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Apache is functioning normally

February 12, 2024 by Brett Tams

Whether it’s a 5% increase or a 20% bump, a pay raise at work is an opportunity to take charge of your financial priorities. A small raise might not seem like much when it’s broken down into a biweekly paycheck, but over time, that difference in income could provide a boost to your lifestyle or be put toward other financial goals.

Whether you decide to pay off debt, pad your safety net, invest, give back, improve your quality of life or treat yourself, a raise is a good time to think about the direction of your financial life.

Keep an eye on lifestyle creep

Many personal finance experts warn against “lifestyle creep,” which is when you begin to spend more as you earn more. Lifestyle creep can take the form of buying more conveniences — like ordering food in more often — or buying more expensive or higher-quality items, like sturdier hiking boots or a better brand of skin care products.

“If you get a raise and use it to buy a new car or a new home or go out every weekend, your rate of spending might surpass your new income,” says Mabel Nuñez, founder of the investing education site Girls on the Money.

Nuñez says that it’s good to reward yourself, but she advises clients to avoid buying more expensive things.

“Think about an expense that’s going to be a one-time purchase or something that’s going to make you better, like traveling somewhere new or taking a cooking class,” Nuñez says. “Don’t spend just for the sake of spending.”

Once you’ve looked at your financial situation, you might find that it’s not in your best interest to increase your spending on nonessentials. But if you’re feeling good about the status of your consumer debt and savings, then you might choose to spend more money on things that will make life more enjoyable.

For example, maybe you’ve been washing dishes by hand because you don’t have a dishwasher or yours is broken. You could put part of your raise toward a new appliance that’s going to save you a lot of time and energy. Or maybe you’ve been driving the same car for the past 20 years or living in a too-small house with your growing family. If you’ve planned for the increased costs, an upgrade that brings you increased functionality and comfort is a raise well-spent.

Focus on high-priority financial goals

Liz Carroll, a financial life and wellness coach at Mindful Money Coaches, says that paying off consumer debt with an 8% annual percentage rate or higher should be a top priority, especially if you have more income that you can put toward it.

Beyond debt payoff, Carroll suggests people have a financial safety net of at least a month’s worth of expenses, with the goal of working toward three to six months’ worth. This could be done through regular recurring transfers from your paycheck to your savings account.

“Give your future self a share,” Carroll says. “I tell my clients to be mindful and pause before the quick reaction of, ‘I got a raise, now I can spend money.’ Instead, you should think, ‘What’s in alignment with my values?’”

Investing for retirement is another priority to consider, such as contributing to your 401(k) to earn any matching funds offered by your employer or putting your money in a Roth IRA. You could also consider an index fund, which allows you to invest in a wide range of stocks all at once.

“You want money in savings for an emergency, but anything above that that you don’t need in the next few years could be invested in a conservative way, like an index fund,” Nuñez says. “Learn how to invest it in a smart way, and it’ll get you to the next level of financial life.”

Treat yourself and give back

Beyond debt, savings and other future financial planning, Carroll says you should feel comfortable celebrating your accomplishments. Just keep in mind that you may want to put up some guardrails around the way you reward yourself so that you can maximize the financial benefits of a raise. Carroll says something that equals 5% of the total raise is a good amount to aim for if you want to treat yourself but are also paying off debt. If you don’t have debt, she says, 10% of the total raise is a good benchmark.

Another thing you may choose to do with your raise is to give back to your community. Whether you donate money to your favorite charity or surprise a loved one with a random act of kindness, it can make you feel good to share your good fortune.

More income means having more resources to achieve your goals. By creating a plan for important financial milestones — as well as for fun splurges — you’ll get the most out of your money.

This article was written by NerdWallet and was originally published by The Associated Press.

Source: nerdwallet.com

Apache is functioning normally

February 12, 2024 by Brett Tams

Mr. Cooper Group was profitable in 2023, a year marked by its acquisition of Home Point Capital and Roosevelt Management Co., along with the fallout from a cyberattack. Mr. Cooper’s strong performance was mainly due to its servicing business, which benefited from a higher interest rate environment.

During a call with analysts on Friday morning, company executives addressed some of the concerns raised by Treasury Secretary Janet Yellen, who said this week that U.S. regulators are monitoring risks stemming from nonbank mortgage lenders, especially failures resulting from market strains.

Dallas-based Mr. Cooper is expected to reach $1.1 trillion of unpaid principal balance (UPB) in mortgage servicing rights (MSR) by the end of March, a target announced in July 2021 when the portfolio was at $650 billion.

“While the overall portfolio has grown considerably, and we expect it to grow by another 25% this year, only half of it is owned MSR. The other half is subservice for a number of clients,” vice chairman Chris Marshall told analysts. “If there are any limitations on concentration, I think it would be focused more on people, on owned MSR. So, I think we have quite a bit of room for us to grow before that becomes a concern for anybody.”

At the end of December, Mr. Cooper had $992 billion in MSR, up 14% year over year. Of that total, 59% was in owned MSR, 5% was in special servicing and 35% was in subservicing. According to Marshall, the company seeks a balance of 50% owned MSR and 50% subservicing.

“And if you look, in total, we’re still in kind of a single-digit market share,” Chairman and CEO Jay Bray said. “It’s a scale business. You have to build and invest in technology. So, we don’t have any concerns about continuing to grow the platform. The key for us is sustainability.”

Executives also added that, in terms of capital, the target for the company is “so much far ahead of what is required of banks” that “it’s not a concern,” according to Marshall. “I can’t even imagine it becoming anything of a conversation. (…) You should think of us as having a rock-solid balance sheet.”

Overall, Mr. Cooper delivered $500 million in net income in 2023. Its almost $1 trillion servicing portfolio generated $869 million in pretax operating income last year. And by funding $12.6 billion in loans, it had a $100 million pretax operating income.

“A key theme for 2023 was operating leverage. We grew the portfolio at a double-digit pace during the year while at the same time cutting costs companywide,” Bray said. “In fact, since 2018, we’ve cut servicing costs by 30%.”

Bray said the company will return its focus to equity, which is expected to grow to 14% to 18% by the end of 2025, compared to its current level of 12.5%.

Cyberattack, changes in leadership

Mr. Cooper generated $46 million in net income in the fourth quarter. That compares to $275 million in the third quarter of 2023 and $1 million in Q4 2022 when it had a negative mark-to-market of $58 million.

The earnings in Q4 2023 included, among other things, mark-to-market net hedges of $41 million and $27 million related to a cyberattack it suffered in October. The company had the data of nearly 15 million current and former clients exposed in a hacking incident, which resulted in at least four class-action suits.

Despite the cyber incident, the company kept its servicing and origination businesses profitable. With 4.6 million customers, the servicing division brought in $229 million in pretax operating income in Q4, compared to $301 million in Q3.

Meanwhile, the originations division — which focuses on acquiring loans from correspondent originators and refinancing existing loans in the direct-to-consumer channel — brought in $10 million in pretax operating income in Q4, compared to $29 million in the previous quarter.

“Bear in mind that these numbers were impacted by the cyber event,” Marshall said. “Excluding that impact, we estimate EBT [earnings before taxes] would have doubled. For similar reasons, refi recaptures dipped slightly during the quarter but are now back up over 80%.”

The company’s total funded volume declined to $2.7 billion in Q4, down from $3.4 billion in the previous three-month period. Cash-out refinances represented 61% of the total, followed by purchase loans (25%), second-lien refinances (12%) and rate-and-term refinances (2%).

In January, the company announced Mike Weinbach, a former Wells Fargo and JPMorgan Chase executive, as its new president. He is succeeding Marshall, who was named executive chairman at servicing fintech Sagent.

Mr. Cooper’s liquidity reached $2.4 billion in Q4, with $571 million in unrestricted cash.

Source: housingwire.com

Apache is functioning normally

February 10, 2024 by Brett Tams

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

If you successfully dispute a charge, the bank will notify the merchant and return funds to the issuing consumer via a chargeback. From here, merchants can decide if they want to dispute the chargeback or not.

If you file a dispute for a credit card charge with a bank, that bank will quickly notify the corresponding merchant that you’ve initiated this process. From here, the merchant can review your claim and decide whether or not to accept or deny your dispute.

Disputing a credit card charge can be a lengthy process with sweeping ramifications. That’s why it’s important to understand what a credit chargeback is and whether this tool is the best option at your disposal.

Key Takeaways:

Merchants may want to cancel a chargeback even if your bank sides with you.
Your bank will initially cover the cost of a chargeback until the matter is settled.
It’s often best to contact a merchant before initiating a chargeback.

What Is a Chargeback?

A chargeback occurs when you successfully dispute a charge on your credit card. The charge is taken off your credit card account and the money paid to the merchant is reversed (or “charged back” to the merchant). Many people dispute credit card charges for services not rendered. For example, there was a strong link between COVID-19 and chargebacks throughout 2020 as many companies struggled to keep up with demand.

A chargeback can be a powerful tool for consumers who do not receive products or services they paid for, but it comes with several caveats. Even if the credit card company sides with you, the merchant may not—and they may try to collect the chargeback funds.

What Happens When You Dispute a Charge?

The Truth in Lending Act is the federal law that gives consumers the legal right to dispute credit card charges if there is a billing error, as outlined in the Federal Reserve’s Consumer Compliance Outlook. This law defines a card issuer’s responsibilities when cardholders file disputes.

When you dispute a charge with your credit card company, it must conduct what the law calls a “reasonable investigation” to determine whether the charge was correct. It must also present you with the result of the investigation within 90 days.

During that process, the credit card company typically reaches out to the merchant involved in the charge. It requests documentation from the merchant regarding the transaction in question, and the merchant may be able to state why the charge was correct.

If the credit card company sides with you, it removes the charge from your credit card statement, and you do not need to pay the charge on your credit card.

Can a Merchant Try to Collect the Money From You After a Chargeback?

The Truth in Lending Act covers your right to dispute a credit card charge, but it doesn’t define what merchants are obligated to do—nor does it bar a merchant from trying to collect the money from you later. Instead, merchant agreements outline what actions a merchant can and can’t take concerning a dispute.

A chargeback means that the credit card company decides in your favor regarding the dispute. It doesn’t mean the merchant agrees or that they’ll return your funds.

Merchants can engage in “chargeback representment” to challenge your chargeback request and prove the original payment was valid. This process can be challenging, and merchants must decide if the potential loss of revenue is worth it—or if they might lose consumer trust with an aggressive approach without evidence.

The merchant might also seek to recover its loss by invoicing you for the charges. If you don’t pay, it might threaten collections activity or even sue you. Understanding your debt collection rights is pivotal if legal action seems imminent.

What’s the Difference Between a Refund and a Chargeback?

Chargebacks are granted by card issuers, while refunds come directly from merchants. While chargebacks can become lengthy and complicated processes, refunds are often straightforward.

So long as your claim aligns with a merchant’s terms and conditions, you’ll likely receive a refund shortly after the merchant receives the product you wish to return.

How Do You Manage Chargebacks?

No one wants to deal with an issue only to have it pop up unexpectedly in the future—especially financial issues that could affect credit scores. Here are some tips to avoid future issues when you request a chargeback.

Only Dispute Credit Card Charges If You Have a Legitimate Reason

Unfortunately, some people request chargebacks even if they received the goods or services in question. They might do so because they have a problem with the vendor or simply because they don’t want to pay for the products. That last instance counts as fraud, and it could lead to your credit card account being closed or other legal consequences.

Reach Out to the Vendor First

Before you file a chargeback, give the merchant a chance to make the issue right first. Many merchants are willing to work with you and might refund the money, offer an exchange, or work to resolve your specific grievance.

As part of your chargeback process, you’ll want to demonstrate that you attempted to contact the merchant about the issue. If you file a chargeback without working with the vendor first, you give the vendor more of a reason to insist that you still owe the money.

Act Quickly

You must dispute a credit card charge in writing, and your letter should reach the credit card company within 60 days of the first bill or statement with the error on it. This short timeline means knowing how to read a credit card statement is critical.

Keep an Eye on Your Account

According to the Federal Trade Commission, you can withhold payment for disputed charges while the investigation is underway. Your credit card company can’t penalize you with late fees, interest, or reports to the major credit reporting agencies regarding nonpayment of those charges.

That doesn’t, however, extend to your account in general. Implementing relevant tips for improving your credit history can keep your score from falling during the investigation. If you do pay your credit card charges and then realize something isn’t right, you can dispute that error. A decision in your favor might result in a credit to your account.

Save the Documentation

Don’t toss receipts, emails, or other evidence just because the chargeback occurred. You might need the documentation again if the merchant decides to try to collect from you. Typically, the higher the amount in question, the more important it is to maintain your documentation.

Monitor Your Credit With Credit.com

Chargebacks won’t affect your credit score alone, but there’s a margin for error while investigation is underway. In addition to reviewing your statements regularly, ensure you’re familiar with the laws that protect you and how you can assert your rights.

If any type of inaccurate negative reporting dings your credit—whether it’s related to a chargeback collection or not—tools like credit repair letters can be vital. One way to help protect yourself is to stay on top of your credit and invest in products and services that let you easily monitor your credit, such as ExtraCredit®.

Source: credit.com

Apache is functioning normally

February 10, 2024 by Brett Tams

Debt relief won’t hurt your credit alone. However, closing your oldest accounts can drastically lower your standing.

Debt relief and debt settlement options don’t hurt your credit score on their own. These programs aim to help reduce your debt and if that debt is revolving credit, it can reduce your credit utilization and improve your credit. However, a debt relief program could accidentally drop your score if it closes your account with the longest payment history.

There are many debt relief options available, so it’s important to consider your unique financial circumstances when choosing a plan. We’ll help you weigh those options and share several resources that can help you learn how to reduce debt over time.

Key Takeaways:

Credit utilization makes up 30% of your credit score.
Each debt relief option has its pros and cons.
Having good credit can help you secure better loans.

How Debt Relief Programs Affect Credit

Your credit utilization rate makes up 30% (roughly one-third) of your overall credit score. When you pay off revolving debt, your credit score often will improve if that is the area most impacting your credit. TIf you’ve nearly reached your credit card’s total credit limit. Keeping your utilization rate below 10% is ideal, but less than 30% is also a strong move.

Below is a breakdown of the five factors that influence credit, according to the FICO^® credit scoring model:

The type of debt relief program you use can also positively or negatively affect your credit. Debt settlement, for example, utilizes some tactics that generally have a more negative effect than other types of debt relief programs.

Credit.com’s free credit report card tool can help you better understand your current creditworthiness and which factors you need to work on to help you improve your standing.

The Main Approaches to Debt Relief

Once you have a clear picture of your credit history, you can choose one of the six main approaches to debt relief to help you get out of debt. Each option has its advantages and drawbacks as well as a distinct impact on your credit score, both short term and long term.

Debt Snowball and Debt Avalanche

Immediate credit impact: None
Long-term credit impact: Reliably positive

The debt snowball is when you pay off your debts one at a time, starting with the ones that have the lowest balance. This eliminates those debts from your credit record quickly.

The debt avalanche is when you pay off your debts one at a time, but you start with those that have the highest balances instead. While it takes longer to clear debt from your credit history, the debt you clear takes a larger chunk out of your overall balance owed.

As long as you stick to the minimum payments needed on all of your other credit accounts while you work to pay down your debt, this method has little immediate impact on your credit report and a reliably positive one in the long term.

Debt Consolidation

Immediate credit impact: Small (positive or negative)
Long-Term credit impact: Minimal

Debt consolidation loans and balance transfer credit cards can help you manage your debt by combining multiple lines of credit under one loan or credit card. While this helps by making one payment out of several, it’s not a strategy that directly gets you out of debt. It’s more like a tool to help you get out of debt faster and easier.

Consolidation loans often offer lower interest rates than the original credit lines, enabling you to pay off your debt faster. In addition, having one lower monthly payment makes it easier to avoid late or missed payments.

Balance transfer credit cards let you transfer debt from other cards for a minimal fee. These cards sometimes require that you pay off the balance transfer balance within a certain time frame to avoid incurring interest. If you choose a balance transfer card, choose one with terms favorable to your situation and needs.

A debt consolidation loan adds a new account to your credit report, which can briefly cause your score to drop. On the other hand, adding a loan or credit card to your credit history could improve your credit mix. You’ll need to consider these factors when determining whether a debt consolidation loan is right for you.

Credit Counseling

Immediate credit impact: None expected
Long-term credit impact: None expected

A credit counselor is a professional adviser who helps you manage and repay your debt. Counselors may offer free or low-cost consultations and educational materials. They often lead their clients to enroll in other debt relief programs, such as a debt management plan, which generally require a fee and can affect your credit.

Be sure you fully understand the potential impact of any debt relief program suggested by a credit counselor before you sign up. Ask as many questions as you can, like “Will this debt relief program have high interest rates?”

Counselors can also help you avoid accumulating too much debt. Seeking advice from a counselor about a loan that you’re interested in can save you money in the long run. Learning how to choose a credit counselor who can meet your needs is essential.

Debt Management Plan

Immediate credit impact: Moderate (positive or negative)
Long-term credit impact: Minimal

A Debt Management Plan is typically set up by a credit counselor or counseling agency. You make one monthly payment to that agency, and the agency disburses that payment among your creditors. This debt management program can affect your credit in several ways—mostly positively.

While individual lenders may care that a credit counseling agency is repaying your accounts, FICO does not. Since FICO is the leading data analytics company responsible for calculating consumer credit risk, a DMP will not adversely affect your credit. Of course, delinquent payments and high balances will continue to bring your score down, even if you’re working with an agency.

When you agree to a DMP, you have to close your credit cards. This will likely lower your scores, but how much depends on how the rest of your credit report looks. Factors such as whether or not you have other open credit accounts that you pay on time will determine how much closing these lines of credit will hurt your score.

Regardless, the negative effect is temporary. Ultimately, the impact of making consistent on-time payments to your remaining credit accounts will raise your credit scores.

Debt Settlement and Debt Negotiation

Immediate credit impact: Severe damage
Long-Term credit impact: Slow recovery

Some creditors may allow you to settle your debt. Negotiating with creditors allows you to pay less than the full balance owed and close the account.

Creditors only do this for consumers with several delinquent payments on their credit report. However, creditors generally charge off debts once they hit the mark of being 180 days past due. Since charged-off debts are turned over to collection agencies, it is important to try to settle an account before it gets charged off.

Debt settlement companies negotiate with creditors on your behalf, but their tactics often require you to stop paying your bills entirely, which can have a severe negative impact on your credit. In general, debt settlement is considered a last resort, and many professionals recommend bankruptcy before debt settlement.

Bankruptcy

Immediate credit impact: Severe damage
Long-term credit impact: Slow recovery

Filing for bankruptcy will severely damage your credit and can stay on your credit report for as long as 10 years from the filing date. However, if you are truly in a place of debt from which all other debt relief programs cannot save you, bankruptcy may be the best option.

Moreover, working diligently to rebuild your credit after bankruptcy can help improve your credit scores. Depending upon which type of bankruptcy you file for—Chapter 7, Chapter 11 or Chapter 13—you will pay back different amounts of your debt, and it will take varying timelines before your credit can be restored.

Learning the difference between bankruptcy types can help you choose the right one. A qualified consumer bankruptcy attorney can help you evaluate your options.

Boost Your Personal Finance Knowledge With Credit.com

Whichever method of debt relief you choose, the ultimate goal is always to pay off your debt. That way, you can save and invest for your future goals. For some, taking a hit to their credit temporarily is worth it if it means finally getting their balances to zero.

Credit.com has an extensive library of personal finance resources that can enhance your knowledge and help you determine if a loan or line of credit is right for you. Plus, you’ll find plenty of resources to help with your debt relief goals.

Source: credit.com

Apache is functioning normally

February 9, 2024 by Brett Tams

AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

This website requires Javascrip to run properly.

AOT, HELOC, Fee Collection, Bidding Tools; Conforming News; STRATMOR’s Ops Workshop; NYCB and Mortgage Prices

By:
Rob Chrisman

Thu, Feb 8 2024, 11:17 AM

Economists have their favorite indices to measure the health of the economy. GDP, if men are buying underwear, CPI, RV shipments, GDP, plastic surgery appointments, PCE, hemlines… tomorrow on The Mortgage Collaborative’s Rundown Skylar Olsen, the Chief Economist of Zillow, will discuss some of this, and more, for 30-45 minutes starting at noon PT, 3PM ET, in “The Rundown”. Meanwhile, lenders are shifting the focus from things they can’t change to things they can: changing regional managers comp plans to incorporate profits instead of volume. Or honing marketing systems now, not when rates drop further and opening up refi opportunities. Or shifting to paying less for a refi and putting the difference into rate sheet pricing. And who’s buying the properties we’re lending on? Women. Okay, that was a bold generalization, but still… (Today’s Commentary podcast can be found here and this week’s is sponsored by Vesta, the new, modern Loan Origination System (LOS) which helps lenders reduce their costs to originate and improve their ability to integrate with new technologies in the ecosystem. Hear an interview with Ally Home’s Glenn Brunker on what’s happening in the housing market and what to expect going into spring homebuying season.)

Lender and Broker Software, Products, and Services

Matic, a digital home insurance platform built for the mortgage industry, recently announced an exclusive partnership with PRMG to extend their marketplace of over 40 A-Rated carriers into PRMG customer offerings. PRMG joins over 100 mortgage lenders, servicers and banks, representing 20 percent of home loans processed in the U.S., that partner with Matic to integrate the insurance shopping experience into the homeownership lifecycle. Now more than ever, mortgage leaders are turning to Matic to help them offer value to customers, generate revenue, and reduce costs in a tough housing market. Mortgage leaders, don’t miss out: book a demo with Matic to discover how to add an ancillary revenue stream that removes friction from the insurance process and keeps customers within your existing systems. And if you’re attending MBA’s Servicing Solutions Conference in two weeks, stop by booth 806 to learn more! Book a demo with Matic.

Only 60 days since launch and already 150+ mortgage originators have signed up to receive daily mandatory bids from MAXEX on bulk pools of Agency-eligible non-owner occupied (NOO) and second home loans. Moreover, we’re currently winning more than 10 percent of the loans bid! Why? Because our unique loan exchange model provides access to competitive pricing from five leading institutional buyers, allows you to underwrite to agency guidelines, and helps you avoid costly Agency LLPAs—all within a single contract and through a single, standardized clearinghouse. This seamlessly integrates with your existing bulk trading process. Visit here to learn more.

We live in a world of autopay, Apple Pay, Venmo, Uber Eats… the list goes on. If borrowers can pay for a pizza online, why are we still asking them to share their credit card info over the phone? Get with the times and collect upfront fees via text with Fee Chaser by LenderLogix.

TPO Products for Broker and Correspondent

“Button Finance is a leading home equity lender specializing in HELOCs and Closed-End Seconds, offering lucrative opportunities for our partners. Correspondent partners can earn 7.85 percent of the loan balance, while brokers can make 5 percent. Additionally, we offer an attractive 3.5 percent Lender Paid Compensation on Texas 50a6 loans. Our services extend to lending against investment properties for brokers, ensuring a broad spectrum of lending solutions. With competitive 8 percent note rates on Closed-End Seconds and no appraisals up to a $250k loan balance, Button Finance is your go-to partner for all home equity lending needs. Email us for more information.”

Eighty percent of homeowners have first mortgage rates less than 4 percent. However, they are sitting on over $10 trillion of tappable equity. HELOC originations provide an outstanding opportunity for lenders and their LOs. Every homeowner receives HELOC solicitations. If it’s not from YOU, then WHO? Depending on YOUR borrowers, this may be the ideal time for them to make home improvements or pay off credit card debt. Or it may be the right time for that dream vacation. NFTYDoor, a division of Homebridge, is a proprietary digital HELOC platform that provides on-demand access to YOUR borrower’s equity. Customers want an experience that is simple and fast, and through NFTYDoor, HELOCs can close in a few days, not weeks or months. Embrace the “Customer for Life” strategy with NFTYDoor’s platform that is 100 percent branded to you. Stay in front of your customers and recapture future business. Contact NFTYDoor today.

STRATMOR and Operations

Forecasters are predicting modest growth in new and existing home sales in 2024, which means we can all look ahead with cautious optimism. Now’s the time to review your operations and prepare for this modest shift back toward normalcy. Senior Operations Executives: STRATMOR Group is hosting its virtual Operations Workshop next week, February 14-16, to help you do just that. Interact with STRATMOR advisors and your peer lenders to discuss improving operational efficiency, overcoming recent challenges and pain points, and current trends in mortgage operations. Contact STRATMOR Group to learn more and sign up.

Conventional Conforming News

The Federal Housing Finance Agency’s 2024 scorecard for the government-sponsored enterprises included a new provision for representations and warranties. “Explore opportunities to harmonize the enterprises’ processes supporting the single-family selling representations and warranties framework, including defect identification, remedies and repurchase alternatives,” the scorecard states.

Fannie Mae’s (FNMA/OTCQB) December 2023 Monthly Summary is now available and contains information about Fannie Mae’s monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, and serious delinquency rates. There’s also Fannie’s Home Purchase Sentiment Index® (HPSI) which increased to its highest level since March 2022, due primarily to increased consumer confidence in job security and another significant jump in the share of consumers expecting mortgage rates to decrease. An all-time survey-high 36 percent of respondents indicated that they expect mortgage rates to go down in the next 12 months, while 28 percent expect them to go up, and 35 percent expect rates to remain the same. (Seems pretty even to me.)

Fannie Mae is updating the Uniform Loan Delivery Dataset (ULDD) to provide further guidance on implementation and mandate dates associated with the data enhancements included in the ULDD Phase 5 specification published on Sept. 12, 2023. Review the announcement for an overview on the implementation and mandate dates associated with business-critical and UAD 3.6 alignment data enhancements for the Phase 5 data requirements.

Pennymac is aligning with Freddie Mac Bulletin 2023-19, announcing updates to their rental income requirements. The updates are effective with loan deliveries on or after 03/15/2024. Details are available in Pennymac Correspondent Announcement 24-06.

National MI announced updates to the TrueGuide which include the following changes and clarifications: AUS Loans Automated Tools have been updated as follows: Fannie Mae Appraisal Waiver has been updated to reflect the name change to “Value Acceptance.” Fannie Mae Income Calculator for self-employment income has been added as an approved income and asset tool. Non-AUS Loans have been updated as follows: Jumbo and Medical Professional Program loan limit increases. Verbal Verification of Employment updated to align with the GSEs’ requirements. Underwriting Guidelines detailing these changes and clarifications will be posted to nationalmi.com in the near future.

AmeriHome Mortgage Announcement 20240111-CL summarizes previously published changes made during January, additional changes made with this announcement, and recent Agency and regulatory news.

Citizens Correspondent National Bulletin 2024-02 includes information on Value Acceptance + Property Data – DU (Delegated Transactions only). Effective February 1st, Conventional Conforming Updates and Disaster Tax Filing Relief. See the bulletin for additional information and all lock, delivery, and purchase by dates, if required.

Capital Markets

Need a crash course in Assignment of Trade (AOT) executions? In this blog post, Assignment of Trade Executions 101, MCT experts delve into the process of AOT executions, the impact of bid tape AOT on to-be-announced (TBA) positions, and how automation is moving the industry forward. The blog also reviews the cost savings associated with bid tape AOT executions and the MCT Marketplace technology used to complete these transactions. To learn more about MCT Marketplace, view the recent video with MCT’s CEO & President, Curtis Richins. In the video, Mr. Richins reviews key features of MCT Marketplace, opportunities within the platform for buyers and sellers, and a roadmap for the future.

Even with all the selling in the bond markets last Friday after January’s payrolls data came in much stronger than expected, yields have merely moved back to where they had been for most of the year so far. Most security prices are determined by supply and demand, and yesterday witnessed a strong sale of 10-year Treasuries at the record $42 billion 10-year Treasury auction.

But bonds barely budged! Sentiment was dominated by fears surrounding NY Community Bank. Do you remember when the spreads between Treasury securities and MBS “blew out” last March with the banks having to sell MBS? We may see that again with the NYCB possibly selling part or all of Flagstar’s billions in mortgage holdings. In news of interest to loan originators, FNMA’s Home Purchase Sentiment Index recorded another impressive gain for the second straight month to post the highest level since March 2022.

Today’s calendar kicked off with weekly jobless claims (218k, about as expected, 1.871 million continuing claims… the job market continues to be strong). Later are wholesale inventories and sales for December, several Treasury auctions that will be headlined by $25 billion 30-year bonds, Freddie Mac’s Primary Mortgage Market Survey, and remarks from Richmond Fed President Barkin. We begin the day with Agency MBS prices about .125-.250 worse, the 10-year yielding 4.13 after closing yesterday at 4.15 percent, and the 2-year is at 4.44.

Jobs and Transitions

“Direct nationwide lender Kwik Mortgage, based out of Parsippany NJ, is hiring Distributed Retail Sales. We have outstanding support, and our platform is built for you, featuring Blend, Encompass, HubSpot, Loan Vision and Optimal Blue! We offer a full suite of correspondent buyers inclusive of Fannie Mae and Freddie is on the table for 2024! From FHA and VA to Non-QM we have it all! We have a very flat leadership structure which means customers are not paying for more and getting less! We invest in our people and our process, and we have 27 years of company owned and operated success! We are always competitively priced. Don’t worry about fulfillment execution we owned and operated one of the best loan fulfillment for pay businesses in the country, Equilibrium Mortgage Solutions! Contact Paul Campbell, EVP of Lending, (760-774-7704), Paul Campbell, LinkedIn! We are connected: a Fannie Mae diverse minority advisory board lender, The Mortgage Collaborative lender board member, MBA Policy, Servicing and Compliance committee participant! A Depository DE&I advisory board member! Get Kwik come join us! NY, NJ, PA, CT, MA, RI originators welcome.”

Stronghill Capital, LLC, an Austin, TX-based Wholesale and Correspondent lender, is NOW HIRING across the country! If you’re a relationship-focused Account Executive with experience in Non-QM and Investor Financing, including multi-family and mixed-use properties, we’d love to speak with you! Stronghill’s Account Executives enjoy open territories, multi-channel opportunities to work with clients as correspondents or brokers, and consistent communication and collaboration with the Executive Leadership team. If you’re looking to join a rapidly-growing, dynamic organization with a focused commitment to growth and expansion in Non-QM, reach out to our SVP of Sales, Matt Brammer at 440.382.3183 to learn more.

Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

February 9, 2024 by Brett Tams

I’ve been in the real estate world since 2002 as an investor, agent, broker, and even author. Real estate has changed over the years but I still love it and still invest today. Over the years, I have learned many things and evolved from trying to rent and screen tenants based on gut feelings to developing systems that work much better!

Being a landlord can be rewarding, but navigating the world of rentals also comes with its share of challenges. To be successful and avoid unnecessary headaches, it’s crucial to avoid these common pitfalls.

Table of Contents – Top 5 Mistakes Landlords Make

1. Skipping Thorough Tenant Screening

Rushing to fill a vacancy almost always backfires. A proper screening process, including checking references, credit reports, and employment history, helps identify responsible tenants who are likely to pay rent on time and respect your property. Gut feelings are not the best way to choose tenants, even if they are friends or family, especially if they are friends or family! Don’t rush to rent a place to the first people who apply because you don’t have the time. If you don’t have the time, you should not be the one leasing the property.

I use DoorLoop for all of my tenant applications and screening. It makes managing background checks very easy.

You can read more about how I screen for tenants.

2. Neglecting the Lease Agreement

A clear, detailed lease agreement is what protects you when a dispute arises, including evictions. If you don’t have a lease or the right lease, it can make eviction take much longer and cost much more money. We try to avoid evictions but that is not always possible even with proper screening.

It must outline expectations, responsibilities, and procedures for rent payment, repairs, maintenance, and dispute resolution. Vague agreements lead to confusion and potential legal issues.

Either get a lease from a local attorney or use a high-quality online legal document generation tool. I use Legaltemplates.com. Using a local real estate attorney will be helpful in case a dispute arises later.

See my tips for the best ways to manage rental properties.

3. Ignoring Maintenance Issues

Ignoring leaky faucets, malfunctioning appliances, or minor repairs can snowball into bigger problems down the line. Prompt maintenance not only keeps tenants happy but also prevents costly damage and potential legal action. You cannot rely on your tenants to tell you about every issue. It is also important to schedule regular inspections to see if there are any major issues in the property and that the tenants are taking care of it.

See my article on how to find contractors for house flips and rentals.

4. Setting Unrealistic Rent Prices

Overpricing your property can lead to long vacancies and lost income. Research fair market rents in your area and consider factors like amenities, location, and condition before setting a price. Remember that asking price for other rentals is not always the best way to gauge market value. Those properties could be for rent for months and overpriced. Pay attention to the market to see which ones are being rented and which ones are sitting.

Zillow provides fairly accurate rent estimates (rent is easier to estimate than value).

Once you have an idea of market rent, you can use my Rental Property Cash Flow Calculator to understand your financials.

5. Failing to Communicate Effectively

Communication is key to a healthy landlord-tenant relationship. Be professional, responsive, and address concerns promptly. Ignoring tenant issues or being dismissive can create frustration and escalate into bigger problems. Ignoring tenants can also get you in trouble with the city or county where you reside.

I don’t personally deal directly with issues. I instead chose a great property manager to ensure communication is open and issues are handled promptly. They typically charge a percentage fee, which I simply build into my expenses.

Read my article on how to find a great property manager.

Conclusion

By avoiding these common mistakes, you can create a positive rental experience for both yourself and your tenants, leading to a smoother, more profitable investment.

Build a Rental Property Empire

Source: investfourmore.com

Apache is functioning normally

February 8, 2024 by Brett Tams

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Master self-employment taxes and avoid common tax mistakes with expert strategies for managing your finances year-round.

How do self-employed taxes work? What are some common tax mistakes self-employed people make? And can you really write off payments on a luxury vehicle if you use it for work purposes? Hosts Sean Pyles and Elizabeth Ayoola discuss the intricacies of self-employment taxes and strategies for financial success and IRS compliance to help you understand how to navigate tax season as an independent worker.

CPA and financial strategist Krystal Todd joins them to delve further into the details of self-employment taxes, with tips and tricks on budgeting for personal and professional life, the importance of making quarterly tax payments, and whether to DIY taxes or hire a professional. They also discuss strategies like depreciating assets, the benefits of hiring family members, and navigating the complexities of tax deductions.

Plus: financial strategies for handling unexpected income and managing self-employment taxes, the importance of setting aside funds for unexpected expenses, and the advantages of timing revenue recognition and prepaying expenses for tax benefits.

Check out this episode on your favorite podcast platform, including:

NerdWallet stories related to this episode:

Episode transcript

This transcript was generated from podcast audio by an AI tool.

Sean Pyles:

As Ben Franklin himself said, in this world, nothing is certain except death and taxes. Taxes, as we all know, can be wildly confusing, and that goes double when an employer isn’t there to help.

Krystal Todd:

We need quarterly payments just of you estimating how much you think you’ll be paying in taxes, and then at the end of the year when you actually file your taxes, they’ll make adjustments based on whatever credits and deductions you’re eligible for, what you’ve already paid, and then you’ll see what you net.

Sean Pyles:

Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.

Elizabeth Ayoola:

And I’m Elizabeth Ayoola.

Sean Pyles:

Today we bring you episode two of our nerdy deep dive into self-employment. In our last episode, we talked about the importance of budgeting when you’re working for yourself. Obviously here at Smart Money we think it’s a good idea for everyone to budget, but especially if you’re self-employed, you’re going to need to budget for both your personal life and your professional life.

So in this episode, we’re going to answer the most important tax questions self-employed people have, like how do self-employed taxes even work? Is it better to DIY your taxes or hire a pro? And can you really write off payments on a luxury vehicle if you use it for work purposes? Welcome to tax season.

Elizabeth Ayoola:

Womp womp. My favorite part of tax season is when it’s over. Thankfully, I’m getting better at taxes every year and I’m also learning to outsource. Shout out to my tax person. Anyways, yes, it’s February and it’s tax time for all of us. And if you’re a gig worker, freelancer, contractor, or other solo entrepreneur, you need to make sure that you’re doing all the heavy lifting an employer would usually do for you. And you have to do that to avoid mistakes and IRS penalties. Hopefully those who aren’t new to self-employment have withheld enough quarterly taxes throughout the year so they’re not hit with an IRS penalty. New listeners who are about to dip their toes into self-employment are about to learn about how self-employed taxes work.

Sean Pyles:

Yeah, that is no bueno. I know people who, when they started freelancing, had no idea that they were supposed to be paying taxes all year long quarterly instead of saving up for a big payment at the end of the year. The IRS does not look kindly on that, even if it ends up that you overpaid. And by people here, I am absolutely referring to myself because I once found myself in a world of tax hurt back when I was a contractor, and that is a lesson I shall not soon forget.

Elizabeth Ayoola:

It’s good to know I’m not alone, Sean, because I’ve been there too and it wasn’t fine.

Sean Pyles:

Elizabeth Ayoola:

It hurts. It’s a heartbreak.

Sean Pyles:

All right, well, we want to hear what you think too, listeners. To share your ideas and questions around self-employment with us, leave us a voicemail or text the Nerd Hotline at 901-730-6373. That’s 901-730-NERD. Or email a voice memo to [email protected].

So Elizabeth, who are we hearing from today?

Elizabeth Ayoola:

Today we’re going to be chatting with Krystal Todd. She happens to be a certified public accountant, a financial strategist, a money mentor and an entrepreneur. Her resume puts her in a good position to give us the juicy details we need on self-employed taxes.

Sean Pyles:

That’s coming up in a moment. Stay with us.

Elizabeth Ayoola:

Hi Krystal. Thank you for coming onto the podcast.

Krystal Todd:

Yes, thank you so much for having me. Really excited to talk taxes. This is my bread and butter. I love talking about anything money, really.

Elizabeth Ayoola:

No, I’m with you. I’m not going to lie, I do not love taxes, but I do love to understand taxes because I don’t want to pay the IRS more than I have to pay them.

Krystal Todd:

Oh, no. That’s why I’m here.

Elizabeth Ayoola:

Another tax year is upon us, and I think this information is going to be super helpful. So with that said, I’m going to jump straight into the first question I have for you, which is how do self-employed taxes work? And I know this is a big question, but I know I learned the hard way about self-employed taxes and I learned that they’re higher than what you pay when you’re working a traditional job with an employer.

So I want you to tell us why self-employed taxes are higher, especially when the government seems to provide so many incentives for small business owners.

Krystal Todd:

So it’s a double whammy because not only is it higher because we’re paying both sides of the employer tax, but we also have to pay it ourselves. So if you’re coming from a W-2 world into self-employment world, normally in W-2 world, it’s all handled for you. The biggest difference is that you’re having to have full control over paying your taxes, paying quarterly, whereas a W-2, you’re paying every paycheck. It doesn’t feel like that, but that’s what’s going on. And then the self-employment tax. So typically with your W-2 employee, you’ll pay half that piece and then your employer pays half of it, but because you’re self-employed, you are the employee and the employer, so you’re paying 15% in taxes.

Elizabeth Ayoola:

That 15%, I remember the first time I saw it and whipped out my calculator and I was like, “Wait, what? This was a chunk of money.” So I was a little unpleasantly shocked by that number.

Krystal Todd:

Yeah, there is a way to get around it.

Elizabeth Ayoola:

Tell me, tell me.

Krystal Todd:

If you’re just starting out, maybe it wouldn’t be most beneficial. It does depend, and of course you have to always throw a disclaimer out there. Everyone’s situation is different. I’m a CPA, but not your personal CPA, so take everything I’m saying as little seeds of wisdom to go research.

When you’re first starting out, maybe you don’t have your EIN, which is just basically your social security for your business, employee identification number. So it’s like your social security number but for your business, because businesses are their own entity. But when you’re first starting out, maybe you’re not doing all of that. So if you’re in the sole proprietor category, which means you’re just working for yourself, you hired yourself, maybe the next level up is LLC, limited liability company. So you’ve gone ahead and filed for that LLC so you have some protection, but you’re still going to be paying a lot of taxes.

It’s not until you get into the S Corp. And of course there’s a couple of qualifications there, but once you get into S Corp, you can actually pay yourself as a W-2 employee in your business. And then that’s how you circumvent that self-employed tax because even though it’s your business, you’re an employee of the business so it looks like a W-2. And the benefit of that too is especially if you’re self-employed, and I know some people have felt me on this, if you’re trying to get a loan for a car, once they see you’re self-employed, guns are blazing, right? They’re ready to ask you all types of questions. You have to provide so much information. As an S Corp, if you’re paying yourself, you’re going to receive a W-2 from your business so they don’t have to know it’s your business. They just see W-2 and no questions asked. There are some benefits to having an S Corp for sure.

Elizabeth Ayoola:

By the way, for everyone listening, we’re going to go a lot deeper into the different business structures in a subsequent episode, so don’t worry. We’re going to touch on that some more.

So now back to taxes. I know estimated taxes are something that I now do. Didn’t do before, but I remember when I was first researching self-employment taxes, that came up a lot. But I thought, “Hey, I can just pay it in one lump sum,” and I didn’t really dig deeper to read all of the fine details. Can you explain to us what estimated taxes are and how exactly it worked?

Krystal Todd:

Of course. So as I mentioned previously, as a W-2 employee, you’re paying taxes every single pay period. So you don’t necessarily have to worry about that, but as a self-employed individual, you’re not paying any taxes. So what the government has said is, “You’re not off the hook.” You’re not going to pay just one time at the end of the year. We need quarterly payments just of you estimating how much you think you’ll be paying in taxes, and then at the end of the year when you actually file your taxes, they’ll make adjustments based on whatever credits and deductions you’re eligible for, what you’ve already paid, and then you’ll see what you net.

So it’s crucial to pay quarterly taxes, and you can use things out there that help you track your expenses and your income and can even help you calculate that too, so you don’t have to necessarily do it all on your own.

Elizabeth Ayoola:

Absolutely. So tell us, when are the self-employed taxes due and what happens if you don’t pay them?

Krystal Todd:

Yes, they’re quarterly. If you don’t pay them quarterly or they realize that you haven’t paid enough, you will get fined. You don’t have to end up in jail if it was a legitimate accident, so you’ll be fine, but you will get penalized and it can be a little costly. So definitely make sure that you are just getting that done ahead of time. It’s a fresh new year, so new opportunities to make sure we’re staying on target.

Elizabeth Ayoola:

Yes. And for those who maybe are listening and unfortunately missed out on paying quarterly taxes and maybe in April are going to end up being hit with a bill, are there any options in terms of how they can pay it if they don’t have that lump sum cash?

Krystal Todd:

It depends on your situation. Sometimes the IRS will say, “No, you need to make this payment,” and sometimes they’ll work with you depending on the amount. So it does depend on your circumstances.

Elizabeth Ayoola:

What was this I heard about that you can sometimes do a payment plan with the IRS. So is this true?

Krystal Todd:

Yeah, no, it’s true. It’s true. I think it just depends on, like I said, your circumstances. Maybe there’s situations where if you had issues before, they’re a little bit more strict on you, but you can make payments.

Elizabeth Ayoola:

So now we want to get into the mistakes so other people can learn from those mistakes. So what are some common mistakes that you see clients make when it comes to paying their self-employed taxes? So for me, for example, I just wasn’t good at bookkeeping initially. I had my money in too many different accounts, so it was overwhelming when tax season came around to see what my deductions were and just basically my income. So as a CPA, tell us maybe two or three common mistakes you see people make.

Krystal Todd:

The common mistake by far is not making sure that they’re taking all the deductions and credits that they’re actually eligible for. So ultimately, a lot of people will think about taxes as a January through April situation, but it’s a year-round thing. Tax planning is almost more important than actually tax preparation. You want to think about the whole year and ways you can save money, different things you could probably invest in to bring your taxes down. So missing out on tax planning and then trying to just rush everything towards the end of the year is by far the biggest mistake. I’ll see people scrambling for receipts, looking back, and a lot of times if you’re just starting out, typically maybe they won’t have a separate business account as well.

Depreciation is the biggest one that I think people miss out on, not only for things like Airbnb in your home, but also your car. If you’re doing Uber or Lyft, you can get credit for the wear and tear on your car. If you have a computer or any devices that you have, those things are also depreciable or you can actually fully deduct them in certain cases. I definitely think that you should be empowered and doing it yourself, but if your taxes are getting complicated, you’d want to make sure that you’re leaning on a tax professional who will catch those expenses because a lot of people are paying too much.

Elizabeth Ayoola:

Thanks for sharing all of those incredible ways that people can reduce their taxes. Can you tell me about some other deductions or ways that people can reduce their self-employed taxes?

Krystal Todd:

Yeah, so a really neat one is making sure you hire your family in any capacity that you can. Now, of course, there’s some caveats here. You have to make sure you’re paying them a reasonable wage. So if they’re just an administrator, you can’t pay them multiple six figures. It has to be reasonable, but to the extent that it’s reasonable, you can actually hire them on. And I especially love this with kids.

So as an example of my own life, I hire my daughter and she’ll help me with my videos, she’ll help me with setup. She helps me with product development, and she’s been featured in a few of my videos online. So I will pay her. She’s a 1099 worker, so it’s not a W-2, so it’s simple. I just have to give her a check, and what I love about that is that I get to reduce my taxes, and this is more like W-2, but either way, we all get a standard deduction.

If I pay my child up to the standard deduction amount, which was just a little over $13,000 for 2023. If I pay her $13,000, I get to reduce my taxable income by that same $13,000. She pays no taxes on it because of the standard deduction, which basically is the IRS giving you some credits for having a kid or just whatever else is happening in life. They say, “Here’s just one flat rate. You just take that.” So she doesn’t pay taxes on that, and then I can put it into a custodial IRA for her and it’ll grow tax-free because it’s Roth. You’re saving money, they’re not paying any taxes, I mean, that’s a really good tax loophole there.

Elizabeth Ayoola:

For sure, for sure. And speaking of which, since we’re on the topic of deductions, I know sometimes people go a little over the top with these deductions, forgetting that the IRS does audit people. I know recently I’ve seen something floating around on social media about being able to buy a Mercedes Benz, also known as G-Wagon, and write it off using your taxes. And the rules for this are really complicated, so make sure to work with the CPA if you’re thinking about doing it. So is this true? And if it is, what is the catch?

Krystal Todd:

There are some caveats. It must be used in business. You can’t just buy a G-Wagon, you never drive in it. If you’re a realtor, for example, that might make sense. You have an image. If you’re a realtor, you’re selling million-dollar homes, you want to look the part. That might make sense. But if you’re a content creator working at home, you never go in the car to do anything, you cannot do that. In the eyes of the IRS that is illegal, so you have to make sure that it’s being used for business use. It doesn’t have to be exclusively, but if it is half business, half personal, you’ll have to adjust your taxes to account for that.

Elizabeth Ayoola:

So sorry to get into the nitty-gritty, but when you say business use, someone might say, “Oh, I have a meeting, I don’t know, once a month, and I’m driving it to my meeting.” A content creator. Does the IRS get into the details of how frequently you’re using the car?

Krystal Todd:

Yes, and the location. So if you’re driving from your home to a meeting, that doesn’t count. It’s only if you’re going from, let’s say, your primary job to your second job. Then that could actually be considered a deductible expense. So yeah, they’re very particular about what you’re using it for, where you’re driving from, and if you get audited, you better be prepared.

Elizabeth Ayoola:

So can you tell us, on that note, some major red flags or even myths that you hear of when it comes to tax deductions?

Krystal Todd:

Yes. I think that people think they could just deduct anything because it’s eligible. The government makes you go through hoops, especially after the Tax Cuts and Jobs Act where the standard deduction was doubled. They’re really trying hard to make you just take the standard deduction and just take that and go.

If you’re saying, “No, I’ve had more than $13,000 worth of expenses,” you might have. That doesn’t mean they’re all going to be eligible. So for example, for health costs that you’ve spent, maybe you spent $10,000 in health expenses for this year, but the government does not give you dollar for dollar, and if you take that, it has to be itemized. So you might do all this work trying to itemize your deductions and you were better off taking the standard deduction because they make you go through a lot of different hoops. There’s percentages, there’s phase-outs if you’re making a certain amount of money. So it’s super, super nuanced, and just circling back to what we talked about earlier as far as DIY goes, if you’re in that situation, unless you’re going to really put the effort into research, you probably are better off just getting someone who already has done this before and they’re comfortable with it because of all those different nuanced requirements that they have.

Elizabeth Ayoola:

So in the spirit of… Well, I don’t want to say in the spirit of getting audited because I don’t think anyone wants to get audited, but just in case, give us some bookkeeping tips. I’m still refining my bookkeeping because it’s just not my strong area, but what are some bookkeeping tips so that if the IRS comes knocking, people are ready?

Krystal Todd:

I strongly suggest getting software. If you have a software, you’re able to attach receipts directly to it. They’ll organize it for you. If you’re not someone who’s too familiar with income statements and cash flows and all of that, they prepare those documents for you. That by far has dramatically changed my business. And also having separate accounts. You can’t even imagine how many people will dig through their personal account looking for business expenses. Even if you’re just starting out, from the decision you’ve made to take this business seriously, please get your EIN so you can open up your business bank account, and that way everything is just flowing through one account. Lean on these different tools that will organize it for you and just be sure to keep receipts.

I would say you should be at least monthly. All these billion-dollar corporations, I mean, they’re doing things very frequently, but every single month we are balancing the books, we are going over our expenses and then we’re tax planning. So many people wait until the end of the year and then it just becomes a hassle. So to the extent that you can, get it done monthly. That is the best advice I have so you’re not stressing yourself out during these times.

Elizabeth Ayoola:

We’re in a very tech-savvy age, so how are digital receipts? So every time maybe you make a purchase or whatever, just keeping a digital file of your stuff.

Krystal Todd:

Yes, absolutely. And let’s say maybe you’re not ready for the software. That’s what I was doing when I first started out and I wasn’t too sure. Just a simple folder in your computer would work. Document everything in the moment as it happens, that way nothing is slipping through the cracks and you should be in good shape.

Elizabeth Ayoola:

So the last question I have, because in this series we’re trying to cover people who also have how they can manage your finances when they have inconsistent income. So for someone who has inconsistent income throughout the year, maybe they don’t make as much during the beginning of the year, but let’s say halfway through the year they land a huge contract.

How do they budget then for self-employed taxes or estimated taxes, rather? Because I know that’s based on how much you think you’re going to make, but you don’t always know. So maybe you’ve been underpaying for the first half of the year and then the end of the year comes. How do you manage that?

Krystal Todd:

I always say be as conservative as possible. It’s kind of like a dual opinion I have here because on one end, you don’t want to give the government an interest-free loan. That’s essentially what you’re doing when you get a tax refund. But on the other end, you also don’t want to deal with owing money, maybe being penalized and then having to pay that next year. So to the extent that you can, I would say be as conservative as possible when it comes to paying your taxes. Again, there’s different software that’ll help you establish what you should be paying. When you get that windfall, you weren’t really expecting it, right? So I like to live off of my most conservative amount of money.

So let’s say maybe it’s $10,000 a month. If I made $20,000 a month, I will ignore that $10,000 and put it to the side just because you’ll have that extra cushion to keep you protected in the event that you have a windfall you don’t expect. That happened to me last year, actually. I had quite the windfall and I wasn’t expecting it, but I had practiced what I preach and I had some money to the side, so it was okay. So whenever you get those large sums of money, pretend like you didn’t. Just live conservatively and then once a year is done, once you calculate your taxes and you pay it, then you can enjoy the rest. So it’s delayed gratification.

Elizabeth Ayoola:

Oh, I like that as a way of looking at it. And one day when I was complaining about my taxes, I remember someone saying, “The brighter side of that is that you made more money.” So we welcome a windfall, we just have to prepare for those windfalls.

Krystal Todd:

This is a little bit more technical, but something that I love because this again happened to me last year. Let’s say seasonality is something that your company is affected by. Maybe you get a big windfall of purchases or something at the end of the year. In certain circumstances, it might be best to ask them to pay you next year, right?

If you are a cash-basis type of accounting, you won’t get taxed unless you actually receive the money. So maybe you did make that revenue, but if you can have it pushed off to the next year because you didn’t expect that windfall and you don’t want to necessarily deal with the influx of the money you have to pay for those taxes, maybe you can have your customers pay you January 1st or January 2nd. That way you’re not going to be affected by that surprise, and that’s 100% legal. You can delay that or you can bring forward some expenses too.

This only works if, again, you are a cash basis, but if you want to pay something off for the whole year, you’ll be able to deduct that even if the whole year hasn’t actually happened yet. So there’s different ways towards the end of the year to try to get some last minute things in just to further insulate yourself.

Elizabeth Ayoola:

Love that. Those are some really, really good tips and a reminder of why it’s good to talk to CPAs. Do you have any final words of wisdom or anything that people might not be thinking about relating to self-employed taxes that you want to share?

Krystal Todd:

Yes. You are the driver. A lot of times people will shy away from it because it is intimidating, but in the age of information that we’re in right now, there is an influx of free information online. This is an example of one of them. Don’t be paralyzed by fear. Really lean into it because the difference between small business, and I really don’t use that word lightly because no matter if you’re small or big, you have to do the same exact stuff. So why even identify with your revenue or the size of your company? But a business is a business, and these larger companies become larger because they are hands-on and they’re very proactive with how they’re managing their money.

So I suggest that you do so too and do not be afraid of delegation. I, in other areas of life, have not delegated, and that is what comes back to haunt you. So you don’t have to do it all on your own. There are free resources, there are paid resources. Definitely make sure you’re just taking advantage of what you can take advantage of and you’re planning so that you can not be surprised with tax bills at the end of the year.

Elizabeth Ayoola:

Yes, absolutely. Echoing what Krystal said, you do not have to do it alone, and that is something that has made taxes a lot less daunting for me. Thank you, thank you, thank you, Krystal. This was so informative. I have learned so many new things that I’m going to apply when it comes time to do my self-employed taxes, so thank you. Thank you for coming.

Krystal Todd:

You’re so welcome. Thank you for having me, and good luck everybody in this tax season.

Sean Pyles:

Elizabeth, I never thought I’d say this, but that was actually a super interesting conversation about taxes. I am someone who was a planner in all aspects of my life, and like Krystal said, planning ahead with your taxes is so key whether you’re finding deductions, hiring your family, or making quarterly tax payments, but also there is a big difference between planning and scheming. I’m so glad that you guys talked about that viral G-Wagon tax hack because I have seen that so many times on TikTok. I have been really worried about people getting themselves into a world of trouble with their taxes.

Elizabeth Ayoola:

I’m telling you, on the journey of self-employment, I have realized that there are some things that are not too good to be true, but other things are too good to be true, and I think that’s one of them.

So while taxes can be a snooze fest, I think learning about ways to save and avoid penalties will always grab my attention. I love all the tax saving strategies that Krystal shared, and also the deduction red flags to look out for. I mean, for me, this episode was also a reminder about how important it is to talk to a tax professional who has extensive knowledge, and that’s even if you’re a DIY type person.

I feel more confident about filing my self-employed taxes now because of all the information we just got. But Sean, before we go, I do want to mention one development that we didn’t address with Krystal.

Sean Pyles:

What is that?

Elizabeth Ayoola:

Well, starting this year, there’s a new law called the Corporate Transparency Act. And what that says is that anyone with an official business designation, especially a one or two-person LLC, is going to want to be aware of.

This is an effort to stem money laundering and tax evasion in the small business category, and basically you have to file some extra paperwork with the Treasury Department called a Beneficial Ownership Information Report. If you don’t do that, you could be fined $500 and possibly get up to two years jail time, and don’t nobody want two years jail time.

Sean Pyles:

Elizabeth Ayoola:

Nobody. So definitely talk to your tax accountant and or your business attorney about that.

Sean Pyles:

Yourself included, Elizabeth. I do not want you to go to jail, so please get this done.

Well, thanks for that information. Elizabeth, please tell us what’s coming up in episode three of this series.

Elizabeth Ayoola:

Sean, we are all about getting to retirement here on Smart Money, but saving for it can often be an extra challenge when you are self-employed. We’re going to walk listeners through their options and how to make sure you’re planning for the future, even while you’re going into business for yourself.

Ayesha Selden:

If I can get to 10%, a double-digit percentage of my pay, of my gross pay, my pre-tax pay, I’m in the right ballpark. If you are self-employed, then the onus is on you, of course, to put in everything into your own personal retirement plan.

Elizabeth Ayoola:

For now, that’s all we have for this episode. Do you have a money question of your own? If you do, turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. You can also visit nerdwallet.com/podcast for more information on this particular episode. And remember to follow, rate, and review us wherever you’re getting this podcast.

Sean Pyles:

This episode was produced by Tess Vigeland. I helped with editing, Courtney Neidel helped with fact checking, Sara Brink mixed our audio, and a big thank you to NerdWallet’s editors for all their help.

Elizabeth Ayoola:

And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

Sean Pyles:

And with that said, until next time, turn to the Nerds.

Source: nerdwallet.com

Apache is functioning normally

February 8, 2024 by Brett Tams

What’s the Difference Between a 403(b) and a Roth IRA?

A 403(b) and a Roth IRA account are both tax-advantaged retirement plans, but they are quite different — especially regarding the amount you can contribute annually, and the tax implications for each.

Generally speaking, a 403(b) allows you to save more, and your taxable income is reduced by the amount you contribute to the plan (potentially lowering your tax bill). A Roth IRA has much lower contribution limits, but because you’re saving after-tax money, it grows tax free — and you don’t pay taxes on the withdrawals.

In some cases, you may not need to choose between a Roth IRA vs. a 403(b) — the best choice may be to contribute to both types of accounts. In order to decide, it’s important to consider how these accounts are structured and what the rules are for each.

Comparing How a 403(b) and a Roth IRA Work

When it comes to a 403(b) vs Roth IRA, the two are very different.

A 403(b) account is quite similar to a 401(k), as both are tax-deferred types of retirement plans and have similar contribution limits. A Roth IRA, though, follows a very different set of rules.

403(b) Overview

Similar to a 401(k), a 403(b) retirement plan is a tax-deferred account sponsored by an individual’s employer. An individual may contribute a portion of their salary and also receive matching contributions from their employer.

An employee’s contributions are deducted — this is known as a salary reduction contribution and deposited in the 403(b) pre-tax, where they grow tax-free, until retirement (which is why these accounts are called “tax deferred”). Individuals then withdraw the funds, and pay ordinary income tax at their current rate.

Although 403(b) accounts share some features with 401(k)s, there are some distinctions.

Eligibility

The main difference between 403(b) and 401(k) accounts is that 401(k)s are offered by for-profit businesses and 403(b)s are only available to employees of:

• Public schools, including public colleges and universities

• hurches or associations of churches

• Tax-exempt 501(c)(3) charitable organizations

Early Withdrawals

Typically, individuals face a 10% penalty if they withdraw their money before age 59 ½. Exceptions apply in some circumstances. Be sure to consult with your plan sponsor about the rules.

Contribution Limits and Rules

There are also some different contribution rules for 403(b) accounts. The cap for a 403(b) is the same as it is for a 401(k): $23,000 in 2024 and $22,500 in 2023. And if you’re 50 or older you can also make an additional catch-up contribution of up to $7,500 in 2024 and 2023.

In the case of a 403(b), though, if it’s permitted by the 403(b) plan, participants with at least 15 years of service with their employer can make another catch-up contribution above the annual limit, as long as it’s the lesser of the following options:

• $15,000, reduced by the amount of employee contributions made in prior years because of this rule

• $5,000, times the number of years of service, minus the employee’s total contributions from previous years

• $3,000

The wrinkle here is that if you’re over 50, and you have at least 15 years of service, you must do the 15-year catch-up contribution first, before you can take advantage of the 50-plus catch-up contribution of up to $7,500.

Roth IRA Overview

Roth IRAs are different from tax-deferred accounts like 403(b)s, 401(k)s, and other types of retirement accounts. With all types of Roth accounts — including a Roth 401(k) and a Roth 403(b) — you contribute after-tax money. And when you withdraw the money in retirement, it’s tax free.

Eligibility

Unlike employer-sponsored retirement plans, Roth IRAs fall under the IRS category of “Individual Retirement Arrangements,” and thus are set up and managed by the individual. Thus, anyone with earned income can open a Roth IRA through a bank, brokerage, or other financial institution that offers them.

Contribution Limits and Rules

Your ability to contribute to a Roth, however, is limited by your income level.

• For 2024, if you’re married filing jointly, you can contribute the maximum to a Roth if your modified adjusted gross income (MAGI) is less than $230,000. If your income is between $230,000 and $240,000 you can contribute a reduced amount.

• For single filers in 2024, your income must be less than $146,000 to contribute the maximum to a Roth, with reduced contributions up to $161,000.

• For 2023, if you’re married filing jointly, you can contribute the maximum to a Roth if your modified adjusted gross income (MAGI) is less than $218,000. If your income is between $218,000 and $228,000 you can contribute a reduced amount.

• For single filers in 2023, your income must be less than $138,000 to contribute the maximum to a Roth, with reduced contributions up to $153,000.

Is your retirement piggy bank feeling light?

Start saving today with a Roth or Traditional IRA.

Roth 403(b) vs Roth IRA: Are They the Same?

No. A Roth 403(b) does adhere to the familiar Roth structure — the individual makes after-tax contributions, and withdraws their money tax free in retirement — but otherwise these accounts are similar to regular 403(b)s.

• The annual contribution limits are the same: $23,000 with a catch-up contribution of $7,500 for those 50 and older for 2024; $22,500 with a catch-up contribution of $7,500 for those 50 and older for 2023.

• There are no income limits for Roth 403(b) accounts.

Also, a Roth 403(b) is like a Roth 401(k) in that both these accounts are subject to required minimum distribution rules (RMDs), whereas a regular Roth IRA does not have RMDs.

One possible workaround: You may be able to rollover a Roth 403(b)/401(k) to a Roth IRA — similar to the process of rolling over a regular 401(k) to a traditional IRA when you leave your job or retire.

That way, your nest egg wouldn’t be subject to 401(k) RMD rules.

Finally, another similarity between Roth 403(b) and 401(k) accounts: Even though the money you deposit is after tax, any employer matching contributions are not; they’re typically made on a pre-tax basis. So, you must pay taxes on those matching contributions and earnings when taking retirement withdrawals. (It sounds like a headache, but your employer deposits those contributions in a separate account, so it’s relatively straightforward to know which withdrawals are tax free and which require you to pay taxes.)
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

Which Is Better, a 403(b) or Roth IRA?

It’s not a matter of which is “better” — as discussed above, the accounts are quite different. Deciding which one to use, or whether to combine both as part of your plan, boils down to your tax and withdrawal strategies for your retirement.

To make an informed decision about which retirement plan is right for you, it can be helpful to conduct a side-by-side comparison of both plans. This chart breaks down some of the main differences, giving you a better understanding of these types of retirement plans, so that you can weigh the pros and cons of a Roth IRA vs. 403(b).

	403(b)	Roth IRA
Who can participate?	Employees of the following types of organizations: • Public school systems, if involved in day-to-day operations • Public schools operated by Indian tribal governments • Cooperative hospitals and • Civilian employees of the Uniformed Services University of the Health Sciences • Certain ministers and chaplains • Tax-exempt charities established under IRC Section 501(c)(3)	Individuals earning less than the following amounts: • Single filers earning less than $146,000 for 2024 (those earning $146,000 or more but less than $161,000 may contribute a reduced amount) • Married joint filers earning less than $230,000 for 2024 (those earning $230,000 or more but less than $240,000 may contribute a reduced amount) • Single filers earning less than $138,000 for 2023 (those earning $138,000 or more but less than $153,000 may contribute a reduced amount) • Married joint filers earning less than $218,000 for 2023 (those earning $218,000 or more but less than $228,000 may contribute a reduced amount)
Are contributions tax deductible?	Yes	No
Are qualified distributions taxed?	Yes	No (if not qualified, distribution may be taxable in part)
Annual individual contribution limit	$23,000 for 2024 (plus catch-up contributions of $7,500 for those 50 and older) $22,500 for 2023 (plus catch-up contributions up to $7,500 for those age 50 and older)	$7,000 for 2024 (individuals 50 and older may contribute $8,000) $6,500 for 2023 (individuals 50 and older may contribute $7,500)
Are early withdrawals allowed?	Depends on individual plan terms and may be subject to a 10% penalty	Yes, though account earnings may be subject to a 10% penalty if funds are withdrawn before account owner is 59 ½
Plan administered by	Employer	The individual’s chosen financial institution
Investment options	Employee chooses based on investments available through the plan	Up to the individual, though certain types of investments (collectibles, life insurance) are prohibited
Fees	Varies depending on plan terms and investments	Varies depending on financial institution and investments
Portability	As with other employee-sponsored plans, individual must roll their account into another fund or cash out when switching employers	Yes
Subject to RMD rules	Yes	No

Pros and Cons of a 403(b) and a Roth IRA

There are positives to both a 403(b) and a Roth IRA — and because it’s possible for qualified individuals to open a Roth IRA and a 403(b), some people may decide that their best strategy is to use both. Here’s a side-by-side comparison of a 403(b) vs. a Roth IRA:

	403(b)	Roth IRA
Pros	• Contributions are automatically deducted from your paycheck • Earning less during retirement may mean an individual pays less in taxes • Employer may offer matching contributions • Higher annual contribution limit than a Roth IRA	• More investment options to choose from • Withdrawal of contributions are not taxed; withdrawal of earnings are not taxed under certain conditions and/or after age 59 ½ • Account belongs to the owner
Cons	• May have limited investment options • May charge high fees • There may be a 10% penalty on funds withdrawn before age 59 ½	• Has an income limit • Maximum contribution amount is low • Contributions aren’t tax deductible

403(b)

Roth IRA

Pros

• Contributions are automatically deducted from your paycheck

• Earning less during retirement may mean an individual pays less in taxes

• Employer may offer matching contributions

• Higher annual contribution limit than a Roth IRA

• More investment options to choose from

• Withdrawal of contributions are not taxed; withdrawal of earnings are not taxed under certain conditions and/or after age 59 ½

• Account belongs to the owner

Cons

• May have limited investment options

• May charge high fees

• There may be a 10% penalty on funds withdrawn before age 59 ½

• Has an income limit

• Maximum contribution amount is low

• Contributions aren’t tax deductible

Pros of 403(b)

• Contributions are automatically deducted by an employer from the individual’s paycheck, which can make it easier to save.

• If an individual earns less money annually in retirement than during their working years, deferring taxes may mean they ultimately pay less in taxes.

• Some employers offer matching contributions, meaning for every dollar an employee contributes, the employer may match some or all of it, up to a certain percentage.

• Higher annual contribution limit than a Roth IRA.

Pros of Roth IRAs

• Individuals can invest with any financial institution and thus will likely have many more investment options when opening up their Roth IRA.

• Withdrawal of contributions are not taxed; withdrawal of earnings are not taxed under certain conditions and/or after age 59 ½.

• Account belongs to the owner and is not affected if the individual changes jobs.

There are also some disadvantages to both types of accounts, however.
💡 Quick Tip: How much does it cost to set up an IRA? Often there are no fees to open an IRA, but you typically pay investment costs for the securities in your portfolio.

Cons of 403(b)s

• There are limited investment options with 403(b)s.

• Some 403(b) plans charge high fees.

• Individuals typically pay a 10% penalty on funds withdrawn before age 59 ½. However, there may be some exceptions under the rule of 55 for retirement.

Cons of Roth IRAs

• There’s an income limit to a Roth IRA, as discussed above.

• The maximum contribution amount is fairly low.

• Contributions are not tax deductible.

Choosing Between a Roth IRA and 403(b)

When considering whether to fund a 403(b) account or a Roth IRA, there’s no right choice, per se — the correct answer boils down to which approach works for you. You might prefer the automatic payroll deductions, the ability to save more, and, if it applies, the employer match of a 403(b).

Or you might gravitate toward the more independent setup of your own Roth IRA, where you have a wider array of investment options and greater flexibility around withdrawals (Roth contributions can be withdrawn at any time, although earnings can’t).

Or it might come down to your tax strategy: It may be more important for you to save in a 403(b), and reduce your taxable income in the present. Conversely, you may want to contribute to a Roth IRA, despite the lower contribution limit, because withdrawals are tax free in retirement.

Really, though, it’s possible to have the best of both worlds by investing in both types of accounts, as long as you don’t exceed the annual contribution limits.

Investing With SoFi

Because 403(b)s and Roth IRAs are complementary in some ways (one being tax-deferred, the other not), it’s possible to fund both a 403(b) and a Roth IRA.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here.)

Easily manage your retirement savings with a SoFi IRA.

FAQ

Which is better: a 403(b) or a Roth IRA?

Neither plan is necessarily better. A 403(b) and a Roth IRA are very different types of accounts. A 403(b) has automatic payroll deductions, the possibility of an employer match, and your contributions are tax deductible. A Roth IRA gives you more control, a greater choice of investment options, and the ability to withdraw contributions (but not earnings) now, plus tax free withdrawals in retirement. It can actually be beneficial to have both types of accounts, as long as you don’t exceed the annual contribution limits.

Should you open a Roth IRA if you have a 403(b)?

You can open a Roth IRA if you have a 403(b). In fact it may make sense to have both, since each plan has different advantages. You may get an employer match with a 403(b), for instance, and your contributions are tax deductible. A Roth IRA gives you more investment options to choose from and tax-free withdrawals in retirement. In the end, it really depends on your personal financial situation and preference. Be sure to weigh all the pros and cons of each plan.

When should you convert your 403(b) to a Roth IRA?

If you are leaving your job or you’re at least 59 ½ years old, you may want to convert your 403(b) to a Roth IRA to avoid taking the required minimum distributions (RMDs) that come with pre-tax plans starting at age 73. However, because you are moving pre-tax dollars to a post-tax account, you’ll be required to pay taxes on the money. Speak to a financial advisor to determine whether converting to a Roth IRA makes sense for you and ways you may be able to minimize your tax bill.

SoFi Invest®
SoFi Invest refers to the two investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.

2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA(www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of SoFi Digital Assets, LLC, please visit SoFi.com/legal.

Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Bank, N.A.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOIN0224006

Source: sofi.com

Apache is functioning normally

February 8, 2024 by Brett Tams

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you’re planning to buy a house in the near future, you may be paying extra attention to your credit. While good credit can help you qualify for the best terms and interest rates, bad credit can stand in the way of your dream home.

If your credit could use a little TLC, continue reading to learn more about credit repair for first-time home buyers and discover helpful tips to improve your credit.

Table of contents:

1. Pay your bills on time
2. Look for errors on your credit report
3. Dispute any inaccuracies
4. Lower your credit utilization
5. Consider consolidating your debt
6. Leave old credit accounts open
7. Avoid opening new credit accounts
8. Get help from a credit repair company

1. Pay your bills on time

Since payment history is the number one factor that affects your credit score, the first step in repairing your credit is getting current with your bills. Late payments, especially those over 30 days past due, can cause your credit to take a significant hit. Not to mention late payments can stay on your credit report for seven years and continue to negatively impact your credit, although the effect lessens over time.

If you’ve missed payments in the past, it’s important to get back on track with making your payments on time. Consider creating a budget, making a list of all your bills, noting their due dates and setting reminders so you don’t forget to pay them. Set up automated payments wherever possible.

Pro tip: Build an emergency fund so you’re still able to pay your bills even if you get hit with an unexpected expense.

2. Look for errors on your credit report

Errors on your credit report could negatively impact your ability to secure a mortgage. In fact, a recent study by Consumer Reports found that 34 percent of participants had at least one error on their credit report.

According to the Consumer Financial Protection Bureau, common errors to look for include:

Identity errors: These include inaccuracies regarding your personal information. For instance, your name, address or phone number may be incorrect or misspelled. Make sure to look for accounts that don’t belong to you and could be the result of identity theft.
Reporting errors: These are errors regarding the state of your accounts. For example, accounts you previously closed that are inaccurately reported as open.
Data errors: These could be duplicate accounts or incorrect information that had previously been corrected.
Balance errors: These include wrong balances or credit limits.

While not all errors affect your credit score, incorrect payment dates or account statuses can have a significant adverse effect, so it’s important to review your credit report before buying a house.

Pro tip: You can get a copy of your credit report from each of the three credit bureaus for free at AnnualCreditReport.com.

3. Dispute any inaccuracies

If you identify any errors on your credit report, you will want to get the inaccurate information removed if you can. File a dispute with the credit bureau via their website, mail or phone.

Regardless of the method you choose, make sure to clearly state what items you’re challenging and why the information is wrong. Consider including a copy of your credit report and highlighting or circling the errors.

Once you file a dispute, the credit bureau has 90 days to complete an investigation into your claim. If the bureau confirms that the error is inaccurate, they will remove it from your credit report. You should see the correction reflected in your score within a few weeks.

Pro tip: Use the Federal Trade Commission’s sample letter as a guide when writing your letter.

4. Lower your credit utilization

Credit utilization is another factor that influences your credit. Your credit utilization ratio is the amount of credit you’re using in relation to the amount of credit available to you.

Keeping your credit utilization low shows mortgage lenders that you aren’t too reliant on credit. Meanwhile, a high credit utilization ratio could indicate that you may struggle to pay your mortgage.

Here are a few strategies to lower your credit utilization ratio:

Pay off large purchases immediately: If you make a large purchase on your credit card, consider paying it off the same day if possible.
Make multiple payments each month: Get in the habit of paying your balance multiple times each month so the credit bureaus are more likely to see a lower number when your credit card issuer reports your statement balance.
Request a credit limit increase: Contact your credit card issuer to see if you qualify for a credit limit increase. Keep in mind that this may result in a hard inquiry, which could temporarily lower your score.
Lower your spending: Consider switching to cash or a debit card to decrease the amount of money you charge to your credit card each month.

Pro tip: Generally, experts recommend keeping your credit utilization below 30 percent. For example, if you only have one credit card and the limit is $10,000, you should aim to spend less than $3,000 each month.

5. Consider consolidating your debt

If you struggle to keep track of your different credit accounts and their due dates, consider consolidating your debt into a single monthly payment. This strategy can help you pay off debt quicker and avoid late payments. However, in order for debt consolidation to make sense, you should aim to get a lower interest rate.

There are a few different ways to consolidate your debt, including:

Zero-percent APR balance transfer credit card: Transfer your credit card debt to a new card, specifically during the 0 percent APR introductory period. Aim to pay down your debt before the introductory period ends—typically between 12 and 21 months.
Debt consolidation loan: Get a debt consolidation loan from a bank, credit union or online lender. Compare options to find the lowest interest rate.
Home equity loan: A home equity loan involves using the equity in your home as collateral to borrow money. While home equity loans typically have lower interest rates, you could end up losing your home if you fail to make payments.
401(k) loan: If you have a retirement account, you can borrow money from your savings. Keep in mind that taking out a 401(k) loan can hurt your retirement savings since you cannot continue to invest until you pay back the loan.

Pro tip: Weigh the benefits and drawbacks to find the best debt consolidation option for your financial situation.

6. Leave old credit accounts open

You may consider closing old credit accounts that you don’t use anymore, but that can actually hurt your credit. FICO® takes into account your length of credit history when calculating your score.

A long credit history signals to mortgage lenders that you have experience using credit and provides a more thorough track record of your credit history.

You should leave old credit accounts open unless you have another reason for closing them, such as an annual fee.

Pro tip: If your oldest account charges an annual fee, consider calling the credit card issuer to see if you can get it waived.

7. Avoid opening new credit accounts

Opening too many credit accounts in a short time frame can be a red flag to lenders. They may come to the conclusion that you’re financially unstable and are relying on credit to get by. As a result, they may consider you more likely to fall behind on payments.

Additionally, too many hard inquiries can hurt your credit. While a single hard inquiry typically only lowers your score a small amount, multiple hard inquiries may cause a noticeable drop in your score.

Pro tip: Try to wait six months between credit card applications.

8. Get help from a credit repair company

If you need help repairing your credit in preparation for buying a house, consider looking into credit repair services. A credit repair company can closely examine your credit report and help you identify negative items that might be wrongfully hurting your credit. The company will then challenge the inaccuracies on your behalf so they might no longer impact you.

Pro tip: Research each company and read reviews to avoid running into credit repair scams.

Why is credit important when buying a home?

Credit is important when buying a home if you plan to take out a mortgage. A good credit score will boost your likelihood of qualifying for a mortgage with a lower interest rate and better terms. This can end up saving you thousands of dollars over the course of your mortgage.

What does your credit score need to be to buy a house for the first time?

The credit score needed to buy a house varies depending on the type of loan you want. For most conventional mortgages, borrowers need a credit score of 620 or higher to qualify. Meanwhile, an FHA loan requires a minimum credit score of 500. Generally, the higher your credit score, the more favorable interest rates and terms you’ll be approved for.

Need help repairing your credit before buying a home? Lexington Law Firm could help you identify and address inaccurate negative items that may be damaging your score. Sign up for a free credit assessment to establish your starting point and see what services may be right for you.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Brittany Sifontes

Attorney

Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.

Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.

Source: lexingtonlaw.com

Apache is functioning normally

February 8, 2024 by Brett Tams

What is a term life insurance rider?

A term insurance rider adds temporary coverage to a permanent life insurance policy for a set amount of time, usually 10, 20 or 30 years. Life insurance riders offer additional coverage to complement standard policies and the options vary among insurers.

Adding term insurance to a permanent policy

Term life riders can typically be added to permanent policies, such as whole life insurance or universal life insurance, often for an extra fee. The payout from a term life rider can be used to cover temporary or short-term costs in the event of your death. For example, you may want to add a term life rider that lasts as long as your mortgage or until your children finish college so these larger expenses are covered if you die unexpectedly.

Let’s say you take out a permanent life insurance policy worth $100,000, which may be sufficient to cover your beneficiaries if you die after retirement or with fewer financial obligations. Adding a 20-year term life insurance rider worth $100,000 could help fulfill financial needs and bridge gaps if you die within that time frame.

It’s often cheaper to add a term life insurance rider to a permanent policy instead of buying a term policy now and a permanent life insurance policy later.

🤓Nerdy Tip

Most life insurance riders can’t be added to an existing policy. If you’re in the market for life insurance, explore all the riders and opt in to the ones you want or need when you buy a policy.

Types of term and permanent insurance riders

There are two main types of life insurance: term life insurance, which offers coverage for a fixed number of years and pays out if you die during the “term,” and permanent life insurance, which typically covers you for your entire life.

While the names can be confusing, a term life rider generally refers to temporary coverage added to a permanent life insurance policy. Some companies allow you to add a term life rider to a term life insurance policy to bump up your coverage even more, though this is rare.

Some of the most common life insurance riders include:

Alternatives to a term life rider

Assessing your needs can help you determine whether you need a permanent life insurance policy with a term life rider, or a different type of life insurance altogether. For many people, a standalone term life insurance policy is enough to provide their beneficiaries’ with a financial cushion.

Since the premiums for a term policy are usually cheaper than a permanent policy, you could save and invest the difference to plan ahead for yourself or your loved ones after the term ends. If you want to leave the option for permanent coverage open, consider adding a term conversion rider to your term life policy. This allows you to upgrade your policy to a permanent life insurance policy before a deadline specified by your insurer.

Frequently asked questions

What is a term insurance rider?

A term life insurance rider adds coverage to a permanent life insurance policy for a set number of years. This rider can help cover time-boxed or short-term financial responsibilities like a mortgage or care for young children.

Is a term insurance rider worth it?

It depends on your financial needs and situation. A term insurance rider can give you the flexibility to add coverage based on your current and future financial obligations. If you’re interested in permanent life insurance, adding a term life insurance rider to your coverage will likely leave you with cheaper premiums than if you were to buy the full amount as permanent life insurance.

How do I add a term rider to my existing life insurance policy?

Most companies only allow a term life rider to be added to the base policy upfront. However, some insurers may let you add a rider later for an extra cost. Contact your insurance company or agent to ask about adding riders to an existing policy.

How much does a term insurance rider cost?

The cost of adding a term life rider to a permanent life insurance policy varies based on factors like your age, amount of coverage and lifestyle. Adding a term life rider will typically increase your monthly premium on a permanent policy, but is likely to be cheaper than having two separate policies.

Source: nerdwallet.com

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Episode transcript

What’s the Difference Between a 403(b) and a Roth IRA?

Comparing How a 403(b) and a Roth IRA Work

403(b) Overview

Eligibility

Early Withdrawals

Contribution Limits and Rules

Roth IRA Overview

Eligibility

Contribution Limits and Rules

Is your retirement piggy bank feeling light?

Start saving today with a Roth or Traditional IRA.

Roth 403(b) vs Roth IRA: Are They the Same?

Which Is Better, a 403(b) or Roth IRA?

Pros and Cons of a 403(b) and a Roth IRA

Pros of 403(b)

Pros of Roth IRAs

Cons of 403(b)s

Cons of Roth IRAs

Choosing Between a Roth IRA and 403(b)

Investing With SoFi

FAQ

Which is better: a 403(b) or a Roth IRA?

Should you open a Roth IRA if you have a 403(b)?

When should you convert your 403(b) to a Roth IRA?

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3. Dispute any inaccuracies

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6. Leave old credit accounts open

7. Avoid opening new credit accounts

8. Get help from a credit repair company

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Brittany Sifontes

What is a term life insurance rider?

Adding term insurance to a permanent policy

Types of term and permanent insurance riders

Alternatives to a term life rider