Good Time to Buy a Second Home

Part of the extension to the First-Time Homebuyers Tax Credit is what’s known as the Move-Up credit. This makes getting a tax credit for buying a home open to just about everyone. It also opens up the possibility of getting started in real estate investing.

The requirements to qualify for the Move-Up credit aren’t that restrictive. Your income needs to be $125,000 or less if you are single or $225,000 if you’re married. The home you buy needs to be valued at $800,000 or less. So, if you’ve been thinking about up-sizing, down-sizing this is the time. Your new purchase must be your intended primary residence, so it’s not the time to think about purchasing a mountain getaway. What the Move-Up credit doesn’t require is that you sell your current home. That’s where the opportunity comes into play.

Consider buying a home to use as your new primary residence and turning your current home into an investment. Before jumping in do note that there are many factors to consider.

1. Depending on the rental market pricing and your monthly mortgage amount, you can potentially cover your monthly mortgage payments and create cash flow.

2. You can allow your property to appreciate as the market returns.

3. Capital Gains—You’ll get a break on Capital Gains at sale if you’ve lived in our home for 2 of the past 5 years. So, if you’ve owned your home for at just a few years then renting for the remainder of 5 years could save you some taxes. Or, if you’ve owned your home longer, you could pull in some passive income for a few years before selling.

4. If you are buying your new home in a different area and end up not being happy, you can return to your previous home.

5. I think you can guess that being a landlord isn’t easy. You’ll have to deal with everything you had as a homeowner, plus tenants.

6. Added tax benefits—Once you become a landlord, it’s a whole new world of tax benefits. If you’re serious about crossing over to the lordship consult a tax advisor.

Of course, ultimately the decision is a financial one. You’ll need to have a healthy cash reserve to pull this off. Still, it’s not impossible especially during this time when there are still great deals on homes.

Don't Rush into IRA Conversion

So, maybe you are running down your financial to-do list and you've come to this one...

• Convert Traditional IRA to Roth

Good for you. You know that the recent changes in IRA conversions opens up this possibility to many more people and that the change took place this year.

You also know that getting in on Roth has it's advantages. Such as:

• Tax-free withdrawals once you hit age 59.5
• No mandatory minimum distributions when you reach age 70.5
• Dipping into your Roth earnings doesn't have tax implications
• No age limit on contributions

In contrast the Traditional IRA

• Contributions may be tax-deductible
• Withdraws can begin at age 59.5, but are mandatory when you reach 70.5
• Taxes are paid on earnings when withdrawn

The biggest difference, however, between the two is seen in how they handle taxes. The Traditional IRA is tax-deferred and the Roth is tax-exempt. Both vehicles let you earn income without paying taxes on profits along the way, but the Traditional IRA will bring you a tax bill later (deferred). Earning on the Roth are not taxed, though you will pay taxes now on the money you contribute.

On the surface the Roth definitely looks like the more winning deal. But before you rush into conversion you've got some thinking to do. Take a look at the last sentence in the previous paragraph for a clue. What happens when you convert from a Traditional IRA to a Roth is that the chunk of money that you pull out of the Traditional is a contribute to your new Roth and you'll have to pay taxes on it. You can either take the taxes out of these funds or if you've got extra cash laying around, you can use that to pay the taxes. Either way the tax man cometh.

In some cases the conversion is painless and makes perfect sense. For others the amount of money you'll lose to upfront taxes will not justify the end gain. Before you move forward you may want to consult the Investment and Retirement Team at Coors Credit Union. They can offer a no-cost, no-obligations review of your situation.

New Credit Standards Not Really Worth Your Worry

Bankrate.com recently posted Good credit score of past not so good now which opens with the following:
“Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score. That was then. This is now.”

The article goes on to warn readers that while you might have sparkling credit it may not be enough to earn you a better lending rate. Reading this article could put fear into the hearts of would be buyers or at least make you feel like things are really spiraling out of your control. But, just how bad is it?

I asked Coors Credit Union Senior Mortgage Consultant, Ron LoSasso for his take on new credit standards.

So, Ron, how worried should buyers be?

He replied, “Although there are now adjustments in the rate due to credit scores the typical
increase is only an 1/8 to the rate. On a $200,000 loan amount this is an increase of the monthly payment of approximately $16.00 per month. Perhaps the cost of one Grande Latte per week.”

While you shouldn’t be scared off by new credit standards, it is helpful to understand how we got here. The new standards are neither arbitrary nor a result of tightened lending. All banks, brokers and credit unions must abide by the same standards. The change came about as Fannie Mae and Freddie Mac, the nation’s two largest lenders, redefined risk after suffering huge losses last year.

So the new standards really don’t affect the lending landscape much. You’ll still be making fair comparisons when shopping for a mortgage. But, as Ron says, “One advantage to coming to a credit union is to compare all loan programs including these agency type loans to the Portfolio
Loans that credit unions may offer.”

Another advantage is that credit union lending is strong. In contrast to many major banks, very few credit unions were burned by foreclosures; therefore they’re still able to give good rates on home loans.

And don’t let the new score standards turn you into a procrastinator. Yes, if you score is poor or even good you should take some time to clean up errors, pay down debt, or other actions to increase your score. But, if you’ve already got an excellent score of say 720 and you’re thinking of eating ramen for a few months to get it up to 740 you could be taking a big gamble You could miss out on current low rates or while you are working to better your score, you’d only be saving a few lattes worth a month.

The best way to prepare for purchasing a home is to get in and speak with a Home Loan Consultant. They can tell whether your score is in need of help or if you should start shopping now.

Stop Guessing About the Best Time to Buy a Car

Way back when I was young, stupid and going to the wrong college and studying the wrong courses--wrong for me anyway, I was taking a retail merchandising class. The one thing I remembered from that class was a chart in one of our books that showed the best time to buy anything like sheets, china, and other things that really don't impact your wallet all that much. I can't seem to replicate that exact chart anywhere but if you interested I'm sure the Internet can help you out.

What I want now is that same chart but tells me without a doubt when is the best time to buy big money items like cars and houses. Like everybody else, I've got my theories on when to buy...houses = spring, cars= end of the month. But these aren't hard and fast rules and aren't based on data. So imagine my excitement when I came across a new gadget on Edmunds, which helps with the guessing about car prices.

It's their True Market Value: Predicted Price Trends. This handy gizmo shows you the pricing forecast for most cars over the following 30-Days. Just find the model you are interested in and the chart will show you whether there is an expected big increase (2% or greater); mild increase (1% to 2% change); relatively flat (less than 1% change); mild decrease (1% to 2% change); or big decrease (2% or greater).

Ah, knowledge...you gotta love it's power.

As far as I know no such tool exists for home sales, but their a different beast.

Ariana Huffington says, "Move Your Money"

I like to think that everyone reading this blog has a credit union account. But I also hope that some readers do not. My bigger wish is that your reading this blog will somehow translate to a recognition that credit unions want to help all consumers make the most of their money. And knowing that you might do the right thing and get your friends and family to stop supporting big banks and open a credit union account.

Ariana Huffington agrees, "When the big banks see real competition from the community banks and credit unions they will change their ways."

Huffington, founder of the Huffington Post, has taken her message to social media with Move Your Money. Huffington presents a sentimental and no-nonsense good-guy vs. bad-guy illustration to convey the message of smaller banking institutions. Naturally whenever this message is presented we get warm and fuzzies. But shouldn't doing the right thing feel good? It's time to fight back, people. Our weapons are cash. Recruit your friends and family from the pain of supporting big banks.

Spread the word follow Move Your Money on Twitter or join the fanclub on Facebook.

NOTE: the zip code search feature at this time only includes FDIC insured institutions. I have contacted Move Your Money to ask them to include NCUA insured credit unions. So don't be alarmed that Coors Credit Union does not come up in a search--no credit unions are listed. Here's a more reliable way to locate credit unions.

Credit Card Reform OUCH!

The Credit Card Reform Act of 2009 was a well-intended and long overdue attempt to stop the credit card fee insanity that imprisons many consumers. But, the Feds underestimated the creativity of their opponents, and they made a big mistake in giving the card companies warning. So what happened? Faster than reform could be implemented card companies rushed to the offense and implemented aggressive sneak attacks before they became illegal.

You became a risk
At one time card companies could raise your credit card rate if you were late on any other bill, even if you were never late on your credit card bill. It was called “universal default”. They justified this by claiming you were a risk. But since the Reform will eliminate this type of action, the card companies rushed to get rate hikes in.

They changed your minimum payment requirements
Say you signed up ABC Bank’s great balance transfer deal way back in 2008. This was a great deal because you took your high-interest balance from XYZ Bank’s card and transferred it to a really low interest card, saving you a bundle in interest rates. But suddenly the economy takes a dive and ABC Bank is suffering from loan loss and the challenges of Credit Card Reform, where are they going to look for money? Why, to you, of course! They do this by raising your minimum balance from 2% to 5%. The result is that you asked to pay a lot more each month. What if you can’t? You call ABC Bank and they’ll offer to lower your minimum payment back down at or close to the 2%, but they ski rocket your interest rate much higher than your initial great deal. This has nothing to do with your payment history, which could be perfect. You just get a lousy rate.

Your credit limit drops
A reduced credit limit can hurt your credit score because part of the formula used to calculate your score is the amount of credit available. A big gap between how much you spend and how much you have available is viewed as responsible credit handling. This is especially important if you have a need for a loan, like a mortgage for example. If a credit card suddenly reduces your credit limit, it looks like you’ve done something wrong when in reality you may not have done anything to hurt your credit.

These actions hurt many consumers deeply. So how do you fix credit card wounds? Go shopping, for a different card that is. Start with Coors Credit Union and you’ll find the following:

1. Our cards don’t offer too-good-to-be-true rates. Always be skeptical of cards that offer incredibly low rates.

2. Simple terms. The longer the terms and disclosures the more traps.

3. No account opening fees. Subprime credit cards often implemented a fee just to open the card, putting the user into a situation similar to payday loans. The Reform Act limits the amount of this fee. Coors Credit Union has never charged account opening fees and does not offer subprime credit cards.

See all the benefits that make the Coors Credit Union a trustworthy credit card.

Happy New Year!