potential

Apache is functioning normally

Figuring out how to manage your money isn’t something that comes intuitively to most people. Instead, it’s a skill people have to learn. I was lucky that I started learning early. Even if you’re a later starter, it’s never too late to take control of your finances.

Thankfully, there are plenty of resources to help you grow on your financial journey. One of those resources is a financial advisor. 

Financial advisors typically help people grow their wealth through investing and strategy. Unfortunately, financial advisors tend to only work with people that have already started building assets.

If you’re on a low income, a traditional financial advisor may be out of your reach. Instead, you may get solicited to work with financial advisors that are more like salespeople. They get paid commissions based on the services and investments they sell you. Often, these investments aren’t your best options and could result in you losing a large part of your future returns. Even so, they may be better than not investing at all.

So what can you do to start managing your finances in a better way? How can you find a financial advisor that will work with you even if you have a low income? Here are some ideas to get you started.

What’s Ahead:

Who can benefit from hiring a financial advisor?

Anyone can benefit from the services a professional financial advisor or planner can offer. Financial advisors usually help you build a financial plan. The plan helps guide you to where you want to be in the future. These professionals help create strategies to get you to that future financial position and educate you about methods you may have had no idea about.

For instance, financial advisors can help you understand the tax advantages of different ways of investing. They can also make you aware of tax planning opportunities to help you keep more of the money you work so hard to earn.

Another key benefit of using a financial advisor is getting direct advice about your situation. They can share the results of the potential impacts of making a specific financial decision. These professionals may advise you whether there are better options available, too.

Financial advisors often earn their fees when markets are facing a downturn. People understandably get concerned they may lose a significant amount of money during an economic downturn. 

I know first hand that it can be tempting to sell and lock in your losses. These professionals can talk you off the ledge and help you stick to your strategy which is set to work for the long-term.

If you’re looking for a financial advisor – find the best options for you through the Paladin Registry – a free resource. 

What if you don’t have a lot of money?

Even if you don’t have a lot of money, financial advisors can be beneficial. If they’re tax-savvy, they can suggest tax credits and other tax advantages you may qualify for as a low-income individual. These could include the saver’s tax credit, the earned income tax credit, and more.

Advisors can help you build a plan to start growing your income and your assets. This type of strategic planning can often benefit from a second set of eyes. Advisors can help from an accountability partner standpoint, too. They can check-in to make sure you’re sticking to the activities you need to complete in order to reach your goals. 

Why it is important for people on a low income to have a financial advisor

If you’re a self-starter and educate yourself about personal finance, you may not need a financial advisor right away. In fact, I’ve never had one. That said, people that don’t have the time or don’t care to learn may benefit enormously from the knowledge financial advisors have learned through education and through experience over their careers.

A fiduciary financial advisor, one that must keep your best interests in mind, can help you avoid making costly financial mistakes. Avoiding mistakes is half of the battle of growing wealth.

You don’t have to pay a financial advisor on a recurring basis. You can pay some advisors a flat fee or an hourly rate to develop a financial plan for you. Once you have the plan, you may be able to enact it on your own. You can then hire a financial advisor on an ongoing basis after you’ve started to grow your assets.

Can you get a financial advisor for free?

You might be able to find financial advice for free, but chances are you won’t find a free financial advisor. Financial advisors can be compensated in many ways that make them appear to be free or low cost, though. 

However, they may be taking commissions from the amounts you invest or a percentage of your assets each year. This means their services aren’t free, even if you aren’t paying them with cash or a credit card for each visit.

Advisors are in business to make money so you shouldn’t avoid them because of these fees alone. Even so, you need to carefully select a financial advisor that has your best interests in the front of their mind, not the amount of money they’ll make from commissions from selling you products.

Financial advisor services to consider

If you’ve set aside money to pay a financial advisor for advice, here are a couple of options you may want to consider.

The Paladin Registry

The Paladin Registry is a free service that matches you with a financial advisor. The service vets the financial advisors you meet in advance. They also rate the advisors and document essential information you should know about them, such as education, experience, and certifications.

You have to share your portfolio range, which is likely less than $50,000, as well as your name, email address, zip code, and phone number. After you do this, The Paladin Registry matches you with one to three potential financial advisors within 24 to 48 hours that fit your profile that would be willing to work with you. 

Once you get your financial advisor matches, you get to interview the advisors to see if they’ll be a good fit. You can also discuss how they’ll be compensated and how they can help you with your specific financial needs. You’re under no obligation to move forward with any of the advisors. If they aren’t a good fit or don’t fit your budget, you can move on to other options.

What are your options if you can’t afford a traditional financial advisor?

If you’re living paycheck to paycheck and can’t afford the fees financial advisors charge for one-time or ongoing advice, you aren’t alone. 

There are still plenty of places you can get inexpensive or free advice about personal finance or investing. You may have to spend a little bit more time applying concepts to your particular situation, but you can still find the knowledge you need.

Robo-advisors

Robo-advisors are a great way to learn how to start investing. They use technology to provide some of the investment picking services a financial advisor would offer at a fee lower than most traditional advisors. They usually offer educational resources on their websites for free, as well.

One key aspect that makes robo-advisors accessible to those with low incomes are the low minimums to get started investing. Some robo-advisors have no minimums while others have small minimums that are within reach, such as $100 or $500. Robo-advisors usually offer many educational resources, as well. Here are just a couple to choose from:

Acorns

Acorns provides investing services for fees as low as $3 per month. This service could be especially useful to those with low incomes because it helps you start investing without directly feeling the pain.

Acorns offers a tool called round-ups. This rounds up your purchases to the nearest dollar. Then, it invests the change. It won’t necessarily build your assets quickly. That said, it’s a great way to get started with the habit of investing. You can also make automatic purchases. These purchases can be scheduled on a daily, weekly, or monthly basis. 

Betterment

Betterment is another option for those without a lot of money to invest. You can get started with just a $10 minimum deposit, and Betterment charges 0.25% of assets under management each year, which is much lower than a traditional financial advisor’s 1% assets under management fee.

Betterment uses technology to match you with a portfolio that meets your needs and investment goals. They also offer strategies to help you minimize the amount of taxes you pay on your investments and portfolio rebalancing to keep your investments on track.

Also, Betterment is a fiduciary, which means they must keep your best interest in mind when making financial recommendations.

Personal finance books

Personal finance books provide a vast amount of knowledge for the extremely low cost of buying a book. If you borrow the book from the library, it can even be free.

Many financial advisors have written books about managing your money and building wealth. The advice won’t be tailored to your specific situation, but you can pick up plenty of great tips to help you get started.

You may have to read a few books to get a good idea of different strategies. That way, you can pick the one that’s best for you. Make sure to read reviews of the books, as well. Some get outdated and others may offer controversial advice. Reviews may point out areas where you should be cautious following the advice given in a book.

Local and online resources

Local and online resources provide even more knowledge, often for free. Check with the companies you already do business with to see if they offer free financial resources. Be skeptical of any offers, though. 

These companies are often trying to sell products that generate more profits. That said, companies like Vanguard or local credit unions may have educational materials you can learn quite a bit from.

You can read through the archives at Money Under 30 to learn about many personal finance topics, too. Other websites also provide a ton of useful information. These range from professional publications such as Kiplinger to other personal finance blogs. 

The key is knowing who to trust and verifying the information with reputable sources. After all, not everything on the internet is true.

Summary

Getting financial advice when you have a low income isn’t easy. Many financial advisors won’t work with you because you don’t have any assets they can manage. Then, some of the advisors that will work with you charge outrageous fees. 

Consider the options listed above to find financial resources that fit your budget and situation. Then, take action to start improving your finances and growing your wealth. Eventually, you may be able to hire a traditional financial advisor if you still feel it is in your best interest at that time.

Read more:

Source: moneyunder30.com

Apache is functioning normally

On 02 August 2005, my friend Frank and his partner awoke at 2:45 a.m. to the dog barking and a neighbor knocking on their door. The apartment complex was on fire. They grabbed their dog and whatever they could carry and ran from the building.

“We lost everything,” he says. Later they’d find out that it was arson. A former employee of the apartment complex stole rent checks and set the office on fire. Frank was moving into a new apartment in ten days, and the new complex agreed to let them move in early. “We moved in with a plastic bag of groceries, paid for with a $50 food voucher from the Red Cross,” he says. The other 70 displaced tenants stayed in Red Cross shelters.

To make matters worse, Frank didn’t have renters insurance. “We didn’t think we’d ever need it,” he says. “You don’t see why you should pay this extra bill until you’re in a situation where you need it.” They had to start over from scratch.

Why Renters Skip the Insurance

There are any number of reasons renters don’t think insurance is a necessary expense. I myself didn’t have a policy until Frank’s situation motivated me to get one. Common reasons renters forgo an insurance policy include the following:

  • “What are the odds anything will happen?” The odds are not in your favor. The Bureau of Justice Statistics reports that renters are 50 percent more likely to be burglarized than homeowners.
  • “My landlord has insurance.” That means that your landlord (or condo association) has their valuables — the building — protected. Your belongings are not covered.
  • “I can’t afford renters insurance.” Many people are willing to spend a couple hundred dollars on clothes, but won’t spend the cash to protect themselves from the risk of losing everything they own. It’s possible to find a policy for $10-12 per month, though your premium will depend on location, the deductible, the insurance company, and coverage needs.

There are ways to lower the cost of coverage, including raising your deductible (make sure you can afford it, though) and having protective devices such as smoke detectors, extinguishers, and security alarms. Some insurance companies offer discounts to senior citizens. Also look for a multi-line discount, which is a discount for buying more than one type of policy from the same company (e.g., renters insurance and auto insurance).

I suspect that the main reason most people don’t have a policy, though, is that they don’t understand how renters insurance works, or why they need it.

Renters Insurance 101

Renters need a HO-4 policy. Condominium owners need a HO-6 policy. Both will cover personal property loss from “named perils,” which is insurance-speak for what you’re insured against. Your policy will likely include the following named perils:

  • Fire and lightning
  • Windstorm and hail
  • Smoke
  • Vandalism and malicious mischief
  • Theft
  • Accidental discharge of water

Other named perils covered sound like scenes from Die Hard (explosion, riot, damage caused by air crafts and falling objects), but I suppose you never know when German radical activists might terrorize your Christmas party.

Renters insurance also includes liability protection, which covers medical expenses for a person injured on your property and legal defense, if necessary. Additionally, if your apartment or condo becomes uninhabitable due to a named peril, your coverage will pay for somewhere to live in the meantime.

What is not covered: If you live an an area prone to floods, earthquakes, or hurricanes, you may need to purchase a rider, or separate policy. Also, if you have valuables that would exceed your policy limit, such as expensive jewelry or antiques, you’ll need a rider to recover the full loss.

Buying a Policy

Shopping for renters insurance is similar to shopping for other types of policies. Here are the basic steps:

Take inventory. This seems to be the step that most of us dread, but it’s where we should start. (Confession: I haven’t done it yet. It’s been languishing on my to-do list for almost a year now, but I’m going to make it a top priority.) If you lost everything, it’d be awful to have to recall every item you owned and it’s value. Better to document it. Here’s the plan of action:

  1. Photograph or videotape each room.
  2. List the value and serial and model number of items.
  3. Attach receipts, if you have them.
  4. Save the list and the photos or video to a DVD, and make at least three copies. Keep one copy in a fireproof place, one at an off-site location (could be a parent’s house or a safe-deposit box), and send one to your insurer.

There also are software programs that walk you through the process. The Insurance Information Institute provides free inventory software that helps you complete a room-by-room inventory.

Prepare. Write down a set of questions you want to ask your potential insurance providers. Some suggestions include:

  • Do you have brochures or any information you can send me in the mail? (Keep the ones from insurers that appear to be a good fit and use them to compare each provider’s policies.)
  • What could cause my rates to increase?
  • What discounts do you offer?
  • Does the liability insurance cover legal defense and medical expenses?
  • Do you pay actual cash value (ACV) or replacement cost coverage? (ACV coverage pays what your property was worth at the time it was destroyed or stolen, minus the deductible. Replacement cost coverage pays what it will cost to replace the items, minus the deductible. It costs more in premiums, but pays more if you file a claim.)
  • Do you offer separate policies for roommates? (Alternatively, talk to your roommate about splitting the cost of a policy.)

Shop around. To find the right provider and policy, consider the following:

  • Contact the insurance company that provides your auto insurance policy. Ask about multi-line discounts.
  • Call your local bank. Some banks offer insurance policies.
  • Search “renters insurance” online. Most providers have Web sites that give you a free quote.
  • Ask friends and neighbors which company they use, and if they are happy with their experience.

Updating Your Policy

Renters insurance is like many other forms of insurance – not fun to think about. But it isn’t a Ron Popeil rotisserie — don’t set it and forget it. Stay in touch with your agent to make sure you’re getting the best deal and taking advantage of new options or discounts. Also, be sure to contact her if your living situation changes, as in the following situations:

  • You moved. Each residence requires a unique policy.
  • You got a roommate: human or furball. You’ll need to decide on a separate or shared policy for the former. Make sure the latter is listed in your liability coverage.
  • You bought an expensive bauble or a pricey new toy. You need to have it listed in your policy, or you might need a separate rider to cover it.

It’s easier than you might think to find an affordable renters policy with good coverage, and it’s time and money well-spent. As my friend Frank says, “It’s the cheapest bill you’ll have. For very little money, we could have replaced everything we lost.”

If you are a renter, do you have renters insurance? If not, is there a reason you don’t have it?

Photo by DVS.

Source: getrichslowly.org

Apache is functioning normally

My husband and I are in the process of building a home on 4.5 acres in the Texas hill country. At the moment, we’re still in the planning phase — not quite ready for blueprints.

Last month, our architect asked us to start thinking about the make and model of the kitchen appliances we want for our home. Visions of sleek, Thermador cooktops and double ovens danced in my head. Even when I saw the hefty price tag, I thought maybe we could find other ways to cut back so that we could afford the dream oven. After all, we’re both avid cooks. To us, eating well is one of the best ways to enjoy life. There’s no doubt we’d use it, so the purchase makes sense. Right?

Reality Check From a Minimalist

Then I happened upon an article by Mark Bittman, who writes The Minimalist column in The New York Times. In “So Your Kitchen is Tiny. So What?” he describes how he makes do with 42 square feet of kitchen space, precious little counter space, and a stove that sometimes doubles as storage for pots and pans. It is in this space that he develops most of the recipes for his cookbooks.

But when he posted a photo of his kitchen on his blog, readers were shocked. Bittman writes:

[Chefs and food writers] know that when it comes to kitchens, size and equipment don’t count nearly as much as devotion, passion, common sense and, of course, experience.

To pretend otherwise — to spend tens of thousands of dollars or more on a kitchen before learning how to cook, as is sadly common — is to fall into the same kind of silly consumerism that leads people to believe that an expensive gym membership will get them into shape or the right bed will improve their sex life. As runners run and writers write, cooks cook, under pretty much any circumstance.

With my feet firmly back on the ground, the fancy cooktop and double oven were erased from our kitchen plans. We don’t need top-of-the-line appliances to do what we love. Sure, I’ll have to cope with the quirky nuances of our oven, which loves to cook my cupcakes unevenly just to spite me, but I’ve learned its ways and I work around it. We know where the hot spots are on the stovetop, and we’ve learned how to position the racks just so for even browning. Surely if we’ve managed with a slightly cantankerous oven for this long, we’d be just fine with a new, moderately-priced range.

We do love to cook — and we like to think we’re pretty good at it — but we don’t need a 36″ Thermador to let the world know that, hey, in case you weren’t aware, we’re serious about food. That wasn’t my conscious thought as I was drooling over appliances at Lowe’s, but Bittman’s article made me question my motives (and probably saved me a couple thousand dollars). Anything that could be cooked on a fancier stove can be cooked on a standard one.

Curbing Wants, Focusing on Needs

Because we’re building a house, it dawned on me that this is just the beginning of a long list of decisions we’ll have to make — each one with a price tag. Our goal is to keep expenses down as much as possible so that we don’t feel owned by our mortgage payment. We want to pay off the house early. We want to travel. We want the flexibility that a lower house payment affords us. My fear is that we’ll be faced with so many decisions that we might lose sight of our goals.

To help us stay on track, I started thinking about questions to ask ourselves as we’re faced with more and more building decisions. I organized the set of questions into a flowchart, which we’ll use as a tool to help ignore emotions and evaluate need.

My “Should I Buy It?” Flowchart

Let’s look at how this would work using my cooktop example:

  • First, we’d ask ourselves whether we can afford it. Technically, yes, we could.
  • Is it something we need? Yes, our house will need a cooktop of some sort.
  • Is there a less expensive option? Yes, a standard range is much less expensive.
  • Is the alternative durable? Yes, there are durable ranges. (We researched Consumer Reports articles on ranges for their top picks.)

Our result? The flowchart suggests we should purchase the less expensive option.

This chart could be used for small, personal purchases, as well. For example, I’ve been coveting a blue YogiToes towel for my yoga practice. Can I afford it? Yes. Is it something I need or lack? No. I have one in red. Flowchart says don’t buy it.

I know we’ll want a few nicer features in our home, but it’s important that our spending decisions are made consciously. Little upgrades here and there could easily add up to a sizable mortgage in the end. If there’s one thing I’ve learned from being in credit card debt, it’s that the seemingly small things accumulate quickly. The only way to combat this is to be conscious of what we buy — and why we are buying it by constantly keeping a check on our credit report.

Photo by LifeSunDeath.

Source: getrichslowly.org

Apache is functioning normally

You’ve paid rent year after year and what do you have to show for it? Zilch. Zero. Nothing.

If you’re starting to dream about building equity, now is a great time to make the leap. Interest rates are still low, and real estate prices haven’t started to spike yet. Before you apply to a lender, though, there are a few things you should know.

Applying won’t damage your credit

“If you are shopping around for a mortgage and worried that the inquiries will ding your credit score, don’t worry,” said Roman Shteyn, co-founder of Credit-Land.com. “The credit bureaus know that people may go to different providers to check interest rates especially for a big purchase like a house. Loan inquiries within 30 to 45 days of each other for the same thing are lumped together and treated as a single request, and your credit score should not be impacted.”

Your past matters to lenders

They will look at previous mortgages on your credit report to determine your creditworthiness

“We all know a foreclosure has a negative impact on your credit score,” says Shteyn “but many people don’t realize a short sale can be damaging as well. It can knock your score down 85 to 160 points depending on your score at the time and how it was reported to the credit bureau.” Occasionally, a lender will agree to report a short sale as paid which will not negatively affect a credit score. But this is rare.

A short sale is not as bad as a foreclosure, which will make it more difficult to get a loan. It will remain on your credit score for seven years, and lenders will see this black mark whenever you apply for credit during this period.

Lenders handle couples with different credit scores in a special way

If you’re applying for a mortgage loan as a couple, the mortgage lender will check both of your credit reports and credit scores. The bank reviews your debt, the length of your credit history and current credit activity.

Paying bills late and too much debt can negatively impact a mortgage approval, plus influence the mortgage rate. However, some couples believe that they’ll receive a low interest rate as long as one person has excellent credit — but this isn’t always the case.

Typically mortgage lenders use the lowest credit score to determine the mortgage rate. Therefore, if you have a 790 credit score and your partner has a 670 credit score, you’re not likely to receive the most favorable rate due to your partner’s less-than-perfect credit history.

To ensure the best rate, both of you need to maintain good credit before applying for a loan. This includes paying bills on time, paying off debt and checking your credit reports for errors.

For a lender, there’s nothing like responsibility

Make other loan and debt payments on time, especially over the months leading up to the filing of your mortgage application. Every 30-, 60- or 90-day delinquency on a loan or credit card is going to reduce the credit score the lender considers as part of the loan file. That score, in turn, will determine how good a loan you get — if you get one at all.

You need to be strategic about your personal finances

Consider paying off more debt and putting down a smaller amount at closing. This move leaves borrowers with larger mortgages, but it will allow them to replace non tax-deductible, high-interest rate debt (like credit card debt) with lower-rate mortgage debt that features deductible interest.

If you have a financial setback and need to miss a payment on your other debts, miss the credit card payment first, followed by the payment on any installment loan you might have and finally, the payment for an existing mortgage. That’s because credit scoring systems look at the performance of similar loans first when deciding what type of score to assign.

Before you apply, think about the future

If your next few years are full of big life changes and multiple new financial obligations, apply for a mortgage first. Numerous credit inquiries, such as new applications for credit cards, can hurt a borrower’s credit score, especially if they’re filed in the months prior to the home loan review process.

The value of your potential home can make or break the deal

Sometimes it’s not your fault that your mortgage application is denied. If your home isn’t worth enough, lenders might not approve your request for a mortgage. Say you agree to pay $200,000 for a home and are asking for a mortgage loan of $190,000. If an appraiser determines that the home is worth only $160,000, a mortgage lender might not grant you a loan, even if you are willing to pay the higher amount.

The 3 big don’ts

We can talk about the things you should do when applying for a mortgage all day long, but realistically, avoiding the big mistakes should be your first concern. Here are five things you should remember.

  1. Don’t make any big purchases over the next couple of months. It makes less money available for the down payment and it might require you to get yet another loan.
  2. Don’t upgrade too fast. Lenders consider what’s known in the industry as “payment shock” when approving loans. Somebody who goes from a relatively small monthly housing payment to a huge one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money.
  3. Don’t just get pre-qualified for a mortgage, get pre-approved. Home buyers must allow their lenders to pull credit reports, check debt-to-income ratios and perform other underwriting steps. But that puts a borrower much closer to obtaining a loan and locking in a rate and term.

Source: totalmortgage.com

Apache is functioning normally

After a push higher on Monday, stocks, bond yields, and mortgage rates are easing back a little on Tuesday. Market participants are still largely in a wait and see mode ahead of Wednesday’s key Consumer Price Index Report.

With inflation data remaining in the spotlight, that reading has the potential to send current mortgage rates one way or another. Read on for more details.

[embedded content]

Market Outlook 2.12.18 from Total Mortgage on Vimeo.

Where are mortgage rates going?                      

Rates down a little today

It was a strong start to the week on Monday with all of the major stock indexes moving higher. With long-term Treasury yields being sold off, we saw yields rise to multi-year highs.

Click here to get today’s latest mortgage rates (Jul. 16, 2023).

Of particular importance to mortgage rates is the yield on the 10-year Treasury note, which moved as high as 2.89% on Monday. That’s a big rise from where it was at the start of the year at 2.46%.

Mortgage rates typically move in the same direction as the 10-year yield, and as we saw in the most recent Freddie Mac Primary Mortgage Market Survey, the average rate on a 30-year fixed rate mortgage has moved up thirty three basis points since the start of the year.

The general consensus among market analysts is that bond yields and mortgage rates still have room left to run. How high they will rise in 2018 is an ongoing debate, but we have seen several calls for the 30-year fixed rate to hit 5% by the time 2019 rolls around.

That’s not something that will happen overnight, but we are still dealing with the threat of rising rates this week. Tomorrow, we will get the Consumer Price Index reading for January–a key inflation reading that financial market participants will certainly have their eye on.

We haven’t seen much uptick for CPI in recent months, but that only increases the potential for a big market reaction if we see some unexpected growth.

After all, one of the leading theories for last week’s stock market decline was the jump in average hourly earning in the monthly job report for January, signaling to investors that inflation was picking up.

So what would happen if CPI comes in higher? Well, it’s easy to imagine a similar scenario as last Monday with stocks falling and bond yields and mortgage rates surging.

It’s definitely a wait and see game, with no clear outcome readily visible. The CPI report will be released at 8:30am tomorrow morning and the market reaction, if there is one, will happen swiftly after the release.

Federal Reserve on track to raise rates in March

Cleveland Fed President Loretta Mester spoke this morning to the Chamber of Commerce in Dayton, Ohio, stating that she is not overly concerned about the U.S. stock market’s recent stumble. She said, “I expect the economy will work through this episode of market turbulence and I have not changed my outlook.”

That means that she’s still planning on raising the federal funds rate by about three-quarters of a point in 2018. Mester did throw in the caveat that she would have to readjust her outlook on monetary policy if the data starts to come in differently.

Overall, it still seems like the Fed is poised to raise the federal funds rate for the first time in 2018 at their March meeting next month.

Rate/Float Recommendation            

Lock now to avoid risk of rising rates

Mortgage rates have been steadily rising throughout 2018. There is the definite risk that they will rise tomorrow when we get some key inflation data. If you want to avoid the risk of rising mortgage rates, your best bet is to lock in a rate now.

In the current rate environment, opting to float could mean that you’ll get a higher mortgage rate down the road. If that’s something you can stomach, then by all means do it, but just understand there is a clear risk involved.

Find out how to get the best rate possible with our in-depth video series. 

Today’s economic data:                               

NFIB Small Business Optimism Index 

The NFIB Small Business Optimism Index hit a 106.9 in January. That’s an increase from the prior month’s reading of 104.9.

Fedspeak  

  • Loretta Mester at 8:30am

Get the GreenLight and close in 21 days*      

Notable events this week:                

Monday: 

Tuesday:    

  • NFIB Small Business Optimism Index
  • Fedspeak

Wednesday:      

  • Consumer Price Index
  • Retail Sales
  • Atlanta Fed Business Inflation Expectations
  • Business Inventories
  • EIA Petroleum Status Report

Thursday:        

  • Jobless Claims
  • Philadelphia Fed Business Outlook Survey
  • PPI-FD
  • Empire State Mfg Survey
  • Industrial Production
  • Housing Market Index

Friday:       

  • Housing Starts
  • Import and Export Prices
  • Consumer Sentiment

*Terms and conditions apply.

Carter Wessman

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

Source: totalmortgage.com

Apache is functioning normally

Wells Fargo is taking bigger precautions on its office building loans, setting aside more funds to cover potential losses as the sector continues to deteriorate.

The office market “continues to be weak” in many cities, Chief Financial Officer Michael Santomassimo said Friday. But he also argued that general trends can be misleading, and said the bank has been doing a property-by-property analysis to see where its specific risks lie.

The warning from one of the country’s largest banks hints at signs of trouble that smaller banks may share as they start reporting earnings next week. Office loans make up about 3% of Wells Fargo’s total loans, but many smaller lenders have bigger concentrations.

Wells, which has $1.9 trillion of assets, continued to conduct a deep dive into its office loan book in the second quarter, which prompted it to set aside more reserves to absorb potential losses later on.

After stress testing its commercial real estate loans, the bank’s allowance for credit losses in the CRE sector jumped to $3.6 billion in the quarter — up 64% from a year earlier. Office vacancy rates have climbed as remote work has shown staying power.

Wells Fargo executives, who also boosted CRE loan reserves in the first quarter, didn’t rule out adding more reserves as conditions evolve. But they said their current analyses covered just about every risk they can see at the moment.

“We’ve gone through a number of stress scenarios and feel like at this point, we’re appropriately reserved,” Santomassimo said on the bank’s second-quarter earnings call.

JPMorgan Chase also bumped up its reserves during the quarter due to office loans, though its executives cautioned against reading too much into the buildup, given the bank’s limited exposure to the office sector. JPMorgan Chief Financial Officer Jeremy Barnum said the company wanted to get “ahead of the cycle,” but he noted that most of the bank’s CRE portfolio is tied to loans backed by multifamily buildings.

Wells Fargo and other large banks have manageable exposures to office buildings and other commercial real estate, said CFRA research analyst Kenneth Leon, pointing to the resilience those banks showed in this year’s stress tests. Leon credited Wells executives for displaying strong “credit risk control” and closely monitoring its CRE loan portfolio.

Wells Fargo’s CRE team is focused on “surveillance and de-risking,” Santomassimo said. The bank highlighted diversification in its portfolio, with an investor presentation showing that office loans make up 22% of its CRE book. 

Loans backed by apartments, a sector that Santomassimo said is performing “quite well,” account for 26% of Wells Fargo’s CRE book. Warehouse, hotel and retail loans make up smaller chunks.

Nearly a third of Wells Fargo’s office loans are in California, and the remainder are spread across several other states. San Francisco, where Wells is headquartered, has been a source of worry in the office market, given that tech companies have embraced remote work more than many other firms. One office building there has reportedly seen an 80% drop in its value.

Asked about office-related risks in California, Santomassimo said that worries are not “isolated to California” and “you see weakness in a lot of cities these days.” He also cautioned against focusing solely on geography.

“Even in California, we’ve got as many examples where clients are actually reinvesting in buildings, even if lease rates are low or even empty in some cases, as they are going into a workout,” Santomassimo said. 

Wells CEO Charlie Scharf said it’s “a very big mistake” to think that a building’s geographic location is the only factor that will determine whether losses occur.

“We have examples in cities that are struggling where the structure of our loan is quite good — the underlying property has very high lease rates for an extended period of time,” Scharf said. In markets that are doing well, specific properties may be at more risk due to a large amount of upcoming lease terminations, he added.

“That’s the level of detail that we’ve used to come up with what we think the appropriate level of reserving is,” Scharf said. “We’ve tried to be as diligent as we can.”

Source: nationalmortgagenews.com

Apache is functioning normally

The average 30-year fixed-rate mortgage sank 10 basis points to 2.78% for the week ending on July 22, continuing several weeks of declines, according to mortgage rates data released Thursday by Freddie Mac‘s PMMS.

According to Sam Khater, Freddie Mac’s chief economist, concerns about the COVID-19 Delta variant and the recovery from the pandemic are taking their toll on economic growth.

While the economy continues to mend, Treasury yields have decreased, and mortgage rates have followed suit, said Khater. “Unfortunately, many homebuyers are unable to take advantage of low rates due to low inventory and high prices.”

While prospective homebuyers face a tough market, Khater added that declining mortgage rates give homeowners the chance to refinance and reduce their monthly payments.

Mortgage rates have mostly remained below 3% this year, despite predictions that they would return to higher levels earlier. Economists and investors are closely monitoring any indication from the Federal Reserve that it may begin tapering of mortgage backed securities and bond purchases.

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But that is “still a ways off,” Federal Reserve Chair Jerome Powell said at a Congressional hearing last week. The U.S. central bank plans to continue its asset purchases until there is substantial progress on jobs.

That accommodative stance is bolstered by concerns about the Delta variant and the market outlook, an analysis from Goldman Sachs noted this week. The Federal Open Market Committee is scheduled to meet next week.

President Joe Biden also pushed back at concerns over rising inflation during a press conference this week. “No serious economist” is suggesting the economy is headed toward unchecked inflation, he said.

“If we were to ever experience unchecked inflation over the long term that would pose real challenges to our economy,” Biden said, adding that his administration would “remain vigilant about any response that is needed.”

Since March 2020, the Fed’s asset purchases have been split between $80 billion of U.S. Treasury bonds and $40 billion of mortgage backed securities each month, keeping the cost of long-term borrowing low, in turn depressing mortgage rates. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.01%.

Despite the low cost of borrowing, the housing market is showing signs of sluggishness. 

Ten-year Treasury yields declined sharply last week, in part due to investor concerns about the spread of COVID variants and their impact on global economic growth, according to a report from the Mortgage Bankers Association.

Mortgage applications for new home purchases decreased 3% from May to June, sliding 23.8% year over year, according to the latest report from the MBA.

New single-family home sales decreased 5% to 704,000 units from 741,000, the trade group found. New home sales also declined slightly, from 68,000 to 66,000 in May. Overall, sales of new homes are down 7% from last year.

Homebuilders have encountered price increases for some building materials and labor shortages have dampened new home sales and increased home price appreciation, according to Joel Kan, MBA associate vice president of economic and industry forecasting. Persistent low inventory is keeping competition for available units high, he added.

In June, the average loan price rose to a record $392,370, according to the MBA.

“In addition to price increases, we are also seeing fewer purchase transactions in the lower price tiers as more of these potential buyers are being priced out of the market, further exerting upward pressure on loan balances,” Kan said.

Source: housingwire.com

Apache is functioning normally

There are lots of different ways to get a mortgage these days – you can walk into a physical bank branch, call a mortgage broker, or even start a loan application on your smartphone.

While the mortgage broker model isn’t new by any means, a company called “Credible” is shaking things up on that front, promising real-time mortgage rates from multiple mortgage lenders without the “annoying calls or emails.”

They also let you compare rates and close your loan all in one place. Let’s learn why this company is different and if they make sense for your mortgage needs.

Credible Launched Back in 2012

  • Company founded by former investment banker in 2012
  • Initially focused on student loan refinancing
  • Has since delved into personal loans, credit cards, and mortgages
  • Lets you compare personalized loan offers from multiple lender partners anonymously
  • Acquired by Fox Corp. in late 2019

The company is relatively new, having been founded less than a decade ago in San Francisco.

But that didn’t stop it from being acquired by none other than Fox Corp., better known for TV shows like The Simpsons rather than finances.

Originally a student loan marketplace, the company has since expanded to personal loans, mortgages, and credit cards.

Our focus will be the mortgage piece of the pie, this being a mortgage blog and all.

In late 2018, Credible announced a “first-of-its-kind mortgage marketplace” that offers actual rates to consumers in just two or three minutes, all without affecting the applicant’s credit score.

But that’s not all – you also get a streamlined origination platform that allows you to complete much of the loan process without leaving Credible’s website, similar to Rocket Mortgage.

Their digital process utilizes “smart logic” to cut down on the number of questions asked to borrowers, as well as documentation requests, by making sure they are pertinent to your unique situation.

Additionally, the Credible platform automates the collection of things like pay stubs, bank statements, and tax documents, making the application process both faster and easier to complete.

Many of these items can be gathered electronically by simply granting access to your financial institution, without having to exit the Credible website.

However, they also have licensed loan officers available to those who would like additional support along the way. And they don’t work on commission, so they should have your best interests in mind.

How Credible Works to Get a Mortgage

First, you tell them a little about yourself and your property, just like most other mortgage companies.

This includes your property address, whether it’s a primary, second, or investment home, property type, estimated value, and mortgage balance.

Next, they ask if you have a second mortgage or if you’re looking to take cash out in addition to refinancing your existing loan balance.

One neat feature is they provide estimates of your property taxes and homeowners insurance for you, but you can adjust those numbers if needed.

They then ask for a source of income and average annual income, along with how much you have in assets.

If it’s a home purchase loan, they’ll ask you how far along you are in the process (just looking or found a home, etc.), and what your down payment will be.

You can generate a pre-approval letter instantly and see how much you can afford based on your inputs.

Lastly, you enter your name, date of birth, and phone number, agree to their terms and conditions, and get your loan options.

They note that they take privacy seriously, and that they’ll NEVER sell your information to external companies, nor will you receive phone calls from lenders.

A Soft Credit Check Provides Accurate Rates

Once you click “See My Rates,” a soft credit check (doesn’t affect your credit score) is conducted to look up your credit history and credit scores to ensure your pre-qualified rates are accurate.

If any of their partner lenders have home loan options that fit your profile, you’ll see a notification on your Credible Dashboard within minutes.

Credible will also reach out via email, phone, or text, but only once they have received responses from all potential lenders.

Note that these are just pre-qualified rates, and you’ll still need to qualify, like you would any other mortgage.

Once you select a loan option, you will be asked to provide additional information, and a hard credit pull will take place (these do affect your credit).

If your credit and application pass muster, the mortgage lender partner will provide you with an offer that you can review.

Then you’ll begin the loan process by signing disclosures, providing financial and personal documentation, and so on.

What Types of Home Loans Does Credible Mortgage Offer?

  • They offer home purchase and refinance loans
  • Including conventional conforming and jumbo loan amounts
  • FHA, VA, and USDA loans don’t seem to be available at the moment

Credible has two main mortgage options available – Home Loans, which is designated for purchase transactions, and Mortgage Refinancing, which as the name implies is for refinancing an existing home loan.

This means both prospective home buyers and current homeowners can take out a mortgage using Credible.

In terms of loan types available, I’ve been told that they only offer conventional loans, aka non-government. That means no FHA, VA, or USDA. It’s unclear if that will change soon, but I assume it will.

They also offer jumbo loans, those that exceed the conforming loan limit.

So if your loan scenario fits those criteria, there’s a good chance their lender partners will provide you with pre-qualified rates.

Which Mortgage Lenders Does Credible Work With? And How Do They Get Paid?

  • The first two lenders to join Credible were Quicken Loans and UWM
  • There are now several others including loanDepot and Stearns
  • Credible acts as a mortgage broker and only gets paid if the loan funds
  • They receive a percentage of the loan amount from the lender who closes your loan

While they don’t list all the mortgage lenders they work with, they do displays the logos of Caliber Home Loans, JMAC Lending, loanDepot, Quicken Loans, Stearns Lending, and UWM.

Originally, they started with just Quicken Loans and UWM, so it’s possible there are even more lender partners today.

As noted, you don’t need to work with those companies directly, or talk to anyone at those companies.

Instead, you can continue to complete your loan application on the Credible website, or ask for assistance from a Credible loan officer.

This is similar to how a mortgage broker works – they handle everything and you never actually deal with the wholesale lender providing the financing.

In terms of how Credible gets paid, it’s also like how a mortgage broker gets paid. If and only if the loan funds, they receive compensation from the corresponding lender.

That means they don’t charge you any fees directly, but rather take a cut, which is a flat percentage of your loan amount, such as say 1% or 2%.

For example, on a $500,000 loan they might make $5,000 to $10,000, depending on the terms they have with their lender partner.

Should I Use Credible to Find a Mortgage?

  • If you like the idea of a mortgage broker in terms of shopping around
  • But don’t actually want to deal with a human being
  • Credible could be a good option for your home loan needs
  • Just note that they may not offer all loan types at this time
  • However they do come highly rated by both Trustpilot and the BBB

If you live in one of the states where Credible offers mortgages, you might be wondering if they’re a good choice.

They refer to themselves as “Your trusted online mortgage broker,” which highlights the fact that they aren’t a direct-to-consumer lender. Nor are they a mortgage lender at all.

Rather, they connect you to trusted lender partners and earn a commission if your home loan funds.

As noted, they don’t charge any fees directly, nor do they hit your credit report with a hard inquiry. Despite this, you get to compare real, pre-qualified rates from a variety of lenders in minutes.

So if you aren’t the type to shop around, but still want the benefit of shopping around, you could give them a whirl.

And you can take advantage of their digital platform, which should make the loan process easier, smoother, and quicker.

However, you’re still at the mercy of one of the lenders they match you up with, so customer experiences will certainly vary based on your unique loan scenario and the lender you’re paired with.

Another potential negative is they don’t seem to offer all types of mortgages – those looking for an FHA, VA, or USDA loan may want to search elsewhere until they add those loans to their stable of offerings.

In terms of customer satisfaction, they have an excellent rating on Trustpilot and an A+ rating with the Better Business Bureau.

They could be a good alternative to LendingTree, which provides a similar shopping experience without the ability to complete the loan process on their own website.

Credible vs. LendingTree

Credible LendingTree
Type of business Online mortgage broker Mortgage lead provider
Compare mortgage rates from multiple lenders Yes Yes, but after providing contact info
Get pre-approved Yes No
Credit check Soft pull Soft pull
Do they sell your information? Keep your data private Share with lenders you are matched with
How they get paid When your loan funds After you fill out lead form
How to apply for a mortgage Digital process via their own website Depends on lender you match with

If you’ve checked out Credible, you might be wondering how it compares to LendingTree.

While the pair sound similar, they’re actually pretty different. Credible is an online mortgage broker that matches you up with wholesale mortgage lenders.

And LendingTree is merely a lead generation service that matches you with retail mortgage lenders.

The key difference is that Credible will be your loan guide throughout, and only gets paid once your loan funds.

LendingTree will simply share your information with multiple lenders, at which point you’ll need to pick one to work with. After that, LT is out of the picture.

Credible’s pitch is that you can shop anonymously, whereas LendingTree will provide your contact to multiple lenders upfront.

Additionally, Credible allows you to complete the entire loan process online with the latest digital tools, and even generate pre-approval letters instantly.

However, both services may match you with the same lender. For example, if you use either you could wind up getting your home loan from Rocket Mortgage.

Source: thetruthaboutmortgage.com

Apache is functioning normally

LONDON, June 29 (Reuters) – Major British lenders on Thursday announced another increase in mortgage rates offered via brokers, pushing many products above the 6% mark in painful news for many homeowners and potential buyers.

Lenders have re-priced home loan offerings repeatedly in recent weeks in a scramble to keep up with soaring funding costs, spurred by expectations of more interest rate hikes from the Bank of England as it battles stubbornly high inflation.

Barclays (BARC.L), NatWest (NWG.L) and Virgin Money (VMUK.L) informed brokers that rates on many mortgage offerings will rise again on Friday, according to emails seen by Reuters.

Nationwide Building Society, another major lender, raised rates on products offered via brokers earlier on Thursday.

“As mortgage rates continue to rise, the property market is being pushed further towards a cliff edge and there’s no real help in sight,” mortgage broker Lewis Shaw of Shaw Financial Services said.

Oxford Economics, a consultancy, said it now expected a peak-to-trough drop in house prices of around 13%.

“The high share of fixed-rate deals and a limited rise in unemployment mean we still expect the downturn to be more of a slow puncture, with prices falling steadily over a couple of years, rather than a sudden, sharp drop,” said Andrew Goodwin, Oxford Economics’ chief UK economist.

Two-year swap rates – a key determinant of mortgage borrowing costs – have soared by 0.83 percentage points over the course of June.

If sustained until the end of Friday, it would mark the biggest one-month increase since May 1989 – apart from during the market turmoil triggered by the economic agenda of former Prime Minister Liz Truss late last year.

Mortgage rates of 6% represent the same financial burden from repayments as they did in the late 1980s, even though mortgage rates were around 13% then, according to housing market analyst Neal Hudson, founder of consultancy BuiltPlace.

Mortgagors today borrow much greater sums against their income – a ratio that has risen from 2.0 in the late eighties to around 3.5 today – while changes to taxes and mortgage products have also altered the equation.

Bank of England data published on Thursday showed lenders approved more mortgages than expected in May but for the first time since records started in 1986, the value of mortgage lending contracted for a second month running.

Reporting by Andy Bruce
Editing by William Schomberg and Sachin Ravikumar

Our Standards: The Thomson Reuters Trust Principles.

Source: reuters.com