Personal Finance Blog

Tips And Stories To Help You With Managing Money

Rent-To-Own? It Can Be Done

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Renting with the option to purchase the house can benefit both renter and seller.
Renting with the option to purchase the house can benefit both renter and seller.
Home ownership is out of the grasp of many Americans today who face a vastly different market from that of a few years ago. That puts leasing with option to buy near the top of the possibilities list for many.

But look before you leap. It’s possible, but not always an easy approach to obtaining a home. Know what is at stake before signing on the dotted line.

There are different variations of the rent-to-own option, but basically it involves an agreement between a potential buyer and a landlord/owner that is expected to lead to a purchase. Such agreements usually are for two to three years. During this time, the owner sets aside a part of each month’s rent into an escrow account. If payments are made as agreed, the money in the escrow account can be used at the end of the lease time as a down payment and the purchase proceeds from there as usual.

In another version, the seller the two parties would agree to a lease for a set time with no portion of the “rent” going into an escrow account and the seller offering a discounted price at the end of the lease. This obviously would be advantageous to a seller who is under pressure.

Both parties to such an agreement have potential benefits. The renter is forced into saving for a down payment and the owner gets a monthly return on his property without waiting for a sale.

Yael Ishakis, a senior loan officer at First Meridien Mortgage in Brooklyn, N.Y., offers a for-instance: A client put $5,000 down on a home and signed a lease for $1,800 monthly rent, of which $600 per month went into an escrow account. On the regular market, the home would have rented for $1,600 per month, so the seller also was contributing to the agreement. At the end of the lease period, the client had $14,400 in the escrow. With the initial $5,000 down payment, plus some $10,000 the buyers had managed to save, they had about $30,000 for a down payment.

The pitfall may come if, in the end, the potential buyers are not able to complete the agreement. They then lose the escrow money, and possibly paid more in rent than they might have done otherwise.

Those owners willing to enter into rent-to-buy agreements usually are motivated by a sluggish market or have had their property on the market for a long time. In areas where the real estate market is thriving, there are likely to be fewer opportunities for renting with intent to buy.

Sometimes a potential buyer can work a deal with someone who is selling, but most often the seller will advertise his intentions. Some agencies specialize in rent-to-own properties. RentMACK is one such agency and there may be others you could find by researching in your own neighborhood.

Be forewarned that at the end of the rental period, you still must qualify as a purchaser. Bad credit will still be a problem. Rent payments are not often considered in building credit. Learn what your credit rating is and what is likely to be required when you try to finance. Try to improve your credit by using a secured or regular credit card, ideally paying it off each month. Or, if possible, get a car loan and make payments faithfully. If you can’t arrange financing, you may lose the escrow money. Take advantage of the lease time to prepare for the purchase. Be sure you understand at the outset what the full down payment will be and work toward it.

Get expert advice. There are dangers on both side of rent-to-own arrangements and often, after looking at the possibilities, people decide not to pursue this approach to home buying. State laws surrounding rent-to-own vary. Be sure you know what they are where you live.

From the seller’s viewpoint, if the potential buyer defaults, but there is money is escrow, a court could rule that the tenant has a property interest.

Involving attorneys on both sides is a good idea. Having legal advice on the proposed agreement may save difficulties if things don’t go as expected.

How To Choose Christmas Gifts For Teens

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Choosing gifts for teens can be challenging.
Choosing gifts for teens can be challenging.
Shopping For Teens Can Be Tough

Teens, bless them, can be a challenge when it comes to buying gifts. They tend to have extensive gift lists that change as often as their minds. They want the newest, trendiest items and what’s at the top of the lists may be changed from day to day.

Electronics

You can bet, though, that electronics of all kinds will be at the top of many lists. Your teen is likely into phones, accessories, video games, fashion accessories, active-wear and other items that say “let me be me.” The smartphone is far and away the most frequently sought in this age group. If you got the phone last year, try for accessories this season.

Gift Cards

Gift cards may have earned their reputation as quick and thoughtless, but they don’t lose popularity in the teen crowd. They beat a clothing, makeup or handbag gift that the particular recipient does not like. Those are items best left to the individual to select, and if the gift card fits . . . Even better is cash, that has no limits as to where it can be used.

Cash, gift cards or electronics, say the experts. And one larger gift card for one store beats a pile of smaller cards that fall short of price of a teen-coveted item. Mix-and-match. Match a gift card for iTunes, for instance, with new earbuds. A Darth Vader flash drive or a purse-size cellphone charger/flashlight might be the stocking stuffer of choice for many a teen.

Food

A gift of food can never be far wrong for the majority of teens. Candy, cookies, soft drinks, chips, etc., in a basket will keep the holiday alive, at least for a day or two. And again, a gift card to a local eatery will let them order for themselves.

Find Out Likes On Social Media Sites

With modern technology, it is possible to check out a teen’s social networks to learn if they have special interests in music, sports or hobbies. An item of clothing, say a winter hat, sporting the favorite team’s logo, is a good choice for the sports nuts.

Clothing

Teens are looking for items that set them apart as an individual. When you look for clothing items, take their personal choices into account. In active wear, sizing is easier if you stick with relaxed-fit items like jogger pants.

Providing the wherewithal for a teen to have a new experience such as flying in a jet pack or taking a hot air balloon ride may be the answer for the youth who has everything, or seems to have.

5 Steps To Get Out Of Debt

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Your debt load is not insurmountable. Make a plan to whittle it down to zero.
Your debt load is not insurmountable. Make a plan to whittle it down to zero.
Conquering The Debt Monster

The first step to getting out of debt is breaking it down into manageable portions and creating solutions a step at a time.

Allowing the problem to overwhelm you to the point of inaction assures that it will continue unabated.

ReadyForZero, a company that creates answers for people who are in debt, advises that a full understanding of your own finances is the key to getting a handle on debt. The company’s advice includes:

1. Know where your money goes.

Replace fear with facts. Be minutely aware of how much money comes into your household each month and where it goes.

If you make most of your purchases with a debit or credit card, log into your online account and do a detailed study of your purchase history. Divide it into categories such as Groceries, Entertainment, Rent, Utilities, Transportation, etc. If you use cash, track spending for a month to develop this data.

2. Don’t Spend Too Much

Are you spending too much? Debt is inevitable if your outgo exceeds your income. Resisting the ubiquitous advertising that surrounds us is a conscious choice that must be made. New electronic gadgets, clothing or cars seldom lead to real happiness if you can’t afford them and they shackle you with debt. Examine your spending behavior and start to change your mental processes. Remove the triggers that encourage you to overspend. Learn to distinguish between real needs and simple desires.

Get rid of your credit cards. Use only debit cards, cash or checks. These modes won’t allow you to overspend as credit cards do. If you are addicted to spending, find new way to gain pleasure and happiness. There are things you can do in almost any community that don’t cost money.

3. Focus On One Debt With The Highest Interest Rates

Pay off debts that carry the highest interest rates first. Add just a few dollars to each payment, more if possible. Some lenders will agree to a lower interest rate. If they will not, look for a transfer option that will give you a better rate. Consider a consolidation loan, but only if the interest savings are real. A small reduction in the interest rate can translate into a big savings.

4. Change Your Motivation

Your motivations have to change. And that isn’t easy. Find inspiration in your family, your life goals or meeting some kind of challenge. Make visible reminders, such a family photos and written ultimate objectives, that are constant reminders if the family is your focus. Write down goals, such as buying a house, retiring early or otherwise meeting life goals and put them where you see them daily. Set a specific date when you hope to be debt free and circle it on a calendar that you can’t ignore.

5. Increase Your Income

If low income is at the root of your indebtedness, try to resolve it. Look for a source of income outside your regular job. Sites such as Elance.com and oDesk.com offer short-term freelance jobs you can do at home. There are jobs in writing, designing, transcribing, organizing and other specialties that are listed online. If it is possible, try to increase your earnings at the job you have. If you can, upgrade your skills to make yourself more valuable to your employer. Research what other people in your job category make and, if necessary, try to match their earnings.

These steps will all make little inroads into your debt load. But none of them will make a difference if you don’t take that first step: the conviction that you can do it. Let fear and inertia drop to the side and begin.

What Is A Good Credit Score?

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Good credit can save you money when applying for a loan.
Good credit can save you money when applying for a loan.
It’s not one of those things that demand your attention. But knowing your credit score can be a real benefit when it comes to borrowing money – and getting a good interest rate when you do.

But determining a “good” credit score can be tricky. Several agencies have different ways of scoring and there are more than one schools of thought on the subject. Fortunately, you can check your own credit score and it won’t adversely affect that score.

Each lender develops its own credit score range. Knowing that is important when you want to know what your numbers mean. Among the various scoring models and the range they use are:

FICO Score, 300-850; VantageScore, 300-850; VantageScore scale (versions 1.0 and 2.0)m 501-990; PLUS Score, 330-830; TransRisk Score, 100-900; Equifax Credit Score, 280-850.

With all of these scores, the lower the number you have, the higher the risk to a lender. Those with the higher figures are more likely to obtain loans, get discounts on insurance and other financial advantages. For instance, if your FICO score is 840, you are near the top of the range and your credit is considered “superprime.” In essence, if the range is 301 to 850, the following categories would emerge. Excellent credit, 750-plus; Good Credit, 700-749; Fair Credit, 650-699; Poor Credit, 600-649 and below.

Within this range, however, lenders have their own definitions of what they will accept. Some who want to qualify a larger number of borrowers may be willing to look at a credit score of 680 or higher, while one that wants to be more selective may up the minimum score to 750 or higher. Some lenders will raise the interest rate for borrowers below a score of 700.

You can get a free Credit.com account simply by applying. It includes the score and a personalized action plan to improve it. It is free and updated every 30 days.

The only way to assure that your credit score is good is to check. Having paid bills consistently and on time does not fully guarantee a good score. Requesting a score once a month provides you with a breakdown of the factors that affect your score.

In general, the score factors in payment history, debt levels and the age of credit accounts. The objective is to predict how new and existing customers will handle credit.

A good score will facilitate your purchase of a home or car, opening new credit accounts and getting the best interest rates. Over time, you will pay less for the use of lent money. Bad credit could add as much as $90,000 to a home, for instance.

It pays to know where you stand credit-wise and to work to improve your score if needed.

Black Friday, Cyber Monday – And the Rest

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Wal-Mart said Thursday, Nov. 28, 2014 was its second-highest online sales day ever after last year's Cyber Monday, which is the Monday following Thanksgiving when online retailers promote bargains.
Wal-Mart said Thursday, Nov. 28, 2014 was its second-highest online sales day ever after last year’s Cyber Monday, which is the Monday following Thanksgiving when online retailers promote bargains.
For years, the commonly accepted wisdom for shoppers is that Black Friday is THE day for holiday deals. Not necessarily true.

While that Friday and its electronics copycat Cyber Monday are packed with bargains, experience shows that there are even greater opportunities on both sides of those days. For instance, thousands of shoppers take time out from turkey on Thanksgiving Day to hit the stores, jam-packed tummies notwithstanding. One survey conducted by DealNews showed that the price breaks on Thanksgiving were better than those on the following day. In a month already noted for sales, it stuck out

Not only that, but the stores offered deals on more of the most-wanted items likely to be on holiday shopping lists, the analysts found.

The advice of experts is to begin looking for deals before the turkey is thawed. Like, say, right now. The holiday shopping period long outgrew single days. All of November is dedicated to the best deals of the year.

DealNews found that Cyber Monday sales last year lagged Thanksgiving by 16 percent, but that it offers more top-shelf bargains than stores that don’t deal primarily in e-commerce items. The research organization suggests that those looking for e-commerce deals also begin shopping the ads before the traditional days.

The circulars will soon be flooding homes. Peruse the ads and if you spot a wanted item that fits your budget, don’t wait for a better deal. DealNews editors and other market-watchers post sales critiques as the annual frenzy begins.