

Don’t be debt delusional: Quit buying stuff you can’t afford!
Time for a reality check.

Q&A: Getting a new mortgage after a foreclosure

Dear Liz: Is it true that we can’t refinance our home until seven years after a foreclosure? We lost a rental property six years ago. Our credit scores now are in the 740 range, and we are anxious to take advantage of lower rates since our mortgage rate is 5.75%. Other than the foreclosure, our credit is perfect.

Answer: As foreclosures surged, the agencies that buy most mortgages increased the amount of time troubled borrowers had to spend in the “penalty box” before being allowed another mortgage.

Fannie Mae and Freddie Mac still have a seven-year waiting period after foreclosures. But that has been shortened to three years when borrowers can prove “extenuating circumstances,” such as a prolonged job loss or big medical expenses. Waiting times for other negative events, such as bankruptcy or short sale, have been reduced to two years with extenuating circumstances. Otherwise, it’s four years.

There are other loan programs that are even more forgiving. For example, the FHA has a three-year waiting period that can be shortened to one year if borrowers participate in its “Back to Work” program, which requires they document a significant loss of household income, that their finances have fully recovered from the event and that they’ve completed housing counseling. The Veterans Administration, meanwhile, makes loans available one to two years after foreclosure.

Q&A: Factors to consider for refinancing into a 15-year mortgage

Dear Liz: I am considering refinancing my home from a 30-year mortgage to a 15-year loan and wondered if it would be a wise decision. I am 57, divorced and make a little over $100,000 a year as a high school teacher (and I plan to keep working until at least age 65). Other than a car loan, I have no debts and an excellent credit rating. I will receive a pretty decent teacher’s pension and I have about $150,000 in mutual funds in retirement accounts. I can afford the larger payment on a shorter loan. Do you think this would be a good move for me?

Answer: For most people, a 30-year mortgage is a good option. People can always make extra principal payments to pay down the loan faster, but the lower monthly payment is easier to handle if they face financial setbacks such as a job loss.

Your employment situation seems pretty stable, though, and you’re in good shape with a pension plus savings. If you can swing the payments, you’d be building equity much faster and while paying less interest. You’ll still have home debt into your 70s, which isn’t ideal, but it’s certainly better than having a mortgage in your 80s.

Wednesday’s need-to-know money news

homebuyerToday’s top story: Credit cards that allow you to set spending limits for authorized users. Also in the news: 8 keys to getting approved for a mortgage if you’re self-employed, how to tell if you’re getting a good car deal, and how to find the best mortgage rates and lenders online.

Which Credit Cards Allow You to Set a Spending Limit for Authorized Users?
Setting limits.

Self Employed? 8 Keys to Getting Approved for a Mortgage and Buying a Home
It’s not impossible.

How to Tell If You’re Getting a Good Car Deal
Deciphering the doubletalk.

How To Find The Best Mortgage Rates And Lenders Online
Navigating the online mortgage waters.

Friday’s need-to-know money news

Financial-PlanningToday’s top story: How to find the best mortgage rate online. Also in the news: How to set up your first 401(k), what happens if you work after signing up for Social Security, and why we value purchases more when we pay with cash.

How to Find the Best Mortgage Rates and Lenders Online
Comparison shopping.

Class of 2016, Here’s How to Set Up Your First 401(k)
Happy Graduation! Time to focus on retirement.

What Happens if You Work After Signing Up for Social Security?
What you can and cannot collect.

Why We Value Purchases More When We Pay With Cash
The psychology of spending.

Friday’s need-to-know money news

mortgage2Today’s top story: Why debt-to-income ratio matter when buying a house. Also in the news: Crucial insurance changed to make after divorce, how to manage your finances when you’re separated, and a bill in congress that would remove credit report strikes after four years.

Debt-to-Income Ratio Matters When You’re Buying a House
How to improve your DTI.

5 Crucial Insurance Changes After Divorce
Things to address immediately.

Managing Your Finances When You’re Separated
You may be apart, but your money is still together.

This Bill in Congress Would Remove Credit Report Strikes After Four Years
Significant changes could be ahead.

Thursday’s need-to-know money news

common-retirement-mistakesToday’s top story: How much should you save for retirement? Also in the news: Tips for buying a home if you have student loans, what to expect from bankruptcy counseling, and how men and women retire differently.

How Much Should You Save for Retirement?
Establishing guidelines.

5 Tips For Buying A Home If You Have Student Loans
Navigating a mortgage and loans.

Bankruptcy Counseling: What It Is, What to Expect
Making difficult decisions.

How (and Why) Men and Women Retire Differently
Taking risks.

Q&A: Reverse mortgage due when borrower dies

Dear Liz: I was laid off from my job this year and decided to move in with my widowed dad in the suburban home that he and my mother purchased outright in 1989. However, over the years they apparently took out a reverse mortgage with a current balance of about $500,000 (the house was recently appraised at $680,000). When my father dies, how much longer can I live in the house? If there is little or no equity left, can I walk away from the house and let the lien holder handle the sale?

Answer: Reverse mortgages, which allow people 62 and older to tap the equity in their homes, are due and payable when the borrower dies, sells the home or moves out. You won’t be expected to vacate the premises the day after he dies, but you typically would have to leave the property within six months. You may be able to get an extension of that time if you’re selling the house or trying to get a loan to pay off the mortgage.

If there is still equity left in the home, it might make sense for you to try to sell it yourself to get the maximum value. Lenders only want to recoup what they’re owed and aren’t required to go to any extra effort to maximize the amount going to the heirs.

If the home is worth less than what’s owed, you can do a “deed in lieu of foreclosure,” which essentially allows you to hand over the keys and walk away. The good news is that you’re not on the hook. Reverse mortgages are non-recourse loans, which means that the lender can’t pursue the estate or the heirs for the balance owed.

Q&A: Invest or pay down mortgage?

Dear Liz: I usually finish the month with $1,000 to $2,000 left over after expenses to invest. My savings are with a money manager who has conservatively invested in a diversified portfolio. Given the uncertainty of the market, does it make any sense for me to start using that monthly excess to pay down the balance on my 15-year mortgage rather than continue to invest? The mortgage has about 91/2 years to go with a balance of just under $75,000. One added point: I would like to retire in about five years.

Answer:
It’s time to talk to a fee-only financial planner who can review your entire financial situation and offer personalized advice. The planner can give you a better idea if you’re really on track to retire within five years. If you are, then paying down the mortgage may be an excellent use of the money. Having a paid-off home will reduce your monthly expenses, which in turn can reduce how much of your retirement funds you’ll need to tap.

Before you prepay a mortgage, though, you should make sure all your other financial ducks are in a row. In addition to saving enough for retirement, you should have paid off all your other debt, accumulated a decent emergency fund (at least six months’ worth of expenses) and be properly insured.

Wednesday’s need-to-know money news

18ixgvpiu0s24jpgToday’s top story: What your bank won’t tell you when you get a mortgage. Also in the news: Retiring your debts before retirement, health care to-dos that can save you money, and apps that can keep your cell phone safe from security threats.

4 Things Your Bank Won’t Tell You When You Get a Mortgage
What you should know.

Before Even Thinking About Retiring, Retire Your Debts
Why your debt needs to retire before you do.

7 Summer Health Care To-Dos That Can Save You Money
Take a hard look at your health care costs.

5 Apps to Keep Your Cellphone Safe From Security Threats
Protecting yourself from identity theft.