Tips On Being A Smart Consumer

 

1. Before you buy a home, attend a homeownership education course offered by the U.S. Department of Housing and Urban Development (HUD)-approved, non-profit counseling agencies.
2. Interview several real estate professionals (agents), and ask for and check references before you select one to help you buy or sell a home.
3. Get information about the prices of other homes in the neighborhood. Don't be fooled into paying too much.
4. Hire a properly qualified and licensed home inspector to carefully inspect the property before you are obligated to buy. Determine whether you or the seller is going to be responsible for paying for the repairs. If you have to pay for the repairs, determine whether or not you can afford to make them.
5. Shop for a lender and compare costs. Be suspicious if anyone tries to steer you to just one lender.
6. Do NOT let anyone persuade you to make a false statement on your loan application, such as overstating your income, the source of your downpayment, failing to disclose the nature and amount of your debts, or even how long you have been employed. When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. Lying on a mortgage application is fraud and may result in criminal penalties.
7. Do NOT let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.
8. Never sign a blank document or a document containing blanks. If information is inserted by someone else after you have signed, you may still be bound to the terms of the contract. Insert "N/A" (i.e., not applicable) or cross through any blanks.
9. Read everything carefully and ask questions. Do not sign anything that you don't understand. Before signing, have your contract and loan agreement reviewed by an attorney skilled in real estate law, consult with a trusted real estate professional or ask for help from a housing counselor with a HUD-approved agency. If you cannot afford an attorney, take your documents to the HUD-approved housing counseling agency near you to find out if they will review the documents or can refer you to an attorney who will help you for free or at low cost.
10. Be suspicious when the cost of a home improvement goes up if you don't accept the contractor's financing.
11. Be honest about your intention to occupy the house. Stating that you plan to live there when, in fact, you are not (because you intend to rent the house to someone else or fix it up and resell it) violates federal law and is a crime.

What is Predatory Lending?

In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

• Sell properties for much more than they are worth using false appraisals.
• Encourage borrowers to lie about their income, expenses, or cash available for downpayments in order to get a loan.
• Knowingly lend more money than a borrower can afford to repay.
• Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
• Charge fees for unnecessary or nonexistent products and services.
• Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
• Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
• "Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
• Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

What Tactics Do Predators Use?

• A lender or investor tells you that they are your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.
• The house you are buying costs a lot more than other homes in the neighborhood, but isn't any bigger or better.
• You are asked to sign a sales contract or loan documents that are blank or that contain information which is not true.
• You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud - it does not.
• The cost or loan terms at closing are not what you agreed to.
• You are told that refinancing can solve your credit or money problems.
• You are told that you can only get a good deal on a home improvement if you finance it with a particular lender.

Remember:

If a deal to buy, repair or refinance a house sounds too good to be true, it usually is!

 

 

Compound Interest

When compound interest is applied, interest is paid on both the original principal and on earned interest. If you make a deposit into a bank account that pays compounded interest, you will receive interest payments on the original amount that you deposited, as well as additional interest payments. This allows your investment to grow even more than if you were paid only simple interest.

Compound Interest Example

Assume once again that you are depositing $5,000 to a bank account that pays 5 percent annual interest, deposited to your account once per year. But in this case, assume that the interest is compound interest. After one year, your account would increase by 5 percent to $5,250. In the second year you would be paid interest on the total in your account, $5,250. This means that you would receive a payment of $262.50, giving you a total of $5,512.50 after two years.

Taking advantage of compound interest need not be a passive strategy on your part. The bigger your investment base, the more that time and math will conspire to build up your wealth. That is why investment advisors suggest taking advantage of time and a schedule of periodic investing. The results build on themselves.

You can maximize the power of compounding by following a few easy strategies:

• Invest early. The longer your money has time to work for you, the better compounding works. In fact, the effect is far more dramatic the earlier you begin and the longer you stay invested. So, the sooner you can begin investing, the more interest or dividends, and hence growth of your principal, you will accumulate through compounding.
• Invest often. Adding to your investments on a regular basis such as monthly or weekly can build your wealth quickly. The accumulation builds the base on which your interest is calculated. To stay on a schedule for periodic investing, some people take part in automatic investment plans, in which money is taken out of their deposit accounts and put into their chosen investments.
• Reinvest your dividends. If you own shares in a stock or mutual fund, you may be able to reinvest your dividends into more shares. This continues to build your investment base, allowing you to compound your return. It's putting your new income to work for you.