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This is a guest post from John Forman from The Essentials of Trading. Forman is the author of a book by the same name. He has been a trader of the stock and other markets for over 20 years, and is a professional stock market analyst for Thomson Reuters.
The wealth building potential of the stock market is enormous. I think we all realize that. The long-running debate, though, is whether one is better off investing in individual stocks (or funds that do just that), or whether it’s best to just put your money in an index fund. Most funds fail to beat the market, so it would seem index funds are the better choice.
While it is certainly true that index investing has some advantages, and some mutual funds do perform better than the indices, no index or fund will ever offer the upside potential of investing in individual stocks. It’s a matter of math.
Indices and funds include many stocks which move in all different directions. One of those stocks could double in price for the year, but because most others in the collection will do much less well, the index’s or fund’s performance will be much lower than that one stock’s gain. An investor who held that stock by itself, though, would have done quite well.
Of course you need to be able to find the stocks that will beat the indices and funds.
How Do I Find Good Stocks? The requirements for success in the stock market are much like the requirements for success in any other undertaking. Proper preparation is one of them — potentially the biggest — and a major part of preparation is having a firm objective in mind. As an investor, that normally means either seeking capital appreciation or pursuing income, or some combination. For the purposes of the discussion here, I will focus on the capital appreciation.
Another part of the equation is timeframe. I’m not talking about how long you have to retirement. There’s plenty of literature in financial planning circles about how you should structure your investments from that perspective. What I’m referring to here is how long you will expect to hold any given stock position in your portfolio.
Are you a patient long-term buy-and-hold investor who will have no problem sitting through the inevitable ups and downs of the market? Or are you someone who wants more action, doesn’t have the patience to hold stocks for years at a time, and/or cannot stomach the idea that at points your positions could go well against you for long periods of time?
You may not always be one or the other. It is, however, important to know which mode you are in when you are looking to pick good stocks. A lot of stock market players get themselves in trouble because they go into a position thinking they are one type of player only to change their minds once prices start moving.
Fundamental Analysis If you are in the first category, then your focus in trying to find good investment stocks is to look at the big picture. You are Warren Buffett. You look at the company and its management team. You look at its business and, in many cases, the broader economy. What you are trying to identify is a company which will steadily increase in value over time.
How do you do that? By thinking about what it takes for a company to grow and profit in a sustained fashion.
What do companies like that have? They have strong management teams who know what they are doing, who have a long term view and who aren’t worried about the quarter-to-quarter results or stock price fluctuations. They are in growing business sectors (or niches) where the competition isn’t so intense that no one can really make any money.
This sort of approach to looking at companies is generally referred to as fundamental analysis. Fundamentals are the underlying elements that determine the long-term growth and profitability of a company.
The idea is that you are giving your money to some really capable people and having them put it to good use in their business. Then you let them do their thing in the way they best see fit. So long as they continue to do good things and keep the business on track for positive growth in value, you stay invested. Maybe somewhere down the line you will cash out your investment. Maybe you’ll leave it to your kids or donate it to charity. Whatever the case may be, you would expect the value of your stake in the company to have grown nicely in value by that time.
Security Analysis by Benjamin Graham and David L. Dodd is the classic text for stock market fundamental analysis. You can also find a brief overview at StockCharts.com.
Technical Analysis Now, if you are in the second category where you’re not just going to buy a stock and lock it away, you need to think more specifically about your holding period. By this I don’t mean to imply that you will hold a stock for an exact period of time and that’s it. I just mean you should have an idea of how long you would expect to be in the position. That could still be years, or it could be months or weeks.
The advantage of the long-term investor is that they need not worry about the fluctuations in the price of the stock. They are investing on the basis of the long-term growth of the company with the assumption that the stock price will generally follow along at about the same pace.
Less long-term players (often referred to as traders) have to be cognizant of the intermediate and shorter-term price action. Generally speaking, the shorter your expected holding time horizon, the more you will have to focus on the price action. This is because the fundamentals mentioned above are usually slow moving elements which play out over the longer timeframes. They don’t change quickly, so they can’t really influence short-term price movements much.
What I mean by that is stock prices can move in the short-term on a great many factors. It could be news, economic data, changes in interest rates, the general market environment, and lots of other things. Just because a company is making money hand over fist doesn’t mean the stock price will be rising. If the company continues to do that, the stock will probably move higher eventually, but in the meantime other factors could cause it to go sideways or to even fall. This is something that baffles a lot of new investors.
Focusing mostly on price moves you into the realm of technical analysis. This approach seeks to identify patterns of price movement in the market for the purposes of determining likely future direction. This is also referred to as market timing, which basically means seeking to define good points at which to buy and sell. A lot of stock investors use fundamental analysis to find good companies, then use technical analysis to try to pick the best time to buy the stock.
Technical Analysis of the Financial Markets is widely considered the ultimate source on the subject. StockCharts.com offers an introduction to technical analysis.
Value Investing To this point you’ll notice that I haven’t used the term value investing yet. Many people would refer to Warren Buffett as a value investor, and as such would put value investing in the long-term investing category.
Value investing need not be a “buy it and bury it” type of approach, however. In fact, I’d guess that most people consider it the process of identifying stocks trading out of line with the value of the company in question. They use any number of metrics to determine what a company’s stock should be worth. If the stock isn’t close to that value, they will either buy it or sell it in expectation that it will eventually get back in line. In most cases, once that happens, the stock position will be exited.
This probably all sounds very familiar. You’ve no doubt heard of Wall Street analysts putting out price targets and ratings and such. They generally use fundamental analysis to come up with what they think is the value of the company right now (adjusting it for new information, of course). Then they look at current price to see how it matches up with what their valuation calculations tell them.
If you’d like to learn more about value investing, consider Benjamin Graham’s classic, The Intelligent Investor. The Motley Fool has an interview with Bruce Greenwald about the three steps of value investing.
It Takes Work Regardless which type of stock market player you are, there are no approaches which don’t require effort on your part to pick the good stocks. Even if you have someone giving you recommendations, you should still be doing your own due diligence to see if they really fit in with what you are trying to do in the market.
Also keep in mind that no matter what timeframe investing/trading you do, you should always take the longer-term view. It’s extremely unlikely that any one stock position is going to make you rich in a short period of time. If you try to score it big on any one trade you’re probably going to end up losing a lot of money. Wealth accumulation in the markets is best sought by steady growth, putting the power of compounding to work in your favor.
One of the perhaps lesser-known, but fastest growing mortgage companies that is making big strides in the industry is Caliber Home Loans.
The national mortgage lender, which is based out of Coppell, Texas, just north or Irving, TX, has been around since 2008, which was essentially when the mortgage industry went bust.
Since then, they’ve grown into a mortgage powerhouse and are now a top-10 mortgage lender nationwide, with aspirations to be top five sooner rather than later.
And it turns out they caught the attention of suitors in the process.
In August 2021, the company was acquired by New Residential Investment Corp. (Newrez).
Caliber Home Loans History
The company rebranded in 2008 around the time of the housing bubble burst
Started with government mortgages such as FHA loans
Then began offering conventional loans backed by Fannie Mae and Freddie Mac
Have grown into a top-10 mortgage lender via a number of large acquisitions
Funded more than $24 billion in home loans via retail channel in 2019
Planned to go public with $2+ billion valuation
Later acquired by Newrez in the second half of 2021
Back in 2008, around the time of the financial crisis, the parent company Caliber Funding went through a rebranding process and acquired the lending assets of the CIT Group, which it later renamed Vericrest Financial.
A year later, they obtained the ability to directly endorse FHA loans and received direct lending authority for VA loans, meaning lending decisions could be made in-house.
In 2012, they received Freddie Mac seller approval and began issuing securitizations. They also gained Ginnie Mae approval at that time, and loan servicer approval for both.
Caliber Home Loans Inc. was born in 2013 when Caliber Funding with Vericrest Financial merged into one brand, which coincided with their correspondent lending business and Fannie Mae seller approval.
In mid-2016, Caliber acquired First Priority Financial, expanding their footprint in northern California and the western U.S., including states like Idaho, Iowa, Oregon, Washington.
Not long after, they became one of the top mortgage lenders in the country, with over 3,500 employees nationwide.
They refer to their loan officers as loan consultants, though they also partner with mortgage bankers and wholesale lenders to originate loans through various channels.
And they pride themselves on being a mortgage-only shop, as opposed to a mega financial institution that also doles out credit cards, life insurance, and student loans. They’re mortgage-focused and only sell home loan products.
Their latest big move was in 2017 when they acquired Banc Home Loans, which resulted in an 1,800-strong sales force across 340 retail branches located throughout the United States.
Aside from retail, Caliber’s originations come via a booming correspondent channel, along with a wholesale channel, meaning mortgage brokers can offer their loan products to consumers as well.
Speaking of, they recently launched a mobile app for their broker partners that uses Caliber’s proprietary H2Online system, which allows them to price and lock loans from their smartphone.
So it’s clear their mission is to grow and become a household name in the mortgage industry, and they appear to be on track.
In fact, they now have plans to go public with a valuation greater than $2 billion, per the WSJ.
What Does Caliber Home Loans Offer?
Home purchase loans
Rate and term refinances, cash out refis, and streamline refinances
Conforming loan products including Freddie Mac BorrowSmart
Jumbo loans and high-balance mortgages
FHA loans
VA loans
USDA loans
Renovation loans
Portfolio loans such as interest-only products
HELOCs
Fixed mortgages
Adjustable-rate mortgages
Now let’s talk about their loan programs. As alluded to in their company history, they’re equipped to provide all types of loans backed by Fannie Mae, Freddie Mac, the FHA, and the VA.
You can also obtain a USDA loan from Caliber Home Loans, and they have specialty products like the 203k renovation loan if the real estate you’ve got your eye on needs a little work.
In terms of government home loans, they’ve got everything. In fact, Caliber even has a special Military and Veteran Lending division solely for VA loans. They also been recognized as a Military Friendly Brand two years in a row (2017 and 2018).
In late summer 2017, they announced the funding of their 10,000 VA purchase loan, so it’s clear they’ve got some experience in that department.
For conventional loan offerings, they have both conforming stuff (Fannie/Freddie) along with jumbo loans, and even a jumbo interest-only ARM.
You can get a HomeReady or Home Possible loan with just 3% down, and they have all loan types from 30-year and 15-year fixed mortgages to a wide array of adjustable-rate mortgages.
If you’re looking for more than just FHA loans and Fannie and Freddie stuff, they’ve got your covered.
In fact, they have some proprietary home loan products like their “Caliber 5-Star ARM” that adjusts once every five years, as opposed to annually once the first five years go by (like the classic 5/1 ARM), whose name I assume is an ode to the Lone Star State.
This 5/5 ARM can be beneficial if the associated mortgage index remains low throughout those five years, giving the homeowner another five years of safety from upward rate adjustments.
Of course, it can also backfire if the first adjustment is high and locked in for a full five years.
With regard to jumbo loans, you can get loan amounts as large as $2.5 million, which should satisfy most folks’ needs. And down payments start as low as 5%.
That jumbo interest-only ARM is one of their flexible non-QM offerings, but does require a minimum 700 credit score, which means only the most creditworthy borrowers need apply.
Ultimate Home Buying Experience
I’ve written about this technology before – in short, it allows for the digital delivery of income, asset, and employment history to speed up the loan process, similar to how Rocket Mortgage works.
If all works out, Caliber Home Loans aims to get your loan from application to closing in as little as 10 business days.
That’s pretty fast, and might give you an edge if you’re a first-time home buyer in a competitive housing market.
There’s also a Caliber Home Loans for Borrowers app that allows customers to track their loan as it moves through the process. They also can opt-in to notifications for any issues or problems that arise, and receive updates such as loan approval or denial.
Once the loan closes, they can make payments, set up recurring payments, via escrow account and payment history, and even request the removal of private mortgage insurance.
Caliber Has Some Unique Home Loan Options
Loan amounts as high as $3 million with credit scores as low as 650
Loan programs for those who have late payments or a recent short sale, foreclosure, etc. with FICO scores as low as 610
Loan amounts as low as $100,000 for both investors and primary residences
A home loan financing program for new builds
HELOCs for those wishing to tap equity
Premier Access
They also have a Premier Access portfolio program that allows loan amounts as high as $3 million with lower credit score requirements down to 650. And the loans may not require private mortgage insurance.
It’s also possible to use asset depletion to qualify for a mortgage through the Premier Access lending suite, and cash-out refinances up to $750,000 are also permitted.
Elite Access
Their newest portfolio loan program, known as “Elite Access,” is a jumbo loan product that allows loan amounts as high as $3 million with as little as 5% down payment. However, a minimum 700 FICO score is required.
It is being offered in both fixed and adjustable options to satisfy home buyers and those refinancing existing mortgages (up to 95% LTV) in high-cost markets nationwide.
Homeowner’s Access
This is Caliber’s loan suite for those who have late mortgage payments, or a recent short sale, foreclosure, or bankruptcy filing.
It features shorter waiting times to buy a home, the acceptance of non-traditional credit history, and higher DTI ratios up to 50%. You may also be able to purchase a home with nothing down by using gift funds, and credit scores go as low as 610.
Fresh Start Program
This suite of home financing solutions seems to be even more aggressive, offering home loans with no seasoning requirement after bankruptcy, short sale, deed-in-lieu, or foreclosure.
The Fresh Start program also offers low down payment options and low minimum credit scores, along with loan amounts from $100,000 all the way up to $1 million.
Investment Program
Additionally, they have a suite of loan programs designed especially for real estate investors, including low down payment requirements on loans up to $2 million.
They’ll go as low as 620 in terms of credit score and allow loan amounts as low as $100,000.
More importantly, they provide the option to purchase an unlimited number of investment properties, and offer things like delayed financing, which allows you to buy with cash then quickly do a rate and term refinance.
National Builder Program
Lastly, they have a home builder financing arm that specializes in providing mortgage loan financing on new homes.
They have a dedicated loan fulfillment team that can offer financing of all types on all sorts of properties, including non-warrantable condos.
And they allow mortgage rate locks for as long as 12 months, yes, that long. Well, for some reason 360 days, but that’s still pretty unheard of! So if it takes a while to close, they can secure your rate.
Along those same lines, they offer a service called “Doc Lock,” which secures income and asset verification for up to six months on conventional home loans.
Oh, and they recently launched a HELOC known as the “HomeAccess Your Way Equity Line of Credit.” It appears to have a 30-year term, including a 10-year draw period and a 20-year repayment period.
So they’ve got plenty of loan products and a potentially streamlined loan process to serve mortgage loans to customers nationwide across all channels.
Caliber Home Loans Mortgage Rates
Caliber mortgage rates aren’t advertised
You won’t see them on their website
However I came across some of their rate sheets
That seem to be in line with what most other lenders are offering
They don’t seem to openly advertise their mortgage rates, unlike other banks and mortgage lenders, you won’t find them on their website.
However, I’ve seen some lender ratesheets from Caliber and their pricing seems to be on par (no pun intended) with what else is out there. Of course, that’s the wholesale lender channel, so results may vary across other channels like retail and correspondent.
From what I can tell, their mortgage rates aren’t necessarily any higher or lower than the average rates available. Of course, take the time to shop your rate with other lenders to ensure it’s the best it can be.
Caliber Home Loans Reviews
On Zillow, the company has a 4.96-star rating out of 5, which is pretty much as good as it gets aside from perfection.
That strong rating is based on nearly 6,000 customer reviews, meaning it’s not a fluke.
Since they’re a very large company, you may want to drill down and look at individual loan officer reviews for Caliber, which you can do on the Zillow website.
Many of the reviews said both the interest rate and closing costs were lower than expected, which is a good sign if your lender decision is driven by price.
On LendingTree, they have a 4.2 out of 5-star rating based on more than 700 customer reviews. While not as good, it’s still mostly positive.
They are a Better Business Bureau accredited company and have been since 2014.
Caliber Home Loans Inc. currently has an ‘A’ rating with the BBB and has just over 3 out of 5 stars based on about 200 customer reviews.
They’ve got some bad reviews, but that’s typical because people are more likely to leave a bad review than a good review. But feel free to peruse them as you see fit.
And pay attention to closing costs, which can vary widely as well.
Why Choose Caliber Home Loans?
Caliber offers a wide selection of home loan types to fit most loan scenarios
They’ve got smartphone apps for borrowers and all their business partners
Along with the latest technology to go digital and upload/track important documents
And they offer home loans via all major channels including retail, correspondent, and wholesale in all 50 states
To sum it up, Irving, Texas-based Caliber Home Loans has a home loan for just about any purpose, and the company originates loans through various avenues to suit all personality types. They’re also a national mortgage lender licensed to do business in all 50 states.
This means you can take advantage of their mortgage products via a retail branch, a mortgage broker, or even another correspondent lender.
And unlike many mortgage lenders, Caliber retains the servicing rights to their home loans, meaning you’ll make your monthly mortgage payments to them, not some other company. This appears to be their pledge to make you a customer for life.
As a servicing customer, you might be eligible for a mortgage recast if your loan type is eligible. The minimum principal reduction payment is $5,000, which when applied, will lower your future monthly mortgage payments.
At last glance, their loan servicing portfolio had swelled to over $100 billion, while monthly loan volume is nearing $2 billion.
As such, I expect Caliber to become a household name in the next decade, if not sooner.
As always, be sure to compare all your loan and lender options to ensure you receive the best pricing and service on your home loan. There are lots of choices out there, so make sure you get more than one quote.
In August 2020, Taylor Lopez and her husband Joseph bought their home for $180,000 in the fast-growing city of Anna.
They bought the three-bedroom house built in 1966 with a loan carrying a 3.8% mortgage rate. “From an investment standpoint, it felt like a good choice,” said Lopez, 36, a real estate manager for restaurant chain Wingstop.
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Dallas-Fort Worth home sales, prices only take slight hit from higher mortgage rates
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After more than two years in the home, they’ve been thinking about selling. Joseph works in Lewisville and Taylor works in Addison, so they would like to find a place offering a shorter commute.
D-FW Real Estate News
Get the latest news from Steve Brown and the business staff.
But, like many other would-be upsizers in Dallas-Fort Worth, the couple feels locked into their current home.
Although they could get a good return on a sale, they would have to shop in a dramatically more expensive housing market than when they first purchased and sacrifice their current loan for a new one at a much higher rate.
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After a wave of low-rate homebuying and refinancing from 2020 to 2022, more than half of outstanding Texas mortgages have rates of less than 4%, according to Federal Housing Finance Agency data.
Since last fall, the average rate for a 30-year, fixed-rate mortgage has been hovering between 6% and 7%.
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“There are people that want to sell, but that is what is keeping them there at their house,” said Misty Michael, a real estate agent in the Sachse and Plano area.
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The Lopez family said any home they would want to buy, in school districts they want to be in and that wouldn’t require a lot of work, would start in the $400,000 range.
“It doesn’t make sense when you weigh out all the pros and cons, so we’re continuing to drive about an hour each way to work,” Lopez said. “We could always purchase a home at a higher interest rate, then refinance it if the interest rates go down, but that’s an if and when situation.
“When you’re playing with that much money, it doesn’t seem like a risk I’m willing to take right now.”
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Changing math
Since the start of 2020, the median price of a single-family home in Dallas-Fort Worth has risen more than 50%, according to North Texas Real Estate Information Systems and the Texas Real Estate Research Center at Texas A&M University.
On top of that, the Federal Reserve has aggressively increased its federal funds rate for more than a year, indirectly driving up mortgage rates. Freddie Mac recorded an average 30-year mortgage rate of 6.96% on July 13.
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The result: The monthly principal and interest payment for a median-priced Dallas-Fort Worth home at the average rate with a 20% down payment, before insurance or property taxes, was about $980 in January 2020. In June, it was more than $2,100.
For buyers who purchased a $300,000 home at the record low of 2.65% in January 2021, just buying a house at the same price again at today’s average rate would add almost $900 to their monthly payments before taxes and insurance.
Purchasing a bigger or nicer home would add significantly more to that already-elevated payment, so people with job promotions or babies on the way looking to upgrade to bigger homes may not find a good enough deal to justify it financially.
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“It now is significantly more expensive to make these marginal changes that you might have been planning,” said Texas A&M economist Adam Perdue. He and his wife are expecting a baby soon and have considered getting a bigger home, but they too have a low rate on their home in Brazos County and don’t want to take on higher monthly payments.
While prices are declining slightly year to year, Texas A&M economists don’t expect them to return to where they were at the beginning of 2020. Rates are also expected to decline, but not back down to the record lows. Mortgage Bankers Association forecasts rates in the 5% range by 2024.
Still buying and selling
As mortgage rates rose and sellers held back, new single-family home listings in Dallas-Fort Worth dropped 22% between June 2022 to June 2023, limiting options for people looking to buy.
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Buyers with an immediate need to move are still purchasing homes, and people continue to move to Texas from other parts of the country. Local home sales recorded in June were down only slightly from a year before.
“We have a ton of buyers that are wanting to buy a home,” Michael said, adding that buyers may choose to refinance later. “You have people getting married, having babies, kids going to college.”
More casual buyers without an immediate need to move may no longer be shopping, said Drew Kayes, who heads up homebuying company Opendoor’s operations in Dallas-Fort Worth and Houston.
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“A lot of those folks right now are not in the market because they’re locked into a sub-4% rate, and that’s more of a luxury move than a necessity move,” Kayes said.
Jason Dickson, co-owner of North Texas-based Nuwave Lending, said while it may be hard for homeowners to leave their current home, it may be worth it for them to tap into equity they’ve built up during the pandemic to pay off credit card debt or auto loans.
“They’ll gladly sign up for the higher interest rate in the new house if they have the benefit of taking that equity and improving their overall financial position,” he said.
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A silver lining
Nipun Gadhok, 31, doesn’t want to lose his 3% rate but hopes to purchase a new home for him and his girlfriend next year.
Gadhok, a development manager for the Nehemiah Co., a local firm behind residential communities throughout Dallas-Fort Worth, purchased his five-bedroom home in Fort Worth’s Augusta Meadows neighborhood in 2021.
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He’s looking to buy a home along the outskirts of the metro area, potentially in one of his company’s developments on the east end of Mesquite. Knowing he has a rate he may never get again, he’s not planning to sell his Fort Worth house.
He intends to keep it as a rental property and is already renting out rooms to four other tenants. With mortgage rates causing many people to rent, that’s turning out to be a good side hustle.
“People are choosing to rent, they are not as much inclined to buy,” Gadhok said. “The rates really helped me out in the way that I’m not having problems with finding tenants.”
Read more stories about the D-FW housing market
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Home sellers in North Texas are pocketing some of the highest gains on record, even though profit is down from last summer’s peak.
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Developers of Plano’s legacy Haggard farmland on the Dallas North Tollway are disclosing more details of a $70 million, four-story, 569,000 square-foot apartment project.
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USAA Mortgage, technically known as USAA Bank Home Loans, is one of the larger mortgage lenders out there, though not quite in the top 10.
They’re probably best described as a top 25 mortgage lender, but they’ve got a great website (per my opinion) and good customer service, per J.D. Power, so I figured it would be prudent to take a closer look.
For the record, USAA stands for United Services Automobile Association, an outfit based out of San Antonio, Texas.
The company has that name because they started out in the insurance business, helping military members get auto insurance coverage, then gradually began offering more financial services, including auto loans, personal loans, credit cards, and home loans.
They’re basically a full-fledged bank today, but let’s learn more about those mortgage offerings, including USAA’s mortgage rates, shall we.
What USAA Mortgage Offers
Mainly conforming loans that meet Fannie/Freddie guidelines
Also VA loans for military and their families
Don’t offer FHA or USDA loans
Must be a USAA member to get a mortgage from them
First off, USAA offer plenty of loan options, including conforming loans that meet the underwriting guidelines of Fannie Mae and Freddie Mac, along with VA loans, which are available for active duty military and veterans and their families.
Additionally, they offer jumbo loans on loan amounts as high as $3 million, which should satisfy most home buyers, and even jumbo VA loans.
Notably absent from their mortgage product lineup are FHA loans and USDA loans, but seeing that USAA is geared toward those who serve, it makes sense.
Speaking of, you need to be a member of USAA in order to get a mortgage from them, which can be obtained if you’re active duty, a veteran, have a spouse that is/was, or a parent that is a USAA member.
Back to those loan programs. In the conforming department, they offer the 97% LTV home loan program that requires just 3% down payment, a home loan offered by both Fannie Mae and Freddie Mac. They actually refer to it as the “30-year first-time homebuyer” loan though it may not actually be limited to just first-timers.
There is an assumption that first-time home buyers can’t come up with large down payments, but this isn’t necessarily true.
It’s also fairly common for these home buyers to put down 20% to avoid mortgage insurance and the higher mortgage rates that come at high LTVs.
While the down payment requirement is low, it is only available on primary residences and the only loan option is the 30-year fixed. Still, that should fit most borrowers’ needs.
If you’re able to put down at least 5%, you can get your hands on a 10-year, 15-year, or even a 20-year fixed mortgage.
If you’re looking for a mortgage with no down payment, USAA also offers VA loans, which don’t require any money down or a minimum credit score. However, USAA seems to require credit scores of 620 or higher to qualify, which is a pretty common threshold.
These are available in a variety of different terms, including 10-, 15-, 20-, and 30-year loan terms. You can also get a 5/1 ARM, which is fixed for the first five years of the loan term before becoming annually adjustable.
The ARM option only appears to be available for VA loans, not on conventional USAA loans.
With regard to their jumbo loans, you can get a 30-year fixed or 15-year fixed if you go the conventional route, with a minimum 20% down payment. This means you also avoid PMI.
If you need a jumbo VA loan, you can go with a 30-year fixed or a 5/1 ARM.
USAA also offers home loans on vacation homes (second homes) and investment properties, which I believe are limited to fixed-rate mortgages only.
USAA Mortgage Rates
Their advertised mortgage rates seem to be on par
With what you’ll see elsewhere
Not noticeably higher or lower than the competition
So customer service might be the deciding factor
This always seems to be top of mind, but is a moving target as well because mortgage rates can change daily.
But I can say that USAA’s mortgage rates seem to be pretty competitive and on par with what you’ll see advertised elsewhere.
And a sweet spot might be their 20-year fixed, which at the moment, is priced a half a percentage point below the 30-year fixed.
It also comes with a lender credit, whereas the 30-year fixed requires a fraction of mortgage points to be paid to obtain the advertised rate.
If you can afford it (and want to pay off your mortgage earlier), it could be a good choice. Not all lenders offer the 20-year fixed, so USAA has that going for them too.
USAA Mortgage Refinance Options
You can get a rate and term refinance
Or a cash out refinance
They also offer the VA streamline refinance
But it appears you can only choose a fixed-rate mortgage
Aside from home purchase mortgages, USAA also offers refinance loans if you already have a mortgage and happen to be looking for a lower interest rate or cash out.
They offer both rate and term refinances, which are intended to lower rates and/or shorten loan terms, and cash out refinances, which allow borrowers to tap into their available home equity.
If you’re refinancing a VA loan, they offer Interest Rate Reduction Refinancing Loan (IRRRL) streamlined refinances.
All refinance options offered by USAA Mortgage seem to be limited to 30-year and 15-year fixed mortgages only. It doesn’t appear adjustable-rate mortgages are an option here.
Occasionally, USAA has loan specials, such as no origination fee charged on VA loans, which could sway your decision to use them over a competitor.
Why Choose USAA Mortgage?
Current members might as well check them out
And include them in their home loan search
But you should also gather quotes from the competition
To ensure you land the lowest rate and closing costs
If you’re already a member of USAA, it’s certainly worth checking out their home loan offerings if you’re in the market to buy a home or refinance your mortgage.
I say that because you should broaden your search in general to see what’s out there, and if it’s with a banking institution you already have a relationship with, the loan process might be a bit smoother.
You may have also established trust, which can be a big plus in terms of putting yourself at ease during what is often a stressful time.
On the other hand, just because you have a checking account or homeowners insurance policy with USAA doesn’t mean you should get your mortgage there too.
There might be a better fit elsewhere based on rate, closing costs, service, or a combination of all those things.
Another plus of going with USAA is that they’re probably well-versed in VA loans, seeing that their members are also members of the military and/or their families.
My assumption is they originate a lot of VA loans for their military family of customers, so if that’s what you’re looking for, it might make for a smoother process compared to a general home loan lender.
Of course, there are lots of other lenders out there that specialize in VA mortgages as well, so they aren’t necessarily the be all, end all for your home purchase or refinance needs.
As always, take the time to shop mortgage rates and look at the interest rate, closing costs, points required, and the track record of the company you ultimately do business with.
While cost is certainly important, a competent lender is a must as well to ensure your home loan actually closes!
U.K. Prime Minister Rishi Sunak conceded shortly after the BOE’s rate hike that the government’s mission to halve inflation to 5% by the end of the year had recently become more difficult.
Wpa Pool | Getty Images News | Getty Images
There is intensifying pressure on Britain’s government to do more to help struggling households, with the country’s shadow finance minister warning of a “mortgage catastrophe” as millions are pushed to the brink of insolvency.
The Bank of England last week hiked interest rates by 50 basis points to 5%, a bigger increase than many had expected. The BOE’s 13th consecutive rate rise takes the base rate to the highest level since 2008.
The surprise move — which is designed to lower inflation — will affect millions of homeowners as the interest rates on many mortgages in the U.K. are directly linked to the central bank’s base rate. Renters, too, are likely to see their payments increase as buy-to-let landlords pass on higher mortgage repayments.
Research by the National Institute of Economic and Social Research, a leading independent think tank, estimated that the BOE’s latest interest rate hike would see 1.2 million U.K. households (4% of households nationwide) run out of savings by the end of the year because of higher mortgage repayments.
That would take the proportion of insolvent households to nearly 30% (roughly 7.8 million), the NIESR said last week, with the largest impact set to be incurred in Wales and the northeast of England.
“The rise in interest rates to 5% will push millions of households with mortgages towards the brink of insolvency,” said Max Mosley, an economist at the NIESR. “No lender would expect a household to withstand a shock of this magnitude, so the government shouldn’t either.”
Credit scores and grace periods
U.K. Finance Minister Jeremy Hunt on Friday met with major banks and building societies to discuss the deepening mortgage crisis in the country.
Hunt said Friday that three measures had been agreed with the banks, mortgage lenders and the Financial Conduct Authority, including a temporary change to mortgage terms and a promise that consumers’ credit scores would not be affected by discussions with their lender.
The minister also said that for those at risk of losing their home, lenders agreed to a 12-month grace period before there’s a repossession without consent.
The Resolution Foundation says current market pricing suggests that households remortgaging in 2024 are poised for an annual mortgage bill rise of approximately £3,000 ($3,813) or more on average.
Christopher Furlong | Getty Images News | Getty Images
“These measures should offer comfort to those who are anxious about high interest rates and support for those who do get into difficulty,” Hunt said.
“We won’t flinch in our resolve because we know that getting rid of high inflation from our economy is the only way that we can ultimately relieve pressure on family finances and on businesses,” he added.
Rachel Reeves, shadow finance minister for the opposition Labour Party, criticized what she described as the government’s “chaotic approach” to the mortgage crisis.
“Unlike this government, Labour will not stand by as millions face a mortgage catastrophe made by the Tories in Downing Street,” Reeves said via Twitter on Thursday.
There’s a lot of mortgage pain coming, and much of it will arrive during the run-up to a 2024 election.
Torsten Bell
Chief executive of the Resolution Foundation
U.K. Prime Minister Rishi Sunak conceded shortly after the BOE’s rate hike that the government’s mission to halve inflation to 5% by the end of the year had become more difficult.
“I always said this would be hard — and clearly it’s got harder over the past few months — but it’s important that we do do that,” Sunak said Thursday at The Times CEO Summit.
“The government is going to remain steadfast in its course and stick to its plan,” he added.
‘There’s a lot of mortgage pain coming’
BOE Governor Andrew Bailey said Thursday’s interest rate rise was necessary to continue the fight against stubbornly high inflation.
Official figures published ahead of the BOE’s meeting showed annual inflation rose by 8.7% in May, exceeding expectations. It means consumer prices remain at a level far above the BOE’s 2% target.
“We know this is hard — many people with mortgages or loans will be understandably worried about what this means for them,” Bailey said. “But if we don’t raise rates now, it could be worse later.”
The Resolution Foundation, a think tank focused on issues facing low- and middle-income households, has since warned that even with the latest rate rise, the problems for borrowers are far from over.
It says current market pricing suggests that households remortgaging in 2024 are poised for an annual mortgage bill rise of approximately £3,000 ($3,813) or more on average.
“There’s a lot of mortgage pain coming, and much of it will arrive during the run-up to a 2024 election,” said Torsten Bell, chief executive of the Resolution Foundation.
Eating well is one of the small pleasures that I decided not to forego when I dug myself out of credit card debt. I’m a busy bachelor with an active social life and an absorbing job; I like food with a lot of flavor to it; and I live in a rural area without a lot of shopping or coupon options. These three things don’t usually go hand-in-hand with eating well or cheaply.
To meet my financial goals, I had to keep my food budget under $100 per month — that’s $25 a week to feed one or two people (since I often cook for dates and friends). It’s been a challenge. Luckily, in Texas and many other states, there is no sales tax on unprepared foods. Using a few simple strategies I managed to meet my goal and then some. I didn’t eat rice and beans for the entire month (unlike Morgan Spurlock), I don’t waste time digging through supermarket circulars, and I don’t spend hours in the kitchen every night. This is definitely the lazy man’s approach to groceries on a budget.
Here’s a quick rundown of my method:
I joined discount clubs at the supermarkets I frequented, and I gave them my real address. Kroger sends me coupons once a month.
I shop for fresh vegetables at the Farmer’s Market. Produce at our farmer’s market is literally half the price as the grocery store.
I have family members send me coupons. (This is also a great way to keep in touch with my grandparents, who don’t have email and who I don’t get to talk to all that often.)
Where it makes sense, I buy store brands to save money.
I make a large shopping run at the beginning of the month, and then only go to the farmer’s market for fresh vegetables during the rest of the month. If I don’t have an ingredient, I make something else. This forces me to get creative and use what I do have.
I plan my meals to use the same or similar ingredients. That way I can buy in bulk and I rarely have to get creative.
I buy staples in larger “family” quantities, and I also shop the short-dated bins for meats, which I usually grill immediately.
The most important thing by far has been getting creative with leftovers. I don’t let anything go to waste, and that’s saying something considering the quantities I buy.
For instance, I typically will buy a 12-pack of fresh thick-cut boneless pork chops at the grocery store near the beginning of the month. (I always compare prices between the butcher’s counter and the meat aisle — you’d be surprised how often the butcher’s counter is cheaper!) For the week after I grill, I have meals that feature pork chops: plain pork chops with various sides, pork chops on top of fresh salads, pork chop slices with barbecue sauce and cheese in a tortilla. You get the idea.
Another perennial favorite is taco meat. A frozen one-pound tube of ground turkey is $2. Taco seasoning from the bulk aisle is $5 per pound (though a pound will last longer than I’ll live!). Besides tacos, taquitos, and nachos, taco meat goes great on fresh salads or mixed with another side dish like beans and rice. That’s five or six meals right there without any repeats. The base ingredient is about $3 for those five meals.
Tacos use the same ingredients as a salad: olives, tomatoes, lettuce, and cheese. Soups, stews, and Spaghetti sauce are in the same category. I make my own spaghetti sauce to an old family recipe using canned tomato sauce and a pound of ground turkey. It freezes well, costs less than $5 to make in a batch, and takes only a minute to reheat. I generally make it once a month.
Don’t buy ingredients that work for only a single meal. A friend of mine loves an arugula salad that I make with lemon balsamic dressing, but I don’t make it for her regularly because you can’t really use the arugula before it goes bad.
On the other hand, one of the few products I buy from my grocery store’s produce section is bagged whole romaine hearts. They come three to a plastic bag for $3. Romaine hearts will keep for at least two weeks fresh in the bag, and it only takes a minute to wash and chop them into salad. (Use the entire heart, of course. Don’t peel the green leaves off. The paler parts are very sweet and juicy!) Don’t buy bagged, pre-cut lettuce — it’s soggy and unappetizing after less than a week.
Be careful with coupons. Make sure you carry a calculator (I use the one on my cell phone) to figure out if it’s really a good deal versus the store brands. You’ll usually find, like I do, that store brands are cheaper. On the other hand, you can find things are a better value — buying lunch meat in the re-useable containers has actually proven to be a good value because you can wash and keep the container. At my grocery store it’s more expensive to buy the containers than it is to buy the half-pound of lunch meat that comes in them!
It seems my grandparents’ lessons are always the best. “Waste not, want not.” I watch my neighbors’ trashcans and shake my head every week. I hardly throw out anything, but some of them seem to fill their trashcans to the brim with kitchen waste every week. How can you get rich (slowly or not!) if you’re throwing out that much food?
For more about eating well for less, check out these past articles at Get Rich Slowly:
Images by Jesse Michael Nix and desi.italy. This article is not associated with Lazy Man and Money, but you should visit his site anyhow.
Farm loans help farmers and ranchers start, grow or maintain their farming businesses. These small-business loans can be used to cover operating expenses, purchase livestock, buy farm machinery and agricultural equipment, as well as construct farm buildings, among other purposes.
Loans for farms are available from a range of sources, including government agencies and lenders that specialize in agriculture. The best farm financing for your business will be the most affordable option you can qualify for that meets your needs.
How Much Do You Need?
with Fundera by NerdWallet
Best farm loan options for agricultural businesses
1. Farm Service Agency (FSA) loans
Best for: Low interest rates; the variety of loan options.
Through the U.S. Department of Agriculture (USDA), the FSA offers several types of farm loans. FSA loans can be a good choice for first-time and established farmers alike. These loans have competitive interest rates, long repayment terms and can be used for a range of different purposes. Here are your options:
Direct operating loans. These loans can be used to cover daily operating costs and family living expenses. They can also be used to purchase livestock, seed and equipment. Loans are available in amounts up to $400,000 with repayment terms up to seven years. The FSA sets monthly interest rates — and as of July 2023, the interest rate on these loans is 4.5%
. No down payment is required.
Direct ownership loans. Farm ownership loans are used to buy or expand a farm or ranch. These loans are available in amounts up to $600,000 with repayment terms up to 40 years. As of July 2023, the interest rate on these loans is 4.875%.
Microloans. FSA microloans are designed to provide financing to small and beginning farmers, as well as niche and nontraditional farm operations, such as truck farms, farms participating in direct marketing and sales, and Community Supported Agriculture (CSA). You can choose between an ownership and operating microloan; interest rates and eligible use cases mirror their standard loan counterparts. Funding amounts for either microloan max out at $50,000.
Guaranteed loans. Unlike FSA direct loans, which are issued directly from the agency to the farmer, FSA guaranteed loans work similarly to the SBA loan program. With these farm loans, the FSA guarantees up to 95% of the financing, and the loans are issued by USDA-approved commercial lenders. Rates and terms are negotiated between you and your lender, subject to the FSA’s maximums.
Additional loans. The FSA also offers youth loans, Native American tribal loans and emergency loans. Rates, repayment terms and maximum funding amounts vary based on the individual program.
To qualify for one of these FSA farm loans, you’ll need to meet a variety of industry- and loan-specific requirements. You’ll need to prove your operation is an eligible farm enterprise, show your managerial experience, as well as describe your acceptable loan purpose.
As a borrower, you’ll need to show your ability to repay the loan. Although the FSA doesn’t rely on credit scores to make eligibility determinations, it’s helpful to have a good credit history. However, the FSA will not deny applications based on credit problems or a lack of credit history.
Applications for these government business loans will require extensive documentation. You have the option to apply online through the e-Gov system, by mail, in person at your local FSA office or by phone. You can expect to receive funding within 60 days after the FSA has received your application and corresponding paperwork.
2. SBA loans
Best for: Established businesses with good credit.
Like FSA farm loans, SBA loans offer long repayment terms and competitive interest rates. Plus, SBA loans have larger maximum funding amounts — up to $5 million.
Although the U.S. Small Business Administration recommends that farms and agricultural businesses look at FSA loans before applying for SBA loans, SBA 7(a) and SBA 504 loans can both be good options for established farmers with strong credit
.
SBA 7(a) loans can be used for a variety of purposes, including working capital, buying inventory and purchasing equipment. Interest rates range from 10.5% to 13%, and repayment terms are up to 10 years for working capital, inventory and equipment purchases and up to 25 years for real estate.
SBA 504 loans, on the other hand, are specifically designed for equipment and real estate purchases. Unlike 7(a) loans, which are issued by banks or credit unions, 504 loans come from three places:
A bank (50%).
A Certified Development Company, or CDC (40%).
The borrower (10%).
Typically, the borrower would provide 10% of the financing, but because farms are considered a “special purpose property” by the SBA, you’re required to provide 15% of the loan amount.
SBA loan rates on 504 loans are tied to the 10-year U.S. Treasury notes. You’ll also have to meet a job and retention requirement to qualify, which is not an element of the 7(a) loan program.
You’ll generally need multiple years in business, good credit and strong finances to qualify for either of these SBA loan options. Although — like FSA loans — SBA loans can be slow to fund, you can expedite the process by working with an SBA preferred lender. These lenders have extensive experience with SBA loan applications and are authorized to accelerate the underwriting process.
3. Farm Credit organizations
Best for: Industry expertise; personalized experience.
Farm Credit is a network of lending institutions across the U.S. that are owned by farmers, ranchers and other agricultural businesses. These institutions are divided into four districts and each district has its own regional wholesale bank.
In each of these districts, you can find organizations that offer loans exclusively for farms and other agricultural businesses. These banks offer farm equipment loans, first-time and beginning farm loans, livestock loans, poultry loans, land loans and lines of credit, among other options.
Loan amounts, repayment terms and interest rates will vary based on the specific institution and loan program — but regardless of which Farm Credit institution you work with, you’ll receive guidance and expertise that’s unique to your industry.
Representatives at these institutions can offer a personalized experience, as well as educational resources and a continuous relationship with your business. If you’re looking to work closely with your bank throughout the loan process and beyond, a local Farm Credit organization may be an option to consider.
4. Farm Plus Financial
Best for: Beginning farmer loans.
Farm Plus Financial is an asset-based lender that offers both farm loans and lines of credit. All of the lender’s available products are secured by agricultural real estate, making it a good choice for newer farmers who may not have the financials to qualify for other options.
Farm loans from Farm Plus Financial are available in amounts that range from $200,000 to $50 million. For term loans, the company can finance up to 75% of the loan-to-value (LTV). For lines of credit, on the other hand, this amount falls to 50% LTV.
Interest rates vary based on the product you choose, your repayment terms and your qualifications, among other factors. You can reach out to a lending representative to receive more information about current interest rates.
Although the value of your farm’s real estate will be one of the most important factors in your business loan application, Farm Plus Financial also requires that all borrowers have a minimum personal credit score of 660 or higher. In addition, your farm property must be five acres or greater to be eligible.
You can start an application by submitting an online inquiry form with basic information about your farm and its financing needs. Once you’ve sent the form, a farm loan specialist will reach out to discuss your options and help you with the application. In general, it can take anywhere from one to three months to get funded.
5. National Funding
Best for: Bad credit; quick access to capital.
If you need capital quickly — or you have bad credit (a personal credit score of 620 or below) — you might consider National Funding for a farm loan. National Funding is an online lender that offers two distinct options: short-term loans and equipment financing.
With National Funding’s short-term loans, you can access up to $400,000 and can use the money to cover working capital needs, inventory purchases and other day-to-day expenses. These loans are available with repayment terms up to 24 months and interest is quoted as a factor rate, which starts at 1.1 for borrowers with strong credit.
The lender’s equipment financing program, on the other hand, provides equipment loans and leases in amounts up to $150,000. You can finance or lease new and used equipment, such as combines, tractors and trucks.
These farm loans have repayment terms up to five years and factor rates that also start at 1.1 for borrowers with strong credit.
Regardless of which option you choose, National Funding offers flexible business loan requirements and a streamlined application process. To qualify, you’ll need to have been in business for at least six months, a personal credit score of 600 or higher and an annual revenue of $250,000 or more.
When you’re ready to apply, you can fill out a simple form on the lender’s website. Next, you’ll talk to a funding specialist who will help you decide which type of farm loan is right for your needs. This representative will also guide you through the application — and once you’re approved, you’ll receive funds in as little as 24 hours.
How to get a farm loan
To get a farm loan for your agriculture business, you can follow these steps:
Understand your financing needs
Think about why you need capital and what you’re going to use it for — this will help you determine which type of financing is right for your business.
You should also consider how much debt you can afford to take on. You should make sure that you’ll be able to handle any potential loan payments based on your current income.
Evaluate typical farm loan requirements
Overall, the farm loan requirements you’ll need to meet will vary based on your loan type and business lender. Most lenders, however, will consider your personal credit score, time in business and annual revenue.
Additionally, as an agriculture business, lenders will likely pay close attention to industry-specific criteria, such as your farm management experience, the amount of land you have, your farm business plan and assets.
Research and compare lenders
With a better understanding of your needs and qualifications, you should be able to focus your lender search to find the options that will be best suited to your business. In general, if you think you may qualify for an FSA loan, you might consider starting your search with these low-interest options.
As you explore different lenders, you should compare them based on factors such as:
Loan types.
Maximum funding amounts.
Repayment terms.
Down payment requirements.
Funding speed.
Application process.
Customer service.
Industry experience.
Lender reputation.
Gather your documentation and apply
Once you’ve found the right lender for your needs, you can gather all of the documentation you need to submit your application. In many cases, you’ll be able to work with a lending representative who will be able to help you through the process and answer any questions you may have.
Once you’ve submitted your application, approval and funding times will vary. Government and commercial lenders tend to have longer timelines, ranging anywhere from several weeks to several months. Online lenders, on the other hand, can fund applications much faster — with some companies providing capital in just 24 hours.
Frequently asked questions
Can I get a farm loan with bad credit?
Yes. Although there may be fewer farm loan options available to borrowers with bad credit, it is still possible to get financing. The FSA, for example, does not exclude its loan applicants for poor or non-existent credit histories. Online lenders are also more likely to accept borrowers with bad credit.
Can you get a loan to buy a farm?
Yes. In fact, the FSA offers a direct farm ownership loan specifically designed to help borrowers buy a farm or ranch. Commercial and online lenders may also issue business loans that can be used to buy a farm.
How can you get a farm loan with no down payment?
If you want a farm loan with no down payment, you can start by looking into FSA loans. Some of the FSA direct farm loans do not require a down payment.
You might also consider online lenders, such as National Funding, many of which don’t require down payments for their loan options. However, to get a loan with no down payment, it will be helpful to have strong qualifications.
And it’s essential to keep in mind that lenders may charge higher interest rates on no-down payment loans than they would if you provided a down payment on your financing.
2022 was a bad year for investors. See the red lines in the graph below? …that’s 2022!
Back in October (around what turned out to be the bottom of the market) I wrote:
2022 is, by far, the worst year for stock/bond portfolios since 1950. We know that stocks can, and will, drop 20%+ in a year. But the fact that bonds are also down 15%+…that’s different.
Now, the real question: what should you do about it?
Should you stop investing? Stocks and bonds are both down…so jump ship altogether?!
No. Definitely not. Remember, “the true cost of long-term investing is psychological.” It hurts to see your portfolio value drop. I know. But success comes from enduring that pain and, if you can, leaning into it. Keep investing.
Should you sell your bonds?
No. It’s too late for that anyway. The leading indicator for future bond returns is the current interest rate. Having bond rates at ~4% right now is a strong signal that you’ll achieve ~4% returns on near-future bonds.
So…should I just sit here and take it?! That’s not advice!
Remember what John Bogle famously said:
My rule — and it’s good only about 99% of the time, so I have to be careful here — when these crises come along, the best rule you can possible follow is not ‘Don’t stand there, do something,’ but ‘Don’t do something, stand there!’John Bogle
Don’t do something? Stand there?!
It feels almost inhuman, right? We’re biologically wired for action. We want to do something!
You can consider something like tax-loss harvesting or rebalancing. But you should not consider abandoning your long-term investing plan.
That’s the difference between an emotional investor who reacts to their gut and a rational investor who follows logical rules. Your gut wants to end the pain…to do something. But logic suggests you do otherwise. Will you succumb to your gut? Or listen to the combined logic of many investors far wiser than me or you?
I’m listening to the wise guys.
2022 is a uniquely bad year. It’s understandable to feel glum about it. But you don’t need a uniquely special reaction. Stay the course. Just keep buying. Let the markets and your portfolio recover in the long run.
From the article: Nowhere to Hide: Why 2022 is a Uniquely Bad Investing Year
Back to 2023. Yes, I’m here today to say:
Just kidding! The truth is it’s a little too early to say I told you so. One bad year of investment performance (2022) shouldn’t ruin our moods, and a half year of great performance (2023) shouldn’t make us over-exuberant. We might not be out of the woods completely. I just don’t know. And neither does anyone else.
But if you allowed 2022 to sour your puss and you chose to abandon your investment plan…yikes! Your results aren’t looking too good.
The chart below shows the S&P 500 (dark) and a 60/40 portfolio (light) from October 12, 2022 (the market bottom) to today (7/20/23).
The S&P is up 29% in 9 months. The conservatively diversified 60/40 is up 19% in that period. If you abandoned your portfolio at the end of 2022 and missed those gains…again, I say yikes.
This is Example 1A of why you should stay the course. The headlines at the end of ’22 and the beginning of ’23 were awful. The stock market was taking a dump, the economy was surely headed for recession, and Barbara Walters died.
July 2022, Bloomberg: “Wall Street Says a Recession is Coming. Consumers Say It’s Already Here.”
September 2022, The World Bank: “Risk of Global Recession in 2023 Rises Amid Simultaneous Rate Hikes”
November 2022, CNBC: “Bezos urges consumers and business owners to reduce risk in the face of a likely recession.”
December 2022, NPR: “Barbara Walters, trailblazing journalist, has died at age 93.”
January 2023, Wall Street Journal: “Big Banks Prepare for a Recession”
Who would voluntarily invest in those headwinds?
I know who! Someone who understood market history, had a long-term mindset, and detached emotion from their financial decisions. Not easy, but very possible.
A bunch of The Best Interest readers did phenomenally well these past 9 months. Not because they’re stock-picking wizards, but instead because they buy a diversified set of income-producing assets month after month, then hold those assets for the long term.
Further reading: How I Invest
Investing won’t always feel good. But the times that feel bad are often the best, most important times to stay the course. We’ll never know in the moment, and won’t find out until sufficient time passes. But with the benefit of hindsight, we usually realize, “How about that…the time that felt terrible was the market bottom, and we’ve only gone up from there.”
That’s the lesson so far in 2023.
That lesson might pivot tomorrow. I just don’t know.
But that’s the point. The exact point. I just don’t know. Neither do you, nor the experts writing the headlines.
And that’s why I’ll continue to stay the course.
Thank you for reading! If you enjoyed this article, join 6500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
Want to learn more about The Best Interest’s back story? Read here.
If you prefer to listen, check out The Best Interest Podcast.
Disability insurance is the most underrated type of insurance, and one that I routinely would see clients skip. Who ever thinks they will become disabled?
Hard truth – According to some statistics from the Council for Disability Awareness, 1 in 4 workers who are 20 years old will be disabled before they retire. That’s a shocking number for most people to consider. If you can’t perform your job, you can’t earn money, and that’s where a disability insurance plan can save the day.
The best disability insurance companies make it easy to get a quote online. Below you can quickly get a quote from top rated disability insurance companies we recommend, or keep reading to learn more about disability insurance and its uses.
Table of Contents
Quotes From Top Rated Disability Insurance Companies We Recommend
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Quotes from the top disability carriers to ensure you find the best rates
Helps thousands of consumers apply for disability insurance each year
Rated Excellent on TrustPilot
Benefit terms range from 3 months to age 67
Choose your waiting period
Multiple riders add flexibility to your policy
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Benefit periods from as little as 2 years or all the way to retirement age
Family care benefit provides coverage for up to a year if policyholder has to take off work to care for a child, spouse, or parent
10% discount to business owners and an additional 10% to preferred occupational classes.
Offers the option of Full Coverage for Mental/Nervous disabilities or a 10% discount for a 2 year limitation.
Rated A (Excellent) by A.M. Best for financial strength
What is Disability Insurance?
The idea behind disability insurance is simple.
It operates similar to a traditional life insurance plan, but instead of paying out upon your death, it pays out if you become disabled.
Coverage for these plans can vary in the size. Just like with other kinds of insurance plans, every disability policy is different.
If you already know what you want and just want to browse different rates from several carriers, click here.
Some plans are going to replace 45 %of your income, while others are going to give more replacement at 65%.
The more replacement coverage you want, the more you’re going to pay for your plan.
The Differences with Workman’s Compensation
When an employee suffers an injury on the job, oftentimes their employer will compensate them through worker’s compensation.
It is important to understand the difference between disability insurance and worker’s compensation – because the two are not the same thing.
The key difference between workers’ compensation and disability insurance is that workers’ compensation (or workers’ comp) pays for injuries that are work-related. Employers will obtain workers’ comp insurance in order to pay for incidents that occur on the job.
If workers sustain injuries on the job, it is oftentimes up to the employer to pay for the person’s medical bills, as well as for the individual’s lost wages if the employee must take time off work because of the injury.
An employee who collects payment via workers’ comp will typically, however, not have a long-term disability, but rather a temporary injury from which he or she will soon return.
On the other hand, disability insurance pays for a percentage of a person’s earnings if the insured is not able to work due to an injury or illness – regardless of whether that injury or accident happened at work or elsewhere.
In addition, if the disability insurance policy is an individual policy (versus an employer-sponsored group plan), the insured will be covered under the policy regardless of who he or she is employed through.
According to the Council for Disability Awareness, less than 5 percent of disabling accidents and illnesses are work related.
This means that the other 95 percent are not – and that these other 95 percent are also not covered by workers’ compensation insurance.
What About Social Security Disability Benefits?
It can be extremely difficult to qualify for Social Security’s disability benefits. For example, Social Security will only pay benefits if a person is considered to be totally disabled. This means that the individual cannot do work that they did previously, nor can they do other jobs either.
In addition, the person’s disability must have lasted, or be expected to last, for at least one year or result in death.
An individual must also have collected enough work credits in order to qualify for Social Security disability benefits.
You can take a look at the 2019 Social Security Administration limits and rates for OASDI and social security here.
The number of credits will be dependent on the age that the individual is when he or she becomes disabled.
With that in mind, the importance of disability insurance becomes even more clear.
This type of insurance can provide you with the additional funds that you need to help pay living expenses – without the need to dip into savings, retirement assets, or worse yet – use credit – for the purpose of paying day to day bills until you are back on the job.
If Social Security deems that a person’s situation qualifies, there is still a five month waiting period before benefits are paid.
This, too, can create a financial hardship for many people in terms of paying living expenses – especially if there are added medical costs due to the illness or injury that has been suffered.
So, we know Social Security won’t give the money you need and workman’s comp probably won’t cover it, so now what?
This is why you should explore a private disability insurance policy.
Types of Disability Insurance
The two main types of coverage are long-term disability and short-term disability.
You can probably guess from the name, but short-term policies are designed to cover employees for a much shorter time, anything shorter than two years.
Long-term disability, on the other hand, is built for anything past two years. A long-term disability insurance policy could continue to pay out for the rest of your life if it’s needed but typically runs from 5-10 years.
Some of the common causes for short-term disability insurance include:
having a baby
a severe illness
a major injury.
Long-term disability could include a lot of things, but some common causes are:
cancer
muscular disorders
cardiovascular complications
or serious injuries
Long-Term Disability vs. Short-Term Disability
Aside from the obvious, there are a few key differences between long-term disability and short-term disability.
One of those is the waiting period for a payout.
With short-term, policyholders can start receiving weekly checks as quickly as a 1 to 7 days after you file a claim for the policy.
With a long-term disability insurance policy, on the other hand, it can be anywhere from 90 days to 180 days.
If you’re looking at the cost difference between the two plans, short-term policies are going to be significantly more affordable than its long-term counterpart. Long-term plans can give you years more coverage which could translate to thousands and thousands of additional coverage from the insurance company.
Another key difference between the two kinds of plans is how you can get the coverage.
A lot of companies offer their employees short-term disability insurance, but almost no companies have a long-term disability insurance program.
If you want to get the long-term coverage, you’ll have to purchase a plan through a private insurance company. If your company offers any type of short-term disability insurance, you should always enroll in the program.
Group, Individual, Multi-life
Inside of the two main types of disability insurance are several “sub-types” of coverage.
One of those is group coverage.
These are policies which are offered through an employer and are offered to all the employees. Group coverage could be either short-term disability or long-term disability.
Employer-sponsored short-term plans are designed to pay for any disabilities which occur outside of the workplace. Short-term disabilities are much more common than long-term disabilities which could impact you for the rest of your life.
Individual Disability Insurance
If your company doesn’t have any sponsored plans, you can purchase a private policy through an insurance company.
You’ll be required to answer some medical questions and depending on the plan, take a medical exam.
Multi-Life Disability Insurance
When you’re shopping around for a disability insurance policy, you’ll probably come across plans being sold as “multi-life plans.”
The idea of these plans is to get several key people in a business (think of several doctors in a practice) to all apply at the same time with their plan.
The insurance company markets these policies as multi-life so they can offer simpler underwriting processes and pass some of the savings onto the policyholders.
Is Group Disability Enough?
For the employees who are lucky enough to get disability insurance through their employer, you still might be lacking. Just because you have a plan through your job, it might not be enough.
Let’s say you’re not able to go to work because of an accident. You can’t get to your job and pull in your paycheck, are you going to be able to pay for all of your monthly bills without having to make any extreme sacrifices.
To determine if your group disability insurance is enough, you’ll need to do some basic math.
Look at your plan and see how much coverage it provides.
For this example, let’s say it pays 50% of your salary. Now, take a look at your bills and expenses.
If the total of those numbers is more than 50% of your income, then your group disability isn’t enough.
If you’ve crunched the numbers and came to the jarring realization your group plan isn’t enough, the best choice is to purchase an additional individual plan.
Both of the policies can work together, and your individual plan can pick up the slack left behind.
What’s the Difference Between Owner-Occupation and Any-Occupation?
One of the most important things to understand about disability insurance plans are the differences between an owner-occupation plan and an any-occupation plan.
They may sound the same, but they completely change how your plan operates and the coverage it will give you.
First, let’s look at owner-occupation (sometimes called own-occupation protection). Policies with this protection will only pay out if you can no longer to the duties and tasks required to you by your job.
If you’re an electrician, but you can not do the simple tasks required on a day-to-day basis, then an own-occupation plan will pay you the benefits.
Any-occupation policies will only pay the benefits of the plan if you can no longer perform any occupation based on your education and work experience.
As you can tell, any-occupation policies have much stricter rules on the circumstances in which they will pay the policyholder.
Type of Disability Insurance
Description of Disability Insurance
Short-term disability insurance
Provides coverage for a limited period of time, usually up to 6 months, and replaces a portion of your income if you are unable to work due to illness or injury.
Long-term disability insurance
Provides coverage for a longer period of time, typically until retirement age, and replaces a portion of your income if you are unable to work due to illness or injury.
Group disability insurance
Provided by an employer as part of a benefits package, group disability insurance offers coverage to all employees and may be offered as short-term or long-term disability insurance.
Individual disability insurance
Purchased by an individual, this type of disability insurance offers customized coverage and can be either short-term or long-term disability insurance.
Own-occupation disability insurance
Offers coverage if you are unable to work in your specific occupation due to illness or injury, even if you are able to work in a different occupation.
Any-occupation disability insurance
Offers coverage only if you are unable to work in any occupation due to illness or injury.
Residual disability insurance
Offers coverage if you are able to work but have a reduction in income due to illness or injury.
How Much Does Disability Insurance Cost?
Now for the part everyone wants to know, how much is a disability insurance plan going to cost you?
Well, there are a lot of different factors which are going to affect how much the premiums are. It’s difficult for me to give an exact number without knowing your exact situation.
For example, the age of the applicant is going to play a major role in the premium rates. If a 25-year old applies for a policy, it’s going to be significantly cheaper than a plan for a 45-year old.
The general rule of thumb for disability insurance is the premiums are going to be anywhere from 1% to 3% of your gross income.
If you are making $100,000, you can budget for $1,000 – $3,000 every year.
As I mentioned, there are dozens of different factors which will completely change how much you pay.
If you’re a smoker, then you’re going to pay much more for your plan.
If you have a riskier job, you’re going to pay more.
The rule of thumb is exactly that.
How Much Disability Insurance Do You Need?
I alluded to the amount of disability insurance earlier in this article, but now let’s take a hard look at how much coverage you should have.
Not having enough disability insurance protection could cause some serious financial strain if something were to happen.
First, let’s look at your living expenses. If you don’t already have a budget, take some time to look at all of your monthly bills (power bill, water bill, mortgage payment, etc.) and your spending (groceries, gas, etc.).
On top of those monthly expenses, add in a few “unexpected” bills as well. You never know when something is going to break or an extra bill is going to pop up.
You want to have some cushion in your budgeting. Otherwise, you end up living paycheck-to-paycheck.
After you have the monthly expenses number, you can do some subtracting.
If you aren’t working, your expenses are going to look very different than they do now. For example, if you aren’t driving to work every day, you probably won’t be spending as much on gas.
You won’t be spending money on work clothes, and you will probably cut out some additional “entertainment expenses” as well.
Now you have a new number, your monthly expenses minus some tweaks.
The next number you want to add to the equation is any income you’ll make from other sources besides your disability insurance plan.
This category can include any money from your investments, money from your spouse or partner’s job (or a second job if they decide to add another job) and any additional disability income you may qualify for.
If you’re the main income earner in your home, then having disability insurance is one of the most important purchases you can make.
Key Man
For most people, they purchase disability insurance for their family and loved ones. for others, they buy a plan to protect their business.
If you’re one of the foundational workers in your business (ex. an owner, CEO, etc.), then you should consider buying a disability insurance policy for your company.
Key man plans operate a little differently than a traditional disability policy. With these policies, the business pays the premiums for the plan, and if something were to happen to you and you couldn’t perform your job, then the business is going to get the money from the payout.
These policies are a way for the companies to protect themselves against financial struggles if a key person in the business were unable to work because of illness or injury.
The company can use this money to outsource those duties or to hire someone to replace the key person while they are out with the disability.
Disability Insurance for High Income Occupations
There is a certain group of people which disability insurance could have some serious problems.
If you are a high-income earner, the standard disability insurance policy simply may not be enough. Just about every insurance company which sells one of these plans is going to have an income limit.
Regardless of the percentage they replace, they are not going to offer more than that limit.
Typically, these are doctors or lawyers who own their own firms, for example.
Some policyholders may find the insurance company’s limit is below the 60% they offer in income insurance.
If you’re one of these people, there are some things you can do to get the protection you need, regardless of how much money you make every year.
One option is to choose a company who offers higher limits. Each company has different coverage limits on their policy. We can help you shop around until you find one with a high enough limit for your needs.
Another route is to buy two separate plans from different companies. Sure, you’ll pay more in premiums every month, but you’ll have the protection in place if you ever need it.
Where to Get a Disability Insurance Quote
You now know the basics of disability insurance coverage, it’s time to go out and find a policy of your own.
There are more than 40 insurance companies which sell these plans. As I mentioned, they are all different. Some are going to have higher limits, offer a larger percentage, or have cheaper rates.
You need to find a company which suits your needs.
Before you pick a company, compare the rates and plans from several companies. You don’t buy the first house you see, why would you buy the first policy you find?
Sure, you can use your own time to contact those 40+ companies individually, or you can use a tool which will do the dirty work for you.
If you’ve decided you want to get disability insurance or supplement the coverage you already have from work, check out PolicyGenius. They are one of the few companies out there which can gather quotes from dozens of companies for disability insurance, all in one place.
PolicyGenius allows you to tailor your quotes to exactly the kind of policy you’re looking for; the perfect amount of coverage with the proper waiting period.
They know shopping for insurance isn’t easy, but they make it as quick as possible.
FAQs – Best Disability Insurance Quotes
How can I get the best disability insurance quotes?
To get the best disability insurance quotes, it’s important to shop around and compare policies from different insurance companies. You can request quotes online or by speaking with a licensed insurance agent. Be sure to provide accurate information about your occupation, income, and health to receive an accurate quote.
What factors can affect the cost of disability insurance?
The cost of disability insurance can be affected by several factors, including your age, occupation, health status, and the type and amount of coverage you select. Policies with longer benefit periods or more comprehensive coverage may be more expensive.
How much disability insurance coverage do I need?
The amount of disability insurance coverage you need depends on factors such as your income, monthly expenses, and savings. A general guideline is to have enough coverage to replace 60% to 80% of your income, but this may vary depending on your individual circumstances.