How to get rid of Private Mortgage Insurance

February 23, 2018

Building a tight household budgetPrivate mortgage insurance (PMI) is required by most private mortgage lenders for borrowers who put less than 20% down on their home purchase. It can be paid for by the buyer with monthly premiums, a lump sum at closing, a combination of the two, or by the lender in exchange for a higher loan interest rate. This insurance protects the lender if the purchaser stops paying the mortgage. It does not provide the buyer with any protection. PMI can cost between .5% to 1% of the loan’s value. For a mortgage of $100,000 that could mean paying an extra $500 to $1,000 each year. This is an expense you want to eliminate as soon as you can.

Because lenders view 20% equity in a home as an indicator that they will recoup their investment, buyers who can provide more than a 20% deposit do not have to purchase PMI. If you were required to purchase PMI, you usually must keep it for at least two years. After that period, in most circumstances, you can cancel PMI once you have more than 20% equity in your home. Under the Homeowners Protection Act, lenders must automatically cancel PMI once the amount owed is 78% of the original mortgage and you are current in your payments. You can request cancellation a bit earlier, once your mortgage balance is at 80% of the original loan. Be aware that lenders will check your payment history and whether you have taken a second mortgage or a home equity loan which would influence the total amount owed on the property.

Other factors that influence how long borrowers must have PMI include the loan-to-value ratio (LTV), a calculation of the difference between the remaining mortgage amount and the property value. For example, someone buying a $100,000 house with a $10,000 down payment would be financing $90,000 or 90% of the home’s value. The LTV is 90%. LTV decreases as you make mortgage payments, but can also decrease because the property has become more valuable. Sometimes this happens because of factors you do not control, such as the average home prices in the neighborhood increasing. It can also decrease because you have taken steps to make your home more valuable. These steps could include improvements for energy efficiency, remodeling, or expansion.

If your home is more valuable than it was when you purchased it, your LTV has decreased. Considering the example above, if the purchaser adds a new kitchen immediately and the house is appraised at $112,000, the LTV ratio has decreased from 90% to 80.3% before the owners have paid down their $90,000 mortgage. If you change your LTV in this way and are current in your payments, you may want to ask for early cancellation of your PMI. You will need to get a new appraisal as proof that your home has become more valuable.

You might have to keep PMI for longer than you planned if your home has lost value leading you to lose equity. For example, someone providing a $10,000 deposit on a $100,000 home owes $90,000 or 90% of the home’s value and initially has 10% equity. If the home’s value dips to $90,000, that loan becomes 100% of the home’s value. The buyer no longer has equity and must maintain PMI until reaching 80% equity. If this happens to you, contact your lender to see if you are eligible for loan modification or speak with a HUD approved housing counselor.


Source: Argent’s Financial Resource Center

These 7 Features Help Sell Your Home

February 5, 2018

Man and his dog doing renovation work at homeYou might be reluctant to make upgrades when you’re ready to sell your house. After all, you won’t be in the house to enjoy them for long. And most projects recoup only 64% of their costs, according to the 2016 cost versus value report from Remodeling magazine.

But complacency can mean your house stays on the market for months—time that costs you money. That’s why these seven updates that rank high on buyers’ wish lists, from the National Association of Home Builders’ (NAHB) “What Home Buyers Really Want” report, are worth considering:

Laundry room. More than half (57%) of buyers say they don’t want a house without this feature; 93% want separate laundry space.

Exterior lighting. Nine of 10 buyers want this amenity, the most-wanted outdoor feature.

Energy-efficient windows. Energy Star-rated windows turn up on 89% of buyers’ priority lists. These windows can help reduce energy bills up to 15% by reducing undesirable heat gain and loss in the home.

Roomy garage. 86% of buyers want bonus garage space that’s accessible and organized.

Eat-in kitchen. This is especially important for families with children; 85% of buyers expect it.

Walk-in pantry. Another 85% are looking for pantries with built-in organization systems to keep food and preparation items out of sight. It’s a bonus if your pantry doubles as a broom closet.

Wireless security system. Fully half (50%) of buyers are looking for homes offering modern conveniences, and wireless home security systems rank the highest among technology features buyers would like to have, according to NAHB.

Home improvements can be a great way to increase value to your home, but keep this list in mind so you spend your money on the right renovations.

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Source: Argent CU Financial Resource Center

Seven Life-Changing Ways to Use Your Tax Refund

Overjoyed young man with fistful of dollars lying on moneyIn 2017, the average individual who received a tax refund for the year before got a cool $3,050 of their federal taxes back. That’s a lot of money, and perhaps a life-changing amount of cash in some instances. On the other hand, what people do with that money determines whether it helps them build wealth — or simply scratch a fleeting consumer itch.

Think about it: With $3,050 in the credit union or bank, you could splurge in ways that don’t really affect your bottom line either way. You could buy a basic hot tub for your back deck, pay for an all-inclusive vacation to the Caribbean, or piss it away on clothes and whatever else you desire.

On the flip side, you could spend your tax refund in ways that actually leave you worse off. You could put $3,000 down on a brand new $35,000 truck that saddles you with a $600 monthly payment, for example. You could put that money down on a boat you always wanted – a boat with costly repair bills and a value that literally sinks overnight.

Seven Ways Your Tax Refund Could Leave You Better Off

If you want to gain some real momentum with your finances in 2018, it’s smart to start thinking about your tax refund early. With several thousand dollars potentially coming your way, what’s the best way to make that money count?

Instead of spending that cash infusion in a way that leaves your finances neutral or even worse off, consider these tried-and-true savings strategies that will improve your finances no matter what:

#1: Pay off high-interest debt.

High-interest debt is one of the biggest hurdles to overcome if you want to build wealth. When you owe money on credit cards or carry personal loans with high interest rates, it’s difficult to get ahead when so much of your payment goes to interest only.

Here’s the good news: Throwing $3,050 (or whatever your tax refund amounts to) toward high-interest debt will always leave you better off. Making an extra payment toward the principal of your credit card or loan balances will help you save on interest automatically while moving your debt payoff date that much closer.

Just how much can you save? Imagine you have a $3,050 credit card balance at 18% APR and you have the opportunity to pay it off in one fell swoop. If you used your tax refund to repay this debt, you would save yourself almost four years of monthly minimum payments, and a whopping $1,210 in interest payments alone.

#2: Save an emergency fund.

Whether you carry some high-interest debt or live a debt-free lifestyle, building an emergency fund is essential for your financial health. Without an emergency fund, you’re prone to struggle if you face unexpected financial emergencies like surprise medical bills, expensive home repairs, or a layoff.

Ask yourself how long your money would last if say, you lost your job this week or you could no longer work due to an injury or illness. With no emergency fund, your savings would likely dwindle and you might even need to use credit to stay afloat. With a healthy emergency fund, on the other hand, you’d have time to figure things out.

While most experts suggest you stock an emergency fund with at least three to six months of expenses, even a smaller amount is a good place to start. Saving $3,050 now can even turn out to be life-changing later on if you find yourself in a situation where you’re suddenly desperate for cash.

If you have a savings account, consider adding your tax refund to the pot. If not, open a high-interest savings account and start funding it today.

#3: Contribute to a health savings account (HSA).

A health savings account (HSA) is a tax-advantaged savings account set up specifically to pay for healthcare costs. Once you open this account, you’ll be able to deduct contributions up to a certain limit, watch your money grow tax-free, then use your funds for qualified healthcare expenses on a tax-free basis. And if you don’t use up your HSA funds by the time you turn 65, you can withdraw funds for any purpose – even to pay for retirement.

The myriad tax advantages this account offers are the reason it’s commonly referred to as the best retirement plan you’ve never heard of. HSAs are helpful when it comes to saving for healthcare expenses, but they may be even more advantageous for retirement.

Either way, individuals can contribute up to $3,450 and families can save up to $6,900 in an HSA account in 2018, provided they have a high-deductible healthcare plan. The IRS defines high-deductible plans as those with a minimum deductible of $1,350 for singles and $2,700 for families. Maximum out-of-pocket amounts on qualified plans are also limited to $6,650 for individuals and $13,300 for families in 2018.

#4: Contribute to a traditional or Roth IRA.

Even if you contribute to a 401(k) or another type of employer-sponsored retirement account, you may also be able to add money to a traditional or Roth IRA. Both traditional and Roth IRAs are easily opened online and simple to use and understand.

The big difference between them is that traditional IRAs allow you to contribute pre-tax dollars and deduct your contributions if you meet certain income requirements. Roth IRAs, on the other hand, let you contribute after-tax dollars and allow you to take tax-free distributions when you retire. Roth IRAs also have income limits that make it harder for high earners to contribute.

If your emergency fund is in good shape and you don’t have a lot of high-interest debt, opening one of these accounts or adding to an existing account could be a smart move.

Just keep in mind that, for 2018, your total contribution to both a traditional and Roth IRA cannot exceed $5,500 (or $6,500 if you’re ages 50 and older).

#5: Start several savings buckets.

If you have competing financial goals and want to save for all of them, starting several different savings accounts can be a smart move. Maybe you want to update your kitchen within the next few years, but you also want to save up for a newer car and a summer vacation. By starting a few different accounts, you could give yourself a head start toward achieving everything you desire.

You could spread your tax refund across several accounts for starters, then commit to weekly or monthly contributions so each savings bucket will grow. Just make sure you stash your cash in a high-interest savings account so you can earn at least a little interest on your deposits.

#6: Invest your refund.

Maybe you’re already invested in your workplace retirement plan or an IRA, and want to try something new. There are many other worthy to invest, so you could always open a brokerage account and invest separately from your retirement funds. The best online stock brokerage firms for 2018 make it easy to learn investing basics online, start investing with small sums of money, and do it all without excessive fees.

Beyond opening a brokerage account, there are other investing avenues to consider as well. If you’re saving for college, a 529 plan is an obvious choice. Riskier alternative investment options might include investing in peer-to-peer lending with a company like Lending Club or Prosper, in real estate notes with a firm like Fundrise, or even in small amounts of cryptocurrency if you can handle the volatility.

At the end of the day, any way you can learn more about investing while also growing your wealth is probably a good thing.

#7: Invest in yourself.

Finally, don’t forget about the most important asset you’ll ever have – yourself. If you receive enough cash in your tax refund to invest in anything, spending that money to improve yourself or your life may pay off more than anything else.

Fortunately, there are a ton of ways to invest in yourself – and some of them don’t cost a dime. You could invest in your mental and spiritual health by meditating, getting a good night’s sleep, or exercising regularly, for example.

In terms of financial investments, there are a ton of ways to use $3,050 (or any other amount) to your advantage. You could pursue an advanced certification that makes you more valuable to your employer, for example. You could take a course in a subject that interests you, purchase the start-up equipment or software needed for a side business, or invest in continuing education that could leave to higher pay and better job security in your current career path.

Any investment you make in yourself will likely pay off in the short term and over the course of your life and career. So, once your other financial ducks are in a row, don’t forget to spend your money where it counts – on self-improvement.

The Bottom Line

Whether you receive $500, $3,050, or considerably more in your tax refund this year, it’s up to you to put this cash to good use. You can use it to splurge on something you’ve always wanted, or you could invest it in a way that could make you richer in the long run.

And, if you can’t decide which way to go, maybe you should do a little of both. Buy something you want for sure, but stash the rest of your cash away for a rainy day. While it’s hard to do the right thing when you receive a windfall, your future self will thank you.


Source: The Simple Dollar

Socially Responsible Investing: Align Your Values and Your Money

January 29, 2018

investment topicsTaking charge of your financial future should be a given for most Americans. We no longer rely solely on our employers to provide us with a pension or retirement fund, and many of us have decided to start our own investment funds. But are you a person that wants to know where your money is being invested? Is it important to you that the company you have invested in shares your values?

Many people are mindful of the products and services they use. They want to know if the products are environmentally friendly, if the manufacturer treat its workers fairly, and, if testing is done, is it done without the use of animals?

If a person considers these things with their day to day purchases, why not consider these factors when investing? Is there a way to be sure your investment portfolio is socially responsible as well? This is a great opportunity to talk to the financial experts at your local credit union about a relatively new type of investing.

Socially Responsible Investing (SRI), is defined as “investing with your ethics in mind, whether that’s avoiding tobacco or oil companies, or seeking out companies with a social or environmental mission” according to Susan Shain in “The Beginner’s Guide to Impact Investing.” Another similar style of investing is referred to as “environmental, social, governance” (ESG) investing, which requires companies to pass certain criteria. For instance, they are rated on how well they treat their employees and whether they follow environmentally friendly practices.

A big concern with SRI is whether it can yield high returns. Since it limits the number of companies you can invest in, some conclude it is not a great maximizer for overall growth in your investment portfolio. Some investors feel it may be wise to forego SRI and invest in more high-yielding securities. Then after you have created your wealth, philanthropically support the environmental and social causes important to you.

The good news is SRI has proven to be a sound investment strategy. According to the Global Impact Investment Network (GIIN), portfolio performance of these companies overwhelmingly meets or exceeds investor expectations for both social and environmental impact and financial return. This includes investments spanning emerging markets, developed markets, and the market as a whole.

GIIN reports that, “in terms of broad SRI investments, some cite the MSCI KLD 400 Social Index, which focuses on companies with high ESG ratings. Launched in 1990, it was one of the first SRI funds, and since 1994, its annualized return has been 9.89 percent. That’s comparable to the S&P 500’s historical average of 9.8 percent.” This is good news for those that want to invest responsibly.

Wanting to be socially conscious may be fairly new in the investment world, but it is truly an emerging market. According to Shain, “(SRI)… has taken off, and it’s no wonder: while people want to watch their money grow in the market, they don’t want to stash their cash with corporations they dislike.” She goes on to state, “78 percent of millennial investors have either put their money into these types of investments, or plan to in the future.” This type of investing is becoming a more popular part of portfolios and its reasoning makes perfect sense. You can invest wisely and conscientiously.


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Source: Argent CU Financial Resource Center

Why is My Credit Score Never the Same?

January 22, 2018

Meeting with financial advisorChecking your credit score can be a bit overwhelming and even anxiety-inducing. Where do you get your score? Should you pay for it? Should you get it for free through your bank or credit card issuer? Why is your score different everywhere you look?

With all the questions you may have, I figured it might be best to just bring it back to the basics.

Differences Between Credit Scores

It’s a common complaint: you checked your credit score online and when you applied for a loan or new credit card, your score was different. What gives?

Well, there isn’t just one main scoring model. In fact, there are several and sites, such as Turbo, that provide a free score may use a different model than the particular bank, lender or credit card issuer that you contacted.

For example, when you check your credit score for free on an app like Turbo, you’re using the new Vantage 3.0 model from TransUnion. Vantage 3.0 is the latest scoring vehicle that allows millions of people to access their credit scores. For instance, Vantage doesn’t require users to have at least six month’s worth of credit history or an update on their credit history every six months.

The advantage of the Vantage 3.0 score is that it compiles more information from users, which means lenders have a better idea of what kind of borrower you might be. The better the predictive model is, the more likely it is that lenders will adapt it.

Another change is that Vantage 3.0 doesn’t report any collections that have been paid in full, a boon to those who are working on repairing their credit history. There’s also more detailed information and scoring related to delinquency and default.

Many people are aware of the FICO credit score which is popular with lenders. What they might not know is that scores for mortgages are factored differently than for credit cards. Because the lender is taking a bigger risk by approving you for a mortgage, they’ll scrutinize your account more carefully, sometimes resulting in a lower score.

The Fair Credit Reporting Act of 1970 stipulates what personal information can be gathered and used when determining your score. It also gives consumers certain rights as far as getting copies of their credit report and disputing inaccurate information.

How to Check Your Credit Score

You can check your credit score directly through an app like Turbo once a month for no extra fee. The score is compiled from the TransUnion credit bureau’s report. You’ll also see advice on how to increase your score, as well as any derogatory marks that might be dragging your score down.

If you want to check your credit report for more details, go to That’s the official site to pull your credit report from the three credit bureaus – TransUnion, Experian and Equifax. You can check your report for free once a year.

Consistently checking your credit report is important. According to the Consumer Financial Protection Bureau, mistakes are surprisingly common. The more often you check your credit score and report, the sooner you can see if there are any errors or negative marks. Worried checking your report will hurt your score?

How a Credit Score Is Compiled

Your score is calculated from several different factors. The percentages vary by credit bureau.

The FICO credit score ranges from 300 to 850, with anything over 700 considered good or excellent. To qualify for a loan, you generally need a score of 600 or higher, although scores of 740 will get you the best interest rates.

The Vantage score works on the same range, but the bands are just a bit different.

When to Check It

If you’re about to apply for a mortgage or other major loan, it’s helpful to check your credit score. You want to know if you have a good enough score to take advantage of the best interest rates or if you need to hold off on any major purchases. I like to check mine every month through Mint to make sure I’m right on track.