One answer is to get the credit profile into shape prior to applying for financing. This can be done easily by first getting a copy of your credit report to see what there is to deal with.

Not sure what your scores are? Click here to find out.

If you have your report or are well aware of negative information that will affect the scores you will need assistance getting these items removed. I can guide to to the right attorneys that will not only remove them from the report but will guarantee their service 100%:

Here are some of the programs designed to get you qualified:

• Mortgage Plus: Improve scores 25 – 30 points in 10 days!
• Credit Restoration: Overhaul report to remove all negative information! (includes bankruptcy, foreclosure, tax liens etc)
• Personal Plus: Transform an “B+” rated borrower to “A+”

If you need help restoring your credit profile call me at (949) 290-1795 and I will refer you to the right source.

Considering the shape of our banking system its time to take a good look at what we can do to get more out of our money.

Our monthly cash flow generally earns nothing. We earn no interest on our checking accounts and so little on savings it is hardly worth it. Yet most of our monthly cash flow runs through these accounts.

The banks get $12 for every dollar you deposit from the FDIC and flip that back to you in credit cards, car loans, and mortgages. So, your cash flow is funding the banks earnings.

In Australia and the UK they have used mortgage checking accounts for years as a means of combining the mortgage, checking and savings accounts into 1 account. This enables the homeowner to earn interest on their monthly cash flow by reducing the principal balance on the mortgage. Think about it. If your mortgage interest rate is 5% and it was tied to your checking you would be earning 5% while your cash flow sat in the account. Even though it will be used for bills throughout the month it generates a savings that is converted to principal payments…automatically.

This new mortgage checking account takes advantage of your cash flow to accelerate the payoff of your mortgage. More importantly, it enables you to use the account as a holding source for any funds earning less than the mortgage rate. This means that savings accounts earning only 2% can be re-routed to the mortgage thus lowering the balance and reducing the amount of interest you pay on the loan.

With your standard 30 year amortized loan you can not do this. Any payments applied to principal are permanent. This is why we use a separate checking and savings account. It holds our liquid capital. Yet this is not earning anything.

Mortgage checking accounts are actually a special equity line that includes all the features of your checking and savings accounts. Unlike a standard equity line offered by all banks, these accounts include unlimited check writing with no per check fees, no monthly fees, no per check minimums, and an ATM - Visa card so that you can setup any auto bill pays you are accustomed to. As a result, you can use the account as your checking and savings account. Now all your cash flow is earning interest which is converted into paid principal yet you remain just as liquid as with your current checking and savings accounts. The key is in the features of the equity line. The banks do not offer this type of equity line because it threatens their chief source of income….your checking and savings accounts. The equity lines they offer have multiple restrictions and fees which negate the benefits.

For more information on how this works as well as free software to map out an acceleration plan check out:

http://www.loanstomper.com/

The simple answer is NO. Mortgage interest costs you more than the deductions are saving. If you have the opportunity to pay off your mortgage early you should do so. Lets look at the numbers.

Lets assume that you earn $90,000 per year which would put you in a 25% tax bracket without any mortgage interest deductions. Federal taxes would be $22,500 in this tax bracket which leaves $67,500 post tax income.

Now lets look at what a person with a take home income of $90,000 ($7500 per month) would pay in mortgage interest. First we need to establish what he qualifies for. A home loan of $488,990 at 5% interest over 30 years would require a payment of $2625 (principle and interest). This is 35% of his net income before property taxes and insurance. A person with this income should use this as his ceiling. With taxes and insurance the total payment would be $3100+ (depending on the tax rate in your area). This puts the total monthly housing payment at over 41% of their income. Again, we are establishing the ceiling so that we know what is the max tax deductions a person with $90,000 yearly would see.

Interest paid in the first year would be $24,285 which when deducted from the gross income leaves $65,715 taxable income. Because of this tax deduction you are now in a 15% tax bracket instead of 25%. Most people stop here because they see this as a benefit. However, if we follow this through we will see the smoking mirrors.

The Federal taxes on $65,715 would be $9,857 which would leave $55,858 left in your pocket. Remember, the money left without the mortgage interest deduction was $67,500.

In conclusion, the mortgage interest caused a loss of $11,642 even with the change in the tax bracket. At the end of the day it is not about what you save as a deduction, its about what you keep when that is all tabulated. Every dollar you pay in mortgage interest loses $.20 - $.30. So if you are spending $5000 in mortgage interest each year you are losing $1000 - $1500 in hard earned cash. This is the same at any level of income. There is no time that paying mortgage interest outweighs the benefits of paying off the mortgage early. You would be better served to have that money to invest elsewhere.

First thing that has to be done is to stem the tide of new foreclosures. This is being addressed by the current administrations recovery plan which includes enabling those who can afford to refinance the ability to do so even if their loan-value ratios are not what standard Fannie-Mae guidelines require. Additionally, the recovery plan includes loan modifications for those who are facing foreclosure. This provides lenders with the ability to lower interest rates to a point that these homeowners can afford to keep their home.

Other things that can be done that are currently not in the plans are:

1) Provide a tax credit for anyone who purchases a bank owned home.

2) Open guidelines for investors to obtain financing to purchase and fix these homes. Most bank owned homes are the sore spot of the neighborhood and drive the entire market down. They usually require money to ready them for rent or resale. If lending guidelines were expanded to provide borrowers with funding to purchase and fix these homes it would help speed the housing recovery.

3) Provide a 2 year window for investors to buy and sell these properties with a tax exempt status. Eliminating capital gains also would help an investor in making his purchase decision.

These are some of the ideas discussed by commentator John Adams and I totally agree. If we just wait for the general market to hit bottom it will be a very slow recovery. There are so many of these bank owned homes that it will be quite some time before many neighborhoods recover.

For those that are not in trouble I suggest paying off as much debt as possible. There was never a time for wasteful spending but now more than ever is a time to focus our efforts on minimizing our own risk by accelerating our debt repayment. Your mortgage is a great place to start. For more information check out a prior article on mortgage acceleration.

Its hard to imaging what would compel the people in charge of the major banks to take billions from taxpayers and yet have the nerve to spend this money lavishly and with complete disregard for the people they represent.

Today it was reported that Northern Trust Bank hosted a party that lasted days in Los Angeles and included golf tournaments, cocktail parties, major entertainment nightly, lavish dinners and gifts. The bank flew customers and employees to Los Angeles for the events and thought nothing about spending multimillions of dollars that they acquired from US taxpayers. Excuse my language, but what the hell is wrong with these people? I am completely outraged and want heads to roll. This is unacceptable and these people need to be held accountable.

Other banks have been buying corporate jets, taking lavish vacations, executive bonuses etc. Have these people lost all sense of common logic and morals? It is now that we will see who we can trust and who we cant.

Somewhat ironic that Northern Trust Bank when abbreviated would be NO TRUST BANK.

Time to take back control of our money. Instead of leaving it in the bank…there is a better way. Check out my article on paying off your mortgage early. It will open your eyes to a better way.

Pay off mortgage early

As bad as that seems it is only going to get worse. The media coverage has helped to put Americans into a financial panic as consumers pull back on everything from durables (cars, appliances, furniture…etc) to non durables (food, clothing etc). In fact, the consumer cutbacks are the worst since 1987 on durables, and 1958 on non durables (which dropped a whopping 27.8% in 2008)!

This is causing major job losses all across the board. The unemployment rate as of December was 7.2% which is the highest in 16 years. Yet the news gets worse. Unemployment could hit over 10% by the end of 2009 experts predict. Retail chains such as Circuit City, Ford Motor Co., Eastman Kodak and many more are slashing jobs by the tens of thousands this month alone!

All this leads to a question that homeowners need to ask themselves. Where should we put our disposable income? Certainly, the stock market is out for all but the risk tolerant. Interest rates are so low that savings accounts do little more than provide a guarantee of not losing your money.

In my opinion, it is time for Americans to get out of debt. We have historically spent more than we earn and have not focused on paying down our largest debt….our home. Most homeowners have no idea when their home will be paid off. Yes, they know when the 30 year term ends but will they stay in the home or need to refinance before that? Each time they do they start the clock again from the beginning paying all the front end loaded interest that a 30 year amortization schedule imposes.

It’s time to take this more seriously and realize that there are better options. Homeowners that have 25% or more equity in their home and good credit can qualify for accelerated programs that will combine your mortgage, checking, and savings into 1 account which offsets interest and results in paying off the home quicker on the same income. It’s time to take financial control of our lives from the banks which hold us hostage. Reduce the interest you will pay on your debts dramatically by switching to an accelerated loan.

For more information check out http://loanstomper.com

I was informed of a case in Florida where a condo owner can not rent or sell his condo due to the condition of the property grounds which are now not being maintained. This is just the tip of the iceburg. The condo association has 60% of its memebers in default! As a result, the association has had to stop paying for the insurance as well! Now the owners are responsible for getting their own insurance on top of continuing to pay their association dues. In addition, the association faces a real possibility of going bankrupt. The owners are concerned that the utilities are the next thing to be shut off! When this owner contacted the insurance company to get insurance he was told that this is common right now and that many associations are facing similar problems. 

Conforming loan limits are currently $417,000 and leave most homes in areas like Orange County forced to finance into JUMBO loans (anything over 417K). The interest rates for jumbos can be as much as 2% higher on high loan - value properties with marginal credit scores. Many homeowners are in that exact position. They have been unable to qualify for refinance due to the limited number of jumbo programs and the stringent qualifiers.

With the increase of conforming loan limits to as much as $729,750 it will create the opportunity to lower payments for many of these borrowers. If the property qualifies, they will be able to apply for a conforming loan rate which can be under 5% without negative amortization currently (3 - 5 year ARMS).

President Bush is expected to approve the bill this week. If approved, it will be effective for 2008 only but the National Association of Realtors, among others, are lobbying to make the change permanent.

The best thing you can do in the current rate environment is to take advantage of the accelerated mortgage options. You determine the amortization and can pay off the home much faster WITHOUT increasing the payments. It takes advantage of principles use for decades in the UK and Australia and can literally cut 20 years off a 30 year loan with no changes to spending habits.

The lenders created the ability for buyers to qualify for homes that were well beyond their normal affordability� by offering “teaser” rates that offered low payments for a limited time. The starry eyed buyer, eager to cash in on the boom that had been happening earlier this decade, stepped up to the plate and secured these homes at 80-100% financing with a limited time in a low payment loan.

Then the boom hits and the market takes its cyclical turn and you have to wonder why there is always a huge number of people that are caught with their pants down. I mean, this is a repeating cycle. After the market has a run up like it did, it WILL have a correction. Unfortunately, this still doesn’t seem to prevent people from making these kind of decisions.

The lending community only fueled the fire. As the market turned, the lenders changed their criteria and created what would be the largest foreclosure market the country has ever seen. Even borrowers who made all their payments, on time, were in a jam because the home they financed at 80 - 100% is now worth less than they owe and their are FEW lenders willing to loan at this level anymore and at very sub par rates. As a result, these homeowners now are in loans that are changing from the low payment, fixed rate “teaser” to an higher, adjustable rate. In many cases this new payment is 30 - 50% higher than the original payment!

This is causing a great number of people to have to sell the home through a short sale or face foreclosure. This year is expected to result in the largest number of foreclosures this country has ever seen. Certainly, when combined with the global bond market issues it is pretty clear that a recession is ahead. The extent seems to be small as recessions go but that remains to be seen. In the meantime, we will probably see another test of the rate bottoms.

For those who have remained steadfast and did not get themselves into trouble this is a good time to consider paying off the home as fast as possible.

Homeowners armed with great information are taking advantage of mortgage acceleration. This is greatly reducing the amount of interest we pay on our mortgages and shifting this savings to paying down the mortgage. It can cut many years off the life of a mortgage without higher payments.

The average homeowner keeps their mortgage for no more than 7 years. Then for whatever reason, the refinance or sell. This puts them back at month 1 starting the 30 year clock all over again. As a result, they typically are left with payments that are 80% - 85% interest. This is great for the banks but it isn’t help us pay off our mortgages.

A 30 year amortized loan does not reach a point of 50% interest - 50% principle until the 231st month! That’s almost 20 years! The worst part is that your loan balance is 60% of what is was day 1.

Some argue that paying off the mortgage early eliminates interest deductions necessary for income tax relief. I personally do not agree with this. For every dollar you save in taxes you spend an average of $2. It is always better to payoff the mortgage as quickly as possible, even if just to gain liquidity for future investment.