Shopping for a Lender (Part 2)

October 24, 2009

It is just as important to look for a lender with a reputation for integrity and service. You will be sharing all of your most private financial information with your loan company. Signing for a loan is a big commitment, so make sure that you feel comfortable with your lender. Here are some important items to consider when shopping for a mortgage lender:

Rate Commitment
Many lenders quote an interest rate at the time of application. However, if market interest rates should go up or down during the period before you close on your loan, you need to find out what interest rate you will ultimately be charged. It is also important to know how long the lender will commit to this rate.

Loan Servicing
After your loan is closed, you will be dealing with a loan servicing company. The loan servicing company will accept your payment every month and handle any questions you may have concerning your mortgage balance. Many lenders service their own loans while many others sell their servicing to outside firms. You should know upfront that the lender you choose works with reputable loan servicing companies.

Considering the cost involved, your final choice of a lender should be one who offers you a good deal financially. However, keep in mind that you will be dealing with your lender for many years and it is always easier to deal with people you like and trust.


Shopping for a Lender (Part 1)

October 22, 2009

When shopping for a mortgage lender, you should make price comparisons, but interest rates alone should not be the determining factor in choosing a lender. Here are some important items to consider when shopping for a mortgage lender:

Fees
Mortgage lenders charge fees for a variety of things such as filing an application, appraisal, credit reports, etc. Be sure to know upfront what the lender charges are so that there are no surprises at closing. Lenders are required to state interest as an annual percentage rate (APR). This rate takes into account the loan origination fees. When comparing interest rates among various lenders, be sure to use the APR as your measure.

Processing Time
What is the average length of time for a mortgage loan to be processed? This is an important question to ask if you need to move into a home quickly.


The Whole Picture

October 20, 2009

Do you have the diversification you need to keep your portfolio on track even when the stock market falters? The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.

Does your investment portfolio have the diversification you need to sail smoothly through the ups and downs of the market? True diversification means more than spreading your assets around to a handful of stocks. It means putting assets into a variety of different types of investments beyond the stock market.

The younger you are the more aggressive you can be. While no strategy assures success or protects against loss, a portfolio heavily weighted in stocks might make sense for investors in their 20s and 30s. But the closer you are to retirement, the more important it is to spread some of your money to other types of investments.

Make sure you have the diversification you need to keep your portfolio on track even when the stock market falters, The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.


The Loss Damage Waiver

October 15, 2009

You’re standing at the rental car counter and the car agent asks if you would like to purchase the insurance on the car you are about to rent. The insurance seems so expensive. What do you do?

The insurance the rental car companies are trying to sell you is called “the loss damage waiver”. Purchasing this coverage from the rental agency relieves you of any responsibility for damage to a rented vehicle. Sounds good on the surface, but is it? It’s possible that you have probably already purchased the majority of what the rental agent is offering. When you purchase physical damage coverage (comprehensive and collision) for a car you own, the coverage will extend to any short-term rental vehicle. In some states (Minnesota included) the coverage for the rental vehicle extends from the liability coverage you purchased for your own personal vehicle.

Think twice before you purchase coverage you may very well already have.


Plan To Get There!

October 13, 2009

Planning is the only way to make sense of the five things you can do with money. If you don’t plan, you will likely spend more, save less, invest less, and do nothing to reduce your taxes.

Don’t sell yourself short by planning your retirement based on some arbitrary percentage of your income. “Needs planning” is a good start for someone who has given no thought to retirement savings. It’s one way to convince people that they should save something, but it’s not good for people who want to do better than just get by. Don’t settle for mediocrity in your investment planning; try to excel. It’s fine to set a floor for what you will need, but then aim higher-and plan to get there! Become a “wants” planner, instead of a “needs” planner. Only when you determine what you want from life can you determine the role that money will play in helping you achieve your dreams.


What is “The Fed”? (Part 3)

October 8, 2009

The most effective tool the Fed has, and the one it uses most often, is the buying and selling of government securities in its open market operations. Government securities include treasury bonds, notes, and bills. The Fed buys securities when it wants to increase the flow of money and credit, and sells securities when it wants to reduce the flow.

Sometimes, in order to understand why you need something, it helps to find out what it was like before that “something” was created. Before the Federal Reserve was created in 1913, there were over 30,000 different currencies floating around in the United States. Currency could be issued by almost anyone — even drug stores issued their own notes. There were many problems that stemmed from this, including the fact that some currencies were worth more than others.

There were even times when banks didn’t have enough money to honor withdrawals by customers. Imagine going to the bank to withdraw money from your savings account and being told you couldn’t because they didn’t have your money!

Before the Fed was created, banks were collapsing and the economy swung wildly from one extreme to the next. The faith Americans had in the banking system was not very strong. This is why the Fed was created.

The Fed’s original job was to organize, standardize and stabilize the monetary system in the United States. It had to set up a method that could create “liquidity” in the money supply – in other words, make sure banks could honor withdrawals for customers.

Source: HowStuffWorks, Lee Ann Obringer


What is “The Fed”? (Part 2)

October 6, 2009

The Fed uses three tools:

  • The reserve requirement
  • The discount rate
  • Open market operations
  • The reserve requirement is the balance that banks must maintain, which is typically a percentage of their total Interest-bearing and non-Interest-bearing checking account deposits (currently 3% to 10%), to ensure that the bank will always be able to give you your money when you ask for it. Changing this requirement has a very large affect on the economy and Is rarely used. The last time the rate was changed was in the early 1980’s.

    In the event that a bank’s money supply drops below the required reserve amount, that bank can borrow either from another bank or from a Reserve Bank. If it borrows from another bank’s excess reserves, then the loan takes place in a private financial market called the federal funds market. The federal funds market interest rate, called the funds rate, adjusts according to the supply of and demand for reserves.

    If a bank chooses to borrow emergency reserve funds from a Reserve Bank, then it pays an interest rate called the discount rate. This was lowered by one-half percent in late August in reaction to the “credit crunch”.

    The “discount rate” is the interest rate that a regional Reserve Bank charges banks and financial institutions when they borrow funds on a short-term basis.

    The discount rate often plays a larger role in the overall monetary policy than would be expected because it is a visible announcement of change in the Fed’s monetary policy. This is the most talked about rate and can affect your mortgage and credit card rates.

    The Fed more often alters the supply of reserves available by buying and selling securities. All of this buying and selling is referred to as open market operations.

    Source: HowStuffWorks, Lee Ann Obringer