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Major Title Loan Lender TMX Finance to Pay $9M for Misleading Customers

One of the nation’s largest title loan firms was fined $9 million for misleading consumers about their cost of borrowing, federal regulators said Monday.

TMX Finance, the parent company of TitleMax, allegedly tricked borrowers into taking out longer-term, more expensive loans, and also used illegal debt collection tactics, according to the Consumer Financial Protection Bureau. The firm was ordered to stop the illegal tactics.

TMX, in a statement, said it settled the case without admitting wrongdoing.

Title loans are similar to payday loans, advertised as short-term instruments to help consumers who find themselves in a cash crunch. With title loans, borrowers use their cars as collateral for the loans. They risk losing their cars if the loans aren’t repaid on time.

According to the CFPB, some TitleMax borrowers were steered into longer-term payback plans for their short-term loans, requiring several loan renewals and significantly increasing the costs of borrowing. TMX Finance employees also conducted “field visits” to consumers’ workplaces, despite knowing such visits were not permitted; the tactics were used starting on July 21, 2011, the CFPB said.

TMX Finance, which is based in Savannah, Georgia, is one of the country’s largest auto title lenders, with more than 1,300 storefronts in 18 states.

“TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” said CFPB Director Richard Cordray. “They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk. Today we are making it clear that these actions were unacceptable and illegal.”

No Customer Refunds

In a press release, TMX Finance noted it was not forced to refund any consumers as part of the agreement, “unlike consent orders that the CFPB has previously entered into with other companies within the emergency credit space.”

“This resolution of the CFPB’s investigation addresses and mitigates the CFPB’s identified concerns while allowing us to continue meeting the urgent financial needs of our customers. Many of our customers have nowhere else to turn when they suffer from short-term financial setbacks like medical emergencies or home repairs, and we are committed to remaining a reliable source of credit for them when the need arises,” said Otto Bielss, President of the TMX Finance Family of Companies. “We continue to focus on enhancing and strengthening our compliance program to support responsible lending practices and our compliance with applicable state and federal consumer lending and consumer protection laws.”

According to the consent order made public Monday by the CFPB, borrowers seeking 30-day title loans were shown a “Payback Guide” that offered repayment terms lasting from two to 24 months. The guides were similar to installment loan amortization schedules. Employees “were trained to focus consumers’ attention on the amount of the potential monthly payment, and the sales pitch does not include any discussion of the total cost of the transaction,” the CFPB said.

“The payback guide and sales pitch … materially interfere with the consumer’s ability to understand that the consumer is receiving a 30-day transaction … and that renewing the transaction over an extended period would substantially affect the overall cost of the transaction,” the consent order says.

TitleMax said that since 2015, the firm has discontinued in-person collection activities at homes and places of employment. The company said it will discontinue use of its payback guide now.

The Consumer Financial Protection Bureau has been examining title loans more closely during the past 12 months. In May, the bureau released a report showing that title loans were very risky for car owners. After examining 3.5 million title loans made to 400,000 consumers (many are repeat customers), the CFPB found that one in five borrowers had their car seized by lenders.

Then in June, the bureau released proposed new rules to regulate short-term lending, including payday loans and title loans. The rules, for example, would require lenders to review borrowers’ ability to repay the loans.

Looking for Alternative Sources of Cash

If you ever find yourself strapped for cash, it’s good to keep in mind these smart alternatives to payday loans (and title loans). But if a payday loan or title loan seem like your only options, it’s a good idea to work on improving your traditional credit scores so you can secure more affordable financing. (You can see where your credit currently stands by viewing  your free credit report summary, along with two free credit scores, updated every 14 days, on Credit.com.)

In general, you can fix your credit by disputing any errors on your credit report, identifying credit score killers and coming up with a game plan to address those issues.

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This article originally appeared on Credit.com.

5 Insider Tips for Finding Affordable Long-Term Care Insurance

Years from now most baby boomers will need help with the daily stuff of life, like dressing, bathing, eating or remembering to take medication.

Regular health insurance, including Medicare, doesn’t pay for help with these “custodial care” tasks, except in limited circumstances. Long-term care insurance does.

Yet faced with the coverage costs, many long-term care insurance shoppers get sticker shock and give up. Here’s how to keep the price affordable.

1.Buy sooner rather than later

“The key to long-term care insurance is to apply early while it’s inexpensive,” says Kevin M. Lynch, assistant professor of insurance at the American College of Financial Services in Bryn Mawr, Pennsylvania.

You can buy long-term care insurance up to age 75 from most companies, but you’ll pay more at older ages and if you have health conditions.

Among 65-year-old applicants, 28% will be denied because of their health, Lynch says.

The ideal age to start shopping? “I think 50 is the magic number,” says Deb Newman, president of Newman Long Term Care, an independent insurance agency in Richfield, Minnesota.

Don’t give up if you’ve passed the half-century mark. Apply at least 60 days before your next birthday to get a price based on your current age, advises Jesse Slome, executive director of the American Association of Long-Term Care Insurance.

2. Work with an independent agent

Prices vary by insurer for the same amount of coverage. Work with an agent who can sell — not just quote — policies from different carriers, Slome says. A good agent will know which companies will likely accept you for coverage based on your health and give you the lowest price.

Get price comparisons even if you’re offered the opportunity to buy long-term care insurance through a group, such as your employer. If you’re healthy, you might find a better deal on your own.

3. Start with a budget

Decide what you’re comfortable spending for coverage, and ask the insurance agent for quotes that fit your budget, advises Brian Gordon, president of Maga Ltd., an independent long-term care insurance agency in Riverwoods, Illinois. Gordon discourages people from buying a policy if they’ll struggle to pay the premium.

Work with a financial advisor to review other options if you can’t qualify or pay for long-term care insurance. Medicaid, the federal and state insurance program for people with low incomes, will pay for nursing home care, but to qualify, you have to spend down most of your money first.

4. Plan realistically

According to the U.S. Department of Health and Human Services, almost 70% of today’s 65-year-olds eventually will need long-term care, and 20% will need it for longer than five years. But few folks want to think about that.

“First of all what pops into people’s minds is the dreaded nursing home,” Newman says. Yet 80% of elderly people who receive long-term care live at home, according to a 2013 Congressional Budget Office report. About 18% live in nursing homes and other care facilities, and 2% live in residential senior communities that offer some support but not round-the-clock supervision.

Newman encourages clients to buy enough coverage to pay for home health care for a few years. The average annual cost of a full-time home health aide is $46,332, compared with $82,125 for a semi-private nursing home room, according to the Genworth 2016 Cost of Care Survey.

Most long-term care insurance policies reimburse you for care at home or in assisted living or a nursing home. So if you buy enough to pay for home health care but instead go to a nursing home, the policy will pay at least some of the nursing home costs.

Look at costs of care in your area to estimate how much coverage to buy, Lynch advises.

5. Go for a simple vs. souped-up policy

Ask for quotes for good, better and best coverage from each company to see costs at different levels, Slome says.

Avoid adding features, called riders, that you don’t need. “Keep it a good, simple, long-term care policy without all the bells and whistles,” Gordon says.

An example is a “restoration of benefits” rider: If you need long-term care but then get better, the benefits you used are restored for a later date. But Gordon says once people start to need long-term care, they usually continue to need it.

An inflation protection rider allows your benefits to grow to keep up with inflation. Reducing the inflation protection, from, say, 3% to 1% will drop the policy price. If you’re older, say 70 instead of 55, you may be able to get by with less inflation protection, Lynch says.

A final thought

Avoid an all-or-nothing approach when buying long-term care insurance.

“Sometimes people look to insuring 100% of the cost of the care,” Gordon says. Instead, think about the costs you can handle and what you want to insure. “Don’t buy more than what you need.”

Barbara Marquand is a staff writer at NerdWallet, a personal finance website. Email: bmarquand@nerdwallet.com. Twitter: @barbaramarquand.

This article was written by NerdWallet and was originally published by USA Today.

4 Simple Money-Saving Tips for Couples

By Kurt Smith

Learn more about Kurt on NerdWallet’s Ask an Advisor

Having the same goals as your partner is important, whether they involve your careers, family or finances. To achieve those goals and live in harmony, it helps to be on the same track, working together toward the same things.

If one partner has the goal of getting out of debt while the other is constantly spending, there’s bound to be friction. It’s important to discuss these differences and make a plan to address any issues as a couple. Remind yourselves that you’re a team and better off when working together.

Having some extra cash on hand will help you work toward goals such as paying off student loans, saving up for a wedding or a down payment on a house, or starting a family. Here are four simple ways couples can start saving money today:

1. Rethink date night

How often do the two of you have a date night? Some couples have a weekly date night where they go out to a fancy restaurant, order drinks and then do an activity afterward, like a movie or bowling. An evening like that can quickly add up to more than $100.

If you want to save money together, you may have to change what you do together. Keep date night a tradition, but decide on a spending limit that supports your goals and then get creative. You can have a “no technology night” where your turn off all devices, or a Netflix marathon, or cook up some food and play board games at your kitchen table. Whatever you do, make date night about spending time together and connecting with one another, not about paying an expensive bill.

2. Declare a ‘no dining out’ month

The money you spend eating out adds up quickly. Even fast food, lattes and vending machine snacks can slowly empty your pockets. You can make simple, homemade meals for a fraction of what you’d spend going out to eat. Choose one month and commit to making all your meals at home, including brown bagging your lunch for work. Then, fight the temptation to stop at the drive through or grab a sandwich at the office deli. You’ll have saved a substantial amount of money by the end of the month.

3. Forgo gifts for a while

While you’re looking to reach specific financial goals, make a pact that you won’t buy each other lavish birthday, anniversary or holiday presents. Couples often spend hundreds of dollars on these special occasion gifts. By putting that amount into a savings account toward your financial goals, you’re both still receiving a gift. You can celebrate the occasion with a card and handwritten note reminding each other of what you’re saving for together, and then enjoy an intimate evening at home. If that doesn’t feel like enough, you can always be creative and make something for your partner out of inexpensive materials.

4. Plan a staycation

Instead of planning your annual getaway, consider having a staycation this year. You and your partner can take the same week off from work and do fun things around town together. Rent a movie and watch it in the middle of the day, have an at-home wine tasting adventure, go for a hike or to the beach, pack a picnic and have a day at the park. There are likely many activities you can do that are close to home and inexpensive. Keep your savings goal in mind and let vacations be relaxing and rejuvenating, instead of draining your bank account.

Track your savings

As you follow these suggestions, keep a log on the kitchen counter that you use to write down how much you saved on a purchase that was reduced or forgone. Keeping a running tally of your savings can be exciting as you watch them grow and bring you closer to your goals.

Of course it’s fun to splurge and do new things or go to fancy meals together. But the most important part of your relationship is that you’re spending quality time together, and you don’t have to spend money for that to be enjoyable and meaningful. When you set financial goals, it’s good to have a plan in place for how you’ll reach them. Making sacrifices and staying the course together can make your relationship stronger and improve your financial position at the same time.

Kurt Smith is a financial and relationship counselor at Guy Stuff Counseling & Coaching.

This article also appears on Nasdaq

The Gender Wage Gap Won't Close Until 2152

Equal pay for women? Not in this lifetime.

According to a new report from the American Association of University Women (AAUA), the pay gap may have narrowed considerably in the past 100 years, but it will still take another 136 to do away with it entirely.

In 2015, women working full-time in the U.S. were typically paid just 80% of what men were, creating a sizable 20% wage gap on average, AAUA said. Since 1960, that gap has narrowed thanks to women’s progress in education and their growing participation in the workforce. But in recent years, women’s progress has stalled, and if things continue to progress at this slower rate, “women will not reach pay equity with men until 2152,” AAUA warned. Here’s what that could mean for your money.

The Financial Effects of the Pay Gap 

As the AAUA pointed out, an average 20% pay gap affects women’s finances in myriad ways. For starters, it contributes directly to their poverty, which could be seen as recently as 2015, when 14% of women between the ages of 14 and 64 were living below the federal poverty level, compared with 11% of men, AAUA said. For those ages 65 and older, 10% of women were living in poverty, compared to 7% of men.

The damage persists well after a woman has left the workforce, AAUA said. When women retire, “they receive less income from Social Security, pensions and other sources than do retired men,” and other benefits such as disability and life insurance are smaller, since they’re typically based on earnings.

Broken down by demographic, the pay gap disproportionately affects women of color more than non-Hispanic white women and women of Asian heritage, AAUA said. And though the earnings and pay gap do vary according to a woman’s unique situation, they “persist across educational levels and [are] worse for African American and Hispanic women, even among college graduates,” AAUA said. The implication for student loan debt is concerning, since women working full-time in 2012 had a tougher time paying off their loans, on average, than men who were working full-time.

A Matter of Choice 

Personal choice also plays a key role in the pay gap. “In 2015,” AAUA said, “the U.S. civilian workforce included nearly 149 million full- and part-time employed workers; 53% were men, and 47% were women … But women and men tend to work in different jobs.” There are more women in education, office, health care and administrative support roles, AAUA said, while men are “disproportionally represented” in production, transportation, maintenance and repair roles. This means segregation is a factor, especially since the jobs associated with men tend to pay more than those occupied by women, despite requiring similar levels of skill.

While gender segregation has decreased in the past 40 years, AAUA said, women in male-dominated jobs still face other obstacles like being paid higher salaries and breaking into a historically male field in the first place. There is also the issue of parenting, which can require taking time off work or cutting back hours, which puts women with children in a tough spot. The so-called “motherhood penalty,” which goes beyond actual time taken out of the workforce, can hinder a woman’s chances of landing full-time employment.

Beyond these factors, some employers are just plain biased, and a woman’s choice of college major, occupation, work hours and time out of the workforce may have nothing to do with her odds of securing fair pay, the report said. Women are less likely to land leadership roles, AAUA said, and, of course, “gender bias also factors into how our society values some jobs over others.”

So What Can You Do? 

With all these factors in mind, how can modern-day women protect their finances? The odds certainly seem stacked against it, given the factors above. But there are ways to counter the problem. A budget can help you stay on top of your day-to-day finances without going into debt, while putting aside whatever you can afford can beef up your savings for the long term. It also helps to know where your credit stands, as this can give you a glimpse into the health of your finances. (You can view two of your free credit scores, updated every two weeks, as part of your credit snapshot on Credit.com.)

 

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This article originally appeared on Credit.com.

Mortgage Rates Today, Monday, Sept. 26: Rates Go Even Lower, Home Values Up

Thirty-year and 15-year fixed mortgage rates as well as 5/1 ARM rates continued their decline, according to a NerdWallet survey of mortgage rates published by national lenders Monday.

With rising home values across the country, though, are lower rates enough to coax potential homebuyers off the sidelines?

Mortgage Rates Today, Monday, Sept. 26 (Change from 9/23) 30-year fixed: 3.61% APR (-0.01) 15-year fixed: 3.03% APR (-0.01) 5/1 ARM: 3.51% APR (-0.02) Zillow: Home values up

Homeowners will be happy with this news, but potential homebuyers might cringe a little when they hear that U.S. average home prices increased 5% nationally over last year to $188,100 last month, according to the August Zillow Market Report.

In some metro markets, Zillow reported that home values soared by double digits, especially in Portland, Oregon (up 14.8% to $338,9000); Dallas-Fort Worth, Texas (up 12% to $193,900); and Seattle (up 11.3% to $397,800).

And while the U.S. Census Bureau reports that Americans earned 5.2% more in annual household income in 2015 over 2014 — the first notable increase in eight years — wages in some of the country’s pricier metro markets still aren’t keeping pace with rapidly appreciating home values.

“The housing market is starting to smooth out ever so slightly, as the peak home shopping season winds down,” Zillow Chief Economist Svenja Gudell said in a release. “This is good news for frenzied buyers tired of tight inventory, rapidly rising home prices and intense competition.”

Gudell warned, however, that it’s “still tough out there for buyers,” especially in booming job markets in the West.

“Things won’t switch from a sellers’ market to a buyers’ market overnight, but conditions are starting to improve,” Gudell said.

 

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

More from NerdWallet Compare online mortgage refinance lenders Compare mortgage refinance rates Find a mortgage broker

Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns.

3 Options to Save for Your Child’s College Education

By Mike Eklund

Learn more about Mike on NerdWallet’s Ask an Advisor 

For the 2015-2016 school year, college costs, including tuition, fees, and room and board, averaged approximately $20,000 per year for a public four-year university (in-state) and around $44,000 at private four-year schools, according to the College Board. In some cases, elite private schools cost more than $60,000 a year (including room and board and other fees).

If you plan to pay for four years of college, this quickly adds up. Fortunately, there are several different ways to save for college. Here are the pros and cons of three popular college savings options. The right one for your family depends on your situation.

Roth IRA

A Roth IRA is a tax-advantaged individual retirement account. With a Roth, you put in after-tax money, and it grows tax-free. Your contributions are nondeductible, and qualified distributions after age 59½ are tax-free. Before age 59½, you can also withdraw contributions to the account tax-free. If you withdraw any earnings before age 59½, you must pay a 10% penalty, except in some special cases.

Though a Roth IRA is intended to be a retirement savings vehicle, it can be used for college savings as well, since contributions can be withdrawn tax- and penalty-free to pay for college. Compared to other college savings options, this flexibility makes it an excellent choice for many families.

Pros
  • You can save for college and retirement.
  • Contributions can be withdrawn tax- and penalty-free at any time.
  • IRA assets are not included for financial aid calculations, improving aid eligibility for your student.
Cons
  • Earnings withdrawn before age 59½ may be taxed as income and assessed a 10% penalty.
  • There are income limits for eligibility (but high earners may be able to fund a Roth IRA through a “backdoor” strategy).
529 college savings plan

These tax-advantaged plans are offered by states and are designed to help families save for future college costs. Investments grow tax-deferred, and withdrawals are tax-free if used for qualified education expenses. All states offer plans, and you can invest in any state you choose. If your only goal is to save for college, 529 plans are a great tool. They have excellent tax benefits, but lack the flexibility of some of the other options if the money is not used for college.

Pros
  • Earnings grow tax-free.
  • Withdrawals are tax-free if used for qualified education expenses.
  • Some states offer a state tax deduction for contributions.
  • You can change beneficiaries in the future if funds are not needed.
Cons
  • Earnings withdrawn for nonqualified education expenses are subject to a 10% withdrawal penalty and ordinary income taxes.
  • Contributions withdrawn for nonqualified education expenses are subject to income tax.
  • These assets are included in determining your family’s ability to pay for college for financial aid purposes.
  • There are limits on the amount you can contribute annually.

Note that there are also private college 529 plans that allow parents to prepay for tuition credits at certain private schools, locking in future tuition costs at today’s prices. But these are even less flexible than state-sponsored 529 plans, since they are school-specific. 

Taxable investment account

This is a regular brokerage account that is funded with after-tax money. Earnings in the account are taxed, but the money can be used for anything. (This could also be cash in the bank, which won’t yield much and will also be taxed.)

A taxable investment account offers the most flexibility of any option on this list, but it’s the least desirable from a tax standpoint. However, there may be ways to eliminate capital gains taxes by transferring assets to your child and using a combination of the personal exemption, standard deduction and the American Opportunity Tax Credit. But this can be complicated, and I’d recommend working with a tax or financial professional to implement such a strategy. 

Pros Cons
  • These assets are included in determining your family’s ability to pay for college for financial aid purposes.
  • Capital gains, dividends and interest are taxed annually.
Get help

These three vehicles tend to be the best options for college savings, and many families will employ a strategy that uses more than one. Other options, like custodial accounts or cash-value life insurance, are less attractive. A custodial account is one created in the student’s name with someone else assigned as a custodian. The funds must be spent for the benefit of the child and become the child’s once he or she reaches a certain age. Cash-value life insurance includes an investment component, which parents may be tempted to use for college. But high fees and limited investment options make this a poor choice for college funding. In both cases, these vehicles lack flexibility, and since the assets are included in financial aid calculations, they may reduce the level of aid a student receives.

Consider working with a fee-only financial planner who specializes in college planning to help you decide what makes the most sense for your family. It’s important that you don’t let saving for college derail your other financial goals — especially your retirement plans. While your child can take out a loan for college, you can’t do that for retirement. Developing a college savings strategy as part of your long-term financial plan will help you determine how much you can save while still reaching your personal and financial goals.

Mike Eklund is a financial planner at Financial Symmetry in Raleigh, North Carolina. 

Study: State Insurance Department Websites Are Short on Consumer Help

The trillion-dollar insurance industry is largely regulated at the state level — that’s the first place consumers should go for help and information on products such as home, auto and life insurance. But the websites of individual state departments of insurance are falling short on their duties to consumers, according to a new analysis.

The NerdWallet study looked at department of insurance websites for all 50 states and the District of Columbia, scoring each on more than 20 factors to determine which sites were most helpful to insurance consumers. The results: The average insurance department has considerable work to do online when it comes to helping residents navigate the complex world of insurance.

The average rating in the analysis was 60%. The Texas Department of Insurance scored the highest at 98%, and New Mexico’s Office of the Superintendent of Insurance the lowest at 17%.

Insurance department websites were rated on offerings such as updated premium comparisons, updated insurance company complaint data, consumer education resources and the quality of consumer telephone assistance.

These departments “have a lot of information for consumers that no one else has, information that no one else can really help you with,” says Robert Hunter, director of insurance at the Consumer Federation of America and former insurance commissioner of Texas.

Since being notified of the study, several departments have updated their websites, including in New Mexico, where spokesperson Alan Seeley credited the NerdWallet analysis for motivating its consumer-centric updates.

Elizabeth Renter is a staff writer at NerdWallet, a personal finance website. Email: elizabeth@nerdwallet.com. Twitter: @ElizabethRenter.

Dozens show support after deaf woman is refused service at Dunkin' Donuts

A deaf woman who was outraged by the way a Dunkin' Donuts employee treated her is getting support from her community.

Jessica Sanzillo said she's a frequent customer at a Framingham, Massachusetts, Dunkin' Donuts and uses a texting app to order through the drive-through. She said she writes her order and what her kids want on her phone, and then will drive up the window and show them her order.

But when she drove up earlier this month, she said she was refused service because she didn't use the speaker and would not be served her coffee unless she came inside. 

>> Read more trending stories

"There were three other workers there that know me, that see me every day. When the server refused to serve me my drink, none of the three people came over and told him that it wasn't OK, that she's a routine customer, she's deaf. They didn't say anything. They just stood back and watched," she told WFXT.

On Sunday, Sanzillo and several others went through that drive-through and ordered like a deaf person would. They hope this sends a message to others.

"To see, to get them the experience of people that work at Dunkin' Donuts. To know what it's like for when a deaf person is going to come through the drive-through and how to approach that better in the future,” Sanzillo told WFXT through an interpreter Friday.

Hearing people and others who have deaf family members came out to the rally, as well.

"As a parent of a deaf child, I would never want William to be excluded from anything, and so thinking of him wanting to get a cup of coffee later in life and being told he couldn't go through the drive-through like everybody else really upset me,” one parent said.Dunkin' Donuts apologized for the initial incident and said the employee involved has been fired. Read the company's statement below:

"At Dunkin' Donuts, providing a friendly and welcoming restaurant environment for all of our guests is a top priority. We are aware of the guest complaint regarding the franchised Dunkin’ Donuts restaurant at 334 Waverly St. in Framingham. We have been informed that upon learning of the customer complaint, the restaurant’s franchisee who owns and operates this restaurant spoke with the guest to apologize for the experience and to try to resolve the matter. Additionally, the franchisee informs us he has terminated the crew member involved in the incident. Franchisees are required by their franchise agreement to comply with all applicable laws."

Should I Get a FHA Loan or Conventional Mortgage?

Federal Housing Administration loans and conventional loans remain the most popular financing types for today’s mortgage borrowers. But which program makes the most financial sense for you? Here’s how to decide.

The Nuts & Bolts of FHA Loans

FHA loans are insured by the Federal Housing Administration. The program contains two forms of mortgage insurance; an upfront mortgage insurance premium calculated at 1.75% of the loan amount, and a monthly premium based on 0.8% of the loan amount. These forms of mortgage insurance make the FHA loan pricey, however the program is very flexible:

  • New mortgage post-short sale or foreclosure is a three-year wait time
  • New mortgage post Chapter 7 bankruptcy is a three-year wait time
  • Payment-to-income ratios can be as high as 55%
  • Co-signers are permitted
  • Borrowers can finance up to 97% loan-to-value paying off a first and a second loan under rate and term avoiding “cash out” (a lender term that refers to the structure of a mortgage where you’re receiving funds to pay off debt beyond what you owe. It is usually subject to more restrictive guidelines, but that’s not the case with FHA loans.)
  • Very attractive interest rates as low as 3.25% on a 30-year fixed rate mortgage

When FHA Makes Sense

The FHA program makes sense when you have little equity to work with or a unique financial situation. You’ll need at least a 3.5% down payment to purchase a home using an FHA Loan. The program will go as high as the maximum county loan limit in the area in which you are looking. For example in Sonoma County, California for a single-family home that means a loan size all the way to $554,300. If your credit score is anything under 680, an FHA loan generally is optimal.

The Nuts & Bolts of Conventional Loans

Conventional loans are loans bought and sold by Fannie Mae and Freddie Mac, and represent the lion’s share of the mortgage market. These loans, while the most popular, also contain tighter qualifying guidelines than FHA:

  • No mortgage insurance with just 10% down
  • The wait for a new mortgage post-foreclosure is seven years; there’s a four-year wait post short-sale; and four-year wait post Chapter 7 bankruptcy
  • Offers the lowest possible payments

When a Conventional Loan Makes Sense

If you have a credit score over 680 and a 5% down payment, you have the bare minimum required to explore working with a conventional loan. Conventional loans also are stricter on employment history, requiring two years in the same field, as well as payment-to-income ratio, which is a max of 45%.

Which Loan Program Is Most Suitable for Me?

Conventional

  • Your credit score is 680 or higher
  • You have a big down payment
  • If you have a big down payment and a so-so credit score under 680, then conventional could be a good vehicle, but your interest rate will be higher due to credit score.

FHA

  • Your credit score is below 680
  • Divorced? Have a previous derogatory credit event such as a foreclosure? Then FHA would be the route to take.
  • Small down payment but great credit score? The FHA primarily would be your vehicle, although a 5% conventional loan would be a solid choice as well.

The key is to understand the characteristics of both programs and how they relate to your financial picture. Right out of the gate you might be a good candidate for either program. Selecting the right loan is a function of choosing the one that is best in alignment with your payment and cash flow expectations.

Remember, if you’re considering applying for a mortgage, it helps to know not only how much house you can afford, but also where your credit stands before you begin the process. That’s because your credit scores help determine what types of rates and terms you may qualify for. You can get two free credit scores, updated every 14 days, on Credit.com.

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This article originally appeared on Credit.com.

6 Things to Do If Your Credit Card Balances Are Creeping Up

About half of all Americans use their credit cards strictly as a method of payment, avoiding interest charges by paying each statement balance in full. The other half will frequently (or always) carry a balance on their credit cards. And while most credit card users will tell themselves that they have their debt under control, some will eventually become worried when their balances keep growing.

Since it’s considered unsecured debt, credit card interest rates are usually higher than other types of financing such as car loans and mortgages. And since credit card interest payments are never tax-deductible, letting your balance grow can be extremely costly. Furthermore, having a high credit card balance will raise your debt-to-credit ratio, and can hurt your credit score. With a lower credit score, you will receive less favorable interest rates when applying for other financing. Therefore, it’s vital that you control your credit card balances before they begin to control your personal finances. (You can see where you credit stands by viewing your two free credit scores, updated every 14 days, on Credit.com.) 

If your credit card balances are creeping up and it’s starting to creep you out, consider these six things.

1. Go On a Diet

Eating less won’t necessarily help you cut your credit card balance (unless you eat at restaurants a lot), but it can make sense to go on a spending diet. Start by cutting out all unnecessary expenditures, while postponing essential purchases for as long as possible. Then, look for ways to save money on all your essential purchases. 

2. Increase Your Monthly Payments

One of the worst mistakes that you can make with your credit cards is to only pay the minimum balance. When you pay just the minimum, it can take years to pay off your credit card debt, even if you don’t make any new charges. In fact, you should be paying as much as you can in order to lower your interest charges and pay down your balance as soon as possible.

3. Make Your Payments Sooner

Just because your statement shows a due date a few weeks in the future, doesn’t mean that you should wait that long to make your payment. Credit card interest is calculated based on your average daily balance, so you will save money by making your payments as soon as you can.

4. Make More than One Payment Each Month

Another way to pay down your credit balances faster is to make multiple payments each month. For example, you could choose to make a payment twice a month after you receive your paycheck, or anytime you receive a significant amount of cash. When you do this, you will reduce your average daily balance with each payment, which will lower your interest charges.

5. Use a Different Method of Payment

By design, credit cards make it easy to spend money you don’t have, which enables some people to get carried away. If this is happening to you, it might be time to store your credit cards in a secure place and temporarily start using cash, checks or debit cards. Some people put their cards in their sock drawer, but others will lock them in their safe or even freeze them in a block of ice.

6. Consider a Balance Transfer

The biggest problem with a high credit card balance is the interest charges that you face. Thankfully, there are credit cards that offer 0% annual percentage rate (APR) promotional financing on balance transfers that last from as little as six months to as long as 21 months. When you open a new credit card account with one of these offers, you can transfer your existing balances to that account and avoid interest charges during its promotional financing period. When the promotional financing expires, the standard interest rate will apply to any unpaid balance. Just be aware that most credit cards with 0% APR promotional financing offers will apply a 3% to 5% balance transfer fee to the new balance.

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This article originally appeared on Credit.com.

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