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Getting the best value from College

by CreditScore.net Staff on January 20, 2012

It’s that time of year. High school seniors are getting college acceptance letters and are already starting to think about where they will be going to school next year. College seniors are thinking about their next step as well: Employment or more school? Decisions… decisions.

A little while ago, we did an article breaking down whether college was still worth the investment with the rapidly rising costs of tuition. And while we touched on some ideas for making the most of your time at college, we wanted to elaborate on some key areas students and potential students alike could focus on in order to make sure they’re getting the best bang for their tuition buck.

Choosing College

For most of you, the single most important decision for your financial future is that of your college education. Not only how much it costs, but also how much that education empowers you to earn money doing your craft for the rest of your life. Those who don’t take this decision seriously enough are most likely to find themselves either lacking employable characteristics or with more debt than they can handle; or both. Those who consider the choice like the important investment that it is, are much more likely to come out on top. So like most investments there is initial investment (cost), potential return (salary), and risk (joblessness). Here are some variables to consider:

Consider employment rate & mean salary over “reputation” - This doesn’t just go for the schools you’re considering, but the specific program/focus/major as well. Some of the top schools may not have a great program for what you’re interested in. Not to mention, some local state schools and/or community colleges may have very good programs for your area of study. This is a great place to start, but be sure to further research specific programs you’ve been accepted for.

Explore program options – More than just picking the program that’s best for your career (and this SHOULD be the focus) consider some options that may cut costs. 3 year degrees, 4 and 1 Masters degrees, or even other programs that allow transfers to save money. I had the option of attending a community college transfer program with my choice school. They allowed local students to spend 2 years at the specific program and have automatic placement in the (much more expensive) university for the final 2 years. It would have saved me almost $50,000 in tuition costs for the exact same degree. In retrospect, I really wish I had done it…

Negotiate with the Financial Aid office – If you can, sit down with a financial aid officer for your school of choice and go over the package they’re offering. Inquire about any other financial assistance, grants, scholarships, etc. Be polite and make it clear that you want to attend their school, but could use more financial help for it to make sense. Sometimes, schools have extra grant and/or scholarship money they could offer or that you could qualify for. Most of it is need based, and this isn’t always the case, but it certainly doesn’t hurt to ask. It worked for me. Not only did I get some extra grant money, they eventually gave me a work-study job in the financial aid office!

Calculate and understand student loan debt – This one is on the parents. Make sure your child understands their financial responsibilities they will have when they graduate. Not enough students understand what they’re going to be responsible for, in terms of loans, when they take them out. Then as the enter the workforce, they’re shell-shocked by how much they owe. Before they make the final choice of where to attend, sit them down and show them how much debt they will accrue in 4 years (at each college). Not only will this help them prepare for the inevitability of paying loan payments, but it will also make them much more aware of the financial decision that is before them.

While In College

The choice of what college to attend isn’t the only factor for making sure you get the most from your educational investment. The rest is on the student to follow through by doing the hard work to earn those A’s. But grades aren’t the only important part of the college experience, especially as employers are concerned. Employers want to see focus, career oriented students. But perhaps most importantly of all, employers want to see experience.

Start thinking about your career – If you aren’t already fully focused on a career by the time you sit in your first classroom, it’s time to start considering it. The further you go into college, the more important this becomes, so the earlier the better. That’s not to say you can’t enter school as an undeclared freshman, it just means these students should spend the most time exploring those options than the rest.

Get to know your academic adviser – This is perhaps the most important faculty-student relationship you will have at college, so make the most of it. Make an early appointment and be one of the first students he gets to know as early as possible. They can help guide you to programs, classes, and other professors that are best for you. And theirs should be the first letter of recommendation you hand out when applying for relevant jobs, co-ops, and internships.

Spend time at your school’s career center – Another great resources at your school is the career center. They usually offer resume/cover letter help, information on job fairs, open positions, and have the best connections for those key first foot-in-the-door opportunities. Don’t miss out on the help they can offer.

Gain relevant work experience – This means internships, co-ops, work-study, and summer jobs. Any way shape or form to get hands-on experience doing the things you want to do as a career. I turned down a summer internship with real work experience because it was unpaid so I could earn some cash delivering Pizzas. After college, my resume lacked that one thing employers really look for to get me an interview for the positions I really wanted: hands-on experience.

Secondary degrees

Going for a masters degree, P.H.D, or M.D. is another huge financial decision. This time, however, the student must have already be goal oriented. There also needs to be a clear financial benefit to going for the additional degree either in the increase in salary and/or financial assistance to make it worthwhile. And you must weigh this decision with that of entering the workforce (or attempting to) with the degree you already have.

Must have a goal/career in mind – For most Medical Doctors, this is a no-brainer. There is a clear salary advantage as well as job demand for doctors in the medical profession. And for the most part, these students have known this is what they want to do since high-school.

For the rest, however, the decision isn’t so easy. Especially, it seems, for would-be lawyers, a profession that for the longest time seemed to be “recession proof”. But again, the more specific and focused your goals are, the better off you’ll be when you enter the workforce.

Calculate ROI – It’s essentially the same way you would calculate ROI for undergrad you take into consideration the potential differences in salary as well as chances for getting a job vs. the cost of the additional degree. Perhaps the one x-factor in this equation is the potential to be considered “overqualified” for entry level positions but lacking work experience for upper level experience. That’s why in many cases, delaying the choice and potentially going back to school is wise for some disciplines.

Categories: Advice

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Things to Consider Before Buying a Home

by CreditScore.net Staff Writer on January 17, 2012

Buying a home is a big investment and a big milestone in a persons life, but there are many things that must be considered before doing so. The very fist thing you want to do is spend some time saving up money for a down payment, there are ways to work around a down payment but it is best to have one and it will also make your mortgage payment lower.  Another one of the very first things you should do is check your credit score to make sure it is in good standing so you an get a loan. Having good credit is the key to buying a new house, so if your score is not at least in the mid 600 range then you should work on repairing the issues that are causing the problem. In many cases the problem that is causing a low credit score may have been something you forgot to pay in your past, in this case it is important to pay these things off. Once you pay off any outstanding bills you will see your score go up but it will not be an instantaneous thing, it usually takes at least a month or two before it reflects on your credit score.

Once you know that your credit is in good standing the next thing you need to think about is how much can you afford to spend on a house. This is another step you can do yourself, the best way is to make a list of your monthly bills that will always be there even after moving into a new house. This includes utility bills and you need to remember in larger living quarters these may go up. Because of that you should add a little bit to what you are currently paying for utilities like heat an electric since they are the main two things that will go up. Once you have a monthly total of all your bills and groceries you need to see what is left going by your current household income. Obviously you do not want every leftover penny to be your mortgage payment, so you need to ensure you also have money to put away in case of an emergency and any spending money you may use during the month for going out with your wife, or to a football game with your friends etc. Once you consider these extra things you can take the estimated amount out of your leftover money each month as well. What you have left is probably the maximum amount you can afford for your house payment. After you know this you can start to figure out what price range of homes you want to look at and contact a real estate agent or start looking on your own and then contacting the realty company listed on the sign of an available house you are interested in.

Usually finding the perfect house will take you a couple months, and then after you find it there is usually another month or two before you will have a closing. During this time you should be saving every penny you can because when closing time comes you will have some unexpected expenses arrive on top of the normal closing costs. It is not a definite that you will have extra expenses, but more often than not that is the case. Also be prepared to find hidden problems in the house that the prvious owners never told you about, this happens all the time and in most instances you will have to invest some money into the house right after you buy it so having extra money after the closing is important.

A few other things you may end up needing are your tax returns from the previous year or two, paycheck stubs for everyone whose name is on the mortgage. Having a recent credit report on hand when you are first talking with a mortgage loan provider will help as well, and will keep your credit score from being accessed for a second time since you already did so in the beginning.  Going in prepared will make the whole process go much faster and will be a lot less stressful on you, and soon enough you will be in your new house!

Here are some links to help you with some of the steps you need to take:

Mortgage/Loan Calculator

Home Budget Worksheet for Buyers

Image credits: pnwra

Categories: Advice

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12 things that will cost less in 2012, but you still shouldn’t buy

by CreditScore.net Staff on January 11, 2012

There was a recent article on msn money by a guest poster from Dealnews called: 12 things that will cost less in 2012. It was a fantastic article highlighting why this year the following 12 items will probably either fall in price or remain low for consumers. It is refreshingly specific and more than likely accurate about its pricing forecasts, and it’s a very nice read for consumer optimism.

With that said, you probably still shouldn’t buy any of these things. Let me qualify that statement: most of you shouldn’t. It’s not that you can’t get a good deal on any of these items this year, it’s just that from a sense of frugality, almost every single item is a consumer value trap. Purchases of excess that while cheaper than before, still may not be a frugal purchase.  Just because they’ve dropped in price, doesn’t mean they make sense to buy or that you’re even getting the best value.  Here’s why:

iPad 2

These things are great. They’re a lot of fun, and as tablets go, it doesn’t get much better. And of course the iPad 3 is coming soon…so the price should drop. The problem is, when it comes down to it, they’re a VERY EXPENSIVE toy. They don’t make a very good replacement for computers unless the only thing you do on the computer is browse the web. But even as web browsing machines go, tablets are still a costly solution. And even after the price drops, the iPad 2 will still be “middle of the road” in terms of tablet prices… for an outdated model.

Wine

This is an item that you can buy on the cheap already and get a great value. Studies have shown that most wine drinkers can’t taste the difference in quality of ‘proportionately’ priced wines. As a result, discount wines are selling very well. This, then, causes brands and wineries that claim higher quality to drop their prices to meet the demand. So a $30 bottle of wine will cost $20, but the “two buck chuck” remains $2. So my question is this: if you already enjoy discount wines, why would it make any more sense to pay $20 for a bottle of wine than $30? It wouldn’t.

If you haven’t tried two-buck chuck, or other discount wines try them.  I think you’ll be pleasantly surprised.

Desktop replacement laptops

I don’t have a problem with people buying powerful laptops that can do the job of a desktop. Especially if portability and performance are important to your computer choice. I have a problem with the term “desktop replacement”. No matter how inexpensive laptops become, for working at a desk, nothing can replace the value of a desktop with a separate monitor. You still get the best bang-for-your-buck on performance (on both the screen and the computer itself) and are a good amount easier and cheaper to upgrade. Also, because computers lose value faster than monitors, when you need to upgrade the entire machine, you aren’t replacing both computer and screen at the same time.  It’s all about value.

Android tablets

If I were to buy a tablet, it would probably be an Android.  The thing is: I simply don’t have a need for another $200+ toy that my cats can break. My netbook is more than adequate for browsing the web on the couch, plus when I’m on the road, I can actually use it to do work. If you really love the apps, you might consider getting an Android smartphone. Sure, they’re not as fun as a 10” screen, but that ultra-portability (i.e. pocket size) coupled with the functionality of a phone & tablet in one device, there’s a much better value there.

Solid State Drives

The time may be soon that the advantages of SSDs and their rapidly dropping prices have eclipsed the value of traditional hard drives. But the fact remains: price per gigabyte is still higher for SSDs. So once again, “value” for this product is more of question of needs and uses than price.

Car Rentals

I’m actually excited about this one because my wife and I just booked a vacation to Miami to visit my sister. The last few days, we’re planning on renting a car and driving out to the keys. I can’t wait. Otherwise, the price of car rentals isn’t much of a thought to me as a consumer.  And unless you were already planning on it too, renting a car will make no more sense this year regardless of the price.

Ebook Readers

These things are fantastic. In fact, for some people, it’s the one item on this list I would recommend to buy this year. They’re cost effective and more environmentally friendly than books while still being easy on your eyes (unlike tablet and computer screens). I honestly recommend them for anyone who loves to read a lot.

Otherwise, however, they’re not much use. That’s why they seem to be losing market share to tablets. Even the Amazon kindle brand has given into the tablet craze. Old models seem to be going the way of the dodo bird. That’s why it might be a good time to buy.

Apple MacBook Air refurbs

I have nothing against Apple computers. As great as they are, I simply don’t believe they’re worth the money. But, if you must have one, this might be the best time (and way) to do it. When the newest model (expected this year) comes out, the current model of macbook airs will drop in price, and refurbished laptops may even go under $700. But consider, for a second, that the very same article that tells you this also points to brand new “desktop replacement” laptops for under $300. So just to recap: the most cost effective way to buy this computer would still cost more than twice as much as a comparable brand new PC laptop… for an older & refurbished model. That’s not “value”.

Standalone GPS units

Few inventions have made long road trips and traveling by car to unknown places a more pleasant experience than the GPS device. And because smartphones are more than capable as such, prices have dropped significantly for standalone GPS units. Still, if you’re considering this as a purchase, I highly recommend, first, considering going all-in and getting a smartphone instead. At nearly $100, a GPS unit can do one thing well. But with some new plans, you can have a smartphone (that acts as a GPS device and so much more) for about the same price (not including data fees). You do the math.

Media Streamers

If you enjoy streaming services such as Netflix, you probably have a device or two that streams directly to your television or home theater. Now, many blu ray players and even TV’s include services making stand-alone streaming boxes (like Roku) less relevant. But for those who have older or multiple televisions you’d like to use these services with, this is the ideal solution. And while the dropping prices are nice for those who were waiting for a cheaper way to add netflix to their bedroom TV set too, they’re value is limited beyond that.

3-D HDTVs

Televisions in general drop in price quite rapidly. It’s one of those purchases where you always pay a premium for the newest models & technology. And because 3-D TV sales haven’t been great, the extra supply is causing prices to drop even faster. But they’re still not dropping below comparable 2-D sets, and with the added cost of the glasses, 3-D blu ray player and discs, in the end: the added feature still seems pricier than it should be. For a technology that might not be supported 10 years from now.

Home Prices

Historic low interest rates and dropping home prices are the recipe for a fantastic buyers market. If you’ve been waiting for the right time to buy a home, now might be that time. But just because the conditions are right and financially it makes more sense to buy than rent, that should be low on the reasons for making such a purchase. There are advantages to renting over owning a home even when (financially) you are losing money by doing so. If you’re settled down, starting a family, and/or are otherwise ready to own a home, now is the time. Otherwise, don’t get into something just because experts tell you this is the best time.

Categories: Advice

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Buying Foreclosure Properties: Tips and Considerations

by CreditScore.net Staff Writer on January 10, 2012

According to the Mortgage Banker’s Association, one in every 200 homes winds up in foreclosure, with as many as 250,000 new homeowners entering foreclosure each quarter. Tough economic times typically see increases in the number of foreclosures on single family homes. Part of the increase is due how many homeowners already straddle the line between economic viability and financial ruin.

Numerous studies and surveys of average Americans bring to light some shocking statistics regarding the financial health of the average family. More than half live paycheck to paycheck, with almost as many having less than three month’s worth of bill money saved. In fact, almost half of all Americans have less than $5,000 in cash, retirement savings or other liquid assets. With so many struggling to stay afloat financially, it is understandable that a tough economy brings on more foreclosures.

Distressed Properties 101

Before jumping headlong into buying foreclosed real estate, buyers should understand some key terms. Reading real estate listings, watching commercials on television, or otherwise hearing about the benefits of buying foreclosed homes often leads buyers to get ahead of themselves. Without understanding the different types of distressed properties, buyers can easily pay far more for a property than they would otherwise.

The three most common terms used regarding distressed properties are short sale, foreclosure auction and Real Estate Owned (REO). Many new buyers mistakenly associate all three as meaning the same or similar things. In fact, each is very different and can have tremendous impact on the purchase price of a home.

A short sale is a home offered for sale by the owner, typically for less than what is owed. Acceptance of a bid depends on the bank agreeing to the sale, usually in an effort to save on the cost of foreclosure proceedings. A foreclosure auction is the first step banks take to recuperate the balance owed on a mortgaged property.

REOs are homes which have already reverted to the lender, typically after a failed foreclosure auction. While not always the case, an REO is typically cheaper than a short sale or foreclosure auction. Most often, the bank lists opening bids at a foreclosure auction based on the balance owed on the mortgage. If a home has little equity, that typically translates to a high initial bid at auction. Experienced realtors, investors and other bidders know that waiting until the house becomes an REO usually results in a lower price.

The Bidding Process

Making an offer, known as placing a bid, varies from lender to lender. State laws may also dictate how the bidding process works. Some sellers, such as HUD and Fannie Mae, limit who is allowed to bid and when. For example, Fannie Mae offers a First Look program, a period of time in which only those buyers who plan to live in the home are allowed to place bids.

While the bidding process might vary, it typically follows a similar pattern, depending on if the property is offered via a foreclosure auction or as an REO. Typically, foreclosure auctions are operated according to state law. A third party trustee is named and bids are made through the trustee. Depending on the state, each bidder may have to present either a cashier’s check for the full bid or a percentage of the total bid. In this case, the buyer typically sets the bid amount, although some auctions may list a minimum opening bid.

Most often, bids are submitted during an open period, where sealed bids are collected for a specific period of time and opened on a set date. The highest, most qualified bidder, if the bid amount meets the bank’s terms, wins. In some states, foreclosure auctions operate more like traditional auctions, with buyers increasing their bids in an attempt to become the highest bidder. If the home is not sold at the foreclosure auction, it becomes an REO. The lender then becomes the owner and decides how to accept bids or offers to purchase.

Buying an REO

Once a property becomes an REO, potential buyers must follow the lender’s guidelines for making an offer. Some sellers, such as Fannie Mae and HUD, only allow certified realtors to make offers on behalf of their clients. Other sellers leave it to the buyer to decide if they want a realtor or a real estate attorney involved. With REOs, the bank determines the selling price, usually based on market value. In some cases, the bank will set the price lower than market value, in an attempt to attract multiple buyers.

To prevent overpaying for a foreclosed home, buyers should understand the home’s appraised value before engaging in any bidding war. Likewise, if an appraisal is needed, buyers should understand the process can take months. Contacting the appropriate parties early is crucial to speeding up the process from offer to closing.

Tips for Finding and Buying

Buyers have numerous avenues for finding foreclosed properties available for purchase. Realtors and some real estate attorneys have access to listings, such as those listed in the HUD Home Store.  Private buyers can contact individual lenders to inquire about available properties. Most lenders have entire departments devoted to handling foreclosure properties. This is typically the same department with whom buyers must consult about appraisals.

Before placing a bid or making an offer, buyers should keep the following points in mind:

  • Set a reasonable bid limit
  • Foreclosures are not always a bargain
  • Homes are sold as-is, including damage, faulty systems, and other encumbrances

In many instances, buyers have the burden of educating themselves on buying foreclosed real estate. While some trustees and banks will offer details on their procedures, that is only part of the equation. To truly understand the process, buyers should observe an auction or employ the services of a realtor or real estate attorney.

Categories: Advice

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Mortgage Lenders Hunt Home Owners Even After Foreclosure

by CreditScore.net Staff Writer on January 8, 2012

No one ever buys a home with the intention of one day losing it to foreclosure or being forced by circumstance into a short sale. Unfortunately, that is exactly the situation in which many homeowners find themselves. Financial struggles push thousands of homeowners into short sale or foreclosure every year. When the housing market collapsed in 2008-09, many found themselves upside-down in their mortgage and opted to simply walk away, leaving the bank to foreclose on the property and sell it for whatever a buyer would pay.

What many homeowners fail to realize is that repossession of a home through foreclosure does not necessarily release the homeowner from his or her financial obligation. Nor does a short sale always alleviate the debt owed to a lender. When a bank or other lender takes possession of a home through foreclosure, the objective is to sell the home to recover the balance owed on the mortgage. Often, the realized sale price may be less than the balance of the mortgage. Likewise, when a house is sold under short sale, the homeowner sells for less than what is owed, leaving a balance due to the lender.

Debt Liability and State Laws

So, what happens to the difference between what is owed and what the home sells for in a foreclosure sale or short sale? Typically, the homeowner is liable for the difference, known as the deficiency.  In some states, that debt can follow the homeowner for up to 20 years. Depending on state laws, the lender may have the right to pursue a legal judgment against a borrower for any deficiency, commonly known as a deficiency judgment. With or without a legal judgment, the lender can sell the debt to a third party collection agency, who can then pursue legal action against the borrower.

State laws regarding deficiency judgments vary. For example, Minnesota allows deficiency judgments, provided certain conditions are met. Lenders must meet different criteria, depending on whether the property is residential or agricultural. Additionally, lenders must file for a judgment within a specific time frame after the sale.  Most other states allow deficiency judgments, but impose limitations on types of mortgages, house size, time allowed between sale and filing, or other conditions. Few states bar deficiency judgments, although many require that a lender declare their intention to pursue a deficiency claim.

It’s Up to the Lender to Choose

Aside from state laws, the choice to pursue any difference between sale price and amount owed is up to each lender. Not all lenders pursue deficiency judgments against all borrowers, but rather use the threat as a deterrent against default. The Department of Housing and Urban Development (HUD), for example, mentions the possibility of a deficiency judgment in a pamphlet about avoiding foreclosure.  In many cases, lenders do not pursue deficiency judgment due to the time and expense involved in collecting the debt, not to mention the unlikelihood of receiving payment.

In 2009, the Federal Reserve Bank of Richmond conducted an extensive study regarding lenders and deficiency judgments. Specifically, the study created a model by which to determine how often lenders utilized deficiency judgments and how such practices affected borrower decisions to default. According to the study, the use of deficiency judgments is rare. This is partly due to regulations on time, fair market value and other state laws that make the process onerous and expensive for lenders. Furthermore, lenders typically pursue other, less expensive means to gain possession of a home in default, such as a voluntary surrender or conveyance of the property, known as a deed-in-lieu.

Ideal Candidates for Pursuing a Judgment

Although not always the case, lenders typically reserve pursuing a deficiency judgment, and the legal expenses involved, for only those borrowers from whom the lender can actually recover. For example, borrowers with considerable wealth are more likely to pay a deficit to protect other assets. Such borrowers are also less likely to file bankruptcy to escape paying the judgment, as this could result in forfeiture of assets. According to the Federal Reserve study, wealthy borrowers are also the most likely to respond to threats of deficiency judgment when facing default, with many opting for friendly foreclosures or short sales, as opposed to simply walking away from a property or contesting a foreclosure.

Wealth is not the only factor in whether a lender chooses to pursue deficiency. If the homeowner causes intentional damage to the home, by removing built-in appliances, cabinetry, major home systems, or otherwise vandalizes the home prior to foreclosure, the lender may pursue on the basis of waste. Many states protect lenders from unnecessary cost resulting from waste, but require including such damages as part of a deficiency judgment.

How to Avoid a Deficiency Judgment

Even though statistics show lenders rarely pursuing deficiency judgments, few homeowners are willing to risk whether their lender will pursue or not. In states with no recourse for lenders, borrowers are more likely to default, at a rate of more than 60 percent. These borrowers may have little regard for any balance remaining after the sale, owing to state restrictions. However, in states that do have recourse, borrowers are advised to address the issue of deficiency with their lender before the home is sold.

For example, with a short sale, the borrower must get the lender’s release in order to sell for less than what is owed on the home. As part of that release, the borrower can negotiate forgiveness for any deficiency. Likewise, homeowners can negotiate a non-judicial foreclosure, such as a deed-in-lieu, and also obtain deficiency forgiveness, prior to surrendering the home. Homeowners should be aware, however, that there may be income tax liabilities associated with any forgiven debt. The IRS offers information regarding relief from tax liabilities on mortgage debt forgiveness.  Borrowers should be advised to carefully weigh all the risks and benefits, including tax liabilities, before proceeding with any type of foreclosure or short sale.

Categories: Debt Collectors

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