Your Mortgage, Your Money, Own Your Future

The VA Loan became known in 1944 through the original Servicemen’s Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation’s economy.With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.

VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.

VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

If the demand for credit reduces, then so do interest rates. This is because there are more people who are ready to lend, sellers, than people who want to borrow, buyers. This means that borrowers, buyers, can command a lower price, i.e. lower interest rates.

When the economy is expanding there is a higher demand for credit so interest rates go up. When the economy is slowing the demand for credit decreases and thus interest rates go down.

 This leads to a fundamental concept:

Another major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly the Federal Reserve increases interest rates to slow the economy down and reduce inflation.

Inflation results from prices of goods and services increasing. When the economy is strong there is more demand for goods and services, so the sellers and producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.

Also lenders naturally want to see a positive return on their money as their reward for lending it. This leads to the concept of the “real” rate of return. This is typically 3% per year. If inflation is 4 % per year, lenders will want to earn 7% per year on their money.

Likewise, if prices are rising rapidly, people are inclined to borrow “today’s” money so as to repay it with “tomorrow’s” money, which will be worth less.

Mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages.

 There is usually an almost fixed spread between A credit mortgage rates and treasury rates. This is not always the case. For example, bank failures in the Far East in the late 90s caused mortgage rates to move up while treasury rates moved down as fearful investors fled to the safety of the treasury bonds and notes.

Bonds Rates

There is an inverse relationship between bond prices and bond rates. This can be confusing. When interest rates move up, bond prices move down and vice versa. This is because bonds usually have a fixed price at maturity––typically $1000. The bond will start off being sold for the face value, $1000 and at a set interest rate. If interest rates go down, then this bond will go up in price so that these bonds will remain fairly priced compared with current bond offerings. Obviously the longer before the bond matures for the face value, $1000, the greater the price premium will be to enjoy that higher than current yield for the rest of the bond’s term.

The inverse also applies. If interest rates move up, the bond seller will have to reduce his price to offer a similar yield to current bond offerings.

Questions? Contact us at info@mortgagelinkhome.com or visit our web site at www.mortgagelinkhome.com

To understand why mortgage rates change we need to know why do interest rates change and there is not one interest rate, but many interest rates!

Interest-rates move because of the laws of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more people who want money, buyers, so people who are willing to lend it, sellers, can command a better price, i.e. higher interest rates. If you have questions about your mortgage please contact me or visit my web site at www.mortgagelinkhome.com.

Is your credit behind the 8 ball and what can you do about it?From mortgages to credit cards to auto loans, your credit score, commonly called a FICO which stands for Fair Isaac Corporation, is the most important factor that a lender or credit issuer will use in making a decision about you.

Until recently, the factors that made up your score were a closely guarded secret, but recent legislation has opened up the credit scoring industry. Your credit score is generated from a mathematical algorithm, a formula, based on information in your credit file.

Numerous factors are weighted across five categories to calculate your individual score. Your payment history makes up 35 percent of the score. The more late payments in your file, the lower your credit score will be. Debts that are sent to collections significantly reduce your score. Another 30 percent of your score is based on your current and available debt.

The score does not take into account income; rather it looks at the ratio of available debt to current balances. If you consistency “max out” the credit extended to you, your score will tend to be lower than if you carry some debt, but keep it manageable.

The length of your credit history and length of time you have credit will credit issuers comprises 15 percent of your score. The variety of credit that you have makes up 10 percent of your score. Generally, if you have experience with multiple types of debt, your credit score will be higher.

The final 10 percent of your credit score is based on applications for new credit. The model accounts for people shopping for credit and does not lower their scores, but it does reduce scores of those who may be in trouble and are heading toward bankruptcy.

To have a great FICO score, you should carry a manageable amount of debt, have experience with a variety of credit types, maintain long-term relationships with your creditors and lenders, and most importantly - pay your bills on time.

As of September 2005 every U.S. citizen has the right to a free annual report from each f the three major credit bureaus - Equifax, Experian and TransUnion. You can order your free report from www.annualcreditreport.com fill out the questionnaire, and indicate where you would like to receive the reports. You can order your credit report from the credit bureaus directly instead of www.annualcreditreport.com but you’ll pay for the report and they will try and sell you a protection plan that can cost anywhere from $4.95 - $14.95 per month.

If you have questions about your credit please contact me or visit my web site at www.mortgagelinkhome.com.

How many times a week do you say; “Why are these people sending me this”? “Where did they get my information”? “How do I stop getting all of this unwanted junk mail”? There are several ways to reduce your junk mail and at the same time protect your identity.

What Can You Do To Stop Receiving Pre-Screened Offers?

1. Register with the Do-Not-Call Registry.

Call 1-888-382-1222 (for TTY, call 1-866-290-4236) or visit the Registry’s website at http://www.donotcall.gov . If you receive an unsolicited call after you have been registered for more than 31 days you can file a complaint. Make sure you have the caller’s company name, the telephone number of the company and the date and the time the company called you.

2. Opt-Out of Pre-Approved/Pre-Screened Offers.

Opting-out allows you to remove your name from lists supplied by the Consumer Credit Reporting Companies (the credit bureaus), Equifax, Experian, Innovis and TransUnion, to be used for pre-approved or prescreened offers for credit or insurance. You are allowed to Opt-out for 5 years or permanently under the Fair Credit Reporting Act.

How to Opt-Out: Visit http://www.optoutprescreen.com or call 1-888-5-OPT-OUT (1-888-567-868 you will be asked to provide personal information, including your home telephone number, name, Social Security number, and date of birth. The information you provide is confidential and will be used only process your request to opt-out.

Here Are 10 Steps to Avoid Identity Theft

1. Take your name off of trigger lists - Opt-out of pre-approved/pre-screened offers of credit and insurance - see section on Opting Out
2. When you are presented with a pre-approved/pre-screened offer over the phone, exercise caution. Ask how they got your information, what company they are with, ask them to forward the information to you in writing
3. Avoid being rushed or pressured into a decision.
4. Shred financial documents and paperwork with personal information before you recycle or discard them.
5. Watch out for the “bait-and-switch” game. This game is run by companies who get business by offering low rates and then switching products.
6. Never click on links sent in unsolicited emails, do not respond to: You’ve Won the Euro Lottery, do not respond to emails from foreign countries telling you they have $50 Billion Dollars to give you.
7. When you receive mail or a phone call that appears to be from your current mortgage company, car insurance company, etc. always confirm who you are speaking with and the company they represent.
8. Protect your pin numbers, passwords, date of birth or mother’s maiden name. Do not leave this information lying around your home or office.
9. Most importantly protect your Social Security Number (SSN). Your SSN is the key to your identity. Do not carry your SS card in your wallet or write you SSN on a check. Give it out only if absolutely necessary. Most health insurance companies have moved away from using your SSN as your insurance ID number, if your company has not done so contact them and request that they do.
10. Don’t use obvious passwords like your mother’s maiden name, your birth date, your child’s name, or your address.

A few small steps to protect yourself can save you hundreds of hours trying to fix, explain, and get documentation to prove that you were a victim of a crime. Don’t be a victim of identity theft, stop the process before it starts!

By: Joseph Kapp

In conjunction with Lincoln Financial Advisors, a registered investment advisor

If you are thinking about making a donation to a charity, you might want to consider making a gift of appreciated stock or mutual fund shares rather than a cash donation. A gift of appreciated property often provides increased tax benefits, along with the satisfaction of contributing to a cause you believe can make a difference.

Tax Benefits

Charitable contributions of appreciated securities provide two potential income-tax advantages. The first is a charitable deduction - generally for the fair market value of the securities at the time of the contribution, subject to certain tax law limits. The second benefit is that you are not taxed on the capital gain that would result if you sold the property.

For example, let’s say you own publicly traded stock currently worth $20,000. You bought the stock over a year ago for $15,000. If you sell the stock, you will have long-term capital gain income of $5,000 which will be taxed. However, if you donate the stock to charity, you may claim a $20,000 charitable contribution deduction and avoid paying capital gains tax on the $5,000 of appreciation in the stock. The charity will be glad to receive the stock and can sell it immediately for $20,000, generally with no capital gains consequences because of the charity’s tax-exempt status.

To gain these benefits, the stock must be long-term capital gain property ¾ stock you’ve owned for more than one year or stock you inherited. If the stock would generate a short-term capital gain if sold, your charitable deduction is limited to your cost basis rather than the stock’s fair market value. Also of importance is the type of charity to which the gift is made. While a gift of appreciated stock to a public charity generally allows the donor to take a deduction for fair market value, a similar gift to a private foundation may result in a charitable deduction that is limited to your cost basis.

Other Considerations

While donating appreciated stock can give you tax advantages, you might want to think twice about giving stock that has lost value since you bought it. A better plan may be to sell stock that has lost value and donate the proceeds of the sale to the charity. For example, if you were to sell stock for less than you paid for it and donate the cash, you’d have a capital loss that you may be able to deduct as well as your charitable contribution. But, if you simply donated the stock, you couldn’t deduct the loss.

In addition, before you donate stock or mutual fund shares, you should consider whether you may need the income from these securities in the future. If you think you might, you may want to contribute fewer shares. You can always donate more later on.

Making the Transfer

Most brokers and mutual fund companies will directly transfer shares to a charity for you. However, they generally require the charity to have a brokerage or fund account with their organization. Check with the charity before you initiate the transfer. If the charity doesn’t have an account with your mutual fund or broker, you should explain your gift and ask the charity to open an account to receive it.

For gifts of stock, if you have a stock certificate for the amount you want to donate, you can sign the back of the certificate and deliver it to the charity. If your stock certificate is for more shares than you want to donate, you can ask your broker to have the stock certificate reissued in two or more smaller certificates. You can transfer one of these new certificates to the charity.

What if it’s inconvenient to hand deliver the stock certificate? You can make your gift by mail. But take these precautions to protect yourself. Have your broker execute a letter of authorization describing the stock certificate and the donation you are making. Then, you can send the unsigned stock certificate to the charity in one envelope and the letter in another.

Before you make a gift of stock or mutual funds ¾ particularly a significant gift ¾ be sure to talk with your professional financial advisor to determine how such a gift may affect your overall financial plan.

Joseph Kapp is a registered representative and investment advisor representative of Lincoln Financial Advisors Corp., 4600 East West Highway Suite 620 Bethesda, MD 20814 offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances.

It’s the question every parent dreads. Although the answer hopefully is yes, you’ll have to plan ahead. Unless you are very well off financially, you can’t expect to sit on the sidelines for years and then suddenly find the funds to pay for college when your child is ready to go. The best thing to do is to start saving as early as possible, even if you’re able to save only a small amount at first.

How much will college cost in the future?

For the 2004/2005 academic year, the average annual cost of a four-year public college is $14,924 and the average annual cost of a four-year private college is $30,581. (Source: The College Board’s Trends in College Pricing Report 2004.) The total figures include five expense items: tuition and fees, room and board, books and supplies, transportation, and personal expenses.

It’s a likely bet that costs will continue to rise, but by how much? During the last few years, college costs increased at an average rate of about 5 to 6 percent each year as colleges tried to control escalating costs. But going forward for the next 10 years, college costs are expected to increase a bit more, about an average of 7 or 8 percent per year. (Source: FinAid, 2002 report on college inflation, based on figures provided by The College Board and the Bureau of Labor Statistics.)

How will I pay for it?

Many parents save less than 100 percent of their child’s education costs before college. Usually, they put aside enough money to make a down payment of sorts on the college bill. Then, at college time, parents can supplement this down payment by:

• Obtaining private loans (e.g., home equity loan, margin loan)
• Obtaining financial aid-related loans (e.g., PLUS loan)
• Tapping their own investments (e.g., mutual funds, 401(k) plan, IRA, cash value life insurance)
• Having their child apply for financial aid (e.g., student loans, grants, scholarships, work-study)
• Having their child contribute a portion of his or her savings and/or investments
• Having their child obtain a part-time job during college

How much should I save?

You’ll want to put aside as much money as possible in your child’s college fund. The more money you put aside now, the less you or your child will need to borrow later. Start by estimating your child’s costs for four years of college. Then decide how much of the bill you want to fund-100%, 75%, 50%, and so on. To meet your goal, you’ll need to use a financial calculator to determine how much to put in your college fund each month. Click below to calculate what it might cost to send your child to college.

College Funding Calculator

In many cases, the amount of money you should contribute really boils down to how much you can afford to contribute. Every situation is different. You’ll need to take a detailed look at your family’s finances in order to determine what you can afford to add to your child’s college fund each month.

Start a savings program as early as possible

Perhaps the most difficult time to start a college savings program is when your child is young. New parents face many financial strains that always seem to take over–the possible loss of one income, child-related spending, and the competing need to save for a house or car, or the demands of your own student loans. Yet this is the time when you should start saving.

With many years to go until your child starts college, you have time to select investments that have the potential to outpace college cost increases (but keep in mind that any investments that offer higher potential returns may involve greater risk of loss). In addition, you benefit from compounding, which is the process of earning additional funds on the interest and/or capital gains that your investment earns along the way. With regular investments spread over many years, you may be surprised at how much you may be able to accumulate in your child’s college fund.

But don’t feel bad if you can’t put aside hundreds of dollars a month right from the start. Start with a small amount, say $25 or $50 every month, and add to it whenever you can. You’ll have a head start, as well as peace of mind knowing you’re doing the best you can.

Now is also the time to speak to a Financial Planner who will help to answer all of your questions regarding saving for college, retirement and/or doing a major renovation on your home. We work with several exceptional Financial Planners and ask that you contact one or all to help you meet your financial goals.

Question:

Should I take out a home equity loan to pay for my child’s tuition?

Answer:

If you own a home and have equity in it, you may want to consider taking out a home equity loan as a source of funds for your child’s private school or college tuition. A home equity loan is secured by the equity you have built up in your home and can be structured as either a revolving line of credit or a second mortgage.

With a revolving line of credit, your lender establishes a credit limit that depends on the amount of equity you have built up in your home and your ability to make payments. You can then access as much money as you need (up to the maximum amount allowed) whenever you need it by writing a check or using a credit card.

Interest rates are variable and tied to the Prim Rate Index which is governed by the Federal Reserve Board. Your monthly payments will also vary, depending upon your outstanding balance.

If the home equity loan is structured as a second mortgage, you borrow a fixed amount (sometimes as much as 100% of the equity in your home) that is transferred to you in full at the time of the closing. You must then repay that amount over a fixed term, just like you do on your original mortgage.

The advantages of a home equity line of credit or a home equity loan include tax-deductible interest and, in most cases, a more favorable interest rate than credit card loans. Keep in mind, however, that a home equity loan puts your home at risk because it serves as collateral for the loan. In other words, your lender can foreclose on your home if you fail to repay the loan.

Before you take out a home equity loan, contact me to see if a home equity loan is the right choice for you.

The holidays are nearly here, which means it’s a good time to remember to take care of ourselves. This is an article I want to share with you about how to maintain balance in your life.

Balance: Healthy Body, Healthy Mind, Healthy Family, Healthy Society, and Healthy Finances.

By: Elizabeth Zachariah

Certified Life Success Consultant (Life Coach) for Bob Proctor’s LSC Inc.

(Bob Proctor is a world renowned speaker featured in the “Secret”, interviewed on Oprah, Larry King and Ellen).

Acquiring balance in every area of our life is a constant struggle these days. It seems like we are running to catch our tails, trying to get everything done, be everywhere, please everyone, and we end up paying a dear price in the process. We have lost our inner balance. We do all “this” to keep our external environment controlled, or so we think.

Are there days when you feel like all the blocks you are neatly building just keep falling? And you keep stacking them up again and again but there is no movement forward in the building process? You feel exhausted, your body having taken a beating from the moment you wake in the morning until you retire at night?

These days the majority of individuals have completely surrendered the well being of their physical health to their physicians, we say “Let someone else take care of this.” Then there is the well-being of our mind which functions from all the beliefs and systems we were raised with. Have you ever stopped to ask yourself: “Why am I not moving forward in life?”

Could you imagine balance in your body, mind and spirit? Many individuals might take a step back to this simple question but those very people don’t realize we as spiritual beings residing in a human shell exists on three planes; the body (physical), the mind (intellectual), and the spirit (soul). It is this wonderful balance in all three planes that allow an individual to achieve a sense of well being.

It all starts with taking responsibility, to understand how critical it is to maintain the well-being of the mind and body connection. This is the first step to overall harmony as individuals, then for our society, community, country and ultimately globally. It all starts with us at the individual level.

Each of us want fulfillment in life so take responsibility to educate yourself on keeping our bodies healthy by having the proper sleep, drinking living water, supplementing with whole foods nutrition technology, fitness, using natural ways to stay healthy, prevention, and keeping the home environment clean. It is just a matter of knowing.

A healthy mind begins with understanding the results we have in our lives is a sum total of all the thoughts we have had until this moment in life. You are the architect of your life the quality for you, your family, your community, your world is up to you. If you want to some additional ideas to help you change the results in your life ask me how and I will gladly work with you.

“As a being of power, intelligence and love, and the lord of his own thoughts, man holds the key to every situation, and contains within himself that transforming and regenerative agency by which he may make himself what he wills” James Allen, As A Man Thinketh

Balance in the mind and body leads to balance in all other areas in our life, if we can motivate and educate ourselves we can make better choices and decisions that will inspire the intelligent action that is needed to have balance and lead a fulfilled life.

Here’s a great article by Joseph Kapp about diversification and risk management.

(In conjunction with Lincoln Financial Advisors, a registered investment advisor*)

ARE YOUR ASSETS REALLY DIVERSIFIED?

You’ve heard the old investment adage, “Don’t put all your eggs in one basket.” It’s good advice. A diversified portfolio should be at the core of any well-planned investment strategy. While a worthy goal at any age, it’s especially desirable as your net worth grows over the years.

The basic purpose of diversification is to reduce your risk of loss. It’s primarily a defensive type of investment policy. Depending on your investment goals and tolerance for risk, your strategy may emphasize one type of investment over another. But overall, your plan should be diversified. That’s because no single type of investment performs best under all economic conditions. A diversified program is capable of weathering varying economic cycles and improving the trade-off between risk of loss and expected return. Of course, diversification cannot entirely eliminate the risk of investment losses.

Forms of Diversification:

An investment portfolio consisting of twenty different construction industry stocks is not diversified. Diversification means dividing your funds among different classes of assets, such as stocks, bonds, real estate, savings accounts and tangible assets. For instance, suppose your portfolio consisted entirely of bonds. Your money would be at significant risk if interest rates rose since bond prices generally fall when rates go up.

It’s also important to diversify by owning several stocks in different industries. Suppose you held just 1,000 shares of a major company’s stock from December 31, 1999 through December 30, 2003, and you suffered a loss of $40 per share when the stock fell from 100 to 60. A diversified portfolio consisting of many different stocks in various sectors may have cushioned the blow of the loss.

A prudent investor managing his own portfolio might diversify his holdings by selecting some stocks for their rising earnings or accelerating “growth” potential while buying other stocks because they offer “value” by temporarily being out of favor. In addition, an investor may buy individual securities for other reasons, such as income or tax advantages.

An alternative to selecting and managing individual stocks and bonds is to invest in mutual funds. Some mutual funds offer diversification by holding many securities within the portfolio. However, some other funds may not be diversified across industries or asset classes and may focus on a single sector. Mutual funds offer several other features, including:

• Funds have clearly defined objectives and strategies, which are detailed in the fund’s prospectus. A prospectus contains more complete information on the style of investment objectives you should expect in addition to the charges, expenses and risks the fund may incur. Read the prospectus carefully before investing. The investment return and principal value of an investment will fluctuate with changes in market conditions so that an investor’s shares when redeemed may be worth more or less than the original amount invested.
• Shareholders receive periodic reports reviewing the fund’s results and performance.
• Funds are managed by full-time professionals.
• Fund families allow investors to allocate investment dollars among a combination of funds with varying objectives.

Diversification also means not tying up all your funds in long-term investments. You’ll need to keep a certain amount easily accessible — that is, in money-market accounts, savings accounts or short-term certificates of deposit (CDs) — for on-going expenses, emergency needs, and short-term goals such as saving to buy a car or pay taxes. And through dollar-cost averaging, a process of buying stocks and bonds from time to time instead of all at once, you can spread the risk over both good and bad markets. Using this investment method involves continuous investment in securities regardless of fluctuating price levels of securities.

Therefore, investors should consider their financial ability to continue purchasing through periods of fluctuating price levels. Dollar cost averaging does not ensure a profit and does not protect against a loss in declining markets. Diversification is also important because CDs are FDIC-insured and typically offer a fixed rate of return while investments such as stocks and bonds are not FDIC-insured and their value will fluctuate with current market conditions.

Sample Portfolio: Keep reading →

Answer:

It depends on several factors, including whether the home is your principal residence or takes some other form (such as a vacation home or investment property). If you owned and used the home as your principal residence for a total of two out of the five years before the sale (the two years do not have to be consecutive), you may be able to exclude from federal income tax up to $250,000 (up to $500,000 if you’re married and file a joint return) of the capital gain on the sale of your home. You can use this exclusion only once every two years, and this exclusion does not apply to vacation homes and pure investment properties.

For example, Mr. and Mrs. Jones bought a home 20 years ago for $80,000. They have used it as their principal home ever since. This year, they sell the house for $765,000, realizing a capital gain of $613,000 ($765,000 selling price minus a $42,000 broker’s fee, minus the original $80,000 purchase price, minus $30,000 worth of capital improvements they’ve made over the years). The Joneses, who file jointly and are in the 28 percent marginal tax bracket, can exclude $500,000 of capital gain realized on the sale of their home. Thus, their tax on the sale is only $16,950 ($613,000 gain minus the $500,000 exemption multiplied by the 15 percent long-term capital gains tax rate).

What if you fail to meet the two-out-of-five-years requirement? Or what if you used the capital gain exclusion within the past two years with respect to a different principal residence? You may still qualify for a partial exemption, assuming that your home sale was due to a change in place of employment, health reasons, or certain other unforeseen circumstances.

You should also be aware that special rules might apply in the following cases:

• If you sell vacant land adjacent to your principal residence
• If your principal residence is owned by a trust
• If your principal residence contained a home office or was otherwise used partially for business purposes
• If you rented part of your principal residence to tenants
• If you owned your principal residence jointly with an unmarried taxpayer

Note: Members of the uniformed services and foreign service personnel may elect to suspend the running of the 2-out-of-5-year requirement during any period of qualified official extended duty up to a maximum of 10 years.

Consult a tax professional for more details.

Need more information? Send me an email!