What to Look for When Shopping for Mortgages

What’s the best advice for people who are buying or refinancing a home?

Get the best mortgage.

According to the Pennsylvania Institute of Certified Public Accountants (PICPA), shopping around for the best mortgage deal you can find and being informed about the right questions to ask mortgage lenders are critical.

Understand the rates: You will want to find the lowest interest rate possible, but understand the difference between fixed-rate loans and adjustable-rate mortgages. With a fixed-rate loan, the interest rate will remain the same for as long as you hold the mortgage. With an adjustable-rate loan, the rate can change based on the direction of interest rates in the credit markets. Adjustable-rate mortgages, also known as ARMs, often offer lower initial interest rates, but those rates can rise down the road. When considering ARMs, it’s important to find out how often the rate can change and by how much.

Understand the terms: Ask, for example, about the minimum down payment that the lender requires. The loan term is another important factor. The number of years you have to pay the loan will affect your monthly payments.

What fees are involved? Most loans include points, which are typically based on a percentage of the loan amount. Typically, a loan with a higher interest rate will charge fewer points. There may be other expenses associated with the loan, as well, such as broker or underwriting fees.

Don’t be afraid to negotiate: It’s perfectly acceptable to find out if the lender would be willing to lower the points, fees, or even the interest rate, but make sure that a drop in one fee isn’t accompanied by an increase in another.

Do you need PMI? Many lenders require that you put down 20% of the home sale price as a down payment. If you’re allowed to make a smaller down payment, the lender will likely require you to buy private mortgage insurance (PMI), which covers the lender’s costs if you are unable to keep up your mortgage payments. If you need PMI to qualify for your loan, find out what the overall cost of the PMI will be and how long you will have to hold this insurance.

Source: The Pennsylvania Institute of Certified Public Accountants.

Tips on Recession-Proofing Your Finances

The formal definition of a recession is a period of two quarters of negative GDP growth. But, you don’t need a dictionary to tell you if you’re feeling squeezed financially.

The National Foundation for Credit Counseling suggests that consumers prepare for any economic downturn by getting their finances in order, and offers the following advice to consumers:

• Make sure your job is secure by making yourself invaluable at work.
• Investigate health insurance options.
• Be familiar with your financial situation.
• Pay down existing debt.
• Don’t take on any new debt.
• Start or add to a rainy day fund.
• Consider setting up a home equity line of credit.
• Adjust your withholding allowances.

Source: The National Foundation for Credit Counseling (NFCC) (www.nfcc.org).

Protecting Your Records Post-Tax Season

Stored tax documents are a gold mine for hackers and thieves, since all tax returns contain at least one person’s Social Security number, name, and address. Here are some post-April 15 tips for on-line taxpayers on ways to protect your tax records, from the makers of software designed to prevent on-line identity theft:

1. When storing a copy of your tax return on your computer, make sure you secure it with a password so that your Social Security number cannot be read if the file is lost.

2. Securely delete all electronic financial documents used to prepare your tax returns so any personal information is safe.

3. Ignore all refund/rebate/warning E-mails claiming to come from the IRS and never click on links within those E-mails; most likely these are phishing attacks.

4. Do not provide personal information to anyone calling you claiming to be from the IRS; the IRS already has your information and it’s likely to be an identity thief calling you.

5. Check your credit report with one of the three credit bureaus for free every four months at www.annualcreditreport.com to make sure your identity hasn’t already been stolen.

6. Install the latest updates to your operating system so known Windows or Mac vulnerabilities can’t be exploited by hackers.

7. Don’t save your password in your Web browser when accessing banks and other institutions that keep your personal information; it could be leaked if you ever get a virus, Trojan, or are hacked.

8. If you provided your bank account and routing information to the IRS for payment or refunds, check your bank accounts to ensure that the proper transfer occurred.

9. Visit your bank account on-line and set up alerts on your accounts to monitor when high amounts of cash are withdrawn.

10. Make sure you do not receive incorrect payment liability or refund information; a thief could have filed a tax return on your behalf fraudulently.

Source: Identity Finder (www.identityfinder.com).