Personal Finance Articles

Pluses and minuses of Kinds of Investments

2012-02-10T02:34:00.001-08:00

As soon as decision making best places to spend your cash, you have to usually think about your current investment decision desired goals and goals. A variety of opportunities take different degrees of pitfalls and also prospective come back. A financial institution Dvd is definitely an dependable investiture. The CD can be FDIC insured nearly $hundred,000, and so presently there truly can be minimal peril. The sole bad thing is that you simply are unable to distance themself those funds inside Disc for any certain quantity of their time alternatively you may obtain a punishment. Bank building Compact disks in general pay just as much as a few% attention. A new bond it's essentially financing you're making with a firm or even a federal government. Bonds rich person numerous examples of threat, via fundamentally danger-free treasuries in order to crap provides. The more expensive risking potential the bond, the higher the give back will most likely follow.

Stocks are purchases throughout companies. Based on the organization, the risk of an investment can be higher or maybe very low. Certainly, getting stock in Manley and Johnson can be fewer high-risk than a unexampled net startup business. Normally, the stock exchange earnings usually in relation to 15% annually, although the actual reappearance involving a investment will be different importantly. A mutual fund generally invests inside more than 100 stocks and options, therefore it is an instantaneous solution to radiate your own stock portfolio. Even so, your open-end fund in general prices any tip, and that is concerning 1% of your assets per year. As a result charge, most common resources tend not to outmatch industry; A imp without consideration finding one hundred stocks and shares although not getting a fee may well outmatch many common funds.

Real estate investment is often a favorite investiture. Decreasing owning a home you'll make is the place you buy your home. Your home can move up or down within worth once you market it; this will depend about the housing market in your town.

Make money online and Together with Affiliate marketing

2012-02-09T03:06:00.001-08:00

Earn money online is exactly what many many men and women pipe dream. The thought of doing the job on the web provides for us plenty of positive aspects like the overall flexibility associated with operating at the personal rate, working in your own under garment, no need to awake ahead of time, evade this good morning visitors dash & so on. The rewards is just too numerous to say the item in this article.

There are several solutions to generate income online yet you will find one particular significant application you need to master to be able to generate income online. This crucial cock may be the Internet. You need to realise the ins and outs in order to touch for this great assets. Using this, Internet marketing represents a crucial role in assisting you to earn money online. You will end up missing without the know-how throughout affiliate marketing.

There are many marketing methods of Online marketing merely I will not begin a lot detail involved with it. Consequently at this point tips on how to truly make money online along with Website marketing? There are lots of strategies to make it happen.

Many people web log for a job. Many people web site with regards to anything that attention all of them & the future prospect. Blogging and site-building is an moderate men and women use for getting traffic & the item flip convert which visitors in to profits. Bloggers sell promotion advertisings place to advertisers. There's also a lot of software programs on the net such as PayPerPost, Written text Url Advertisings, Paid out Critiques to allow them to monetise their particular blog site. So, blogging and site-building is really a popular method to generate income.

Another popular technique has been doing web multi level marketing to generate money on-line. At this time there several favorite multilevel marketing or maybe MLM plans available. A good example may be the Success College or university. Most multilevel marketing applications do offer enrolling by using the web and never having to face the individual. On the other hand, you should be good within internet website marketing.

Currently one of the most easiest way to generate money on the internet is the one and only affiliate marketing. You won't have to have a product or service, an internet site, you should not make a record along products, do not need manage charge cards transaction, don't bother approximately client phone calls & many more.

Which means that an individual showcase other folks items in exchange for the payment. Oahu is the the majority of best established business model to generate money on the web. You will end up given any affiliate url and also a handful of promoting points or perhaps tolls through the product owner. Nevertheless don't assume all item managers give you marketing instruments.

Everything you should do now could be to market your selected affiliate program website link & if someone else click on the link & thought i would pip out, you create A payment from the financial transaction.

I would suggest to your account should you be only starting at on your quest inwards accomplishing your current personal freedom on the internet, being a online marketer is most beneficial & easiest way for making cash on the net. Only visit for getting access & get cracking to become super affiliate marketing expert quickly.

In summary, to make funds on-line(a), you need to be educated within online marketing. The actual good results depend on knowing about it with the internet abilities. The net is indeed big that the probable of creating funds on the web cannot remainder.

Standing Out within the Group

2012-02-08T07:24:00.000-08:00

I realize My spouse and i’meters possibly gonna appearance how old irrrve become with the information When i’michael gonna declare or maybe, even worse, manufacturer me personally equally hopelessly anachronic. Regardless, My partner and i’onal observed our own latest stage business way of life to get progressively impersonal. For those who have question about it, twenty-four hours a day acquire a telephone, telephone dial improving many companies and continue to experience an truthful to be able to amazing benefits existing, eupneic man to go to at stake. Sure, you could possibly really acquire one, and you’lmost all wear the epidermis down ones index finger push the telephone number sleep pad looking for through the machine-controlled requests and you also’re also more likely to drop the higher part of 1 hour hanging around in hold waiting around.

One in all likelihood shouldn’capital t workout on in which example. I realize, One’ng offered the great amount of the people automatic near and dear during my occasion, merely I want to to generate a point. Many of us’ng become reliant upon technology and doing work by way of pc proxy. It’ohydrates normal. Exceeding disadvantages means busting out from the norm, although. Increasing your business will take a lot more than undertaking exactly what the other market is doing. Bearing that in mind, well then , i'll create a radical recommendation that basically shouldn’capital t possibly be which radical, promoting having a particular contact.

Not any, a person wear’big t ought to professionally response almost every phone in which has your office. Things i’mirielle hinting is always to art print enterprise card game (in the event you’ng got obsolete or perhaps boring playing cards, get more finances having specialist, coloring business playing cards) and round with your social network abilities. I’michael definitely not talking about trashing with doorways and striking people who have belligerent gross sales pitch. What I’meters referring to can be definitely appealing persons in your community. You actually shouldn’T cause using your card, sometimes. Preserve the company circuit board with the tail end of your discussion, when you’onal designed a individual association. In the process, a person’ll make some pals, discover clients and be a notable as well as recognizable encounter with your neighborhood.

Of which’utes the real key. Whenever you put an individual deal with on your own business, men and women will experience convenient wasting their together with you. Granted the option, about buyers will want to manage person they do know inside their biotic community when compared with another cool, faceless corporate institution. That will work for both excessively. Since your clients will be friends and family rather than walking money involved, you actually’ll realize that the degrees of support and also deal with supplying on the pledges increases, which will even more bolster the client platform.

It’s a win/win situation that will need an extremely minimal expenditure - exactly the expense of organization minute card impression as well as a belittled expenses of energy. It may be what in the end helps make your business the perfect, regional organization. You never know, it could also motivate you to definitely go out your automatic clerk in addition to solution ones telephone if a customer cell phone calls. Hi, I can usually desire, right?

Accountancy Rivalry

2012-02-08T06:57:00.000-08:00

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Pension Red Alert: 70% Of Pensions Are Never Audited

2012-02-06T11:41:00.000-08:00

Chances are that your pension or 401k plan has never been audited. No one's checking annually to see if the money's really there. Worried yet? It should freak you out, in my opinion. According to regulators, seventy percent of the nation's pensions have never been audited.

Lest you think I'm an alarmist, the Inspector General of the U.S. Department of Labor earlier this year in his Semiannual Report to Congress wrote that plans lacking full audits "provide no substantive assurance of asset integrity to plan participants." That's a pretty dire assessment. In layman's terms it means that if your money is invested in a pension that has never been audited, no one knows for certain the money is actually there. That, I would submit, should be of concern to every investor in an unaudited retirement plan. You need to find out if your pension is unaudited and, if so, demand a true audit before it's too late.

Is this the familiar tale of an agency of the federal government being asleep at the wheel while an outrageous compromise to the integrity of the nation's pensions came to pass? A regulator who woke up far too late to abuses?

Not exactly. In fact, nothing could be farther from the truth.

Would you believe that every year since 1989, the Inspector General of the DOL has sounded the alarm about the risks to pension participants related to failures to audit? For over twenty years, the Inspector General has recommended that Congress close the loop-hole in the federal law applicable to pensions, ERISA, that allows this state of affairs to persist.

Counsel to the Inspector General recently stated to me “we have long believed that this is an important issue. A lot of pension dollars have not been properly audited.”

I am told that this year, for the first time in over two decades, the Inspector General is considering dropping the recommendation to Congress to address this issue of critical importance to retirement savers. Why? Because the recommendation has been rejected so many times. I can't blame the Inspector General's office from being discouraged but, in my opinion, it would be a collosal mistake to give up at this point in time because we are only now on the cusp of determining the harm related to unaudited plans.

What's going on here? Under ERISA, a pension sponsor may instruct the auditor to a pension not to perform any auditing procedures with respect to investment information prepared and certified by a bank or similar institution. That's right-- no auditing procedures. The bank simply certifies the accuracy and the completeness of the information submitted to the auditor and the auditor includes it in his financial report with the following gargantuan caveat: Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the accompanying financial statements and schedule taken as a whole (emphasis added). In the words of the Inspector General, these so-called "limited scope audits" are "no opinion audits." They're worthless. The auditor is saying to you, "because I have been instructed not to look at certain pieces, I cannot tell you what the whole is worth."

But it's not just a sliver of plan assets that the auditors are not examining -- it's often all or virtually all of the assets in plans. To make matters worse, plans are increasing their high risk bets by loading up on hard-to-value assets, such as private equity and hedge funds, in a desperate attempt to close their funding gaps. What are these hard-to-value assets worth? Who knows? Nobody's checking, or even concerned. The custodian banks have provisions in their contracts which specify that they may conclusively rely upon values that these lightly-regulated managers provide to them. Of course, since these managers are paid a fee based upon the value of the assets they manage, they have every incentive to inflate valuations. Let's hope they're committed to telling the truth-- even if it means their rich fees dwindle. The net result is that the auditors rely upon unverified statements provided by custodian banks and the banks, in turn, rely upon unverified valuations provided by hedge fund managers handling plan assets. Nobody is required under the law to check that the money is there. Sounds Madoff-ish to me.

Here's some background on this impending train wreck. In November 1989, the Office of the Inspector General for the U.S. Department of Labor issued a report titled “Changes Are Needed in the ERISA Audit Process to Increase Protections for Employee Benefit Plan Participants.” According to the Inspector General, the most critical recommendation made in that report was to amend ERISA to require full scope audits-- real audits, not bogus no opinion audits. In September 1996, the Inspector General issued a report entitled “Full Scope Audits of Employee Benefit Plans Still Needed” which stated that “the need for full scope audits of employee benefit plans is as important today as it was 7 years ago.” This review confirmed that, at that time, almost half of the plans reviewed received limited scope audits and disclaimers of opinions. The Office of the Chief Auditor “concluded that this is a disservice to plan participants in terms of protection and in terms of useful information the participants need to monitor their plans’ ability to pay benefits.”

In 1990, 1992 and 1998, the GAO recommended that the limited scope audit exemption should be repealed. According to the GAO:

“Under this limited scope audit, the auditor is required to obtain financial statements from the company holding the investments and a certification from that company that the statements are accurate and are a part of the company’s annual report. However, the auditor would not perform the normal procedures designed to provide certain basic assurances about the existence, ownership, and value of a plan’s assets held in trust. The resulting lack of audit work can result in an auditor disclaiming an opinion on the financial statements."

No normal procedures performed to establish basic facts like the assets ... exist? That's a pretty basic fact that, in my book, somebody ought to know -- with absolute certainty.

But the GAO had more to say:

"The disclaimer can cause two problems. First, it can diminish the value of an audit by leaving a significant gap in the information intended to help participants evaluate their plan. For example, plan participants would have no basis for judging whether excluded investments are vulnerable to mismanagement, fraud, or abuse. Second, the disclaimer language could confuse the participant. It says that the auditor does not express an opinion on the financial statements and supplemental schedules, but that the auditor does provide some assurance that the form and content of information included in statements and schedules comply with the Department of Labor rules and regulations. As a result of this potentially confusing wording, users of limited scope audit reports could be uncertain about what, if any, assurance these reports provide.”

For those of you participating in an unaudited plan where signifcant assets are invested in hedge funds and other hard-to-value investments, I can assure such investments, if excluded, are "vulnerable to mismanagement, fraud, or abuse," and you should be very concerned.

The GAO is right that users of limited scope audit reports should be uncertain about what, if any, assurances these reports provide. I can assure you that, when and if sued, auditors who issue such opinions will claim that the opinions plainly warned that no assurances were provided.

As mentioned earlier, this year the Inspector General in his Semiannual Report to Congress recommended repeal of ERISA’s limited-scope audit exemption. According to the Inspector General, “This provision excludes pension plan assets invested in financial institutions such as banks and savings and loans from audits of employee benefit plans. The limited audit scope prevents independent public accountants who are auditing pension plans from rendering an opinion on the plans’ financial statements in accordance with professional auditing standards. These “no opinion” audits provide no substantive assurance of asset integrity to plan participants or the Department (emphasis added).”

You should be concerned if your retirement savings are held in a retirement plan that has never been audited. Don't let anyone tell you otherwise. Call me crazy, but it does matter whether procedures designed to verify the existence, ownership, and value of a plan’s assets have been performed. I predict that we are on the verge of learning just how worthless no opinion audits of pensions really are. I am confident that in the future it will become apparent that lack of scrutiny has resulted in widespread misrepresentation of pension asset values. Take action now to protect your retirement security.

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Fixed mortgage rates end year above record lows

2012-02-06T11:31:00.000-08:00

WASHINGTON (AP) — Fixed mortgage rates rose slightly this week off their record lows. The year ends much like it began, with few people able to take advantage of the best rates in history.

Freddie Mac said Thursday that the average on the 30-year home loan increased to 3.95 percent from 3.91 percent. Last week's rate was the lowest average on records dating to the 1950s.

The average on the 15-year fixed mortgage rose to 3.24 percent. That's up from 3.21 percent, also a record low.

Rates have been below 5 percent for all but two weeks in 2011. Even so, this year is shaping up to be one of the worst ever for home sales.

Previously occupied homes are selling just slightly ahead of last year's dismal pace. And new-home sales appear headed for their worst year on records going back half a century.

Next year could be better. More than 5 percent of households said this month they plan to purchase a home within the next six months, according to the Conference Board.

Builders are also hopeful that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose in December to its highest level in more than a year.

But so far, rates are having no major impact. Mortgage applications have fallen slightly in recent weeks, according to the Mortgage Bankers Association.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many Americans don't want to sink money into a home that they fear could lose value over the next few years.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week. The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan was unchanged at 0.7; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate rose to 2.88 percent from 2.85 percent. The average on the one-year adjustable loan ticked up to 2.78 percent from 2.77 percent.

The average fees on the five- and one-year adjustable-rate loans were unchanged at 0.6.

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Celebrity, Inc.

2012-02-06T11:19:00.000-08:00

What can four drunk airplane passengers, first time parents, and a delightful new book called Celebrity, Inc. do for your wallet?

Plenty.

Let me start with the drunks and new parents. Monday night I boarded a very delayed flight from Houston to Los Angeles. Behind me were four 20/30-somethings boisterously swigging from "coffee" cups. (Our gate was across from a Cantina and you could practically smell the tequila in their paper cups.)

As the boarding continued they grew increasingly animated. Their frenetic energy seemed to wind up not just each other but everyone around them. Fellow passengers were visibly agitated.

Just before the plane doors closed, a young couple came on with a sleeping baby. The last two open seats were amongst this motley crew.

Suddenly, everything changed.

The presence of the earnest and exhausted parents had an immediate calming effect on both the inebriated passengers and those around them. It was as if a mirror had been placed in the center of the plane to remind us all of our humanity.

Enter, Jo Piazza's delicious new book, Celebrity, Inc: how famous people make money.

To me, this book is the figurative version of the newborn's parents getting on the plane. It serves as a mirror reflecting back the reality what's in the "coffee" cups of the celebrity scene.

That got me wondering what other financial lessons the author of Celebrity, Inc. might have stumbled across while writing this fascinating book. Thankfully, Jo Piazza was willing to share with us...

Q: Of the celebrities you profile in Celebrity, Inc. whose money attitude were you most impressed with and why?

Jo: Despite current controversy I was completely impressed with the Kardashian's money attitude and their work ethic. I have never met a celebrity crew who works so hard to maintain their brand. I don't necessarily agree with the massive amounts they are paid to do what they do, but unlike a lot of celebs they truly do work for it. And beyond that they manage their money well. They budget, they funnel funds back into new projects, they try not to spend excessively and they do donate a portion of their income to charity each year.

(2) What surprised you the most about the money habits you observed during your Celebrity, Inc. research?

Jo: So many of the people I talked to over-spent their budgets on a consistent basis even though they were making crazy amounts of money. Spencer Pratt told me he and Heidi Montag pulled in about $10 million in 4 years but because they thought it would keep coming at the same rate they blew through it all. That's a common thread I found with a lot of celebs. They're making so much but they're spending just as quickly. They buy $5 million houses and spend half a million on a security detail and they rarely save a dime. I just don't think they realize the shelf life of fame is shorter than ever and they may not be famous tomorrow.

(3) What personal finance lessons do you think the rest of us can take away from the way famous people live their lives?

Jo: Budgeting for a rainy day is the best thing we can learn from celebrities in terms of personal finance. I saw so many cases of celebs who thought it would last forever and then forever came up really... quick.

I was inspired by the extent to which celebs expand their personal brands. Tim McGraw went from country singer to fragrance king. When Valerie Bertinelli's career as an actress seemed like it was over she reinvented herself through a weight loss campaign. I don't think we see these instances of celeb entrepreneurship as inspiring enough and I truly think they should be a lesson in taking chances, building a new business and making lemonade out of lemons.

In many ways our celebrity culture is like a group of chaotic drunk people. It lurches rapidly from one topic and fad to the next. In the heat of the excitement money can feel like no object. But the financial hangover of being, or trying to emulate, that lifestyle can result in a serious financial crash.

So pick up a copy of Celebrity, Inc. and tell me what you think. Does our national obsession with the lifestyles of the rich and famous ever cause you to do things with your money that you later regret?

[This post originally appeared at ManishaThakor.com.] For more MoneyZen in your life, follow Manisha on Twitter at @ManishaThakor on Facebook at ManishaThakor or sign up to receive Manisha's MoneyZen blog via email by clicking here.

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How I Woke Up From My Money Coma

2012-02-06T11:04:00.000-08:00

One afternoon two years ago, three big bills hit my mailbox—a grand total of $11,000 in unexpected expenses. As the founder and CEO of DailyWorth, I knew I should have sat down addressed the situation right away.

Instead, I fell into a money coma for two weeks, ignoring the bills and pretending everything was just fine—until I woke up one day to an empty checking account.

Talk about a wake-up call.

I emerged from my money coma, paid the bills, reexamined my budget, set up a curveball account to cover out-of-the-blue expenses—all the things a good Chief Household Officer does—and assumed I had made a full recovery.

Until recently, when my family and I moved—and I managed to blow a $2,000 hole in my budget--$2,077 to be exact. I’d love to tell you how I did it, but that’s the point. Money Coma No. 2.

That’s when I realized that, despite my curveball account and trusty Excel spreadsheets and Mint budgeting charts, that it’s not the financial events themselves that trigger a money coma, but something within me.

Obviously, it’s not that I can’t do math or handle complex accounting. I’ve been an entrepreneur for most of my adult life, and I’m accustomed to managing deals in the millions.

So how does a busy executive cure a mysterious tendency to fall into patches of financial oblivion? I consulted with MP Dunleavey—and not just because she is the DailyWorth editor-in-chief. MP is a long-time personal finance columnist, and she’s dealt with some financial denial of her own.

First, MP pointed out that being a successful, confident, savvy career woman can (weirdly) be an obstacle when it comes to handling your own personal accounts.

It’s hard to admit to yourself that the know-how you bring to your work doesn’t automatically carry over to your wallet or your 401k.

So yes, I can bat around terms like EBIDTA and CPMs in any board meeting. But that doesn’t necessarily help me at the grocery store, Target (my personal downfall), or when I open my IRA statements.

So you have to come to terms with the need to build whatever is missing in your financial skill set.

Next, to banish the money fog, MP recommended just looking at the numbers, the real numbers. There’s nothing like viewing your actual transaction history to see where your cashflow is breaking down. The photo above is me, pulling up my checking account statement. Really.

I’m not sure why it’s hard to look at raw numbers. I suppose it reveals my weakspots, or where I wasn’t planning as well as I should have (an exec mom’s least favorite feeling). But in this case, it was helpful to simply see that between a slew of unforeseen moving/new-household costs, plus the need for extra child care—it’s not surprising that my budget collapsed.

But there was good news in the numbers, too. MP was impressed that despite the shortfall, I still kept contributing to my retirement fund—because I was smart enough to put that on automatic pilot a few years ago (and I never mess with it).

The bottom line for me is realizing that my personal finances require the same oversight and scrutiny and regular adjustments for reality that my company’s finances do. I’m not sure if that means I’ve found a permanent cure for my money comas, but I’ll keep you posted.

Amanda Steinberg is the founder of DailyWorth.com, a community of women who talk money. Sign up here.

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The Benefits Of Buying A Home With Cash

2012-02-06T10:51:00.000-08:00

This story appears in the Dec. 5 Investment Guide issue of Forbes Magazine. Click here for the full Investment Guide 2012 special report.

When a 62-year-old financial advisor bought a two-bedroom Manhattan co-op recently, he showed up at the closing with a check for the full $970,000 purchase price. No mortgage? “The money I had in cash was sitting getting 0% interest,’’ explains the man, who asked not to be named. “It made absolutely no sense to borrow.”

There were other benefits as well to buying for cash, he says. He figures he got a “liquidity discount” for being able to close quickly—the asking price had been $1.05 million. And he avoided the hassles and paperwork that come with getting a mortgage these days. At the closing, he gloats, “they spent more time making photocopies than anything, so we sat discussing Broadway plays.”

Similar closing scenes are playing out across the country these days—minus the theater chitchat. Rates for 30-year fixed mortgages are hovering at 4%, and 15-year fixed loans can be had for 3.5% or less, the lowest in more than 50 years. Yet the National Association of Realtors estimates that roughly 30% of U.S. home buyers are now making their purchases 100% in cash, compared with 15% in 2008.

Some cash buyers are foreigners, who have never easily qualified for U.S. mortgages. Some are very-high-net-worth folks who have long favored cash for their multimillion-dollar trophy mansion purchases. The increase in cash buying comes mainly from two other groups: real estate investors, who nowadays rarely qualify for mortgages at all, and older buyers (like the New York financial advisor) who could qualify for mortgages but don’t want to.

In foreclosure-plagued Florida, where prices in some areas are down 55% from the peak, investors and snowbirds bearing cash dominate the market. Charlie Brasington is chief executive of Hoffman Development Group, which since 2008 has been using cash from private investors to buy distressed Tampa- and Palm Beach-area condo buildings from banks. Hoffman fixes the properties up and then sells the units to end users. Brasington reports two-thirds of the roughly 300 units Hoffman has sold so far have gone for cash, as have all eight of the $1 million-plus penthouses it has moved.

“These people probably have $5 million or more, so to take 10% of it out and buy a quality home in Florida and know that you’ve got your stake in the sand, that may be a good investment,” Brasington says. “Your cash is not making money in a CD, that’s for sure, and in the stock market there’s volatility. In real estate, sure, you may have some downward trend still, but there’s not that volatility anymore.”

A sales pitch? Sure. But recent cash buyers make similar points, and signs abound that Florida prices may have bottomed. If you’re considering a cash purchase, here are some pointers.

Cash buyers often get a discount

“Until recently I’d say sellers didn’t care that the buyer was coming in all cash or financed, they just wanted the highest number. Now the game has changed,’’ says Tracie Hamersley, a senior vice president at Citi Habitats, a New York City-based realty firm. “While banks are lending again, it is much more onerous, and there are many hoops to jump through. So someone who can close in cash can in most cases qualify for somewhat of a price discount based on that sureness of a sale.”

That cash-is-king phenomenon is being reported by Realtors across the country. “It’s like all of a sudden having this four-star gold status,” says Karen Bergin of Coldwell Banker Advantage in Overland Park, Kans., who has represented three baby boomer cash buyers so far this year. One of her clients, a couple selling their western Kansas farm to relocate to the Kansas City area, even managed to secure an extended closing period while they awaited a buyer for their farm.

Closing costs are lower with cash

Cash buyers can also save on closing costs. You don’t have to fork over money to pay a bank attorney for the mortgage. This is an expense that can run $750 and up (although it can be wise to retain your own lawyer). You don’t have to put real estate taxes in escrow up front nor pay the estimated $300 to $600 for a mortgage application plus additional thousands in loan origination fees and assorted junk charges. And you aren’t required to cough up $400 to $600 for an appraisal, which mortgage lenders insist upon, or, in a growing number of cases, multiple appraisals. (The multiple appraisal requirement is popping up in foreclosure-riddled areas where nondistressed homes have few sales to be compared against.)

Should you get an appraisal anyway? Most Realtors still strongly recommend one, in addition to a home inspection, to ensure you aren’t overpaying or buying hidden structural problems. But if it’s clear you’ve negotiated a good price, an appraisal may not be an imperative.

Another expense that will drop: title insurance, which offers protection against problems with the chain of ownership and preexisting claims like unpaid property taxes or liens placed by stiffed contractors. On a $600,000 house with a 20% down payment, title charges, which include researching local land records, can easily top $2,000. But roughly one-third of that is for coverage that protects only lenders (which, of course, they mandate you get and pay for). Cash-only buyers don’t have lenders, so there’s an immediate savings right there. Indeed, as a cash buyer, it’s up to you whether you want title insurance at all. Realtors say it’s a prudent add-on.

Getting a mortgage is not guaranteed

No matter how good your credit, if you haven’t gotten a mortgage in a while, you could be in for a shock. Even if your finances pass muster, the lender will likely pull the funding if the required home appraisal doesn’t reach the price you’ve agreed to pay. That’s the biggest issue hampering home sales this year, says Jed Smith, a managing director at the National Association of Realtors, which tracks sales data. (Some Realtors gripe that gun-shy appraisers are low-balling property values.)

The mortgage approval process also takes longer these days—an average of 45 days, up from 30 in 2008, according to online mortgage supermarket LendingTree.

Here’s another factor to be aware of. The maximum size for “conforming” government-backed loans—those carrying the lowest rates with a traditional 20% down payment—was reduced in October. In highest-cost jurisdictions, such as New York City, Bergen County, N.J. and Los Angeles, the maximum is now $625,500, down from $729,750. Most everywhere else the maximum is now $417,000, down from $443,750. Those taking larger nonconforming loans generally must pay a 0.5% higher rate, put 30% down and meet even tougher credit standards.

On the other hand, if you are a cash buyer, all these mortgage difficulties are to your benefit, since they could wipe out other potential bidders who do need a loan. (If you’re paying cash, make a bid that doesn’t have a mortgage contingency—and stress that point to the seller.)

You’re giving up a tax break—now

Interest on up to $1.1 million in mortgage principal originally used to buy, build or improve a first (and second) home is currently tax-deductible. But if you later borrow against your equity for anything other than home improvements (say, for college tuition) your deduction is far more limited. In that case, interest on only the first $100,000 of home-equity borrowing is deductible, and even that isn’t allowed when you’re calculating whether you owe more under the dreaded alternative minimum tax. (You might be stuck in the AMT if you pay high state and local taxes and earn between $200,000 and $500,000.)

Keep in mind that this is all under current law. There’s been lots of talk in Washington about a tax reform that might lower tax rates while curbing tax breaks, including the mortgage interest deduction.

Even without a mortgage you get two other tax breaks from owning a primary residence. First, when you sell, the initial $500,000 in capital gains profit per couple ($250,000 for a single) isn’t taxed. Second, you’re getting a tax-free economic return on your investment in the form of free rent for all your years of residency.

Cheap money is relative

With rates so low, why not take out a mortgage and use your spare cash to invest? That’s an attractive option, but only if you believe your aftertax return on that investment will be greater than your aftertax cost for the mortgage, says James Maule, a Villanova Law School professor who specializes in taxes. He explains, “It depends on where you think your cash will make the most money or be the safest investment.”

Finally, don’t let the mortgage question obscure the bigger issue. Since you can always rent, is buying a house in the market you’re looking at a good investment? That depends on whether prices have bottomed (or are close to bottom) and how high local rents are.

Remember that New York financial advisor who paid cash for his co-op? Here’s a little insight into how this longtime renter decided the time was finally right to buy.

He figures the apartment he bought would rent for $5,000 a month or $60,000 a year, a 6% yield on his $970,000 investment. But he pays the co-op corporation $2,540 a month, or $30,480 a year, in maintenance charges to cover things like building operating expenses, property taxes and debt service on the building’s own borrowings. If he itemizes he gets to deduct his share of those tax and interest bills. So he reckons he’s still getting a 3% yield on his $970,000 investment, compared with the 2% that U.S. Treasury bonds are paying.

That assumes no appreciation of the apartment—and he does expect some. After falling roughly 23% from their 2008 peak, Manhattan co-op prices have been showing signs of a revival. Moreover, rents there are rising fast, up 7% in the year through October, according to Citi Habitats.

All in all, a sound use of money he’d otherwise have sitting in cash. Not that he intends to rent out the apartment, mind you. He and his wife plan to enjoy their new home, particularly the five walk-in closets, a coveted amenity in the cramped quarters of Manhattan.

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Rate on 30-year mortgage ticks up to 4 pct.

2012-02-06T10:26:00.000-08:00

WASHINGTON (AP) — The average rate on the 30-year mortgage stayed hovered above the record low for a third straight week. But cheap mortgage rates have done little to boost home sales or refinancing.

Freddie Mac said Thursday that the rate on the 30-year loan ticked up to 4 percent from 3.99 percent. Six weeks ago, it dropped to a record low of 3.94 percent, according to the National Bureau of Economic Research.

The average rate on the 15-year fixed mortgage rose to 3.31 percent from 3.30 percent. Six weeks ago, it hit a record low of 3.26 percent.

Rates have been below 5 percent for all but two weeks this year. Yet this year could be the worst for home sales in 14 years.

Mortgage applications fell 10 percent this week from the previous week, according to the Mortgage Bankers Association.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many Americans don't want to sink money into a home that could lose value over the next three to four years. And most homeowners who can afford to refinance already have.

The low rates have caused a modest boom in refinancing, but that benefit might be wearing off. Most people who can afford to refinance have already locked in rates below 5 percent. Refinancing fell 12.2 percent last week, according to the mortgage bankers group.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees for the 30-year and 15-year fixed mortgages were unchanged at 0.7.

The average rate on the five-year adjustable loan fell to 2.97 percent from 2.98 percent. The average rate on the one-year adjustable loan increased to 2.98 percent from 2.95 percent.

The average fees on the five-year and one-year adjustable loans were both unchanged at 0.6.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

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Home market being held back by wary first-timers

2012-02-06T09:57:00.000-08:00

WASHINGTON (AP) — This should be a great time to buy a first home. Prices have sunk to 2002 levels. Sellers are waiting anxiously as homes languish on the market. Mortgage rates are their lowest ever.

Yet the most likely first-time homeowners, especially young professionals and couples starting families, won't buy these days. Or they can't. Or they already did, during the housing boom. And their absence helps explain why the housing industry is still depressed.

The obstacles range from higher down payments to heavy debt from credit cards and student loans. But even many of those who could afford to buy no longer see it as a wise investment. Prices have sunk 15 percent in three years.

"I've looked for a home, but the places we can afford with the money we have are not that great," says Seth Herter, 23, a store manager in suburban St. Louis. "It also doesn't seem smart anymore to buy with prices falling. Buying a home just doesn't make sense to us."

The proportion of U.S. households that own homes is at 65.1 percent, its lowest point since 1996, the Census Bureau says. That marks a shift after nearly two decades in which homeownership grew before peaking at 70 percent during the housing boom.

The housing bubble lured so many young buyers that it reduced the pool of potential first-timers to below-normal levels. That's contributed to the decline in new buyers in recent years.

In 2005, at the height of the boom, about 2.8 million first-timers bought homes, according to the National Association of Realtors. By contrast, for each of the four years preceding the boom, the number of first-timers averaged fewer than 2 million.

Still, the bigger factors are the struggling economy, shaky job security, tougher credit rules and lack of cash to put down, said Dan McCue, research manager at Harvard University's Joint Center for Housing Studies. The unemployment rate among typical first-timers, those ages 25 to 34, is 9.8 percent, compared with 9 percent for all adults.

"The obstacles facing first-time buyers are big, and it's changing the way they look at home ownership," McCue says. "It's no longer the American Dream for the younger generation."

First-timers usually account for up to half of all sales. Over the past year, they've accounted for only about a third.

A big reason is tougher lending standards.

Lenders are demanding more money up front. In 2002, the median down payment for a single-family home in nine major U.S. cities was 4 percent, according to real estate website Zillow.com. Today, it's 22 percent.

And one-third of households have credit scores too low to qualify for a mortgage. The median required credit score from FICO Inc., the industry leader in credit ratings, has risen from 720 in 2007, when the market went bust, to 760 today.

Homes in many places are the most affordable in a generation. In the past year, the national median sale price has sunk 3.5 percent. Half the homes listed in the Tampa Bay area are priced below $100,000.

The average mortgage rate for a 30-year fixed loan is 4 percent, barely above an all-time low. Five years ago, it was near 6.5 percent. In 2000, it exceeded 8 percent.

When the economy eventually strengthens, the housing market will, too. More people will be hired. Confidence will rise. Down payments won't be so hard to produce.

The question is whether first-time buyers will then start flowing into the housing market. That will depend mainly on whether they think prices will rise, said Mark Vitner, senior U.S. economist at Wells Fargo.

"It's a guessing game as to when things will turn around," Vitner said. "But until they do, you won't see young people buying homes."

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First Person: I Repaid My Student Loans While Still in College

2012-02-06T09:40:00.000-08:00

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

The first two years of my college experience was spent at a community college. My tuition was covered, but I took out a loan for $20,000 to cover living expenses. Upon transferring to a costly four-year university I received a hefty scholarship, which covered most of my expenses. Still, my loans were at $11,500 per year. The day of my graduation, I received the coveted diploma and a not-so-coveted array of bills for my student loans.

However, the difference between other students and myself was the large sum of money lingering my savings account that I started four years prior. Let me explain how I managed to pay off my bills on the same day that I graduated from college:

Federal Loans Only

The first goal during my college career was to stay away from private student loans because they are nightmares. Trust me, I know. I took out a $5,000 private student loan in my first year of college and watched it as it was passed around from lender to lender and the interest rate jumped around, ranging from 8% to 20%. Not to mention the compounding of interest that increased the loan nearly $1,500 in eight months. Needless to say, I paid that off with every dime that I had to give to it by taking on a job. Please, if you can avoid them, do not take out alternative loans.

The government offers student loans at wonderful interest rates and the government will pay the interest of the loan while you are pursuing your education.

Monthly Payments While in School

Let's evaluate my loans. During years one and two, I took out $7,500 for each year. My plan was to get a job that I could take the money that I would need to pay off the loan in one year and pay it into a high-interest savings account. That meant that for years one and two, I paid $625 into my savings account each month. During years three and four, I took out $11,500 per year, which meant that I had to contribute $960 each month to the savings account. This may seem like a lot of money, but at the time I was single and still didn't have my daughter (until the fourth year), so it was easy to have all of my expenses paid, get a job on the side and contribute all of that money into a savings account.

At the end of the four years, I had contributed $43,000 to my savings account and earned about $1,000 in interest on the money.

On the day of my graduation I was able to pay off my student loans and never had to pay a cent of interest. If you are financially capable to do this, then I suggest that you do it. All it takes is finding extra income through a part time job or funding. You will save thousands of dollars in interest if you can manage this. If you cannot afford to pay the monthly payment, then pay half of it or pay what the interest would be on the loan. That way you can make a lump sum payment at the end of your college education.

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U.S. Housing Market Still On Life Support; Prices At 2003 Levels

2012-02-06T09:25:00.000-08:00

NEW YORK (Reuters) - Stocks opened lower on Monday after a five-week rally on concerns Greece will be unable to avoid a chaotic default as it tries to reach terms on a new bailout package. The Dow Jones industrial average dropped 53.20 points, or 0.41 percent, to 12,809.03. The Standard & Poor's 500 Index dropped 5.81 points, …

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How to Buy a Home Without 20% Down

2012-02-06T08:55:00.000-08:00

With housing prices and mortgage rates still near historic lows, now could be a great time to become a homeowner. I recently talked to a caller on our Financial Helpline who had a great credit score and could afford the mortgage payment for the home value she wanted since it would be about the same as her current rent. (In many parts of the country, it's actually cheaper to buy than to rent right now.)

There was one problem though. The traditional down payment is 20% of the home value but she only had enough to put down about 10% and was worried about missing years of building equity if she tried to save up the rest over time. If you're in a similar situation, here are some thing to consider:

You Need More Than the Down Payment

Keep in mind that you'll also probably have to pay at least some closing costs, which are generally about 2% of the price of the home. You'll also want to have an emergency fund with at least 3-6 months and ideally 6-12 months of necessary expenses. That's because the last thing you want is to lose your home to a foreclosure if an unexpected emergency makes it difficult to pay the mortgage.

An Insured Mortgage

You might be able to put down less than 20% by having your mortgage insured against default. One way to do that is with a government guaranteed mortgage. For example, the FHA loan program uses more lenient credit criteria than traditional mortgages, requires only a 3.5% down payment, and has the seller pay most of the closing costs.

Sounds pretty good, huh? Of course, there are costs to this. First, to qualify you typically need 2 years of steady employment with a stable or increasing income, a minimum credit score of 620 with no more than 2 30-day late payments over the last 2 years, no bankruptcies in the last 2 years, no foreclosures in the last 3 years, and a mortgage payment no more than about 30% of your gross pre-tax income. Second, there are limits on how much you can borrow based on where you live. Finally, you have to pay a premium of up to 1% of the loan amount at closing (it can be rolled into your mortgage but that would increase your monthly payments) and a monthly premium of up to .9% of the loan amount each year.

VA loans are another type of government guaranteed mortgage but only veterans on active duty in World War II and later periods are eligible. The loan limits are determined by the lender but generally max out at $417k except in certain high-cost counties. No down payment is usually required at all and there are no monthly premiums. However, there is a one-time funding fee of up to 2.4% that is reduced based on the size of your down payment.

Alternatively, you can get private mortgage insurance. The premiums can vary but are reduced the more you put down. The best part is that unlike with the government programs, the premiums can disappear altogether once you have 20% equity in your home, whether by you paying down the loan, the property rising in value, or (hopefully) both.

Confused? Don't worry about it. Your mortgage lender can help you decide which programs you qualify for and which one might be most beneficial for your situation.

Piggyback Loans

In this scenario, you would get 2 loans. One would cover 80% of the home value and the other "piggyback loan" would cover the rest minus your down payment. The advantage is that you can avoid paying for mortgage insurance with less than 20% down. The disadvantage is that the piggyback loan has a higher interest rate and often has a "balloon payment" at the end. This is a final payment that's considerably larger than your normal payments so be sure to save up for it if you're going to keep the loan that long.

Using Your Retirement Accounts

Finally, there are several ways you can use retirement funds for a down payment. If you have an IRA, you can withdraw up to $10k penalty-free to purchase a home if you haven't owned one in the last 2 years. This is a lifetime limit for the total of all your IRAs so only use it if you must. If it's a Roth IRA, the earnings can also be withdrawn tax-free if the account has been open for at least 5 years (the contributions can always be withdrawn tax and penalty free). Otherwise, the withdrawals could be taxable.

If you have a retirement plan at work, you may be able to take a hardship withdrawal or a loan. A hardship withdrawal doesn't have to be paid back but it's taxable and subject to a 10% penalty if you're under age 59 1/2. A loan isn't taxable but must be paid back with interest. The good news is that the interest goes back into your account and the payments for a loan used to buy a home can often be spread over a longer time period than a regular loan.

The real cost of using your retirement accounts isn't the taxes or interest you pay but that those funds aren't growing for your retirement. The more aggressively you're invested, the greater that opportunity cost is likely to be. On the other hand, you have to weigh that against the value that owning a home can add as an asset that you can later sell or borrow against to help provide for your retirement.

The Bottom Line

If you want to take advantage of today's real estate market and record low interest rates but don't yet have the full 20% down payment, be sure to explore all of your available options. Figure out how much each option would cost you in mortgage premiums, interest rates, taxes, and lost investment earnings. Of course, you could always decide to stick with the tried and true old-fashioned method: save for it.

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Are you looking for an unbiased answer to your own financial question? Once a week, we’ll be responding on this blog to questions from our Financial Helpline or posted on our Twitter or Facebook site.

Erik Carter, JD, CFP® is a resident financial planner at Financial Finesse, the leading provider of unbiased financial education for employers nationwide, delivered by on-staff CERTIFIED FINANCIAL PLANNER™ professionals. For additional financial tips and insights, follow Financial Finesse on Twitter and become a fan on Facebook.

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Instant view: Home prices decline in September: S&P

2012-02-06T08:26:00.000-08:00

NEW YORK (Reuters) - Single-family home prices declined in September, highlighting the fragility of a market that is struggling to get back on its feet, a closely watched survey showed on Tuesday.

COMMENTS:

KEVIN CARON, MARKET STRATEGIST AT STIFEL, NICOLAUS & CO IN FLORHAM PARK, NEW JERSEY

"It is accelerating to the downside and you don't want that. And it comes in the face of record low mortgage rates.

"If you are looking at the equities markets what you are going to be concerned about are...the global appetite for risk and that is going to be tied to the perception of health in the banks and to the extent that mortgage assets become impaired that is yet another weight on the banks."

BARCLAYS CAPITAL ECONOMICS RESEARCH

"In general, those regions with the highest concentration of foreclosures continue to post the largest price declines. We expect prices to begin to stabilize as distressed sales gradually decline as a proportion of total sales, but this process will take some time."

BRIAN JONES, SENIOR ECONOMIST, SOCIETE GENERALE, NEW YORK

"The rate of drop has subsided slightly on a year over year basis but in the last year, April was the only month out of 12 where we reported a sequential gain. The details of this report show weakness was broadly based across the areas surveyed.

"These numbers are from September. There's probably further to go on prices, but the residential home market is probably stabilizing. The months' supply of homes at 6.3 is a long-term historical average. That's telling you supply and demand for new homes is in balance but at very low levels.

"Looking at the housing sector overall, to be fair the existing home sales numbers were a little better. Pending home sales figures are likely to be better. Overall we're going sideways. Starts should probably post modest gains in the months ahead. Multi-family activity is pretty solid.

"There are so many homes on the market. People are lowering prices to clear the market."

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"The data clearly implies a very weak housing market in September. Home sales and housing starts have shown some modest improvement since then, and the NAHB homebuilders index is looking quite promising. However there is little reason to expect prices to stage a quick turnaround. Before seasonal adjustment price data tends to weaken into the winter, and recently the tendency for winter weakness has appeared to deepen, with even the seasonally adjusted numbers tending to look weaker in the winter months. The quarterly index did manage a marginal 0.1% increase in Q3 before seasonal adjustment, but an adjusted 1.2% decline reveals weakness. The Q3 numbers were weaker than Q2's, which saw a 3.8% rise unadjusted and a marginal 0.2% adjusted increase."

TOM PORCELLI, CHIEF US ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

"Ultimately we continue to expect home prices to remain under pressure. This report is generally consistent with that idea. The supply-demand imbalance that exists in the housing market will continue."

TODD SCHOENBERGER, MANAGING DIRECTOR AT LANDCOLT TRADING IN WILMINGTON, DELAWARE

"No surprise whatsoever. This continues to validate all our concerns, which is that the housing recovery isn't occurring, and that if anything we're heading toward a housing depression.

"From a trader's perspective, all you needed was a couple of decent headlines to change sentiment, and we've had that with news from Europe and holiday spending. That was the ingredients for a decent rally yesterday and should keep the trend upward as we go into December."

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First Person: What My College Degree Means to Me

2012-02-06T07:56:00.001-08:00

My college degree helped me pursue a successful 30-year career in advertising and public relations. However, it only happened after I realized I had not made the right decision in choosing my college major.

Pursuing The Major Course I Wanted

It all began when I had earned four years of tuition under the GI Bill of Rights by serving in the U.S. Navy. Ever since childhood, I had wanted to be an artist, and that was my chance to enroll as a fine arts freshman at the Philadelphia Museum College of Art (now the University of the Arts).

An Enjoyable Fine Arts Education

Throughout my undergraduate years, I appreciated the challenges and encouragement of the school's excellent teaching staff. My courses consisted of drawing, painting, sculpture and other fine arts classes. Some of my paintings were accepted for exhibition at local galleries. I was graduated with top honors and the degree of bachelor of fine arts.

Then it was time for me to earn a living from what I had learned in four years of college. I made the rounds of the many galleries in Philadelphia and New York selling my art, and had some moderate success. However, the sales were few and far between, and my income wasn't nearly enough to support myself.

Had I Made an Error in Judgment?

After a year, I came to the conclusion that I had chosen a field that, while traditionally attractive, wasn't practical in the reality of today's business world. While I hadn't wasted my four years of fine arts studies, they had not prepared me for the necessity of making a living.

I had several choices. I could go on painting, get some kind of part-time job to pay my bills, and hope I'd eventually become a successful exhibiting artist. The other choice was to go back to college and major in practical business subjects.

Fortunately, an application I'd sent to the University of Pennsylvania earned me a lab assisantship and free tuition at the Annenberg Graduate School of Communications there. I majored in mass communications and public relations, with a minor in graphic arts. After two years, and armed with a much more practical resume, I began another job search.

A Favorable Career Turn

Another fortunate opportunity coincided with earning my Master of Arts in Communications degree. Prudential Financial, Inc. was just establishing an Eastern regional office in a Philadelphia suburban area, and hiring a staff of more than 3,000 employees. I applied for the newly-created position of Public Relations and Advertising Manager, and was hired to direct the 30-person creative staff.

I recently retired after 30 years with Prudential. Today I consider my education choices and experiences may be of value to college students in the same situation I was after earning my bachelor's degree. Looking back, I had not realized then the impracticality of attempting a fine arts path in the real world where income opportunities are very limited.

Business-related degrees are essential in finding practical career promises. I believe my decision to enhance my education goals beyond fine arts to communications offered me those opportunities. For today's students, armed with the right credentials and personal determination, there's no limit to the heights that talent, hard work and ambition can earn for them.

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