Which home updates tend to make back their money?


Do you want to revitalize your kitchen and bathroom this year? If you’re planning to sell your home, these rooms will be major points of interest and need to shine. Without spending a fortune on remodels, why not invest in some key areas of each room to increase resale value?Popular Kitchen Improvements

According to a recent infographic, the most popular size of a kitchen remodel averaged around 400 square feet. In terms of improvements, data showed you should focus on popular projects like:

• Countertops: Materials like granite and quartz are common choices to grab a buyer’s attention.
• CabinetsContracting a professional to reface or repaint your cabinets helps renew them for a fraction of the cost of total replacement.
• Sinks: You can customize sink size, shape and material with options like concrete, copper and stone.
• Appliances: Consider energy efficient models to replace your old ones. It will save on your and the new homeowner’s utilities costs.
• Lighting: Kitchen work areas like drawers, cabinets and pantries benefit from additional lighting.

While a kitchen remodel can cost around $23,000, focusing on specific projects cuts down the price tag. At the same time, paying attention to certain areas can make a big difference in an offer price. The other room buyers pay attention to is your bathroom. So revitalize these rooms, whether they need a few changes or a complete overhaul.

Popular Bathroom Improvements

According to the infographic, the average bathroom remodel size was between 400 and 800 square feet. The most popular improvements to the bathroom included:

• Installing a shower: Consider features like temperature controls and adjustable showerhead settings.
• Installing a bathtub: Additional options include in-line heaters, adjustable jet speeds, foot massage jets and foot rests.
• Updating faucets: Replacing your faucet could mean a filtration system and new materials like brass or plated nickel.
• Updating flooring: Consider bamboo or tile for your floor if you currently have outdated vinyl or linoleum.

Investing in one or more of these will cost less than remodeling your entire bathroom–which may run more than $10,000. Renewing your bathroom shower and tub, in particular, will jump out to potential homebuyers, helping you make your money back. You can also make smaller improvements like a new medicine cabinet, refacing your countertops or cabinets and regrouting bathroom tile.

Which monthly bills affect your credit score? Most people don’t know


Here’s the truth about your credit score: There are more things that can hurt it than help it, and there’s some confusion about how that works.

A recent survey from TransUnion asked consumers about a few common bills and whether or not they’re regularly reported to the major credit reporting agencies. Generally, things like rent payments and utility bills aren’t reported to credit bureaus, so you don’t get “good credit” for making those payments on time. However, if one of those bills is overdue, it might end up hurting your credit, if the company you owe sends the bill to a debt collector.

If you thought paying your rent or electric bills on time helped your credit standing, you’re not alone: 48% of those who responded to TransUnion Interactive’s online survey said they thought rent payments were regularly reported to credit bureaus. Even more confusion surrounded other bills: 53% thought cable and internet payments are regularly reported, 54% thought their utility payments are reported, and 52% thought credit bureaus had record of their cellphone payments. That’s not the case.

At the same time, if you fail to pay those bills, your credit score may be in jeopardy. Collection accounts have a negative impact on your credit standing, and even after you pay the debt, your credit will continue to suffer. The damage will be short-lived if the collection account is an outlier on your credit report, but multiple debts in collection will really hurt your score, and making on-time cellphone bill payments won’t directly improve your credit standing. Unfortunately, you don’t benefit from doing the right thing, but if you screw up, you’re in trouble.

There are plenty of regular bill payments regularly reported to the major credit bureaus. Any time a bank or lender extends you a line of credit, your payment history for that product will be reported, like credit card bills, student loan payments, mortgage payments and auto loan payments. No one type of credit payment is superior to another — if your mortgage is more than 30 days past due, it’s just as bad as your credit score if your credit card bill is more than 30 days past due (but if your mortgage goes unpaid for a long time, you’re headed for much worse problems).

The TransUnion data is based on a survey of 1,001 U.S. consumers ages 18 through 64 who rent their current living unit. Even though the respondents are exclusively renters, it’s surprising that only 29% knew mortgage payments are regularly reported to credit bureaus and, as a result, have a significant impact on credit scores.

Paying rent on time may not be your path to a high credit score (though it’s a data point the credit scoring industry is looking at as a potential risk indicator), but it’s still an important priority, so you avoid late fees and dealing with debt collectors. If you’re looking to improve your credit, there are plenty of strategies to consider, and it’s a good idea to track your progress by getting two of your free credit scores on Credit.com.

Yahoo Finance is answering your money questions on Tumblr! Got a question about your credit score, your student loans, your retirement portfolio, your health insurance, or anything else finance-related? Drop us a line: YFmoneymailbag@yahoo.com.

PMI cost is no longer necessary


For those who’ve gotten a mortgage in the past few years with little equity, most are all too familiar with private mortgage insurance, the added premium built into the mortgage payment insuring the lender against payment default. Measured over time, it can cost you thousands, so it’s worth a closer look — especially if you can eliminate it entirely.There Are No Longer Tax Advantages

For years, mortgage borrowers got to enjoy additional tax advantages by having the ability to write off their annual mortgage insurance premiums — much like their property taxes and mortgage interest. A dollar-for-dollar write-off, paying PMI wasn’t all that bad. From 2008 through 2013, it was simply the cost of doing business if you didn’t have the holy grail 20% down payment. Then the IRS changed the rules, and disallowed the mortgage insurance premium deduction for taxable years after Dec. 31, 2013. As we enter Q4 2014, many homeowners are not privy to this change, and will learn that their PMI is now an after-tax expense (like fire insurance or a consumer loan payment).

It Reduces Your Borrowing Ability

If your mortgage payment has PMI built in, by definition you have more debt, requiring more income to offset it. Without more income, the PMI erodes the existing income normally used to offset the rest of the mortgage payment and other obligations (like car payment, student loans, credit cards, etc). The exact amount of the PMI is how much your gross income is reduced by — without the tax advantage. For example, a $250 per month PMI reduces your income by $250 per month.

Home Equity Needed

Here’s the thing: You don’t need to have 20% equity anymore to get rid of PMI. If an appraisal of the property you’re going to buy shows you have 10% equity, you could qualify for the lender to pick up the monthly mortgage insurancepayments, aptly called Lender Paid Mortgage Insurance. (This can also be done if you’ve already purchased the home and want to eliminate PMI from your monthly payment.) This is especially advantageous as PMI can be anywhere from .75% of the loan amount to 1.3% of the loan amount, annually, paid on a monthly basis. On a loan for $400,000 that could be as high as $430 per month, which is an immense net tangible benefit if the lender scoops up this premium each month.

However, you need an appraisal to see if you qualify for this. Most lenders’ appraisal fee is $400-$500, but it’s worth it if you can get a substantially lower mortgage payment without the PMI. On the flip side, the appraisal may also determine that you have insufficient equity to qualify, but it will help you define exactly how much more value you would need to refinance in the future.

PMI Slows Your Mortgage Payoff Timeline

This is a big disadvantage of PMI. Let’s say your mortgage payment is $2,800 per month, and $300 of it is the PMI payment. You’re investing an extra $200 per month into your principal balance to reduce the interest you pay on the mortgage over time — as a smart consumer, you’re making a $3,000 per month mortgage payment. If you didn’t have the PMI, you would be paying an extra $500 per month directly to your principal, compounding your timely prepay efforts and reducing your interest expense exponentially. If you’re overpaying on your mortgage and you have PMI, you’re only realizing half the potential you would be if you were able to get rid of the PMI or shift the cost of the PMI to the lender via lender paid mortgage insurance.

How to Cut PMI If You’re Refinancing

Some homeowners have a mortgage they took out when 30-year mortgage rates were below 3.75%. In this case, why refinance a mortgage if you have a 3.25% 30-year fixed with PMI and a new 30-year fixed rate mortgage is just over 4%? Well, petitioning out with PMI is daunting task indeed, especially depending the type of loan you have.

If you have an FHA mortgage you took out pre-June 2014: The requirement then was after 60 months of mortgage insurance premiums paid to HUD and 20% equity, you had the ability to petition out of PMI — and it is up to the lender’s sole discretion to grant the homeowner’s request, not a guarantee. Alternatively, the PMI would be removed at 78% loan-to-value / 22% equity based on an amortization schedule from the original loan inception, calculating out at 120 months (that’s 10 years).

However, PMI for FHA loans originated after June 2014 with 3.5% down contains permanent mortgage insurance, and the only way out is to refinance or with 10% down. You can petition out of the mortgage insurance after 10 years. However, refinancing may be a more worthwhile choice in either situation.

For conventional loans, you can petition to remove it after a minimum of 24 months of mortgage payments. The key here is: If refinancing into a conventional loan with lender paid mortgage insurance is less costly than how much more you would pay in PMI between now and when 24 months is up, moving out of the PMI would make sense as long as the rate is the same, or lower.

*Mortgage Tip: If the interest rate on a new refinance is .125 %to .25% higher than the current rate with PMI, the rate differential could make financial sense if prepaying the mortgage.

Borrowers might just have more equity than they think. In many markets, home prices have not only stabilized, but have risen, creating more equity for homeowners who otherwise were thinly financed in years past. This additional equity can easily pave the path to reducing the PMI payment, if not completely removing it.

The Bottom Line

You can avoid PMI if you have as little as 10% down payment or home equity. Work closely with your loan officer, they are incentivized to help you. If you can’t avoid mortgage insurance, depending on your financial situation, ask your lender what other adjustments can be made to reduce your mortgage costs: credit score, loan program and of course equity all play important roles in your loan structure. You can check your credit scores for free every month on Credit.com.

Credits for first-time home buyers


Thinking of buying your first home? You’ll need to save for the down payment and closing costs. But there are a number of federal and state grants, tax credits or other options designed to make it easier for first-time buyers to afford their first home. In fact, even if you’ve owned a home in the past, you may qualify for these programs if you meet certain guidelines.Who Can Benefit

According to the U.S. Department of Housing and Urban Development (HUD), the government agency for the housing, a “first-time homebuyer” is someone who meets any of the following conditions:

• An individual who has not owned a principal residence during the three-year period ending on the date of purchase of the property. A person’s spouse is also considered a first-time homebuyer if either person meets the above test.

• A single parent who has only owned a home with a former spouse while married.
• A displaced homemaker who has only owned with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local or model building codes – and which cannot be brought into compliance for less than the cost of constructing a permanent structure.
• As long as you qualify as a first-time homebuyer, these options can help make your dream of buying a new home a reality.

Tax Credit Vs. Tax Deduction

The first thing to understand about tax benefits is the difference between a tax deduction and a tax credit. “Many people think these terms are interchangeable,” says Lisa Greene-Lewis, a certified public accountant and TurboTax expert in San Diego, Calif.  “A tax deduction reduces your taxable income, but your actual tax reduction is based on your tax bracket, ” she explains. “A tax credit is a dollar-for-dollar reduction in the taxes you owe,” she says.

You save a lot more on a credit: “A tax credit of $100 would reduce your tax obligation by $100, while a tax deduction of $100 would reduce your taxes by $25, if you are in the 25% tax bracket,” says Greene-Lewis. For more, see Tax Deductions Vs. Tax Credits.

Special Benefits for First Time Buyers

Hone in on HUD. The first place to look for grant assistance is HUD. Although HUD does not make grants directly to individuals, it does grant money to organizations that is earmarked for first-time homebuyers. Check out HUD’s resource list by clicking here.

Look to your IRA. Every first-time homebuyer is eligible to take $10,000 during their lifetime out of their traditional or Roth IRA without paying the 10% penalty for an early withdrawal. “However, the federal government’s definition of a first-time homebuyer is someone who hasn’t owned a personal residence in three years,” says Dean Ferraro, a Mission Viejo, Calif., enrolled agent authorized to represent taxpayers before the Internal Revenue Service. So even if you owned a home in the past, if you meet the federal criteria, you’re eligible to tap into these funds for a down payment, closing costs, etc.

If you have a traditional IRA, you will have to pay income tax on the money you withdraw. Roth IRA accounts will not be subject to additional taxes as they are funded with money that’s already been taxed. Because each person has a $10,000 lifetime amount that can be withdrawn penalty-free from their IRA, a husband and wife could withdraw a maximum of $20,000 combined to pay for their “first home.” Just be sure to use the money within 120 days or it does become subject to the 10% penalty, Ferraro cautions.

Size up state programs. Many states –for example, IllinoisOhio and Washington– offer down payment assistance for first-time homebuyers who qualify. Typically, eligibility in these programs is based on income and may also have limits on how expensive a property can be purchased. Those who qualify may be able to receive financial assistance with down payments and closing costs as well as costs to rehab or improve a property.

Know about Native American options. Native American first-time homebuyers can apply for a Section 184 loan. “Next to the no-money-down VA loan, this is the best federal-subsidized loan offered,” says Ferraro. This loan requires a 1.5% loan up-front guarantee fee, and only a 2.25% down payment on loans over $50,000 (for loans below that amount, it’s 1.24%). Unlike a traditional loan’s interest rate being based on the borrower’s credit score, this loan’s rate is based on the prevailing market rate. Section 184 loans can only be used for single family homes (1-4 units) and for a primary residence.

No longer available: a federal tax credit. You may know someone who benefited from the federal first-time homebuyer tax credit, which ended on July 1, 2010. This program has ended.

Tax Benefits for All Homebuyers

Buying a first home also makes you eligible for the tax benefits afforded to every homebuyer – whether it’s their first home or not.

Home Mortgage Interest Deduction. “The IRS allows you to deduct for the interest you pay your lender,” says Greene-Lewis. Home mortgage interest is one of the biggest deductions for those who itemize, and can make a huge difference for filers. You should be advised of interest paid to your lender on a 1098 form sent out annually in January and/or early February.

Points or Loan Origination Fees Deduction. The fees you pay to obtain a home mortgage may be applied as a deduction, according to Greene-Lewis. “Points will also be reported on Form 1098 from your lender or your settlement statement at the end of the year.” The rules for how you deduct points are different for a first purchase or a refinancing, she explains.

Property Tax Deduction. Property tax deductions are available for state and local property taxes based on the value of your home. The amount that’s deducted is the amount paid by the property owner, including any payments made through an escrow account at settlement or closing. “You may find property taxes paid on your 1098 form from your mortgage company if your property taxes are paid through your mortgage company,” says Greene-Lewis. “Otherwise, you should report the amount of property taxes you paid for the year indicated on your property tax bill.”

Residential Energy Credit. Homeowners who install solar panels, geothermal heat systems, and wind turbines – or energy-efficient windows or heating and air-conditioning systems – to their home may receive a tax credit worth up to 30% of the cost. Click here for details.

The Bottom Line

Factor in both first-time homebuyer and other tax benefits and deductions in deciding whether you can afford to buy a home and how much you can pay for one. Homeownership costs extend beyond down payments and monthly mortgage payments.

“Make sure you factor in closing costs, moving costs, the home inspection, escrow fees, home insurance, property taxes, costs of repairs and maintenance, possible homeowners association fees and more,” says J.D. Crowe, president of Southeast Mortgage, Georgia’s largest nonbank lender, and president of the Mortgage Bankers Association of Georgia. Knowing you truly can afford the home you choose gives you the best chance of being able to live there for years to come

8 ways to pay off your mortgage years earlier

Adding about $100 to your monthly payment can shave thousands of dollars, and several years, off of your mortgage.

Adding about $100 to your monthly payment can shave thousands of dollars, and several years, off of your mortg …

The mortgage burning party may have gone the way of the rotary phone, but that doesn’t mean Americans don’t own their homes free and clear anymore. In fact, about 34 percent of homeowners in the U.S. no longer have a mortgage, according to U.S. Census data.The stories of people who pay off 30-year mortgages after 30 years in the same home are indeed rarer than they once were. But the recent foreclosure crisis did serve as an incentive for homeowners to pay off their loans sooner rather than later – and some have actually given it a try.

Jackie Beck, creator of the Pay Off Debt app, and her husband paid their $95,000 home mortgage in less than three years. To finish off the mortgage, they repeated the same tactics they had used to vanquish their credit card, student loan and auto loan debt. The secret to their success? They started earning more money but didn’t increase their expenses, plus they were careful not to borrow any more money.

For Beck and her husband, the major benefit was having more money for travel and other goals. Not having to make a house payment also meant that Beck could quit her full-time job and focus on marketing her app and running her own The Debt Myth website business.

While living mortgage-free may sound like an enviable goal, paying off your mortgage early isn’t always the best use of your money, says Todd Tresidder, a financial coach and author who publishes the website FinancialMentor.com. He was asked about the merits of paying off a mortgage early so many times by his readers and clients that he wrote up an exhaustive 5,200-word article, with charts, covering all the considerations.

The 140-character Twitter version: You might be better off putting your extra cash elsewhere, but the emotional payoff of being debt-free matters.

“The intuitive response is to get out of debt. We all want the security of owning our castle free and clear with one less expense to deal with. The prospect of making monthly payments for the next 30 years is antithetical to freedom,” Tresidder wrote. “However, there are times when intuition and finance disagree. … The correct answer is not cookie-cutter but must be custom fitted to your personal financial situation.”

If you have high-interest credit card or student loan debt, you’re much better off paying those off before making extra mortgage payments. Saving for your child’s college education and funding your 401(k) at least to the point of getting the maximum employer match – and maybe more – may also be more important than getting ahead on your mortgage.

Beyond that, you want to make sure you have enough cash on hand for emergencies because drawing from your home equity isn’t always easy. If your mortgage is underwater, or if you anticipate losing your house to foreclosure or short sale, making extra mortgage payments is just throwing money away.

The harder calculation is whether you’re better off investing your money or applying it toward your mortgage. When the market is strong (for whatever investment you’re making), you will likely earn much more on your investments than you are paying in interest on your mortgage. But if your investments lose money, you would have been better off applying that cash to your mortgage.

Many people aim to pay off their mortgages before they retire, but even that may not be the best move in all circumstances.

Having a mortgage does provide a tax break, but it’s not as good a benefit as many people think. According to an analysis of 2012 tax data by The Pew Charitable Trusts, just under 24 percent of tax filers claim the deduction. Many homeowners, even those who itemize, often find they do better on their taxes with the standard deduction.

For those homeowners who are fully funding their retirement accounts, are free of high-interest debt and have enough cash socked away for other life goals, here are eight simple ways to pay off your mortgage early.

Add something to every month’s payment. The advantage to extra payments is that all that money goes toward principal. Early in a mortgage, most of your regular payment goes toward interest. According to calculations by Bankrate.com, if you added an extra $100 to your payment of a new $100,000 30-year mortgage at 4.5 percent interest, you’d pay off the mortgage eight and a half years early and save more than $26,300 in interest.

Make a payment every two weeks. There are companies that volunteer to set this up for you, for a fee, but you can do it yourself for nothing. You’re effectively making a full extra payment each year. Paying half your mortgage payment every two weeks, on that same $100,000, 30-year mortgage at 4.5 percent, would cut just under 5.5 years off the term and save roughly $14,000, according to a calculator at The Mortgage Professor site run by Jack Guttentag. Splitting your mortgage payment into two pieces produces minimal savings.

Make extra payments whenever you can. Beck and her husband started by paying $35 extra per month, but then began making additional payments, at one point so eager to pay off the loan that they made eight payments in a month.

Make one extra payment a year. This provides about the same savings as making half a payment every two weeks. When you make the payment isn’t important. You could make it at the end of the year or wait until you get a tax refund or a bonus.

Refinance your mortgage to a lower rate, and keep making the higher payment. The amount this will save depends on the exact figures, but it should shave years off your mortgage and save you thousands in interest.

Refinance your mortgage to a shorter term. This cuts the amount of interest you pay significantly as well as getting you out of debt sooner.

Contribute funds from another source. Designate money from a bonus, odd jobs or freelance work toward paying of the mortgage. If your income is variable, rather than making regular additional payments toward principal, make one big payment when you can.

Cut expenses and put the savings toward your mortgage. Change to a cheaper cellphone plan, cut the cable cord or otherwise cut living expenses and devote that extra money to extra mortgage payments. Living a frugal lifestyle may be difficult in the moment, but it’s worth the struggle if your ultimate goal is to be debt-free.

Where We Came From and Where We Went, State by State

Click on the link below and take a look and see where people are moving to and from in the US.

Where We Came From and Where We Went, State by State

The interactive map is from NYTimes.com 8/19/14


Save thousands on your mortgage by taking this tiny step

From MainSt 10/21/14

Photo: Thinkstock

Photo: Thinkstock

Homeowners can save thousands of dollars when they work with counselor to get their mortgages modified and decrease their odds of defaulting again.

A new study for NeighborWorks America by the Urban Institute determined that homeowners were able to avoid spending millions of dollars annually because of the National Foreclosure Mitigation Counseling (NFMC) program. Homeowners working with NFMC program counselors are nearly three times more likely to obtain a mortgage modification and are nearly twice as likely to get their mortgage back on track without a modification.

After working with counselors, homeowners are 60% less likely to re-default after curing a serious delinquency and able to complete short sales faster than homeowners who don’t work with counselors.

The research is based on analysis of nearly 240,000 homeowners with outcomes observed through June 2013. More than 1.8 million homeowners have been helped by the NFMC program, administered by NeighborWorks America since it began in March 2008.

“Whether measured by benefits to homeowners through more likely mortgage modifications, sustainability of those modification or mortgage cures, the research answers all housing counseling benefit questions with a resounding ‘yes,’” said acting CEO Chuck Wehrwein of NeighborWorks America, the Washington, D.C.-based trainer of community development and affordable housing professionals.

The research shows that homeowners were able to cure delinquent mortgages more frequently with the assistance of an NFMC counselor than owners who do not receive such help. Servicers also likely saved lost revenues by having performing loans back on their balance sheets.

“The bottom line for the servicing industry is that housing counseling saves them time and money,” he said. “Servicers that increase their partnership with NFMC program counselors are benefiting their shareholders and mortgage customers.”

Once a homeowner is 45 days delinquent on his mortgage, it is a warning sign that he is headed for serious problems and is at a higher risk of foreclosure, said Matt Ribe, director of legislative affairs for the National Foundation for Credit Counseling (NFCC) based in Washington, D.C.

“It depends on your servicer, but I recommend working with counselor to get as current on your mortgage payment as soon as possible,” he said.

Now that the backlog of cases from the recession has subsided, mortgage servicing companies are catching up on their older cases. Being delinquent on your mortgage for one to two years is no longer a realistic expectation, Ribe said.

Working with the servicer as much as possible will help resolve the issue better.

“Homeowners mistakenly believe that nothing good can come from it,” he said.

While the process can be intimidating due to the enormous amount of paperwork involved, a counselor can help homeowners understand fill out and submit the necessary forms throughout the process, Ribe said.

“The counselor works with these issues on a regular basis, so they can walk you through the process and understand the legal language and requirements,” he said. “They can put all the information into context.”

One option is for homeowners to use the Home Affordable Modification Program (HAMP), a government program which can extend a mortgage to 40 years from the date of the modification and the interest rate will be lowered. It is designed for a homeowner in crisis to lower payments as soon possible while keeping the loan positively amortizing, Ribe said.

“The hope is that after a certain period of time, the program will help the homeowner increase their cash flow, decrease other debt and think about refinancing their mortgage into a lower rate,” he said.

HAMP accepts homeowners based on their current debt to income ratio and sets up a plan to extend the term of the loan and to reduce the amount of the payment.

Homeowners can also reach out to their mortgage servicer or lender, who also has their own loan modification programs.

One critical measurement of all the programs is how to determine the current value of the home especially if the value has declined and the owner owes on the mortgage than the home is worth, known as being underwater.

Short sales are still a good option for homeowners who are not able to secure a principal reduction in the mortgage and still owe more than the house is worth.

“This can be a powerful option for people if they can find a buyer willing to take the house,” Ribe said. “It sort of lets them start over.”

Working with a counselor can give owners more options and achieve the most “affordable and sustainable option as possible,” and helps reduce the number of people who defaulted again, he said.

“I would recommend that before they make any decision, they should work with a HUD certified housing counselor to discuss their options and the implications,” Ribe said. All NFCC counselors are certified financial counselors and work with people regardless of their ability of pay.

Since buying a home is something that most people only do once or twice in their lives, there is no question that homeowners whose mortgages are in default or at risk of default should look for assistance as soon as possible, said David Reiss, professor of law at Brooklyn Law School in New York.

“Losing their home is something that most never do at all, so to think that going it alone is the best strategy is a mistake,” he said. “Foreclosure counselors know the range of options available to borrowers and may have access to more direct lines of communication with lenders. They also will have a better sense of when to complain to regulators about bad behavior by lenders.