Financial Goals Archives - Page 34 of 271

Apache is functioning normally

November 15, 2023 by Brett Tams

Wholesaler Wanted; PPE, DSCR, Marketing, AVM Products; FHA, Ginnie News; Listings on the Rise!

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Wholesaler Wanted; PPE, DSCR, Marketing, AVM Products; FHA, Ginnie News; Listings on the Rise!

By:
Rob Chrisman

Tue, Nov 14 2023, 10:32 AM

This morning I head to Kansas, greeted by the news that Southwest is raising drink fees for the holidays. Has the “Let’s circle back after the holidays” season officially begun in your office or in your meetings with vendors? Chortles aside, one of the discussion topics in KC will certainly be the impending move in credit prices as lenders everywhere move toward charging borrowers up front. Whether the cost change is driven by Fair Isacc or the credit bureaus, and then being passed along by the CRAs, it doesn’t matter. It’s coming, and the jungle drums are saying the price changes will impact soft credit pulls, which (or course) many lenders implemented to reduce their costs with the amount of credit reports run as it’s cheaper than the full hard credit pull. Some lenders may use Freddie or Fannie AUS. (Today’s podcast can be found here, sponsored by LoanCare, the mortgage subservicer known for delivering superior customer experience through personalization and convenience. Its award-winning portfolio management tool, LoanCare Analytics, supports MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with Polunsky Beitel Green’s Peter Idziak on the direction of mortgage interest rates in the months and year ahead, and what to make of the NAR case verdict’s impact on the home buying process.)

Lender and Broker Software, Products, and Services

Housing authorities rolled out 54 down payment assistance (DPA) programs in Q3 and are funding buydowns, and certain loan fees to offset the home affordability crisis. That’s according to Down Payment Resource’s (DPR) Q3 2023 HPI Report. In fact, 50 new agencies began offering programs last quarter alone. Prospective homebuyers are being hammered with news about affordability being in the dumps, but what they aren’t hearing is that there are thousands of DPA programs to help. With DPR, you can be the bearer of good news, while using DPA to salvage DTI ratios as interest rates go up. As the industry authority on DPA solutions, DPR tracks the eligibility, benefit, and guideline data of the nation’s 2,200+ assistance programs. Learn how DPR’s integrated toolset makes it easy to operationalize DPA across departments and geographies. Schedule a demo today.

Strength, stability, and proven performance are essential in the mortgage space. Flagstar Bank has been checking all the boxes for 35 years, leading the way with more than $111 billion in assets, diverse product offerings, and consistently delivering excellent service. As the nation’s second largest warehouse lender with a team of a dozen dedicated relationship managers, you can count on Flagstar to handle your business with care. They warehouse most loan types, including conventional, non-QM, and construction, with a platform designed for quick and easy funding solutions for their 400 warehouse clients. Flagstar’s expertise also covers MSR, servicer advance, and EBO financing solutions, all of which they can tailor to meet your business needs. Their specialized mortgage banking team can even help streamline your operations and maximize the value of your cash balances. Flagstar is the ultimate one-stop-mortgage shop for lenders of all sizes. Contact Patti Robins or Jeff Neufeld today to learn firsthand why Flagstar should be your top choice.

Don’t let inaccurate home values harm your customer experience! When Hitch, a digital HELOC provider, found that the AVM it used to assess the value of a client’s home and deliver an estimated HELOC limit was off by up to $100,000, it sought a better solution. Hitch upgraded to a lending-grade, industry-leading AVM and boosted valuation accuracy, enhanced customer experience, and approved 30 percent more loans. Discover how Hitch transformed their HELOC lending operation to improve customer experience and internal efficiencies with ClearAVM™. Read the full case study to learn more.

“Maximize your efficiency and lower costs with Richey May’s RM Analyze. Our business intelligence solution will show you where you can make improvements and save money. Stay ahead of the competition by operating leaner and smarter. For the cost of half a full-time employee, you’ll gain access to a team of experts with a wealth of experience in the mortgage industry and a wide range of reports, including up-to-the-minute benchmarking data. With this valuable knowledge, you can make informed decisions that will propel your business forward. Don’t just survive… Thrive by learning how to operate leaner with Richey May.”

Equity is an untapped $18T (yes, trillion!) opportunity for mortgage lenders. That’s because most homeowners aren’t actively monitoring their equity level or making plans for how to use it. And, until now, the challenge for lenders has been identifying equity-rich contacts and engaging them with personalized communications that help them understand their options. Total Expert Customer Intelligence creates enriched contact profiles so loan officers can help homeowners understand their options for leveraging home equity and provide the guidance and support they need to reach their financial goals. Download our Equity Enrichment Guide to learn more.

In mortgage lending, speed matters. Consumers are more likely to buy from the company that responds to their inquiry first. ICE helps lenders answer the demand for instant availability with Surefire℠ CRM and Mortgage Marketing Engine Power Messaging. The feature sets LOs up to win by instantly responding to any lead, from any source, via text message. Here’s another stat for you: text messages enjoy a whopping 97 percent open rate within 15 minutes of being delivered, far surpassing the performance of email marketing. To discover how Surefire automated multichannel marketing campaigns can help you convert more leads to closed loans, schedule a demo with the ICE team today.

“Expiring Soon! Earn Up to 125bps bonus on DSCR loans! LendingOne is offering a Volume Incentive Bonus for Mortgage Brokers available until December 31st, 2023. Join the Preferred Broker Pricing Program and have access to Bronze, Silver, and Gold tiers with volume incentive bonuses based on funded loan production or number of loans funded. Earn 50bps, 100bps, or 125bps at each production level on DSCR Loans. LendingOne’s Third-Party Originations Channel is committed to providing mortgage brokers opportunities to increase their revenue and grow their bottom line in the DSCR market. Call us today to learn more: 866-794-0937 or visit our website.”

Reflecting on her decision to adopt Polly’s cloud-native, high-performance PPE, Kristin Ankeny Bickenbach, SVP of Secondary Marketing at New American Funding, said: “Back in the second half of last year, we knew the mortgage industry was in for a challenging 2023. I was asking myself: ‘How can we maximize our responsiveness? How can we be creative and position ourselves for success in an incredibly challenging market?’ As a sales-focused organization, I knew we needed a sharp PPE to enable us to act decisively and with precision, which is ultimately what led me to Polly.” NAF partnered with Polly as they sought to navigate the complexities of an increasingly dynamic market using a modern and proven engine that would grant access to the most sophisticated data science and machine learning tools available. Click here to read the press release. Looking for even more detail?! Request the NAF case study: [email protected].

Listings!

Want some good news? Altos Research reports that as of November 10th, inventory was at 567,000. Meanwhile, the St. Louis Fed, the source of some great information, pegs the active listing count at 737,000 and it is rising. This is still only about 7 listings for every real estate brokerage firm out there. I am too lazy to figure out the difference between the two stats.

Government Program Updates

FHA Press Release, HUD No. 23-257, describes FHA’s proposal to allow assignment of the HECM when its due and payable status is based on the death of all borrowers and non-borrowing spouses. HECMs that are due and payable are not eligible for assignment to the Secretary unless there is a non-borrowing spouse in a deferral period. FHA posted a draft Mortgagee Letter (ML), Updates to Home Equity Conversion Mortgage (HECM) Assignment Eligibility, on its Single-Family Housing Drafting Table (Drafting Table) web page for public feedback.

On October 16, 2023, FHA published Mortgagee Letter (ML) 2023-17, Revisions to Rental Income Policies, Property Eligibility, and Appraisal Protocols for Accessory Dwelling Units, which provided expanded financing options for borrowers seeking to purchase properties with an existing accessory dwelling unit (ADU), rehabilitate existing structures to add ADUs, or construct new homes with ADUs. To support changes announced in the ML, FHA is enhancing its FHA Connection (FHAC) system.

FHA published extensions to its temporary regulatory waiver and related Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) waiver, which allow mortgagees to utilize alternative methods for conducting meetings with borrowers in accordance with FHA’s early default intervention requirements. These alternatives provide practical and useful methods for conducting non-contact interviews with borrowers while ensuring they still receive needed information directly from their mortgage servicer. FHA initially published temporary partial waivers of these requirements on March 13, 2020, and previously extended them through December 31, 2023. FHA is now extending the waivers through May 31, 2024. For the details, read the temporary regulatory waiver and Handbook 4000.1 waiver.

Ginnie Mae’s APM 23-12 provides information on the December 1, 2023 deadline for the complete transition of all Single Family and Manufactured Housing Program pooling to the new Single Family Pool Delivery Module (SFPDM) and the establishment of SFPDM as the sole application for this type of pooling going forward, As part of this transition and further modernization of the Mortgage-Backed Securities (MBS) programs, the APM also outlines the discontinuation of paper pooling options for Single Family and Manufactured Housing Issuers. The MBS Guide has been revised to incorporate these updated policies and operational requirements.

For the 2023 calendar year to date, Ginnie Mae supported the pooling and securitization of more than 520,000 first-time homebuyer loans. According to Ginnie Mae Press Releases post,

Ginnie Mae Mortgage-Backed Securities Portfolio reached $2.492 Trillion in October. For more information on monthly MBS issuance, Unpaid Principal Balance (UPB), real estate investment conduit (REMIC) monthly issuance, and global market analysis, visit Ginnie Mae Disclosure.

On October 16, 2023, FHA published ML-2023-17, establishing guidelines for consideration of rental income in underwriting and protocols for the Appraiser’s analysis and reporting of Accessory Dwelling Unit (ADU) market rent on appraisals. Applicability to AmeriHome requirements are posted in AmeriHome Mortgage Announcement Number: 20231101-CL.

Capital Markets

Recall that last week closed with investors digesting “hawkish” rhetoric from Fed Chair Powell, though MBS and Treasuries rebounded on Friday from Thursday’s auction-driven slide. Even with Fed Chair Powell once again dashing investor hopes of the Fed easing policy in the near term, stating that the FOMC would leave the door open for additional rate hikes should economic data show inflation remains elevated, it’s safe to say that the U.S. economy has entered a “wait-and-see” period.

Ahead of today’s highly anticipated October CPI report, the New York Fed’s Survey of Consumer Expectations yesterday showed a decline in one-year and five-year ahead inflation expectations, which conflicted with Friday’s UMich Sentiment Survey showing increasing inflation expectations amongst consumers. Regardless, Treasuries also digested a Moody’s downgrade of the U.S. credit outlook to negative from stable reasonably well. Moody’s on Friday cited the mounting debt and the rising cost of servicing that debt. With several Federal Reserve officials warning investors last week that additional rate hikes may lay ahead, investors opened the week looking ahead to today’s October CPI report, where analysts anticipated that the annualized headline reading would drop to 3.3 percent from 3.7 percent previously.

Today’s economic calendar kicked off with NFIB small business optimism for October before the all-important October CPI report. Headline CPI was flat, up 3.2 percent year over year. The core rate, ex food and energy, was up .2 percent for the month and +4.0 percent year over year. Several Fed speakers are also scheduled, including Vice Chair Jefferson, Vice Chair of Supervision Barr, Cleveland President Mester, and Chicago President Goolsbee. We begin the day with Agency MBS prices better from Friday by .250-.375 and the 10-year yielding 4.49 after closing Friday at 4.63 percent after a stellar CPI number.

Employment

GO Mortgage distinguishes itself in product, technology, and personal touch! GO has the full range of products including single close construction, non-QM, state housing, and more to ensure you capture every loan you can. Get the modern top-tier tech suite you need to build your personal brand, including Total Expert with Customer Intelligence for real-time database insights, online reputation management from Experience.com, and the SOCI platform for automated social media – all without any added costs. Plus, the personal touch of unmatched speed, adaptability, and direct access to underwriting and leadership. Let’s GO! Reach out to us or apply directly here.

Movement Mortgage has experienced a 300 percent year over year growth in reverse mortgage business in 2023! Earlier this year Movement brought in the most experienced reverse mortgage team in the nation who have dedicated their careers to reverse sales and operations. Plus, Movement has set its loan officers up for success with a reverse-eligible borrower dashboard in MORE, Movement’s new sales and marketing platform powered by Salesforce. Movement LOs can now identify reverse-eligible borrowers from their previous and current loans to offer this incredibly powerful product. Click here to learn more about reverse mortgages at Movement.

A veteran group of mortgage bankers is interested in purchasing a small wholesaler in good standing and that has its “tickets” with Fannie, Freddie, and Ginnie. Loan production volume is not a priority. Interested parties should send me a confidential note for forwarding.

Mobility Market Intelligence (MMI) announced Brian McKray has been promoted to Vice President of Product. DepthPR writes, “His efforts in spearheading the development and implementation of MMI’s user insights tool and custom dashboard hub have fueled this promotion. Using these customer insights, MMI is actively building improved in-app onboarding and support tools.”

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Source: mortgagenewsdaily.com

Apache is functioning normally

November 15, 2023 by Brett Tams

Most of us have hopes and plans for the future, and they often require a degree of financial success. Whether your aspiration is relatively small and close to home (say, hosting an amazing 30th birthday party for your sweetie at their favorite restaurant) or considerably grander (owning multiple homes and retiring by age 50), it takes planning and discipline to achieve them.

In a nutshell, smart money habits can start you on the path to achieving financial success and realizing your dreams. Adopting small (and repeated) changes in behavior can be one way to start building good financial habits that can last a lifetime.

Read on to learn six of the most important money habits that can help steer you to financial success and realizing your money goals.

Why Good Money Habits Matter

Good money habits can set you up for financial success. They act like guardrails, keeping you moving towards positives (like an impressive retirement fund) and away from potential challenges (say, too much credit card debt). They are, in fact, similar to other wise habits in your life, whether that means eating well, exercising regularly, not staying up too late watching Netflix, or remembering to call your folks often.

Yes, good habits can require some time and energy to establish, and then you likely need to maintain focus to stay on track. Some will become second nature or no-brainers; others may require more ongoing effort. But by sticking with them, good money habits can guide you to help manage your personal finances well, make smart decisions with your funds, and achieve your future goals.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

6 Good Money Habits to Adopt

Here’s a closer look at six key money habits that can help you develop financial success.

1. Set Financial Goals

Formulating your financial goals can be an important step. Goals can guide you as you go about building a financial plan for the years ahead.

One person’s goals might be to pay off their student loans and save for a down payment on a house; another might want to sock away enough cash to start their own business down the road; and yet another might want to achieve a lifestyle where they can pay for their child’s college education and take ski vacations every winter.

Putting pen to paper or opening a document on your laptop can be a helpful way to focus and define specific financial goals to work towards. This can give you clarity and boost your motivation vs. simply saving in the abstract.

Once you have goals in mind, you can begin saving toward them and tracking your progress.

2. Budget Well and Track Your Spending

If you are just winging it in terms of your finances, it’s probably wise to prioritize setting up a budget. The word “budget” can cause a knee-jerk reaction because it smacks of deprivation (as in, no more lattes, ever!) but that’s not what it’s about.

Rather, a budget involves understanding how much money you have coming in and where it’s going (typically towards spending and saving). It can help you be more aware of your finances and balance them, too.

Out of the various techniques, the 50/30/20 budget rule is a popular option. It spells out that 50% of your take-home pay goes towards your needs (housing, food, and healthcare, for instance), 30% towards your wants (dining out, those lattes mentioned above, travel), and 20% towards savings.

There are plenty of other different budgeting methods to try and tools you can use to track your spending, which is an important facet of good budgeting. Your bank may even offer a convenient system for this. By tracking your spending, you can see where you may be spending too much (say, your once-a-week takeout habit has crept up to four times a week), be more mindful with money, and optimize your finances. Perhaps you can put more towards debt payments, for example, than you realized.

It can also be wise to get in the habit of checking in with your money regularly; many people find that a couple of times a week is a good frequency.

💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

3. Consolidate Debt

As you work on your budget, you may want to cultivate another money habit to develop financial success. That involves dealing with debt.

This might mean paying off credit card balances in full and making all other necessary debt payments on time, such as mortgage installments and student loan payments. Calendar reminders can help ensure that all payments get made on time, as can automating your payments (more on that below). It may even help to arrange to have all payments due on the same day. Some lenders are willing to move a monthly due date.

If you have student loan debt, you might look into refinancing options. You might, say, be able to lower your monthly payment, though that could extend the term of your loan and cost you more in interest over the life of the loan. However, doing so may be the right move for some people. (Also keep in mind that if you refinance federal loans as private student loans you will lose access to federal benefits and protections.)

Facing and managing your debt is an important step, regardless of the specific solution you decide upon. It’s a habit that allows you to take control of your money. And it can keep your debt-to-income ratio low, which can be an important factor when you want to borrow money at as low a rate as possible.

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4. Know When to Consider Balance Transfer vs. Personal Loans

Building on the idea of consolidating debt is the next financial habit. This one involves knowing the warning signs when your debt is getting uncomfortably high and then taking steps to rein it in.

Sometimes, the steps above aren’t enough. If that’s the case, it’s wise to consider your options vs. taking a wait and see approach. Currently, credit card interest rates are over 20% which can be hard for some people to pay off.

So if you see your balance rising to a level you are worried about, consider the following options as you take control of your debt:

• You might try a balance-transfer credit card, which can give you a reprieve from high interest accruing for a period of time (often 18 months), allowing you to pay down your debt.

• You might consider taking out a personal loan and using those funds to pay off your credit card debt. The goal here is to have a lower monthly payment on the personal loan than what your credit card bill amounted to.

• Contact a nonprofit credit counseling service, such as the National Foundation for Credit Counseling, or nfcc.org.
Getting in this habit before debt gets deeper can help you in the long run.

5. Automate Your Finances

It can be a good idea to save money right after getting paid — before the cash sits in checking long enough to spark the urge to spend it. So why not make it simple and save automatically upfront?

A person interested in saving might begin by automating just one kind of transaction. For example, they may opt to have $50 moved from a checking account to a different savings-oriented account each month. If that money remains unspent each month, those monthly automatic savings would total to $600 at the end of the year.

That could be a good way to start an emergency fund without expending much effort. You can also automate payments of, say, your utilities and housing costs or your car loan. Paying bills on time this way can help build your credit.

There are also numerous ways to automate your investments. A workplace plan, like a 401(k), may already be doing this. For someone who’s on their own, mutual funds can make auto-investment really easy. Alternatively, a robo-advisor service can automatically invest contributions on behalf of the investor. (Note: This automation may be challenging for those paid irregularly, such as freelancers and seasonal workers.)

By embracing automation, you can nail an important money habit. You can pay yourself first and stash cash away in savings. And you can avoid such bad money habits as not saving enough, paying bills late, or forgetting to pay them at all.

Recommended: How to Become Financially Independent

6. Investing Early and Often

“I invested too much money for retirement,” said no one, ever. Arguably, there’s no other financial goal that requires more habitual action — spread over decades — than saving and investing for retirement.

It can be tempting to push off planning for retirement until tomorrow. After all, when someone’s in their 20s or 30s, retirement is likely decades and decades away. Psychologically, it’s simple to presume that it’s just not worth thinking about in the now.

But, for many, retirement can be one of life’s biggest and most important expenses. It can secure your comfortable future. Investing early, often, and wisely, can help accomplish that goal.

Adopting this habit ASAP can be a big help; it allows for more time for money to grow via compounding. Compound returns are earnings on both the original amount invested (the principal) and the money earned via investing (the profit). The more months (or years) a person invests, the higher the potential for profits to compound. Note: It is important to note that all investing carries risk as the stock market can fluctuate.

Being consistent about moving money into your portfolio is important, too. Luckily, there are easy and affordable ways to get started investing. First, open an account, like a brokerage or a retirement account. (Investing in a 401(k) also counts as investing.) Then, investors can purchase investments like stocks and funds to achieve their goals. Or investors can use an automated investing service.

The Takeaway

Building good financial habits can be rewarding. There are more technological tools than ever to help with budgeting or expense tracking. From digital apps to automatic investing, building healthy financial habits has never been more accessible.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

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Apache is functioning normally

November 13, 2023 by Brett Tams

This is a sponsored partnership with The Entrust Group. Having more options for your retirement savings is always nice. And that’s where self-directed IRAs (SDIRAs) come in. These tax-advantaged accounts allow you to invest in real estate, small businesses, private equity, gold, oil, and more. An SDIRA differs significantly from an IRA or a 401k…

This is a sponsored partnership with The Entrust Group.

Having more options for your retirement savings is always nice.

And that’s where self-directed IRAs (SDIRAs) come in. These tax-advantaged accounts allow you to invest in real estate, small businesses, private equity, gold, oil, and more. An SDIRA differs significantly from an IRA or a 401k from a brokerage, where your options are limited to traditional assets like stocks, bonds, and mutual funds.

SDIRAs do give you more choices, but there is more work needed from you as they are a tad more complicated.

Key Takeaways

Self-directed IRAs can diversify your portfolio with different kinds of alternative assets.
SDIRAs can be set up as traditional or Roth IRAs.
There are cons to having an SDIRA, such as possible scams and the need for increased due diligence on the part of the account holder.

What is a Self-Directed IRA? – Complete Guide

So, what is a self-directed IRA?

A self-directed IRA (SDIRA) is simply an IRA in the eyes of the IRS.

But there is a big difference.

The most significant change with using an SDIRA is that you can invest in assets that are different from a standard retirement account (such as real estate, gold, bitcoin, and more – otherwise known as “alternative assets”), AND you can still use the same tax benefits as any other IRA.

Every investment and transaction is made on your request – not at the discretion of a financial institution.

Why have I never heard of a self-directed IRA?

Okay, so until recently, I had yet to hear of a self-directed IRA. You may not have either.

This is because SDIRAs are less common than the typical IRA you might already have. There are many different options for building your retirement portfolio out there, and this one requires more work on your end, so it’s less commonly used.

But, SDIRAs do have a wide range of potential. They are helpful for investors who want to diversify their retirement portfolio with assets beyond the usual stocks and bonds. In particular, they are an excellent option for investors with expertise in a specific area, like real estate or startups. They allow investors to use their existing retirement funds to invest in these types of assets to better take advantage of their own experiences.

How is a self-directed IRA different from a regular IRA?

The main difference between a self-directed IRA and one that is not self-directed is the different investment options available. SDIRAs can invest in alternative assets such as real estate, private businesses, precious metals, etc. However, standard IRAs are limited to stocks, bonds, and mutual funds.

If you’re looking to diversify your assets, then this may be a retirement account that could be great for you.

Types of self-directed IRAs

With SDIRAs, you can still receive the same tax benefits as an IRA holding publicly traded assets.

There are two main categories of self-directed accounts: traditional and Roth. Both have tax advantages, but they differ in how your contributions and withdrawals are taxed.

Traditional self-directed IRA – Your contributions are made with pre-tax dollars, which could lower your taxable income. There are also no income limits on contributions. When withdrawing the funds at retirement, you pay taxes on the distributions.
Roth self-directed IRA – Your contributions are made with after-tax dollars, so they don’t reduce your taxable income. All qualified withdrawals at retirement will be tax-free, including any gains your investments have made.

It’s essential to evaluate your financial situation and goals when choosing the type of SDIRA that’s best for you. There are also income and contribution limits to remember, mainly as these are updated annually.

How does a self-directed IRA work?

To invest with a self-directed IRA, you’ll have to open an account with a financial institution offering SDIRAs, often called a custodian, administrator, or recordkeeper.

After that, you can transfer or rollover money from an existing IRA or 401(k) into your SDIRA and look for an asset to invest in. You’ll be in charge of all asset decisions (this means that it’s your job to do as much research as you can), as well as ongoing account management.

It’s crucial to remember: per IRS rules, the custodian you choose does not help you to make investment choices. There are also other rules and regulations you must follow (you can read more about this at Self-Directed IRA Rules), such as avoiding prohibited transactions and staying within the annual contribution limits.

What Can You Invest In With A Self-Directed IRA?

A self-directed IRA lets you invest in various assets compared to regular IRAs.

Common investment choices

With a self-directed IRA, you can invest in assets such as:

Real estate – This could be rental properties, hotels, parking garages, or even empty land.
Precious metals – You can invest in physical gold, silver, platinum, and palladium.
Private equity – This includes investing in private companies not listed on public stock exchanges, including small businesses and start-ups.
Cryptocurrencies – Some self-directed IRAs allow investing in digital currencies like Bitcoin and Ethereum.
Commodities – You can invest in oil, gas, sustainable energy, and more.

Prohibited investments in self-directed IRAs

While there are many new things that you can invest in with an SDIRA that you may not normally do, there are some that are not allowed. Here are some examples of investments that are not allowed:

Collectibles – You cannot invest in antiques, artwork, and stamps.
Life insurance
S Corporations

Explore over 90 alternative assets you can invest in with a self-directed IRA (and learn more about the ones you can’t) here!

Understanding a Self-Directed IRA (SDIRA)

Here are some essential things to think about when it comes to self-directed IRAs:

Due diligence

Due diligence means doing careful research and checking everything thoroughly before making an important decision. Since you are responsible for all the investment choices, you’ll want to do your homework beforehand to make sure you know all the facts and risks involved.

Legalities and regulations

You should be aware of the legalities and regulations surrounding SDIRAs. As mentioned before, certain transactions, such as investing in life insurance or collectibles, may be prohibited. There are also separate IRS deadlines for some types of assets.

In addition to the prohibited transactions listed above, it’s also essential to remember that the IRS has strict regulations concerning who can materially benefit from or transact with the SDIRA – known as “disqualified persons.” These are people like your spouse and children. For example, if you purchase a rental property, you (and your family) cannot use it for a family vacation.

Fees and expenses

SDIRAs have fees for recordkeeping and making transactions. Knowing the costs can impact how much money you make from your investments and may change your decisions.

Contribution limits and rules

Like IRAs from a bank or brokerage, SDIRAs have annual contribution limits. Be mindful of the limitations and make sure that your contributions follow the rules set by the IRS.

Withdrawal rules and penalties

You should be aware of the self-directed IRA withdrawal rules and penalties. Early withdrawals made before the age of 59.5 years may be subject to a 10% penalty and additional taxes. Additionally, if the funds are tax-deferred, you must also pay income taxes on the distributed amount.

Pros and cons of a self-directed IRA

Advantages of self-directed IRA:

Diversification – You can invest in real estate, private equity, precious metals, and other alternative assets.
Tax benefits – SDIRAs have the same tax advantages as regular IRAs. You can enjoy tax benefits based on the type of IRA (traditional or Roth) you choose.
Potential for higher returns – With a self-directed IRA, you can go after investments that might earn you more money than the usual choices. This could mean your retirement savings grow faster in the long run.

Disadvantages of self-directed IRA:

Can be more complex – Managing an SDIRA can be a more complicated process due to having more responsibility in choosing suitable investments and having to do more research. There is also less transparency surrounding alternative assets than those traded on the public market.
Higher risk – There may be higher risks, such as illiquidity, lack of regulatory oversight, and market volatility. There are also more scams in the SDIRA world because the investments differ and don’t have as much oversight.
Fees and expenses – SDIRAs often have higher fees, such as custodial, transaction, and recordkeeping fees.

How to Open a Self-Directed IRA

Setting up a self-directed IRA requires a bit more work than opening one through a bank or brokerage.

Here are some steps:

Find an SDIRA provider. Often referred to as an administrator or custodian, this entity is a financial institution that handles alternative investments and fulfills IRS-mandated recordkeeping requirements associated with your self-directed IRA.
Ensure they can hold the asset you want to invest in. For example, not all SDIRA custodians allow single-member LLCs or cryptocurrencies.
Choose between a traditional or Roth SDIRA
Create your account and pay your account establishment fee
Fund your SDIRA via a transfer, rollover, or contribution

Note: Having an experienced financial advisor can be super helpful in handling your SDIRA, as they can give you expert advice on what you should do.

The Entrust Group Review

Want to open a self-directed IRA? A popular administrator option is The Entrust Group, which has been in the business for over 40 years, with over 45,000 investors and $4 billion in assets under custody.

Opening an account with The Entrust Group makes the process easy, and you can choose your funding type, including rolling over an old 401(k), transferring an existing IRA, or making a new contribution.

Keep in mind that there are increased fees associated with an SDIRA. But, The Entrust Group is open about their fee structure, which you can find on their website here. Some of their fees include:

Account establishment fee – This one-time fee covers the cost of opening an account.
Annual recordkeeping fee – This is the fee that covers IRS reporting, recordkeeping, and admin.
Purchase and sale of asset fees – This one-time fee covers the paperwork required to execute the purchase or sale of an asset.
Transaction fees – These fees are charged for transactions.

The Entrust Group has a quick calculator that you can play around with to see what your fees are. I spent some time with it to better understand the different fees; for example, if I have one asset valued at $45,000, my one-time setup fee would be around $50, and my recordkeeping fee would be $199. If I have two assets with a total value of $100,000, then my set up fee is $50, plus the recordkeeping fees of $374. However, any undirected cash in your account isn’t subject to recordkeeping fees; so you won’t be subject to these when you’re between investments.

In summary, The Entrust Group is a reputable and experienced provider of self-directed IRA services, giving you the power to invest in many different alternative assets. If you want to diversify your investment portfolio simply, The Entrust Group may be a choice for your self-directed IRA.

Download their free Self-Directed IRAs: The Basics Guide to learn how you can take control of your financial future with an SDIRA with The Entrust Group.

Frequently Asked Questions About Self-Directed IRAs

Below are answers to common questions about self-directed IRAs.

What are the risks of a self-directed IRA?

Some risks of self-directed IRAs include the potential for fraud, and higher fees, and it may be a little more challenging to manage your alternative investments because there are more rules. And you are entirely in control of your account – so it requires more of a time investment. Also, self-directed IRAs require a custodian, and fees for these services can be higher than with a regular IRA.

Do you pay taxes on a self-directed IRA?

Yes, you do pay taxes on a self-directed IRA, but as with a regular IRA, the matter of “when” depends on what type of account you have. With a self-directed traditional IRA, your contributions may be tax-deferred, and you will pay taxes on withdrawals during retirement. Comparatively, a self-directed Roth IRA holder contributes after-tax dollars and can make tax-free qualified withdrawals.

Is a self-directed IRA better than a 401k?

It depends on your financial goals and investment preferences. A self-directed IRA can give you more control over your investments, while a 401(k) has limited investment options but may include employer-matching contributions.

How do self-directed IRA fees work?

Self-directed IRAs typically have higher fees than traditional IRAs due to the increased administrative costs associated with alternative assets. Some of the fees you may come across with SDIRAs include set-up fees, annual maintenance fees, and transaction fees.

Can I invest in real estate with a Self-Directed Roth IRA?

Yes, you can invest in real estate with a Self-Directed Roth IRA. You can also learn more about this at Self Directed IRA for Real Estate: Benefits, Risks, & Next Steps.

Are Self-Directed IRAs a Good Idea? – Summary

I hope you enjoyed this self-directed IRA guide.

While it is great that you have more options in what you can invest in, SDIRAs do require a little more work on your end.

But, if you’re looking to invest in different kinds of assets than just stocks and bonds, then SDIRAs are worth considering.

Are you interested in opening a self-directed IRA? Visit The Entrust Group to schedule a consultation with one of their experienced IRA experts.

Source: makingsenseofcents.com

Apache is functioning normally

November 13, 2023 by Brett Tams

About 95% of Americans have a bank account, and many people have both a checking and a savings account. Sometimes, though, there may be advantages to what is considered a hybrid account, offering the best of both worlds (or at least some of the benefits of each).

For instance, you might have the ease of access that you get with a checking account: Hello, debit card! And you might also earn a higher interest rate, the way you might with some savings accounts vs. checking.

Financial institutions may offer different versions of hybrid accounts. Read on to learn about some of the most common features so you can decide if a hybrid bank account is right for you.

Defining the Hybrid Account

There are a variety of bank accounts available to consumers. And the type of accounts people are drawn to will depend on their financial goals, situation, and how they choose to organize their finances.

A hybrid account can merge the features of both checking and savings accounts. Here’s a bit more about hybrid accounts:

• A hybrid account is one that combines the perks of a checking account with features of an interest-bearing savings account. Instead of linking your checking and savings account, they’re basically functioning as one cohesive account.

• A hybrid account allows access to your money on a day-to-day basis, like a checking account would. That can mean that you may get a debit card to use with it.

• On the flip side, it allows your money to grow the way it might in a savings account.

Of course, every financial institution is different, and each might have a different approach to crafting a hybrid bank account. But the main gist of a hybrid account is that it’s a bank account that bears some resemblance to a day-to-day checking account and a long-term savings account.

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Different Types of Accounts

To understand what can make a hybrid account a useful tool, it’s helpful to first understand the features and pros and cons related to traditional checking and savings accounts and then compare.

Checking Accounts

Checking accounts usually allow you to deposit money, write checks, or use a debit card to pay for goods and services. There are typically no withdrawal limits, and you can often link a checking account to other accounts and credit cards. It might be the account you use to pay recurring bills each month, like a car loan or student loan payment.

Banks may pay you interest on the money that sits in your checking account. However, regular checking account interest rates are typically low, with an average rate of 0.06%.

These rates don’t always catch up with the national inflation rate, which is currently about 3.7%. That means your money is actually depreciating in value while it sits in the account. In the long term, this may not make checking accounts a particularly good place to park a lot of cash.

Checking accounts may also charge fees for the services they offer, such as monthly maintenance fees.

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Savings Accounts

Savings accounts are another type of deposit account that you can open with your financial institution of choice. They usually earn some interest, with the current standard savings account earning about 0.46%.

However, high-yield savings accounts are an alternative to traditional accounts; they may sometimes offer interest rates of 4% or more. Higher-interest savings accounts can help you beat inflation so your money doesn’t lose value by growing at a slower rate than inflation. You may find these accounts offered at online banks vs. traditional ones.

Savings accounts are generally appealing because they are a separate place to store money you don’t necessarily want to use on day-to-day expenses. For example, it could be a good place to keep your emergency fund or even to save for a vacation or a move across the country.

However, there are some downsides to savings accounts, too. A few to note, which may or may not apply to only the high-interest variety:

• They sometimes don’t allow consumers to use them for direct payments.

• There may be restrictions on the number of savings account transactions you initiate every month.

• There may be restrictions such as a balance cap that sets a limit on the amount of money on which you can earn a high rate.

• There could be a minimum opening deposit and ongoing balance requirements to earn the higher interest rate. Or, if you fail to meet the amount, you might be assessed a minimum balance fee, which could offset the extra interest you’re earning.

If you’re considering this as an option, you may want to look closely at the fine print when choosing your savings account.

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Hybrid Accounts: the Details

Hybrid bank accounts will often take benefits from checking and savings accounts and combine them into one account. A hybrid account may allow you to use checks or a debit card for day-to-day transactions, while still offering the interest rates typically associated with a savings account. Hybrid bank accounts are often more likely to be offered by online vs. traditional banks.

Traditional brick-and-mortar banks must pay for their storefront locations, the people who staff them, and ATMs. They may do so by charging more and/or higher fees and paying lower interest rates, while online banks can often afford to drop fees and pay higher rates.

You may hear the term money market account (or MMA) used by some financial institutions when describing their hybrid accounts. Keep in mind that this is different from a money market fund, which is a type of investment.

Introducing SoFi Checking and Savings