credit score

Apache is functioning normally


Credit Card Debt Relief: 6 Strategies – MintLife Blog

Skip to main content

$1 trillion in credit card debt, there must be a sustainable option to lessen the stress of carrying large debts month over month, year over year. Credit card debt relief is a way to not only get out of seemingly endless debt but also to perhaps bring about a little bit of mental—and ultimately, financial—peace.

Rather than just assuming you can entirely write your debt off with little impact otherwise, it’s important to know the various credit card debt relief options that are available and the different impacts each approach will have on your credit and financial health over the long term.

Keep reading to learn six credit card debt relief strategies, or use the links below to navigate the article.

How to Pursue Credit Card Debt Relief

Seeking credit card debt relief can be an ideal option for those experiencing hardship from life’s unexpected happenings, whether that’s medical bills, a sudden loss of income, or debt that has become excessively difficult to manage. Before deciding on a course of action, it’s important to know the differences between each approach.

Here are six strategies to consider for credit card debt relief:

1. Do-It-Yourself

Credit card debt relief may be able to be reached through a resolute commitment to aggressively paying down debts as quickly as possible. Do-it-yourself options to credit card debt relief require discipline and may not offer the degree of immediate debt relief desired.

If you have a particularly good credit score, you may be able to negotiate a lower interest rate on your cards through individual credit card companies to lessen the burden of debt.

While you’re not necessarily entitled to a lower interest rate, explaining your hardship and mentioning the length of time you’ve been with the credit card company could help secure a better deal, making debt repayment more manageable.

You might also consider taking a new approach to paying down debt by:

  1. The debt snowball approach — paying off the credit card with the smallest interest rate first while making minimum payments on other debts.
  2. The debt avalanche method, which allows for accelerated debt repayment as you put extra money towards the debt with the highest interest rate, while paying the minimum on all other outstanding debts.

The snowball method costs more but can boost confidence in being able to fully tackle paying off one card before moving onto the next.

2. Consolidation

Consolidating debt means combining all outstanding debts you owe to different lenders into a new loan.

Credit card consolidation, while not a method that outright eliminates debt, can be a strategy to help you pay down debt faster. With this option, you’ll only be making one payment a month instead of several— potentially making it easier to keep track of what you owe.

By taking out a low-interest rate loan through a lending institution, you may be able to pay off the majority, if not all, of your high-interest credit card debt.

Another option for consolidation is to do a balance transfer from a high-interest credit card to a credit card with a lower or no interest rate to lessen the burden of interest charges. It’s important to note that this option may come with a fee and doesn’t simply get rid of debt, but it could make the credit card debt relatively easier to pay down.

3. Credit Counseling

Seeking credit counseling, which is usually a free service provided through nonprofit organizations and independent financial agencies, may help lead you in the right direction to achieve credit card debt relief.

  • How it works

Trained counselors can guide you through repayment planning by reviewing your budget, analyzing your debt, and offering recommendations to help find a sustainable debt relief solution.

Counselors simply offer suggestions, making the service free unless you opt to use their help in pursuing a course of action, such as enrolling in a debt management program.

4. Debt Management Program

If you decide to sign up for a debt management program (DMP) through a credit counseling agency, you’ll make a single monthly payment to the agency, and the agency will in turn pay your creditors. With this option, you’ll likely be able to pay off your debts within three to five years, as outlined in your specific debt management plan.

  • Considerations

By enrolling in a debt management plan, you won’t be able to obtain new credit until your debts are paid off. In fact, the credit counseling agency will close your active credit accounts while you complete the plan.

Closing your credit card accounts could negatively impact your credit score in the short-term, but by making regular monthly payments (that you can actually afford), debt management programs may help you find credit card debt relief over time.

5. Debt Settlement

Debt settlement means negotiating with your creditors to pay less on your debt than the amount you actually owe. This agreement is typically arranged by a third party—a debt settlement company—that acts as an intermediary between you and your credit card companies.

  • How it works

In this scenario, you cease making payments directly to the credit card companies and instead pay the debt settlement company, which in turn offers a lump sum payment to appease the creditors.

  • Considerations

This avenue is typically a poor choice for credit card debt relief because as you stop making payments to your creditors, your credit score will not only deteriorate, but credit card companies can also come after you with penalty fees and even legal action for failing to make payments. There could also be tax implications if a large amount of debt is forgiven, because the IRS may consider cancelled or forgiven debt as taxable income.

6. Bankruptcy

Bankruptcy should be reserved as a last resort in extreme cases of credit card debt hardship, as it has serious implications on your credit score.

  • The two most common types of bankruptcy are:
  1. Chapter 7 which forgives your debts on the condition that you liquidate some of your assets to pay creditors.
  2. Chapter 13 in which you enter into a court-arranged debt repayment plan that lasts three to five years, after which your debts are dismissed.

Chapter 7 bankruptcy is the only true way to avoid paying your debts, as it essentially wipes out outstanding debt entirely and offers a clean slate. Creditors still receive some means of repayment, whether in assets or through the repayment plan, and bankruptcy can offer a way out of otherwise inescapable debt.

Effects of Credit Debt Relief on Your Credit

Depending on which approach you pursue to achieve credit card debt relief, effects on your credit could range from nonexistent to severe damage. Since credit utilization (the amount of outstanding balances you have compared to your credit limit) makes up 30 percent of your credit score, carrying high credit card debt month after month is likely to have a damaging effect on your score.

The self-managed approach to reducing debt may not necessarily hurt your credit, so long as you continue to make regular payments. Credit card consolidation may help you tackle debt faster, possibly leading to a better score in the long run. Credit counseling won’t have a direct impact on your credit unless you decide to act on the advice given, such as signing up for a debt management plan. Depending on the parameters of the specific debt management program you sign up for, DMPs could have either a positive or negative effect on your credit.

On the more extreme end, opting for debt settlement through a third-party has the potential to hurt your credit when you stop making regular payments to credit card companies. Similarly, filing for bankruptcy could critically weaken your creditworthiness and should only be a last resort option, as a Chapter 7 filing stays on your credit report for ten years, while a Chapter 13 will remain for seven years.

The Bottom Line

The best approach to credit card debt relief depends entirely on the individual level of hardship you have in paying back credit card debts. It’s essential to consider the different options to reducing the strain of credit card debt that will work for your lifestyle. Whether you opt to take the do-it-yourself route or find yourself filing for bankruptcy, taking a committed approach to minimizing your debt could lend itself to better financial health in the long run.

  • Previous Post
    6 Tips to Get Ahead of Your Student Loans Before…

  • Next Post
    Getting Approved for Your First Credit Card

Browse Related Articles


Browse by Topic

Source: mint.intuit.com

Apache is functioning normally

The nation’s top mortgage lender has lowered the minimum credit score required for an FHA loan, according to American Banker.

Going forward, the bank is accepting FHA loan applications from borrowers with credit scores as low as 500, though they must come up with a 10 percent down payment and sport a maximum debt-to-income ratio of 31 percent.

That seems like a pretty safe bet, given the fact that home prices have likely seen bottom or are relatively close to bottoming out.

Previously, Wells only accepted FHA loans from borrowers with credit scores of 600 and upwards.

The move was made following pressure from HUD, which oversees FHA lending, along with affordable housing advocates, largely because FHA loans are intended to serve the underserved, not everyday Joes.

Back in November, Wells and other top lenders were actually raising minimum credit score requirements on FHA loans…

It is believed that loans originated via mortgage brokers and correspondent lenders still carry harsher underwriting standards, with the minimum credit score 620 or 640.

At the end of the third quarter of 2010, just 3.8 percent of FHA loans had scores below 620 or no credit score, compared to 50.4 percent as of the end of 2008.

Back in mid-2010, the FHA announced a minimum credit score of 500 on all loan programs, with a 580 score needed to qualify for the flagship 3.5 percent down payment program.

Source: thetruthaboutmortgage.com

Apache is functioning normally

I’ve written about the importance of credit scores before, especially when it comes to getting a mortgage, mentioning that you could save tens of thousands of dollars if you simply had excellent credit.

Fortunately, it appears that the general public is aware of this, per a new study from credit bureau Experian.

The company said some 45% of would-be home buyers (those planning to buy in the next year) are holding off until they improve their credit scores.

This is a good thing because it means they’ll be able to qualify for a greater array of mortgage programs, instead of say just FHA financing, and potentially obtain a lower mortgage rate (and lower monthly payment) in the process.

Still, 34% of those surveyed fret that their credit scores may hurt their ability to purchase a home. And one in five are holding off entirely for at least the next 5-10 years because of a low credit score.

But instead of worrying and accepting defeat, why not take action to improve things so you can shop for a home with confidence?

54% of Future Buyers Are Working on Their Credit Now

The survey found that more than half of future buyers were actively working on improving their credit before making an offer by paying off existing debt, keeping balances low, and making on-time payments.

This is wise given the difference in mortgage rates for an average credit score versus an excellent credit score.

Generally, you want to shoot for a FICO score north of 760 (though 740 might also do) to ensure you obtain the best pricing on both your mortgage rate and PMI, if necessary.

Sure, you can still get approved for a mortgage with an average or even poor credit score, but you’ll just wind up paying a lot more interest over the years. And poor credit history is still the number one reason why individuals are denied a mortgage.

How to Take Action Today

If you’re unsure of how to turn things around, it’s actually pretty easy if you have the means. Assuming you’ve made timely payments on all your credit accounts but your score still isn’t where it should be, consider paying down those outstanding debts.

Last month, I revealed that that my own credit score tanked after the holidays because I made a ton of purchases on my credit cards, this despite paying all the balances to zero well before the due date.

The problem is that credit scores are simply a snapshot in time of your situation, and if you make a bunch of charges you could look worse off than you really are.

So the easiest way to keep your credit scores elevated is to avoid as many purchases as possible before looking for a home, while also paying down any existing balances. This will certainly boost your scores. Additionally, this budgeting can help you set aside more money for the down payment, closing costs, and reserve requirements associated with a mortgage.

Another biggie is to avoid opening any new credit accounts before you begin your home search. This is easy, just don’t do it. Those new credit accounts can drag your credit scores down and will likely increase your debt and take a bite out of your assets. Once your mortgage closes, you can go buy new furniture and whatever else you want.

If you’ve got some late payments on your credit history, your scores will definitely be depressed. One way to resolve this is by disputing the delinquencies with the credit bureaus directly, via their own websites. You don’t have to mail in letters anymore, so this process is a lot easier.

It’s possible to get negative items removed simply if the creditor(s) doesn’t respond to your dispute (even if you were still technically at fault). Once removed, your credit scores can skyrocket.

The takeaway is that a low credit score shouldn’t be the sole reason why you’re not buying a home. And it’s a very fixable problem.

However, it does take time for positive actions to reflect in your credit scores, so it’s never too early to start working on it. The moves you make today can save you thousands upon thousands in the way of a lower mortgage rate.

In some cases, you might even be able to buy more house because less outstanding credit card debt means your DTI ratio will allow for a larger mortgage payment. Your offer will also be more competitive.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Whether you’re deciding on a new career path or wondering whether you’re being paid enough, it can help to know what the typical American worker earns per year.

Based on the latest data available from the Social Security Administration (SSA), the average annual pay in the U.S. in 2021 was $60,575 — an 8.89% jump from the previous year. The U.S. Bureau of Labor Statistics (BLS) estimates the average worker made closer to $67,610 that same year. The amount you make may depend on a number of factors, including your occupation, where you live, your gender, and your level of education.

Check your score with SoFi Insights

Track your credit score for free. Sign up and get $10.*

Key Findings

Let’s take a closer look at how the average annual pay in the U.S. has changed over a three-year period based on data from both the SSA and BLS.

Year Average Annual Salary per SSA Average Annual Salary per BLS
2019 $54,099.99 $59,209
2020 $55,628.60 $64,021
2021 $60,575.07 $67,610

It can also be helpful to look at median earnings, which represent the midpoint of salaries in the U.S. In other words, half of the salaries fall below the median, and half are higher than the median.

The following table shows the median annual salary for a three-year period.

Year Median Annual Salary
2022 $54,132
2021 $51,896
2020 $51,168

Source: BLS

As you can see, average and median incomes have risen each year. However, average salaries can be affected by various factors such as your occupation, age, and gender. Note that the numbers above also don’t include unearned income.

Examples of High-Salary Jobs in the US

Some industries tend to pay more than others, which means the career you choose may affect how much you earn. Here’s a sampling of high-paying jobs and their average annual salary, according to the BLS:

•   Cardiologist, $353,970 per year

•   Dentist, $177,770

•   Aircraft pilots and flight engineer, $169,540

•   Lawyer and judicial law clerk, $146,220

•   Public relations manager, $138,000

•   Air traffic controller, $127,920

Recommended: How to Reduce Taxable Income for High Earners

Average American Income by Occupation

While salaries tend to vary based on geography, seeing how much certain types of jobs pay can be informative. Let’s take a look at different occupations and how much they typically pay.

Occupation (Type) Average annual salary
Management $123,370
Legal $113,100
Computer and Mathematical Operations $99,860
Architecture and Engineering $91,740
Healthcare Practitioners and Technical $91,100
Business and Financial Operations $82,610
Life, Physical, and Social Science $80,730
Arts, Design, Entertainment, Sports, and Media $66,100
Educational Instruction and Library $62,140
Construction and Extraction $55,900
Community and Social Service $53,960
Protective Service $53,420
Installation, Maintenance, and Repair $53,380
Sales (and Related) $46,080
Office and Administrative Support $43,430
Transportation and Material Moving $41,340
Farming, Fishing, and Forestry $34,730
Building and Grounds Cleaning and Maintenance $33,750
Personal Care and Service $33,620
Healthcare support $33,330
Food Preparation and Serving Related $29,450

Source: BLS, May 2022 data

Keep in mind that average salaries may differ depending on the specific occupation you have. For example, although claims adjusters fall under the business and financial operations category, their average salary is around $70,960.

US Income by Gender

Demographics, specifically gender, are another factor to consider. By and large, men tend to outearn women throughout their career. The median annual salary for a 16- to 24-year-old man is $33,800; a woman of the same age earns $31,460, per the latest data available from the BLS. Likewise, the median annual salary for a man aged 25 and older is $60,320; a woman of the same age earns $49,608.

Median Income by State

Wages often vary based on where you live. In many cases, states with higher costs of living also have higher wages. For example, the median annual income in Hawaii is $100,532 — much higher than Mississippi’s median annual income of $61,205.

Below is the median income by state for a household of three people, according to data compiled by the Census Bureau between April 1 and May 14, 2022.

State Median annual income
Alabama $70,250
Alaska $108,072
Arizona $79,110
Arkansas $70,169
California $97,092
Colorado $100,744
Connecticut $108,409
Delaware $96,841
District of Columbia $138,342
Florida $75,057
Georgia $79,980
Hawaii $100,532
Idaho $76,635
Illinois $97,067
Indiana $81,783
Iowa $85,758
Kansas $88,369
Kentucky $71,501
Louisiana $71,371
Maine $87,051
Maryland $113,994
Massachusetts $117,415
Michigan $84,245
Minnesota $106,445
Mississippi $61,205
Missouri $80,022
Montana $79,652
Nebraska $91,076
New Hampshire $113,013
Nevada $91,076
New Jersey $117,697
New Mexico $66,183
New York $96,854
North Carolina $76,386
North Dakota $94,950
Ohio $82,734
Oklahoma $71,397
Oregon $93,773
Pennsylvania $92,441
Rhode Island $101,104
South Carolina $75,128
South Dakota $87,475
Tennessee $75,394
Texas $80,733
Utah $90,629
Vermont $92,628
Virginia $102,869
Washington $104,644
West Virginia $71,757
Wisconsin $92,586
Wyoming $88,902

US Income by Race

As the BLS data below shows, there is often a pay disparity among workers of different races and ethnicities.

•   Asian, $69,056 per year

•   White, $52,936

•   Black or African American, $41,652

•   Hispanic or Latino, $40,404

How Does Your Income Stack Up?

Now that you’ve seen some of the average and median annual salaries by occupation, location, gender, and race or ethnicity, how does yours compare? If you’re not making as much as you’d like, you may want to research wages in your industry and region, and use that information to help you negotiate a higher salary. If you’re ready to make a bigger change, you can use this data as you consider whether to switch to a more lucrative field or relocate to a higher-paying region.

Recommended: How to Negotiate Your Signing Bonus

How to Stretch Your Income

Here are some different strategies to help you make the most of the money you make:

Track Your Spending

Understanding exactly where your money is going can help you keep tabs on where your money is going and identify areas where you can cut back. Consider using a spending app to track your spending and saving.

Negotiate Bills

Want to lower monthly expenses, such as your cell phone or internet services? Consider calling up various providers to see if you’re able to get a better deal or if there are promotions you can take advantage of.

Cut Back on Large Expenses

Housing, food, and transportation tend to be the largest line budget items. Explore ways to trim your biggest costs. Examples include refinancing your mortgage, negotiating your rent, shopping at discount grocery stores, and taking public transportation when possible.

Sharpen Your Marketable Skills

Accepting networking opportunities and taking professional development courses could help you become more marketable as an employee. This in turn could set you up to earn more in the long run. If you’re on a tight budget, look into no- or low-cost ways to cultivate high-income skills, and ask your employer if there are any free resources are available.

Pros and Cons of a High Salary

A high income can be great, but it does come with some downsides.

Pros:

•   Improved quality of life: With more money, you can afford a higher standard of living and be able to afford different amenities such as better access to healthcare and food.

•   Financial security: The more you earn, the more you can feel secure you have enough money to afford the things you want and need.

•   Ability to achieve financial goals faster: Having more disposable income could mean you can set more money aside for long- and short-term savings goals, like retirement or going on a family vacation.

Cons:

•   Higher taxes: Earning more can put you in a higher tax bracket. However, there are ways to reduce your taxable income.

•   Pressure to maintain income: If you’re accustomed to a certain living standard, you may feel like you need to keep earning the same amount or more to maintain it.

•   More work stress: In many cases, higher-paying jobs come with more responsibilities and at times, longer hours.

The Takeaway

Understanding what the average American worker makes in a year can come in handy, especially if you’re considering a new career path, negotiating a higher salary, or looking for a new place to live. According to the latest data from the Social Security Administration, the average annual pay in the U.S. is $60,575. But the amount you earn may depend on a wide range of factors, such as the industry you work in, where you live, your gender, and your race or ethnicity.

If you’re looking to make the most out of the money you earn, consider using amoney tracker app. The SoFi Insights app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring, plus you can get other valuable financial insights.

Stay up to date on your finances by seeing exactly how your money comes and goes.

FAQ

What is a good salary in the USA?

There’s no one set amount that would be considered a good salary in the U.S. However, the average salary is around $60,575, according to the Social Security Administration.

What is the real average wage in the US?

The average wage in the U.S. is $67,610 according to the most recent data available from the U.S. Bureau of Labor Statistics.

What is the top 10 percent income in the US?

According to the Economic Policy Institute, the top 10% of workers in the U.S. earn $133,482.

How much should you be making at 30?

While there is no definitive amount you should earn by the time you’re 30, the average salary for U.S. workers aged 25 to 34 is $52,832, according to statistics from the U.S. Bureau of Labor Statistics.

Photo credit: iStock/VAKSMANV

SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
*Terms and conditions apply. (Must click on the link to be eligible.) This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the Rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SORL0423006

Source: sofi.com

Apache is functioning normally

Save more, spend smarter, and make your money go further

In an ideal world, your monthly cash flow would cover all your expenses — both expected and unexpected — and enable you to reach your financial goals. But financial situations are rarely ever that simple and straightforward.

What happens if something comes up in your life and your monthly budget nor your cash savings can handle the expense? There’s always the option to borrow, and while being in debt isn’t ideal, there are situations where it may make sense.

Before you take out your credit card and rack up a balance, look into other options. A personal loan might be a better financial bet.

What Is a Personal Loan (and Why Get One)?

A personal loan is a type of unsecured loan. “Unsecured” means you don’t put up collateral against the loan. When you take out a personal loan, you’ll typically receive the amount borrowed in a lump sum with fixed payment terms and a set interest rate.

Personal loans may be better options than credit cards because they offer better interest rates. Costing you less can be the biggest benefit, but a personal loan is also a different kind of credit account than a credit card. Managing various types of credit is one small action you can take to improve your credit score.

Keep in mind this is only true if you manage accounts and loans wisely. Here’s how to do so.

How to Manage Your Personal Loan Responsibly

Again, in an ideal world, you wouldn’t need to borrow money or wait a very long period of time to save up to buy what you want. But in real life, things happen and timelines shift. Taking out a personal loan can be an option. You just need to plan and act responsibly with the sum you borrow.

Don’t request more than you can reasonably afford to repay — and don’t take out a loan for a greater amount that what you truly need the money for. Not only do you need to pay that money back, but you’ll need to pay loan origination fees and whatever the interest rate on, making this option more expensive in the long run than simply using cash.

Create a repayment plan and stick to it. Know how much you need to allocate toward repaying your personal loan each month, and make it a priority in your budget. You may need to cut back on some discretionary spending, like meals out and shopping trips, in order to knock that loan out on time.

And before you take out any loan, make sure you fully understand the terms. Understand all the fees associated with the loan, and ask the lender if there are penalties for repaying the loan early.

What About Consolidating Debt with a Personal Loan?

Remember how it may make sense to take a personal loan over racking up credit card debt, thanks to a potentially lower interest rate? If you already have credit card debt across multiple cards and a high debt-to-income ratio, it may make sense to consolidate that debt with a personal loan.

This might be beneficial if you can get a lower interest rate on the personal loan than what you’re paying on your credit cards, and if you could afford the monthly repayment on the personal loan.

Like most other financial products, personal loans can be useful tools — but only if you wield them wisely and responsibly. Before applying for a personal loan, consider your overall financial health with a free credit score and report and consider if this is the right move for you.

Kali Hawlk is a freelance writer and the co-founder of Off The Rails, a free mentorship platform for creative women. She’s passionate about helping others do more with their money, their work, and their lives. Get in touch by tweeting @KaliHawlk.

From the Mint team: Everyone has different needs and desires as it relates to their financial situation. Mint’s new Loan Center has select personal loan and student refinancing options that may suit your needs (and have passed our sniff test!).

Save more, spend smarter, and make your money go further

  • Previous Post
    Are Personal Loans Right for Me?

  • Next Post
    How to Get Student Loans Forgiven: Your Guide to Programs…

Browse Related Articles

Source: mint.intuit.com

Apache is functioning normally

Save more, spend smarter, and make your money go further

There’s no secret password when it comes to getting a mortgage. But while most people know what to do to get a mortgage — or get a better rate — fewer people give thought about what not to do.

Whether you’re preparing to apply or just got approved, there are perhaps more “don’ts” than “dos” when it comes to getting a mortgage.

New Credit Is Bad Credit

Never apply for any new credit while you’re trying to get a home loan. Opening new credit decreases your net worth by giving you more available debt. This makes you a riskier investment in the eyes of a mortgage lender.

As such, you can suffer from higher interest rates or even get denied a loan. This includes co-signing for other people’s credit, which is the same as applying for your own credit in the eyes of the bank.

Opening new bank accounts and moving money between existing accounts is also a bad idea, even though you aren’t technically applying for any new credit.

And while we’re at it, leasing a car might not be the same as buying one but it also falls under this general category of avoiding new debts.

Quitting Your Job

This one is pretty much a no-brainer. While your credit score and credit history pay a big role when it comes to whether or not you get a mortgage, so does your income.

Quitting your job without having another one lined up is never a good idea, but when you’re applying for a home loan, it’s just about the worst idea out there. Switching careers isn’t the best plan either, even if you have a job waiting for you.

Lenders want to know that you have a steady income stream that (probably) isn’t going anywhere.

Depositing Phantom Funds

Underwriters want to be sure that all funds in your bank accounts are actually yours and not money your parents gave you to make it look like you have more funds than you actually do.

Talk to a mortgage advisor before you put anything into your bank account that doesn’t come from a payroll within 60 days of applying for a mortgage. After 60 days, mortgage lenders are less interested in having a paper trail for everything.

If you’ve just had some kind of cash windfall, keep the money in your mattress until after you’ve closed.

The exception? Properly documented gifts. Talk to your mortgage advisor about creating the right paper trail for gifted money.

Ins and Outs of Credit

Closing old credit accounts can potentially lower your credit score, as the length of your credit history is as important as what you’ve done with your credit. Discuss it with your advisor before you close any outstanding accounts.

The same goes for paying off unsecured credit lines or credit cards while you’re applying for a loan. When you pay off your outstanding consumer credit accounts, you might not be able to use the money for a down payment.

While on the subject of credit cards, we should say that you generally should not be charging significant sums on your credit card before or during the loan application process.

Try and pay off whatever you charge every month. This is because even a few points can make a significant difference in what you pay for your home over the life of the loan in the form of interest.

Discuss your specific situation with your mortgage advisor.

Listen To Your Advisor

If there’s one piece of advice that you should take away from this article, it’s consult closely with your mortgage advisor throughout the process. They’ll be able to tell you what to do and not to do in a manner far more specific to your situation.

Still, be mindful of your credit and remember it is under especially close scrutiny during the mortgage process. Keep your eyes on the prize — your new home.

Nicholas Pell is a personal finance writer based in Los Angeles, CA. He is the last of the die-hard renters. 

Save more, spend smarter, and make your money go further

  • Previous Post
    Facebook Fan Q&A: When Does Closing a Credit Card Make…

  • Next Post
    The 4 Basic Financial Accounts Everyone Should Have

Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint

Browse Related Articles

Source: mint.intuit.com

Apache is functioning normally

Buying a home is a big deal — it’s a huge financial commitment and a serious responsibility. But confusing and misleading information on the internet can throw curveballs in the research process.  

Three pieces of information in particular about mortgages and the housing market have recently been floating around the internet that may confuse potential home buyers.

Here’s what they actually mean:

Half-truth #1: The government gave the OK to 40-year mortgages

In April, Google
GOOGL,
+0.47%
searches for “40-year mortgage rates” surged after people and some news outlets apparently misunderstood an announcement from the federal government that referred to 40-year mortgages. While a small share of lenders may offer a 40-year mortgage product, it’s not the norm.

These longer mortgages are typically available to current homeowners who have Federal Housing Administration mortgages and need help because they’re in financial distress and have already defaulted on their loan.

A 40-year loan modification (meaning, changing an existing shorter-term mortgage into a 40-year mortgage) can help these borrowers avoid foreclosure by extending the duration of their mortgage. This makes their monthly payments smaller and therefore a little more affordable and brings their loan back to current status, meaning that the borrower is making payments on time.

In the U.S., most people are familiar with the fixed rate 30-year mortgage, a conventional, tried-and-true financial product that gives people decades of stability in terms of their monthly housing expenses. Other common types of mortgages include 15-year fixed-rate mortgages as well as adjustable-rate mortgages, which can run for shorter terms, such as three, five or 10 years.

And to be clear, there are some lenders who may offer you a 40-year mortgage. Make sure to read the fine print, because it’s not the typical fixed-rate mortgage that most Americans take on. 

Half-truth #2: Buyers with higher credit scores will have to pay higher mortgage fees than those with lower scores

Also in April, media outlets reported that the federal government was changing the way it charged home-buying fees to borrowers, and in the process penalizing homebuyers with higher credit scores and lowering fees for those with poor credit scores.

A change in federal rules to fees that are known as loan-level price adjustments went into effect on May 1, and were initially interpreted as making mortgages more expensive for buyers with credit scores between 680 to above 780, which are considered good to excellent. Buyers who put down 15% to 20% for their home were reportedly going to be hit with the biggest increase in fees.

Some of that is partly true: some fees related to homebuying went up under the new rule, but it’s not the case that borrowers with higher credit scores are being charged more so lower-credit score borrowers can pay less.

The Federal Housing Finance Agency reacted to the misleading press coverage of the new rule with a statement called “Setting the Record Straight,” saying that “much of what has been reported advances a fundamental misunderstanding about the fees charged by [Fannie Mae and Freddie Mac], and why they were updated.”

“There’s a widespread myth that the updated fees punish home buyers with high credit scores to help buyers with low credit scores,” Holden Lewis, home and mortgage expert at NerdWallet, told MarketWatch. “But the truth is that home buyers with high credit scores will pay less for their mortgages than people with low credit scores.”

In its statement addressing “misconceptions” about the new rule, the FHFA said that “higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less,” and stressed that “the updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.”

The federal government did eliminate certain upfront homebuying fees for first-time buyers with lower incomes “who nonetheless have the financial capacity and creditworthiness to sustain a mortgage,” FHFA said. It also upped fees on products such as second-home loans and cash-out refinances, the statement read.

Half-truth #3: Home prices are about to crash

High home prices may have some would-be buyers hoping for a crash, but don’t hold your breath, Lewis said. In a survey from January, NerdWallet found that two-thirds of the respondents expected the housing market to crash in the next three years.

“There’s a lot of misinformation about home prices crashing,” Lewis said. “Home prices aren’t moving in the same direction nationwide. Home prices are falling in many markets on the West Coast, plus Boise, Las Vegas and Austin. But prices are rising in a lot of markets in the Midwest and the South.”

Cities like San Francisco, San Jose, and Reno saw home prices drop in the first quarter of this year by at least 10% year-over-year, the National Association of Realtors said on Tuesday. In Austin, prices dropped in the first quarter on an annual basis by 13.5% and in Boise by 10.3%, the NAR said. 

Overall, the U.S. is facing a housing deficit, and there aren’t enough homes to meet demand.

While it may be tempting to speculate about the housing market crashing, one fact remains: People are still frustrated by how expensive it is to buy a home. In a separate survey by Fannie Mae, though respondents were more upbeat about falling mortgage rates, they said they expect home prices to go up in the next 12 months.

Source: marketwatch.com

Apache is functioning normally

A low credit score increases your interest rate and closing costs, but how can you bump up your score quickly? Here are two ways to shoot up your score 30–100 points, in less than a month.

1. Lower the percentage you owe on your credit cards.

It’s not the amount you owe that matters; it’s the percentage of available credit that’s important. So, if you have a credit limit of $10,000 and your balance is $6,000 you’re in a worse position than someone whose credit limit is $20,000 and the balance is $8,000. Keep the following percentages in mind.

50+%: Ouch. When the amount you owe is more than your available credit, you’re in credit bureau trouble. This could detract 30–100 points from your score, which could cost you thousands at closing and increase your monthly payment.
30–50%: Decent. This won’t detract much from your score, but it won’t help raise it either. If you want the lowest interest rate possible, spend some time figuring out if you can pay this down a bit. How much? Get to less than 10% for the best score.
10–30%:
Nice job.		 Still, shaving a few percentages off this number can save you quite a bit of money.
0–9%:
You’re golden.		 Lenders can see that you use and manage credit well. When the amount you owe on credit cards is below 10%, it can send your credit score skyrocketing, which helps reduce your monthly mortgage.

Take note: you need to reduce the percentage owed across all your cards. Just paying off one card or transferring an existing balance to a new card isn’t going to help.

Also, you’ve got to keep this debt off your credit card balance, not only while you pre-qualify, but until you close (many a home loan has been lost by racking up a credit card with excited furniture purchases between offer and closing).

Lastly, your credit card company does not report your balance to credit bureaus on your due date, rather, they report on your statement date, which is typically 7–10 days after the due date. So, give yourself the time for your score to increase and for the new percentage to be reported.

2. Do not dispute a claim.

We’ve all heard we should pull our credit to have a look at what’s there before applying for a home loan. That’s great advice. Where do you go to get accurate info without having to submit your credit card? One good option is creditkarma.com. But hang on, read the rest of this post first.

Once you’ve checked your credit, don’t get into the middle of a dispute with a credit bureau while you’re applying for a home loan. Once you dispute a claim, the bureau puts a big red DISPUTED flag on your file, which stays there until the matter is officially resolved (which can take months). If you have a negative mark on your credit and are applying for a home loan, it’s better to write an explanatory letter to your chosen lender than to dispute the claim with the credit bureau.

Want to talk to an expert about other things you can do to bring your credit score up and keep your interest rate down? Call 801-770-6841 for a customized list of can-dos that apply specifically to your credit situation.

Source: homie.com

Apache is functioning normally

There are legitimate ways to stop payday loans and cancel or pay less, depending on your specific situation. Here are some options to consider:

Negotiate with the lender: You can try to negotiate with the lender to work out a payment plan that is more manageable for you. Explain your financial situation and offer to make smaller payments over a longer period of time.

Consider debt settlement: Debt settlement involves negotiating with the lender to settle your debt for less than the full amount owed. This option can be risky and may impact your credit score, but it can provide relief if you’re struggling to repay your payday loans.

Talk to a Debt Pro: Consider talking to Damon Day about your situation. He’s a talented debt coach that gives people custom plans and solutions based on individual circumstances.

Seek credit counseling: Credit counseling can provide education and guidance on budgeting, debt management, and financial planning. A credit counselor can work with you to develop a plan to repay your debts, including payday loans, and provide support and resources along the way.

File for bankruptcy: Bankruptcy can provide legal protection from creditors and may allow you to discharge or reorganize your debts, including payday loans. However, it’s a serious decision with long-lasting consequences and should be considered only after all other options have been exhausted.

It’s important to note that there is no one-size-fits-all solution for payday loan debt, and the best approach will depend on your individual circumstances. Consider consulting with Damon Day or other debt solution providers to help you evaluate your options and determine the best course of action for your situation.

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
Latest posts by Steve Rhode (see all)

Source: getoutofdebt.org

Apache is functioning normally


©
2023 MintLife Blog.

All rights reserved. Intuit and QuickBooks are registered trademarks of Intuit Inc. Terms and conditions, features, support, pricing, and service options subject to change without notice.

Source: mint.intuit.com