Archives for 2012

Can You Get A Mortgage If You’re Self-Employed?

Home prices are still quite low, and mortgage rates remain at record-low levels. As a result, many consumers are considering buying homes right now. It's possible to get a good deal, and it's likely that rates will start rising in a few years. Because of the current conditions, it seems reasonable to buy a home right now. And, even if you don't want to buy another home, it can make sense to refinance, locking in a lower rate for the remainder of your home mortgage loan.

But what if you're self-employed? Will you be able to get a mortgage when you don't have a W-2 and pay stubs you can show your lender? Even with the tighter lending standards, you can be approved for a home mortgage loan, even if you're self-employed and running a home business. Just be prepared to show a lot of documentation.

getting a mortgage when self employed

What Documentation Will You Need?

If you are self-employed, you will have to show your latest tax returns. Normally, the lender averages your last two tax returns to get an idea of your monthly income. This can be somewhat distressing for the self-employed, since many of us take every deduction we can in order to reduce taxable income. However, there are other ways to show that you are making a solid living from your efforts. You will probably be asked for a quarterly profit and loss statement. Indeed, if you want a FHA loan, you will be required to submit a year-to-date profit and loss statement if your last tax return was filed more than a quarter ago.

Another option you have is to pay yourself a salary. If you have organized as an S-Corp., and even if you have another business organization, it's possible to pay yourself a salary. You can show that your business venture is enough to provide you with a regular salary, and that can bolster your case. You might also show your bank account statements as a way to prove that money is coming in. When I applied for a mortgage five years ago, my lender's underwriters required that I hire an accountant to perform an income audit to help establish my income.

Credit, Debt, and Assets

On top of your income, lenders also want to know what your current financial situation looks like. Lending standards have been tight since the global financial crisis, and this is especially true for self-employed borrowers. If you are self-employed, you need to make doubly sure that your situation is solid. You will, of course, be subject to a credit check. Additionally, your lender will want to know your debt to income ratio. If you have a high debt to income ratio, lenders are likely to be concerned that one bad month at your business could lead to problems.

You will also have to show what assets you have at your disposal for a down payment, as well as in reserve. Lenders generally want to see that you have two or three months' of mortgage payments in reserve before they approve you. As long as you have the assets and good credit to back up your income, you should be able to secure a mortgage loan — and get a good interest rate to boot.

Are You Raising Your Kids To Be Financially Independent?

By Miranda Marquit 4 Comments

One of the things I remember growing up was that my parents tried to teach me financial independence. While they helped pay for extracurricular activities, and provided for my needs, I was also expected to save up for various items related to my own entertainment. If I wanted to go to a concert, or if I wanted to go out with my friends, I had to use my own money.

My parents also made it clear that I wouldn't get a free ride, should I decide to move back into the house after I left at age 18. When my sister moved back in with her family for a few months, the ground rules were clear: You need to have a job, or be attending school. You need to be trying to improve your situation, or you're out. They didn't charge rent, but they did expect financial progress to be made, and my sister's family moved out after getting back on their feet.

It's true that my parents have sacrificed for us, but they're not about to let us ruin their financial future, and the emphasis has always been on getting us to a point at which we could fend for ourselves financially. At some point, it makes sense to send your kids out there to provide for themselves. And, of course, those lessons start at home.

kids financial independence

Make Kids Responsible For Their Money Choices

While you can't expect a 10 year old to pay rent, or cover all of his or her clothing costs, you can help your child understand how to manage money. Let your child have money of his or her own to manage. This includes putting money away in a savings account (my son thinks it's fun to head to the bank and earn prizes for reaching certain milestones), donating to charity, and making spending decisions. My son has made mistakes, since we have, in the past, let him buy stupid things that he's regretted. Better he learn about making good decisions now, with the small stuff, than learning the hard way later. As a result of being allowed to make money mistakes, my son is already more thoughtful about what he does with the money he controls.

Teach More Complex Concepts As Kids Age

Starting out with an allowance, or with a way for children to earn their money, is a good way to begin teaching financial fundamentals. As kids age, you can teach more complex lessons. Consider helping them invest, and let them borrow from you — with interest. Requiring your children to pay you back with interest is a valuable lesson they can learn about finances, and borrowing. My son borrowed money not too long ago, and his repayment schedule meant that he saw all of his allowance for four weeks (after his tithing and savings were taken out), go to repaying the debt. He hasn't borrowed since, especially now that he knows that repaying debt means you have to give back more than borrowed.

Hopefully, these lessons will help my son learn financial independence. Later, we'll start a Roth IRA with him when he starts working a “real” job. It will be a good thing for him to get an early start on financial freedom.

What do you do to teach your kids financial independence?

Avoiding Debt? You Still Need Good Credit

By Miranda Marquit 1 Comment

You probably know that if you plan to borrow money, you'll only get the best terms if you have good credit. If you want to save money on interest, and enjoy the best possible terms, you need to show the lender that you are responsible, and that there is a good chance that you will repay your debts. But what if you have been avoiding debt?

There many people who save up to make purchases. They save up for car purchases to avoid auto loans. There are those who prefer to invest their money instead of getting a mortgage. Or, if you already have mortgage, you might not see the sense in the need to borrow for anything else. Cash often works just fine when making most purchases. Why do you need to worry about your credit when you won't be borrowing?

Whether or not you agree with the trend, the truth is that lenders aren't the only people interested in looking at your credit situation. You need good credit if you expect to save money in other ways, or have access to opportunities that may not necessarily be directly connected with getting a loan.

Insurance, Renting, Cell Phones, and Jobs

Your financial habits are of immense interest to a number of people that you might not realize. Some banks check your credit before allowing you to open certain types of accounts. Even if a full credit check isn't done, a ChexSystems check might be used to look at some of your consumer behavior. You can be denied a bank account based on what's in certain consumer reports.

Additionally, one of the biggest impacts come when insurers occasionally check your credit score. I am actually receiving a discount on my bundled home-aut0-life policy because of my credit score. A poor credit score means that you can miss out on monthly savings in the form of lower insurance premiums. Over a lifetime, a savings of $10, $20, or $30 a month can make a real difference.

Others want to check your credit to determine what kind of deposit you will have to pay. Landlords sometimes adjust the security deposit you are required to pay based on your credit history. A poor credit history can result in a higher deposit, since there are indications that you could skip town without paying your rent. Cell phone, Internet, and TV providers sometimes run credit inquiries as well. The inquiry might only be a “soft” check, but it still emphasizes that these service providers want to know if you are reliable. In some cases, the company might require that you pay for your first month of service up front, rather than waiting until you have actually used it.

Finally, some employers run background checks that include pulling your credit report. Credit bureaus offer special credit reports geared toward employers for this purpose. Employers aren't supposed to have access to your credit score, but seeing some of your credit history can still help them get a feel for your habits — as well as whether or not you might represent a risk in sensitive situations.

In the end, more and more decision makers are relying on your credit. It's an easy indicator, and it's easy to access. So, even if you aren't borrowing anymore, and even if your debt levels are low, it makes sense to ensure that your credit history looks good.

Supreme Court Upholds The Affordable Care Act Health Care Law. What Does It Mean For You?

By Mr. Money 2 Comments

Earlier today the Supreme Court came back with a 5-4 decision upholding most of the key provisions of the Protection and Affordable Care Act (PPACA) that was passed by Congress and signed into law in 2010.

The law has been an extremely contentious, but no matter where you stand on the issue, with today's announcement the only way the act won't go into effect is if it is repealed by Congress. Because of that the election seems to have just taken on added importance this year.

So with the law being upheld, what does the decision mean and how will it affect health care and the economy in the U.S.?

Health Care law Upheld By Supreme Court

Pros And Cons Of The Law

So what are some reasons people are happy about the law being upheld?

More people will have health coverage.
Folks with pre-existing conditions can get coverage.
People can stay on their parents coverage until age 26.
More people can take advantage of care.

Others are unhappy that it was upheld, and cited a variety of reasons it should be repealed now.

Individual mandate is a loss of freedom forcing people to buy coverage.
Increased cost to business, which could hamper recovery from recession.
Higher costs for many people.
Government bureaucracy will weaken health care.

So let's review what some of the things that are in the health care law that have now been upheld.

Individual Health Care Coverage Mandate

One of the most controversial aspects of the health care law was the individual mandate. That part of the law required that individuals have some form of health insurance, either on their own or through an employer. If you don't have coverage, you pay a penalty. The court upheld the individual mandate, and people will soon be required to have insurance or pay the penalty.The court clarified that the the requirement is not a mandate, but a tax, and as such is constitutional and falls under the government's taxing authority.

So what is the penalty for no health care coverage? It will be whichever is greater of:

(In 2014) 1 percent of a household's taxable income, or $95 per person in the household, up to three people.
(After 2016) 2.5 percent of a household's taxable income, or $95 per person in the household, up to three people.

Some have suggested that if you don't pay the tax/penalties for not having coverage you could be subject to the same penalties as non-payment of taxes (jail time).

Upheld Provisions Of Obamacare

Most of the main provisions of the Affordable Care Act were left intact after the Supreme court made their ruling. Obamacare provisions that remain in effect:

Pre-existing conditions: Insurers may not deny coverage based on pre-existing conditions, one of the key planks of the overall insurance industry reform outlined in the bill.
Coverage up until 26: The ACA had a provision that required companies to offer coverage for the children of policyholders up until the age of 26.
Medicare coverage gap closed: There is something called “donut hole” in Medicare Part D coverage. Basically after people have paid their deductible Medicare kicks in to cover 75% of the cost of meds. After a threshhold is reached the patient is 100% liable to pay the costs. After the donut hole is crossed, costs are 100% covered by Medicare again. The gap will gradually be eliminated so that it will be closed by 2020.
Cadillac insurance plan tax: People with high end “Cadillac” insurance plans can expect a 40 percent excise tax beginning in 2018.
Tax on indoor tanning: There is a 10% tax on indoor tanning that will now remain in effect.

Medicaid Provision Limited

The Affordable Care Act when it was passed had a provision that said families earning as much as 133 percent of the federal poverty line would be eligible for Medicaid. If states failed to comply with the expansion of Medicaid the government would be able to withhold all Medicaid funds.

The court allowed for the expansion of Medicaid, but denied the government's ability to withhold all funds, but not the ability to withhold new funds. Because of this ruling the expansion of Medicaid is now thought to be optional for states.

Health Care Will Be A Major Election Issue This Year

While the ruling today was certainly a big win for Obama, and will have major ramifications for this country, the debate surrounding health care is far from over.

Already you're seeing how the election season will be shaping up, and I guarantee that the health care law, and the repeal thereof, will be one of the main issues people will be focusing on, right after the struggling economy.

What are your thoughts on the Supreme Court's decision today and what effect it will have?

How To Enjoy A Cheaper Road Trip

By Miranda Marquit 1 Comment

One of the fun things about the summer, in my opinion, is the road trip. I've already been on one this travel season, and I'm excited for further road trips. Most of the time, my road trips are relatively short, ranging from three days to a week. Road trips can be a great way to spend time with family, and even enjoy a fairly inexpensive vacation.

If you want to have a cheaper road trip, though, it helps to plan ahead.

Tips For A Cheaper Road Trip

cheaper road trip

Here are some tips for creating a cheaper road trip that everyone in your family can enjoy:

Map your route: The first step is to map your route. You don't have to have everything perfectly timed (that takes some of the spontaneity out of the journey), but you should have a general idea of where you want to go, and which days you should arrive. Plus, mapping it out can help you find the best hotel deals, as well as the cheapest gas prices.
Car maintenance: Before you head out, check your car. Make sure that everything is in good order. Breaking down in the middle of a road trip is an expensive proposition. A little expense now can save you big later.
Be smart about food: One of the things I remember from my childhood is the big cooler. My parents brought a big cooler packed with drinks (including milk and juice), deli meat, condiments, and other items. We made our own sandwiches, and had access to other food. A smaller cool, and a bag with other items, was available as well. Bring your own food, and you'll spend much less. When you do need to replenish your supplies, head a little farther into town and visit the local grocery store.
Use your rewards: Maximize your road trip with the help of a rewards program. You can save up money for a road trip, but then use credit cards. Earn the rewards, pay off the balance when you get back, and be ready for the next trip. You can also sign up for hotel rewards and earn free stays. If you already have free stays, use them during your road trip to reduce costs.
Look ahead for discounts and promotions: Find out if there are discounts and promotions in the area. Look online for coupons on food, attractions, and lodging. It's a great way to cut down on costs. Groupon, LivingSocial, and Restaurants.com can all provide you with discounts to use during your road trip.
Choose souvenirs carefully: Rather than load up with expensive souvenirs that clutter the house, choose carefully. We buy a magnet or two, and postcards. These items don't take up much room, and they are inexpensive. We save money on those items, and can spend on the things that are more important to us.

A road trip can be a fun way to go on vacation. If you are careful about what you spend your money on, and if you plan ahead, it should be possible to enjoy an inexpensive vacation that helps you create plenty of good memories.

What are your tips for taking a cheaper road trip?

Saving Money On Your Pet’s Food Bill With Dog Food Coupons And More

By Contributor 1 Comment

We all want to feed our pets the best food possible to keep them happy and healthy. Feeding your dog the highest quality dog food, however, can come with a high price tag. To keep from going over your dog food budget, here are some money saving tips:

Find Coupons

Does your dog already have a favorite dog food brand that you struggle with finding dog food coupons for? Often their websites or social media will offer discounts. For example, sign up for Pedigree dog food coupons on their website or “like” their Facebook page for printable dog food coupons so that you can receive discounts on the best dog food brand. Many companies, even high end brands, offer traditional dog food coupons in newspaper inserts. If you often buy your dog food at a particular store, sign up for their emails for notification of sales. You can combine your coupons with the sale for the best price possible without sacrificing nutrition.

saving on pet food

Ask your family and friends if they will trade coupons of your favorite dog food brand for coupons they may need. Many coupon swap groups do this already, but a simple email to your friends or a notice on the work bulletin board can help you save several dollars on your dog's diet. Another source of coupons is eBay–people often sell coupons for a fraction of their face value.

Buy In Bulk

Even if you don't have much storage space, consider buying in bulk. Large bags of dry food and multiple packs of wet food usually have a much lower unit price. Dry food can be portioned into smaller, airtight containers which can be easily found at pet or department stores. Wet food cans can be stored in the back of the pantry or unused closet space. If you have a smaller dog or are concerned a large quantity of dog food might go bad before it's used, ask other dog owners if they would like to split the quantity with you. You still get the lower price and the best quality food.

Visit The Feed Store

If you have never visited your local feed store, they are a great source of the best foods for excellent prices. They carry animal feed for both pets and farm animals and are usually very knowledgeable about nutrition. See if they carry your favorite dog food brand and ask for vendor coupons. Many dog food companies distribute coupons directly to the store to be given to customers.

Higher quality dog food doesn't have to break the bank. By combining coupons and sales and by lowering your cost-per-unit price, you can continue to feed your dog the best.

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