Effective tax rates in the United States

I messed up! Despite trying to make this article as fact-based as possible, I botched it. I’ve made corrections but if you read the comments, early responses may be confusing in light of my changes.

For the most part, the world of personal finance is calm and collected. There’s not a lot of bickering. Writers (and readers) agree on most concepts and most solutions. And when we do disagree, it’s generally because we’re coming from different places.

Take getting out of debt, for instance. This is one of those topics where people do disagree — but they disagree politely.

Hardcore numbers nerds insist that if you’re in debt, you ought to repay high-interest obligations first. The math says this is the smartest path. Other folks, including me, argue that other approaches are valid. You might pay off debts with emotional baggage first. And many people would benefit from repaying debt from smallest balance to highest balance — the Dave Ramsey approach — rather than focusing on interest rates.

That said, some money topics can be very, very contentious.

Any time I write about money and relationships (especially divorce), I know the debate will get lively. Should you rent a home or should you buy? That question gets people fired up too. What’s the definition of retirement? Should you give up your car and find another way to get around?

But out of all the topics I’ve ever covered at Get Rich Slowly, perhaps the most incendiary has been taxes. People have a lot of deeply-held beliefs about taxes, and they don’t appreciate when they read info that contradicts these beliefs. Chaos ensues.

Tax Facts

When I do write about taxes — which isn’t often — I try to stick to facts and steer clear of opinions. Examples:

  • The U.S. tax burden is relatively low when compared to other countries.
  • The U.S. tax burden is relatively low when compared to U.S. tax burdens in the past.
  • Overall, the U.S. has a progressive tax system. People who earn more pay more. That said, certain taxes are regressive (meaning that, as a percentage of income, low earners pay more).
  • A large number of Americans (roughly one-third) pay no federal income tax at all.
  • Despite fiery rhetoric, no one political party is better with taxing and spending than the other. The only period during the past fifty years in which the U.S. government had a budget surplus was 1998-2001 under President Bill Clinton and a Republican-controlled Congress.

Even when I state these facts, there are people who disagree with me. They don’t agree that these are facts. Or they don’t agree these facts are relevant.

Also, I sometimes read complaints that the wealthy are taxed too much. To make their argument, writers make statements like, “The top 50% of taxpayers pay 97% of all federal income taxes.” While this statement is true, I don’t feel like it’s a true measure of where tax burdens fall.

I believe there’s a better, more accurate way to analyze tax burdens.

Effective Tax Burden

To me, what matters more than nominal tax dollars paid is each individual’s effective tax burden.

Your effective tax burden is usually defined as your total tax paid as a percentage of your income. If you take every tax dollar you pay — federal income tax, state income tax, property tax, sales tax, and so on — then divide this total by how much you’ve earned, what is that percentage?

This morning, while curating links for Apex Money — my second personal-finance site, which is devoted to sharing top money stories from around the web — I found an interesting infographic from Visual Capitalist. (VC is a great site, by the way. Love it.) They’ve created a graphic that visualizes effective tax rates by state.

Here’s a summary graph (not the main visualization):

State effective tax rates

As you can see, on average the top 1% of income earners in the U.S. have a state effective tax rate of 7.4%. The middle 60% of U.S. workers have a state effective tax rate of around 10%. And the bottom 20% of income earners (which Visual Capitalist incorrectly labels “poorest Americans” — wealth and income are not the same thing) have a state effective tax rate of 11.4%.

Tangent: This conflation of wealth with income continues to grate on my nerves. I’ll grant that there’s probably a correlation between the two, but they are not the same thing. For the past few years, I’ve had a low income. I’m in the bottom 20% of income earners. But I am not poor. I have a net worth of $1.5 million. And I know plenty of people — hey, brother! — with high incomes and low net worths.

It’s important to note — and this caused me confusion, which meant I had to revise this article — that the Visual Capital numbers are for state and local taxes only. They don’t include federal income taxes. (Coincidentally, I made a similar mistake a decade ago when writing about marginal tax rates. I had to make corrections to that article too. Sigh.)

GRS readers quickly helped me remedy my mistake, pointing to the nonprofit Tax Foundation’s summary of federal income tax data. With a bit of detective work, I uncovered this graph of federal effective tax rates by income from the Peter G. Peterson Foundation. (Come on. What parent names their kid Peter Peterson? That’s mean.)

Federal effective tax rates

Let’s put this all together! According to the Institute on Taxation on Economic Policy, this graph represents total effective tax rates for folks of various income levels. Note that this graph is explicitly comparing projected numbers in 2018 for a) the existing tax laws (in blue) and b) the previous tax laws (in grey).

TOTAL effective tax rates in the U.S

Total Tax Burden vs. Total Income

Here’s one final graph, also from the Institute on Taxation and Economic Policy. This is the graph that I personally find the most interesting. It compares the share of total taxes paid by each income group to their share of the country’s total income.

Tax burden vs. total income

Collectively, the bottom 20% of income earners in the United States earned 3.5% of total income. They paid 1.9% of the total tax bill. The top 1% of income earners in the U.S. earned one-fifth of the nation’s total personal income. They paid 22.9% of total taxes.

Is the U.S. tax system fair? Should people with high incomes pay more? Do they pay more than their fair share? Should low-income workers pay more? Are we talking about numbers that are so close together that it doesn’t matter? I don’t know and, truthfully, I don’t care. I’m concerned with personal finance not politics. But I do care about facts. And civility.

The problem with discussions about taxation is that people talk about different things. When some folks argue, they’re talking about marginal tax rates. Others are talking about effective tax rates. Still others are talking about actual, nominal numbers. When some people talk about wealth, they mean income. Others — correctly — mean net worth. It’s all very confusing, even to smart people who mean well.

Final Note

Under the Digital Accountability and Transparency Act of 2014, the U.S. Department of the Treasury was required to establish a website — USASpending.gov — to provide the American public with info on how the federal government spends its money. While the usability of the site could use some work, it does provide a lot of information, and I’m sure it’ll become one of my go-to tools when writing about taxes. (I intend to update a couple of my older articles this year.)

U.S. federal budget

The USA Spending site has a Data Lab that’s currently in public beta-testing. This subsite provides even more ways to explore how the government spends your money. (I also found another simple budget-visualization tool from Brad Flyon at Learn Forever Learn.)

Okay, that’s all I have for today. Let the bickering begin!

Source: getrichslowly.org

Where’s the House from ‘Home Alone 3’?

Year in and year out, we know the holidays are almost upon us when TV networks start airing Home Alone, the iconic family movie that has by now become synonymous with Christmas cheer. And while the first two Home Alone movies starring Macaulay Culkin are the clear fan favorites, the third one (written and produced by the same John Hughes that gave us the first two festive flicks) was deemed the least successful in the series — by far — and failed to make a lasting impression.

And that’s not because of the plot, cast, or setting, but rather the result of the ultra-high expectations created by the first two Home Alone movies, and the fondness audiences had for Macaulay Culkin (which refused to return for a role in the third one, despite popular demand). In fact, the plot of the third Home Alone was quite an elaborate — and downright frightening — one, seeing Alex Pruitt, an 8-year-old boy living in Chicago, fending off international spies who were seeking a top-secret computer chip that was hidden in his toy car.

The poster for Home Alone 3, featuring the house in the background.
The poster for Home Alone 3, featuring the house in the background. Image credit: IMDB

Unlike a normal cat burglar situation — the first two movies featured petty thieves just trying to score a hit during the holidays, eyeing million-dollar-homes left unattended while the owners were celebrating elsewhere — Home Alone 3 is actually a matter of national security. With four thieves (said to be working for a North Korean terrorist organization) looking to retrieve the toy car/computer chip gifted to Alex by his unknowing neighbor, Mrs. Hess, the movie’s plot tackles a far more dangerous situation that the first two, despite the light way in which it is presented.

But there are two major things that all the Home Alone movies have in common: a clever, brave 8-year-old that will stop at nothing to protect himself and a beautiful Chicago-area home that acts as the ‘battleground’ of sorts where the bad guys get what’s coming to them. And since we’ve already covered the house in the first Home Alone movies, we thought I’d be the perfect time to do some scouting and find the one in the third movie too, especially since it’s no less beautiful.

The real-life house from Home Alone 3

While the movie’s storyline places it in Chicago, the house used in the third Home Alone is located in Evanston — a city 12 miles north of Downtown Chicago. According to ItsFilmedThere.com, the exact address is 3026 Normandy Place, Evanston, and a quick Google Maps search confirms that, showing us the exact same Pruitt family house we see in the movie.

house in home alone 3 in real life
House in Home Alone 3 – Google Maps

According to real estate website Zillow.com, the Pruitt family home is worth a little over $1,000,000, with neighboring properties all selling for about the same amount — though admittedly, none of the other houses that line the street had a high profile movie credit in their property history. Nor did they have Hollywood A-listers on their grounds (just in case you forgot, the most famous cast member in Home Alone 3 was none other than Avengers star Scarlett Johansson, who played Alex Pruitt’s sister in the 1997 movie).

scarlett johansson as the sister in home alone 3
Screen grab from Home Alone 3, featuring a young Scarlett Johansson as the older sister.

Just in case you were wondering, the house where Alex Pruitt’s neighbor — Mrs. Hess — supposedly lived is actually located next door, at 3025 Normandy Place.

More famous TV homes

Richie Rich’s House is Actually the Biltmore Estate, America’s Largest Home
The ‘Fresh Prince of Bel-Air’ House Isn’t Even in Bel-Air
The Real-Life Homes from Modern Family — and Where to Find Them
The Simpsons House Gets a Modern Day Makeover

The post Where’s the House from ‘Home Alone 3’? appeared first on Fancy Pants Homes.

Source: fancypantshomes.com

Newly Renovated, 1915-Built Townhouse in Park Slope Asks $4.4 Million

A four-bedroom townhouse with park views and tons of charm has recently hit the market, and we’re dying to tell you all about it. The listing, brought to market by Compass’ Michael J. Franco, is right next to Prospect Park, Brooklyn’s second largest park, and has plenty of outdoor space (and a rooftop deck to boot).

The townhouse sits in one of Brooklyn’s trendiest, most desirable neighborhoods — Park Slope — with its leafy streets lined with brick and brownstone townhouses, many of which were built near the turn of the 20th century and have been lovingly updated over the decades by young families migrating from Manhattan. Much like its neighboring properties, the 2,600-square-foot townhome at 15 Prospect Park was originally built more than a century ago in 1915 and retains its old-world charm — but has been carefully updated to meet modern standards of living.

beautiful townhouse in prospect park, Brooklyn
Park Slope townhouse on the market for $4.4 million. Image credit: Compass//Michael J. Franco

With 4 bedrooms, 3.5 baths, a generously sized living room, and a finished basement, the Brooklyn townhouse also comes with a few rare features for a New York home: ample outdoor space and private parking (that includes a private garage and its own driveway).

The layout is split on three levels, with the first floor housing a large living room and open dining room — both with distinctive pre-war features like classic moldings and arches — and a renovated kitchen that opens up to a lovely terrace.

inside a beautiful pre-war townhouse in Park Slope, Brooklyn
Beautiful living space with distinctive pre-war features like arches and moldings. Image credit: Compass//Michael J. Franco
dining room of a pre-war townhouse in park slope, Brooklyn
Beautiful living space with distinctive pre-war features like arches and moldings. Image credit: Compass//Michael J. Franco
renovated kitchen in Brooklyn townhouse
The renovated kitchen. Image credit: Compass//Michael J. Franco
lovely terrace of a pre-war townhouse in Park Slope, Brooklyn
The Park Slope townhouse has a lovely terrace. Image credit: Compass//Michael J. Franco

The second floor is home to 3 bedrooms and a sizeable landing which is perfect for either a library or a home office, while the third floor is dedicated to the primary bedroom suite and its massive walk-in closet, renovated bath with skylights and soaring ceilings, with a separate sitting area/den. The third level also provides access to the townhouse’s own rooftop deck, which adds more outdoor space and looks like a perfect place to entertain guests.

bedroom of a charming brooklyn townhouse in park slope
Bedroom opens up to Prospect Park views. Image credit: Compass//Michael J. Franco
bathroom with skylight in brooklyn townhouse
 Renovated bath with skylights and soaring ceilings. Image credit: Compass//Michael J. Franco
roof deck of a brooklyn townhouse in park slope
Rooftop deck of the $4.4 million townhouse in Park Slope, Brooklyn. Image credit: Compass//Michael J. Franco

The property is listed for $4,400,000 with Compass associate real estate broker Michael J. Franco.

More beautiful New York City homes

This Brooklyn Condo Has a Dreamy Backyard that Will Make You Forget You’re in the City
Trophy Apartment Once Owned by Composer Leonard Bernstein Asks $29.5 Million
These 5 Unique Listings Will Remind You of Everything that Makes NYC Real Estate Special
This $16M NYC Penthouse Has Unobstructed Views of Central Park and the Manhattan Skyline

The post Newly Renovated, 1915-Built Townhouse in Park Slope Asks $4.4 Million appeared first on Fancy Pants Homes.

Source: fancypantshomes.com

Is Now a Good Time to Buy a House?

So you’re at the point in your life where buying a home is not a question of if, but when. You’re scrimping. You’re saving. You’re dreaming of walking through the front door of your very own home.

But as the decision draws near, you start questioning everything. Is now a good time to buy a house? Or is this the worst time? Is it more financially responsible to buy a house right now or wait? And what if you mistime the market, buying too soon or too late, and miss out on lower home prices?

Ultimately, the experts say the answer is less about economies, markets and pandemics and more about you.

So, how do you think through this decision? You’ll want to take time to thoroughly review your personal financial situation and life goals. At the same time, you’ll need to gain some understanding of the market dynamics that impact home costs.

External factors can make buying a house right now intimidating, but your personal finances are an important factor.

This process will take some time, but it’s well worth the effort. With a firm grasp on your personal situation and some context on the housing market, you’ll be able to confidently go forth knowing you’re making a fiscally informed decision about whether to buy a house right now.

Honestly assess these aspects of your finances

Financial security is always important if you’re trying to determine when you’re ready to buy a home. To decide if now is a good time to buy a house, ask yourself the following questions about your finances:

How secure is your income?

Job or income stability is an important factor if you are buying a home in a rocky economy, such as the one triggered by the coronavirus pandemic, says real estate economist Gay Cororaton. Even in a robust economy, your income security should be top of mind when you’re thinking of buying a house right now.

If you have any inkling that your position may be eliminated or that you’ll be making a career change, you may want to delay buying a home. Even a recent break in employment that caused you to draw down some of your savings may raise a red flag with lenders, says Kate Ziegler, a real estate agent with Arborview Realty in the Boston area.

If you’re considering buying a house right now, you should avoid opening any new lines of credit right before purchasing a home.

– Jeff Tucker, senior economist at Zillow

Do you have enough money saved?

After income stability, savings is the next-most-important financial factor you’ll want to consider to determine if now is a good time to buy a house, Ziegler says. The old rule of thumb was to save 20% of the price of the home for your down payment. While that is ideal, it’s not necessary—far from it, Ziegler says. In fact, it has become more common for first-time buyers to put down much less than 20%.

How much house can you afford?

The down payment is one side of the affordability coin. Your monthly mortgage payment is the other side. You need to know how much you can spend on both to determine if you can afford to buy a house right now, says Jeff Tucker, a senior economist at Zillow. Aim for a monthly mortgage payment that doesn’t stretch you too thin—experts typically put this at around 28% of your monthly gross income, according to Bankrate.

With those guidelines, you can determine what you can afford. For example, if you make $4,000 a month, you should typically spend no more than $1,120 on your monthly mortgage payment in total.

How much house that buys you depends on multiple factors: mortgage rates, property tax rates, homeowners insurance and—if you don’t have the savings to put down 20%—primary mortgage insurance, or PMI. To get a rough estimate, plug your income details into an online calculator. For a more specific figure, talk to a local lender and get pre-approved for a mortgage, Ziegler says.

If you're buying a house right now, aim for mortgage payments around 28% of your monthly gross income.

Once you know your price range, you can determine how much savings you need in the bank to buy a house right now. You’ll also need to have money saved for closing costs, which vary but typically run 2% to 5% of the loan amount, according to Bankrate.

Again, Ziegler recommends talking to a lender to really understand what your individual down payment and closing costs would be. Finally, be sure to add a line item in your budget for home maintenance that will inevitably pop up after you move in. Whether it’s a dishwasher on the fritz or a leaky roof, you don’t want to be caught off guard, so be sure to save money for emergency home repairs.

How is your credit?

Your credit profile is also important to lenders, and it will likely be a factor in what interest rate you’re offered. Given that, you should be checking your credit report and know your credit score before investing in a home. If you’re considering buying a house right now, you should avoid opening any new lines of credit right before purchasing a home, Tucker says.

What is your debt-to-income ratio?

Another factor lenders check is your debt-to-income ratio, or DTI, Tucker says. This is the percentage of your gross monthly income that goes to paying monthly debt payments, plus your new mortgage. Lenders typically require this ratio to be 45% or less but prefer it even lower—in the 33% to 36% range.

Have you considered the opportunity cost?

Another financial consideration when deciding if now is a good time to buy a house is the opportunity cost of delaying a home purchase, Ziegler says. If you’re renting in a market where the rent is higher than your would-be monthly mortgage payment, you may be spending a lot more money each month than if you were to purchase a home. And of course, with a mortgage, your monthly payment increases your equity.

After taking a clear-eyed look at your income, savings and these other financial factors, you will have a better sense of when you’re ready to buy a home and whether now’s the time for you to dip into the market.

Consider key market factors

Next, take a look at factors that are outside of your control, but still influence your purchase: prices, interest rates and national employment trends.

Where are housing prices?

As you’re looking at the market, one of the biggest considerations when you are ready to buy a home will be housing prices and availability. Research your local market by talking to real estate agents who work specifically in the area where you want to buy and asking them about market trends, Ziegler says.

Track current listings and recently sold prices to get a sense of how prices look today. Generally, the tighter the inventory—meaning the fewer houses available—the higher prices will be, Tucker says.

If you're trying to determine when you are ready to buy a home, track current listings to get a sense of how prices look today.

What’s going on with interest rates?

When you’re ready to buy a home could also depend on another major economic factor: interest rates. When interest rates are low, your housing budget is effectively supercharged, Tucker says, and you can afford a more expensive house because you’re spending less on interest. When they are high, the opposite is true.

This is what compels people to buy when interest rates are low—you get more for your money. If you get a 30- or 15-year fixed-rate mortgage, you lock in that rate for the entire life of the loan, which could save you money now and into the future, Tucker says.

How does employment look nationally?

Finally, if you want to get a general idea of where the housing market may be headed—if prices will drop or rise soon—check out the national employment trends, Cororaton says. Low unemployment means prices will generally trend upward because more people can afford houses, boosting competition and prices, she says.

But if unemployment is inching up, then people are losing jobs and will be more likely to remain in their current homes. As a result, there tends to be less competition for them, lowering prices.

You don’t need to be an expert in the market to determine if now is a good time to buy a house, but a baseline understanding of these big-picture forces can give you the confidence you need to embark on your home-buying journey.

So when are you ready to buy a home? Paying attention to big-picture economic forces can help you decide.

Think about your future plans

After reviewing your savings and income and assessing the market conditions, take a step back and think about your life plans over the next few years. Your lifestyle and goals will help determine whether now is a good time to buy a house.

“For buyers who are not certain whether they will still be living in the same place in three or five years, I would caution against locking themselves into a certain location,” Ziegler says. “If they’re just not sure what the future holds, it may be better to have that flexibility.”

It’s unlikely in many markets that you will see substantial financial gain from homeownership if you move within five years, Ziegler says. Your equity gains will likely be offset by the transaction costs of buying and selling your home.

That goes for remote workers, too. Are you working from a home office these days? While widespread remote work may allow buyers to consider homes farther from their offices, ask yourself: Is my company going to permanently allow employees to work from home? Do I think there will be other remote opportunities in the future?

Is now a good time to buy a house? That depends on your lifestyle and long-term goals.

While you’re thinking about the next three to five years of your career, also consider the next three to five years of your personal life. Will you have a family? Will that family grow?

These can be weighty topics, so be sure to think them through on your own schedule. Buying a house is a big decision, and it’s not one to be rushed. By taking the time to assess your life, from your job security to your financial health to your lifestyle, and considering the impact of market factors, you’ll have a clearer sense of when you are ready to buy a home.

If you’ve decided that buying a house right now is the best decision for you, it’s time to learn more about how it will impact your budget. Get started by reading up on these eight unexpected expenses when buying a home.

Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

The post Is Now a Good Time to Buy a House? appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com

7 Ways to Invest in Real Estate Without Buying Property

This page may include affiliate links. Please see the disclosure page for more information. How do many wealthy people get that way? They invest in real estate. It is a proven way to build wealth. 90% of millionaires became so through owning real estate. So said famous industrialist (and billionaire) Andrew Carnegie. Yet only 15% of Americans…

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7 Ways to Invest in Real Estate Without Buying Property was first posted on March 11, 2020 at 6:00 am.
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Source: debtdiscipline.com

What's the Best Type of Mortgage for You?

When you're ready to buy a home, choosing the best lender and type of mortgage can seem daunting because there are many choices. Since no two real estate transactions or home buyers are alike, it's essential to get familiar with different mortgage products and programs. 

Let's take a look at the two main types of mortgages and several popular home loan programs. Choosing the right one for your situation is the key to buying a home you can afford. 

What is a mortgage?

First, here's a quick mortgage explainer. A mortgage is a loan used to buy real estate, such as a new or existing primary residence or vacation home. It states that your property is collateral for the debt, and if you don't make timely payments, the lender can take back the property to recover their losses.

In general, a mortgage doesn't pay for 100% of a home's purchase price.

In general, a mortgage doesn't pay for 100% of a home's purchase price. You typically must make a down payment, which could range from 3% to 10% or more, depending on the type of loan you qualify for. 

For example, if you agree to pay $300,000 for a home and have $15,000 to put down, you need a mortgage for the difference, or $285,000 ($300,000 – $15,000). In addition to a down payment, lenders charge a variety of processing fees that you either pay upfront or roll into your loan, which increases your debt.

At your real estate closing, the lender wires funds to the closing agent or attorney. After you sign a stack of mortgage and closing documents, your down payment and mortgage money go to the seller and various parties, such as a real estate broker, title company, inspector, surveyor, and insurance company. You leave the closing as a proud new homeowner and begin making mortgage payments the next month.

What is a fixed-rate mortgage?

The structure of your loan and payments depends on whether your interest rate is fixed or adjustable. So, understanding how these two main types of mortgage products work is essential.

A fixed-rate mortgage has an interest rate that never changes, no matter what happens in the economy.

A fixed-rate mortgage has an interest rate that never changes, no matter what happens in the economy. The most common fixed-rate mortgage terms are 15- and 30-years. But you can also find 10-, 20-, 40-, and even 50-year fixed-rate mortgages.

Getting a shorter mortgage means you pay it off faster and at a lower interest rate than with a longer-term option. For example, as of December 2020, the going rate for a 15-year fixed mortgage is 2.4%, and a 30-year is 2.8% APR. 

The downside is that shorter loans come with higher monthly payments. Many people opt for longer mortgages to pay as little as possible each month and make their home more affordable.

Here are some situations when getting a fixed-rate mortgage makes sense:

  • You see low or rising interest rates. Locking in a low rate for the life of your mortgage protects you against inflation. 
  • You want financial stability. Having the same mortgage payment for decades allows you to easily budget and avoid financial surprises. 
  • You don't plan to move for a while. Keeping a fixed-rate mortgage over the long term gives you the potential to save the most in interest, especially if interest rates go up.

What is an adjustable-rate mortgage (ARM)?

The second primary type of home loan is an adjustable-rate mortgage or ARM. Your interest rate and monthly payment can go up or down according to predetermined terms based on a financial index, such as the T-bill rate or LIBOR

Most ARMs are a hybrid of a fixed and adjustable product. They begin with a fixed-rate period and convert to an adjustable rate later on. The first number in the name of an ARM product is how many years are fixed for the introductory rate, and the second number is how often the rate could change after that.

For instance, a 5/1 ARM gives you five years with a fixed rate and then can adjust, or reset, every year starting in the sixth year. A 3/1 ARM has a fixed rate for three years with a potential rate adjustment every year, beginning in the fourth year.

When shopping for an ARM, be sure you understand how often the rate could change and how high your payments could go.

ARMs are typically 30-year products, but they can be shorter. With a 5/6 ARM, you pay the same rate for the first five years. Then the rate could change every six months for the remaining 25 years.

ARMs come with built-in caps for how much the interest rate can climb from one adjustment period to the next and the potential increase over the loan's life. When shopping for an ARM, be sure you understand how often the rate could change and how high your payments could go. In other words, you should be comfortable with the worst-case ARM scenario before getting one.

In general, the introductory interest rate for a 30-year ARM is lower than a 30-year fixed mortgage. But that hasn't been the case recently because rates are at historic lows. The idea is that rates are so low they likely have nowhere to go but up, making an ARM less attractive. 

I mentioned that the going rate for a 30-year fixed mortgage is 2.8%. Compare that to a 30-year 5/6 ARM, which is also 2.8% APR. When ARM rates are the same or higher than fixed rates, they don't give borrowers any upsides for taking a risk that their payment could increase. 

ARM lenders aren't making them attractive because they know once your introductory rate ends, you could refinance to a lower-rate fixed mortgage and they'd lose your business after just a few years. They could end up losing money if you haven't paid enough in fees and interest to offset their cost of issuing the loan.

Unless you believe that rates can drop further (or until ARM rates are low enough to offer borrowers significant savings), they aren't a wise choice in the near term.

So, unless you believe that rates can drop further or until ARM rates are low enough to offer borrowers significant savings, they aren't a wise choice in the near term. However, always discuss your mortgage options with potential lenders, so you evaluate them in light of current economic conditions.

RELATED: How to Prepare Your Credit for a Mortgage Approval

5 types of home loan programs 

Now that you understand the fundamental differences between fixed- and adjustable-rate mortgages, here are five loan programs you may qualify for.

1. Conventional loans

Conventional loans are the most common type of mortgage. They're also known as a "conforming loan" when they conform to standards set by Fannie Mae and Freddie Mac. These federally-backed companies buy and guarantee mortgages issued through lenders in the secondary mortgage market. Lenders sell mortgages to Fannie and Freddie so they can continuously supply new borrowers with mortgage funds. 

Conventional loans are popular because most lenders—including mortgage companies, banks, and credit unions—offer them. Borrowers can pay as little as 3% down; however, paying 20% eliminates the requirement to pay an additional monthly private mortgage insurance (PMI) premium.

2. FHA loans

FHA or Federal Housing Administration loans come with lenient underwriting standards, making homeownership a reality for more Americans. Borrowers need a 3.5% down payment and can have lower credit scores and income than with a conventional loan. 

3. VA loans

VA or Veterans Administration loans give those with eligible military service a zero-down loan with no monthly private mortgage insurance required. 

4. USDA loans

The USDA or U.S. Department of Agriculture gives loans to buyers who plan to live in rural and suburban areas. Borrowers who meet certain income limits can get zero-down payments and low-rate mortgage insurance premiums.

5. Jumbo loans

Jumbo loans are higher mortgage amounts than what's allowed by Fannie Mae and Freddie Mac, so they're also known as non-conforming loans. In general, they exceed approximately $500,000 in most areas.

Always compare multiple loan products and get quotes from several lenders before committing to your next home loan.

This isn't a complete list of all the loan programs you may qualify for, so be sure to ask potential lenders for recommendations. Remember that just because you're eligible for a program, such as a VA loan, that doesn't necessarily mean it's the best option. Always compare multiple loan products and get quotes from several lenders before committing to your next home loan.

Source: quickanddirtytips.com

Financial Scams That Target the Elderly and How to Prevent Them

financial scam targets elderly

A 2015 study found that older adults lose more than $36 billion every year to financial scams. Unfortunately, con artists see the elderly population as an easy and vulnerable target.

The American Securities Administrators Association’s President, Mike Rothman, explains that scammers take this approach because the current elderly population is one of the wealthiest we’ve seen with such hefty retirement savings. Where the money goes, the con artists follow.

With so many scams targeting older adults, it’s essential to make yourself and your loved ones aware of the different types of cons. Here is a list of common financial scams that specifically target the elderly and how you can prevent them:

The Grandparent Scam

The grandparent scam is common because it appeals to older adults’ emotions. Scammers get the phone number of a senior and they call pretending to be a grandchild. Making their lie seem more believable, the con artist will playfully ask the older adult to guess what grandchild is calling. Of course, the first reaction will most likely be for the senior to name a grandchild and then the scammer can easily play along, acting like they guessed right. Now the grandparent thinks they are talking to their grandchild.

The scam artist will then begin to confide in the grandparent, saying they are in a tough financial position and they need the grandparent’s help. Asking them to send money to a Western Union or MoneyGram, they plead for the grandparent not to tell anyone. If the grandparent complies and sends the money, the scammer will likely contact the senior again and ask for more money.

Avoid this scam:

  • Never send money to anyone unless you have 100 percent proof that it is who you think it is. Scammers can find out quite a bit of information from social media and other methods, so don’t think that just because they know a couple pieces of information about you and your family that it is legit.
  • Verify that it is actually your grandchild on the phone by texting or calling the grandchild’s real phone number and verifying if it is him or her.
  • Call the parent of the supposed grandchild and find out if the grandchild really is in trouble.
  • Talk to your family members now and compile a list of questions only you and your family know the answers to. If a family emergency really does happen, you can ask the questions and know if it is your family member based on the answers.

“Claim Your Prize Now!” Sweepstakes Scam

The sweepstakes scam is when con artists contact the elderly either by phone or email and tell them they have won something, whether that be a sum of money or another type of prize. To claim the prize, scammers tell them they have to pay a fee. Once the senior agrees, scammers send a fake check in the mail. Before the check doesn’t clear and seniors can realize it is a scam, they have already paid the “fee.”

Avoid this scam:

  • Do not give out any financial information over the phone or email.
  • Practice Internet safety by protecting your passwords, shopping on encrypted websites, and avoiding phony emails.
  • Be skeptical of any message that says you have randomly won a prize and you must do something before you can claim it. Unless you specifically enter a contest, you most likely aren’t going to randomly win a monetary prize.

Medicare Scam

Because of the Affordable Care Act that allows seniors over the age of 65 to qualify for Medicare, scam artists don’t have to do much research about seniors’ healthcare providers. This makes it simple for scammers to call, email, or even visit seniors’ homes personally and claim to be a Medicare representative.

 

There are a variety of ways these con artists use this Medicare scam to target the elderly. One way is telling seniors they need a new Medicare card and to do so, they need to tell the “Medicare representative” what their Social Security number is. An additional way is they can tell seniors there is a fee they need to pay to continue their benefits.

Avoid this scam:

  • Do not give out any information to someone you have not verified is from Medicare. Real Medicare employees should have your information on file so if you are skeptical, ask the person some questions to verify it is legitimate.

The “Woodchuck” Scam

A common scam to target seniors who live alone is the “woodchuck” scam. Scam artists will claim to be contractors and will complete house projects if seniors agree to let them.

The scammers will gain seniors’ trust and eventually come up with a variety of fake repairs that need to be done, such as a roof repair. This often results in seniors giving the fake contractors thousands of dollars.

 Avoid this scam:

  • Make sure the person doing your home repairs is a professional. Find out what company they work for and call and verify they are indeed a legitimate contractor.

Mortgage Scam

Con artists are using senior homeownership to their benefit. The mortgage scam is when scammers offer a property assessment to seniors, telling them they can determine the value of their home. This scam has become increasing popular as housing confidence is hitting record highs and people are putting a large chunk of their income towards saving for new homes.

The scam artists make the process look legitimate by finding the home’s information on the Internet and sending seniors an official letter detailing all of the found information. The scammers do this because it is an easy way to con seniors into paying a fee for the requested information.

 Avoid this scam:

  • Ensure the property assessment is legitimate by asking what company they work for and following up with the real company to verify.

Talk to Your Loved Ones

Older adults are often too embarrassed to tell authorities or a family member they have been scammed. Talk to the seniors in your life and let them know they can confide in you and let you know if they have been scammed. You can also have them read through this article and make themselves aware of the scams that could potentially target them in the future.

Check Your Credit Regularly

Check your credit regularly so you are aware of any suspicious activity with your accounts. You can check your credit for free on Credit.com and receive a free credit score updated every 14 days along with a credit report card, which is a summary of what is on your credit reports.

Get It Now
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The post Financial Scams That Target the Elderly and How to Prevent Them appeared first on Credit.com.

Source: credit.com

15-Year vs. 30-Year Mortgages: Which is Better?

Once you decide to become a homeowner, it’s likely that you will need to take out a mortgage to purchase your new home. While the conclusion that you need a mortgage to finance your home is usually easy to arrive at, deciding which one is right for you can be overwhelming. One of the many decisions a prospective homebuyer must make is choosing between a 15-year versus 30-year mortgage.

From the names alone, it’s hard to tell which one is the better option. Under ideal circumstances, a 15-year mortgage mathematically makes sense as the better option. However, the path to homeownership is often far from ideal (and who are we kidding, under ideal circumstances we’d all have large sums of money to purchase a house in cash). So the better question for homebuyers to ask is which one is best for you?

To help you make the most informed financial decisions, we detail the differences between the 15-year and 30-year mortgage, the pros and cons of each, and options for which one is better based on your financial priorities.

The Difference Between 15-Year Vs. 30-Year Mortgages

The main difference between a 15-year and 30-year mortgage is the amount of time in which you promise to repay your loan, also known as the loan term.

The loan term of a mortgage has the ability to affect other aspects of your mortgage like interest rates and monthly payments. Loan terms come in a variety of lengths such as 10, 15, 20, and 30 years, but we’re discussing the two most common options here.

The Difference Between 15-Year Vs. 30-Year Mortgages

What Is a 15-Year Mortgage?

A 15-year mortgage is a mortgage that’s meant to be paid in 15 years. This shorter loan term means that amortization, otherwise known as the gradual repayment of your loan, happens more quickly than other loan terms.

What Is a 30-Year Mortgage?

On the other hand, a 30-year mortgage is repaid in 30 years. This longer loan term means that amortization happens more slowly.

Pros and Cons of a 15-Year Mortgage

The shorter loan term of a 15-year mortgage means more money saved over time, but sacrifices affordability with higher monthly payments.

Pros

  • Lower interest rates (often by a full percentage point!)
  • Less money paid in interest over time

Cons

  • Higher monthly payments
  • Less affordability and flexibility

Pros and Cons of a 30-Year Mortgage

As the mortgage term chosen by the majority of American homebuyers, the longer 30-year loan term has the advantage of affordable monthly payments, but comes at the cost of more money paid over time in interest.

Pros

  • Lower monthly payments
  • More affordable and flexible

Cons

  • Higher interest rates
  • More money paid in interest over time

15-Year Mortgage

30-Year Mortgage

Pros

• Lower interest rates
• Less money paid in interest over time
• Lower monthly payments
• More affordable and flexible

Cons

• Higher monthly payments
• Less affordability and flexibility
• Higher interest rates
• More money paid in interest over time

Which Is Better For You?

Now with what you know about the pros and cons of each loan term, use that knowledge to match your financial priorities with the mortgage that is best for you.

Best to Save Money Over Time: 15-Year Mortgage

The 15-year mortgage may be best for those who wish to spend less on interest, have a generous income, and also have a reliable amount in savings. With a 15-year mortgage, your income would need to be enough to cover higher monthly mortgage payments among other living expenses, and ample savings are important to serve as a buffer in case of emergency.

Best for Monthly Affordability: 30-Year Mortgage

A 30-year mortgage may be best if you’re seeking stable and affordable monthly payments or wish for more flexibility in saving and spending your money over time. The longer loan term may also be the better option if you plan on purchasing property you couldn’t normally afford to repay in just 15 years.

Best of Both: 30-Year Mortgage with Extra Payments

Want the best of both worlds? A good option to save on interest and have affordable monthly payments is to opt for a 30-year mortgage but make extra payments. You can still have the goal of paying off your mortgage in 15 or 20 years time on a 30-year mortgage, but this option can be more forgiving if life happens and you don’t meet that goal. Before going this route, make sure to ask your lender about any prepayment penalties that may make interest savings from early payments obsolete.

Best of Both- 30-Year Mortgage with Extra Payments

As a prospective homebuyer, it’s important that you set yourself up for financial success. Fine-tuning your personal budget and diligently saving and paying off debt help prepare you to take the next steps toward buying a new home. Doing your research and learning about mortgages also helps you make decisions in your best interest.

When picking a mortgage, always keep in mind what is financially realistic for you. If that means forgoing better savings on interest in the name of affordability, then remember that path still leads to homeownership. Try out these budget templates for your home or monthly expenses to help keep you on a good path to achieving your goals.

Sources: Consumer Financial Protection Bureau

The post 15-Year vs. 30-Year Mortgages: Which is Better? appeared first on MintLife Blog.

Source: mint.intuit.com

Shigeru Ban-Designed Home in Sagaponack, NY is the Prized Architect’s Only Project in the Area

Many million dollar homes come with name-bragging rights. Sometimes, it’s because a celebrity once lived in the house, or because a famous designer left its touch on the home’s interiors; or maybe the address itself is well-known, for one reason or another.

But there’s a whole other level of name dropping that comes with owning a home envisioned by one of our generation’s leading architects. And that’s exactly the case for this modern glass home in Sagaponack, NY, designed by world-renowned architect Shigeru Ban.

In fact, the property is the award-winning Japanese architect’s first and only work in Long Island, and has recently hit the market with a $4,995,000 price tag. Listed with Matt Breitenbach of Compass, the architectural masterpiece was already marked as Contract Signed on the brokerage’s website mere days after it came to market, which means it’s likely that an architect buff has already seized on the opportunity to own a home designed by the Pritzker-prize winner.

outside a Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass
Interiors of a Shigeru Ban-designed home in Long Island, NY. Photo credit: Compass
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass

Famous for blending traditional Japanese elements with modern Western architecture, Shigeru Ban was named to TIME magazine’s shortlist of 21st-century innovators, won the 2014 Pritzker prize (the biggest distinction in the architecture world), and left his imprint on structures like the Aspen Art Museum, Centre-Pompidou-Metz in France, and Tainan Art Museum in Taiwan.

Despite the many accolades, the Japanese architect is most known for being a champion for sustainable architecture and has been instrumental in designing disaster relief housing from Rwanda to Turkey.  His design philosophy is centered around creating uniquely free and open spaces with concrete rationality of structure and construction method, and the Sagaponack home is a perfect embodiment of this.

With a design based on Ludwig Mies van der Rohe’s unbuilt Brick Country House (which dates back to 1924), the 8,000-square-foot home boasts unique architectural features, including a row of pillars that line the path to the front door — and that can double as hidden storage.

Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass
Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass
Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass
Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass

The 5-bedroom, 5.5-bath home comes with exceptional furnishings by renowned designer Shamir Shah. It has floor-to-ceiling windows, an oversized living room (with a wood burning fireplace and wraparound views of the landscaped lawn), and a massive workout room that is more akin to a private high-end gym — complete with floor-to-ceiling mirrors and every piece of equipment you could think of, including a spin bike, elliptical, treadmill, press machines, and more.

The indoors seamlessly open to the outdoor areas, where there’s a heated in-ground pool and a pool-side terrace with multiple lounging areas — adding to the tranquil zen garden area (with a modern stone fountain) which greets visitors as they enter the property.

Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass
Shigeru Ban-designed home in Long Island, NY
Shigeru Ban-designed home in Sagaponack, NY. Photo credit: Compass

More beautiful homes

This Brooklyn Condo Has a Dreamy Backyard that Will Make You Forget You’re in the City
Power Couple Loren & JR Ridinger Selling Palatial Unit in Jean Nouvel-Designed Building
This Stunning Former East Village Synagogue is Seeking Renters
Former Home and Office of Marilyn Monroe’s Psychiatrist Listed for Sale in Manhattan

The post Shigeru Ban-Designed Home in Sagaponack, NY is the Prized Architect’s Only Project in the Area appeared first on Fancy Pants Homes.

Source: fancypantshomes.com

How to Buy a HUD Home at the Hudhomestore Website?

Using the Hudhomestore to buy a HUD home is easy.

If you’re looking to buy a HUD home, the Hudhomestore website is the best place to do it. It can be found here at hudhomestore.com. HUD homes are listed for sale at the site.

While anyone can buy a HUD home, you will need to get approved for a loan first.

Just like buying a house through the conventional route, all financing options are available for HUD homes. That includes conventional loans, FHA loans, VA loans, etc.

However, most people used an FHA loan to buy a HUD home due to its low down payment and credit score requirements.

If you have questions beyond buying a HUD home at the hudhomestore website, consult a financial advisor.

What is the Hudhomestore?

The hudhomestore is a website operated by the U.S Department of Housing and Urban Development (HUD). The website can be found here at hudhomestore.com.

Homes are listed there for sale after they have gone through foreclosures. Real estate agents and/or brokers can place bids on your behalf to buy a house.

What is a HUD home?

A HUD home (usually a 1 to 4 unit) is a property owned by HUD. Before a home became a HUD home, it was owned by a homebuyer who had purchased the home with an FHA loan.

Once the borrower stopped paying his or her FHA loan, the home went to foreclosures. Then the home goes to HUD and becomes a HUD home.

Why you should buy a HUD home at the Hudhomestore?

The benefits of buying a HUD home are huge. The main benefit is that most of these homes are priced below market value.

In addition, if you’re an EMS personnel, police officer, firefighter, or teachers, and live in revitalized areas and plan to live there for at least 36 months, HUD’s Good Neighbor Program offers HUD homes at a 50% discount.

This program is listed at the hudhomestore website.

In addition, HUD offers other perks such as low down payment and sales allowances you can use to pay for moving, repair and closing costs. The low down payment, that is on top of the FHA financing that you may be qualified for.

Another huge benefit of buying a HUD home is that HUD gives preferences to buyers who intend to live in the home for at least one year. So this puts you ahead of investors.

Are you qualified to finance a HUD Home?

All financing options, including conventional loans, VA, and FHA loans, are available when it comes to buying a HUD home.

But FHA loans are very popular among first time home buyers, due to its low requirements. But before you start searching for HUD homes through the Hudhomestore website, you should compare multiple loan offers so you can the best mortgage rates.

FHA loan requirements:

  • 580 Minimum score
  • 3.5% down payment

If your credit score is below 580, you can still be qualified but you’ll have to pay at least 10% down. Or, you can always take time to raise your credit score.

Don’t know what your credit score is, visit CreditSesame.

Our Review of Credit Sesame.

Steps to buy a HUD Home at the HUDhomestore website:

HUD homes can be hard to find if you don’t know where to look. In other words, they are not listed on conventional real estate websites such as Zillow or Redfin.

Instead, they are listed at the HUDhomestore webiste, which can be found at hudhomestore.com. They also have HUD Homestore Mobile Apps.

Knowing these steps is important to mastering one of the best strategies to buy a house at below market or wholesale prices.

Step 1: Shop and compare home loans

Before you start searching your house through the hudhomestore site, it’s a good idea to

The worst thing that can happen is to find a house that you like to then realize that you cannot secure a home loan.

To get the best mortgage rates, you need to compare multiple loan offers. Buying a home is major expense, and getting the best rates could save you a lot of money. I can spend a lot of time talking about why it is a bad idea to only speak with one mortgage lender.

But when it comes to having multiple loan offers, I highly suggest LendingTree.

LendingTree is an online platform that connects you to several mortgage lenders without visiting a dozen bank branches.

LendingTree will provide you up to 5 loan offers from multiple lenders for free, so you can compare and make sure you get the best deal.

So if you’re at this step right now, go and compare current mortgage rates for free at LendingTree, and come back to this article.

Our LendingTree Review.

Step 2: Finding a HUD Home at the HUDhomestore website.

To find a HUD home, simply go to the hudhomestore website. It can be found at hudhomestore.com.

There are three ways to find HUD homes on the hudhomestore website. The first way is through a map.

Once you on the website, you will see a map to the right with all of the states listed there. You simply look for your state and click on it to see all of the available HUD homes.

The hudhomestore site will show you a list of all of the HUD homes available for that particular state. It will include the photo of the HUD home, the address, the asking price, etc.

If you click on the photo of the house, you will be able to see more information of the property, including more photos, street views and information of the property.

Another way to find a house through the hudhomestore website is by clicking on the HUD Special program links.

The hudhomestore site specifically lists three HUD Special Programs: Good Neighbor Next Door; Nonprofits; $1 Homes-Government Sales. It specifically states on the hudhomestore website that if you click on any of these special programs, you will see available properties.

The third way to find a HUD home via the hudhomestore site is through the Search Properties. At the middle of the homepage, you will see a Search Properties where you can enter more detailed criteria.

Step 3: Buy your HUD home

Once you have found your desired HUD Home at the hudhomestore, it’s time to buy your HUD home.

But note that HUD homes are sold through an auction process. When you’re searching for the property through the hudhomestore site, it will tell you a deadline by which to submit your offer.

So if the deadline has not passed, submit your bid. Once it has passed, HUD reviews all offers. Just like any auction, the highest bid wins. If all of the offers are too low, HUD will extend the offer period and/or lower the asking price.

Note that you will not be able to place the bid yourself. Only real estate agents need to register to place bids on the hudhomestore website. You will need to find a real estate agent or you can specifically search for HUD registered agents at hudhomestore.com.

For more information on buying a home through the hudhomestore website, visit www.hudhomestore.com.

More on Buying a Home:

  • How to Buy a House: A Complete Guide
  • How Long Does It Take To Buy A House?
  • Buying a Home for the First Time? Avoid These Mistakes.
  • 10 First Time Home Buyer Mistakes to Avoid.

Work with the Right Financial Advisor

If you have additional questions beyond buying a HUD home at the Hudhomestore, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).

So, find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post How to Buy a HUD Home at the Hudhomestore Website? appeared first on GrowthRapidly.

Source: growthrapidly.com