S&P cuts Russia's ratings to 'CC' on debt default risk

S&P on Thursday lowered its long-term sovereign credit rating on Russia to "CC" from "CCC-", as the country reported difficulties meeting debt-service payments on the due date on its US dollar-denominated 2023 and 2043 Eurobonds.

"Although public statements by the Russian Ministry of Finance suggest to us that the government currently still attempts to transfer the payment to the bondholders, we think that debt service payments on Russia's Eurobonds due in the next few weeks may face similar technical difficulties," the ratings agency said.

-reuters-

US small businesses seek $5.4 billion in virus relief loans

WASHINGTON - Small and medium-size US businesses have applied for more than $5.4 billion in government-backed loans as a key pillar of the country's coronavirus relief plan took effect, the Trump administration said. 

Jovita Carranza, who heads the federal Small Business Administration, said late Friday on Twitter that 17,503 companies -- those with 500 or fewer employees -- had filed applications through local banks for loans totaling more than $5.4 billion.

Friday was the first day the companies were able to apply for the money, intended in large part to help them pay employees' salaries.

The loans, which could eventually total $350 billion, constitute a central part of the $2.2 trillion coronavirus relief plan adopted by Congress and then signed into law by President Donald Trump on March 27.

"I will immediately ask Congress for more money to support small businesses... if the allocated money runs out," Trump tweeted Saturday.

But things were "so far, way ahead of schedule," he said, adding that Bank of America and community banks "are rocking!"

On Friday, most applications were submitted to local banks. Some of the biggest US banks said they had encountered difficulties with administrative procedures, although Bank of America reported that it had processed tens of thousands of applications by the end of the day.

Treasury Secretary Steven Mnuchin told the Fox Business Network that "our expectation is starting next week" all big banks would be ready.

Companies that receive the money and do not fire their workers -- or that otherwise re-hire those they have laid off -- will have their debt forgiven.

The funds are intended to help hundreds of thousands of restaurants, hair salons and other small- and medium-size businesses pay wages and rent for eight weeks, allowing them to keep staff on the payroll during virus-enforced closures. 

"If we run out of money, we're going to go back to Congress and get more money," Mnuchin said. "This is a great, great program with bipartisan support."

But Mnuchin said he was working with key bank executives to iron out any kinks and expected the largest banks to be taking part in the coming week.

Mnuchin also said money transfers to households would start within two weeks, down from the previously estimated three weeks. A family of four can receive up to $3,000 under the larger relief package.

The first economic effects of the crisis struck across the United States in March, when 701,000 jobs were lost. The unemployment rate rose to 4.4 percent.

Agence France-Presse

LIST: Philippine banks extending payment due dates to help Filipinos in time of COVID-19

MANILA - Major banks in the Philippines have announced a 30-day extension for credit card, mortgage, and loans for eligible customers to help Filipinos during the Luzon-wide COVID-19 lockdown.

SECURITY BANK

• Payments for credit card, home, personal, auto, business mortgage or business express loans are extended by 30 days for qualified customers
• Eligible customers are those with current payment status and with a payment due date of March 16 to April 14 

BANK OF THE PHILIPPINE ISLANDS

• A 30-day grace period will be given to qualified customers for credit card and other types of loans "to help ease the burden during these trying times," the bank said.
• Eligible customers will be notified

UNIONBANK

• Qualified customers will be given a 30-day payment extension from the original due date with no late fees
• Fees for Instapay transactions are also waived until April 14

EASTWEST BANK

• Payments for credit card, auto, home, personal and mortgage loans will be extended for 30-day for eligible customers
• Qualified clients will be notified

source: news.abs-cbn.com

ECB pumps up bank lending, bond buys to cushion virus impact

FRANKFURT AM MAIN, Germany - The European Central Bank on Thursday followed other major central banks with a flurry of measures to cushion the impact of the coronavirus, including increased bond purchases and cheap loans to banks, but surprised observers by leaving key interest rates unchanged.

Policymakers agreed a new round of cheap loans to banks, known as long-term refinancing operations (LTROs) "to provide immediate support to the euro area financial system," a spokesman said.

They also eased conditions on an existing "targeted" LTRO program, aiming to "support bank lending to those affected most by the spread of the coronavirus, in particular small- and medium-sized enterprises."

And the ECB will pile an extra 120 billion euros ($135 billion) of "quantitative easing" asset purchases this year on top of its present 20 billion per month.

The "quantitative easing" (QE) scheme will include "a strong contribution from the private sector," the ECB said, as room to buy government debt while respecting self-imposed limits has grown tight.

On top of the monetary measures, the ECB's banking supervision arm said it would allow banks to run down some of the capital buffers they must build up in good times to weather crises.

Its teams supervising individual lenders may provide more flexibility to institutions under their remit, such as giving them more time to patch up shortfalls in their risk management, while a broader range of assets will count towards the watchdog's capital requirements.

President Christine Lagarde will be on the spot to explain the measures to journalists at a 2:30 pm (1330 GMT) press conference.

Stock markets had plunged again early Thursday on President Donald Trump's announcement that travelers from much of Europe would be barred from entering the US, after a Monday rout triggered by an oil price war combining with virus fears.

Losses on European stock indices deepened after the ECB's announcement, with analysts citing disappointment at its decision to leave the key interest rate untouched.

But they also said that the scope for the central bank to lift the markets' mood was always going to be limited.

"We do not think the ECB will be able to change investor sentiment... What matters for the economy is the trajectory of the virus itself and the measures which national authorities take to contain it," Andrew Kenningham of Capital Economics commented.

- Paying banks to lend -
Ahead of Thursday's meeting, analysts had highlighted tweaks to the ECB's bank lending scheme in particular as a critical tool for virus response.

"Bravo!" Pictet Wealth Management analyst Frederik Ducrozet tweeted after the statement, hailing the ECB's "bold decisions".

Ducrozet noted that under the changes to the TLTRO program, lenders that loan the cash they get from the central bank on to the real economy will enjoy an interest rate potentially as low as -0.75 percent.

At 0.25 percentage points below the rate the ECB charges on banks' deposits in Frankfurt, the difference represents an effective subsidy to the financial system.

Meanwhile, the central bank dispensed with what many expected would be a purely symbolic interest rate cut of just 0.1 or 0.2 percentage points.

The US Federal Reserve last week and Bank of England on Tuesday had space to cut interest rates by half a percentage point each to ease financial conditions.

But the ECB's already-negative deposit rate robbed it of that option.

"Forget rates," Allianz chief economist Ludovic Subran tweeted ahead of the meeting.

"All eyes (are) on real measures to immunize the financial system" such as changes to the bank lending schemes and supervisory rules.

Later Thursday, Lagarde will likely reinforce the ECB's long-standing call on governments to do more with their fiscal powers to buttress the eurozone economy.

In a conference call Tuesday with European heads of government, the former International Monetary Fund (IMF) head "drew comparisons with past crises" like the 2008 financial crisis, a European source told AFP.

Such past trials were overcome by central banks and governments working in concert.

In mid-February, Lagarde reiterated that "monetary policy cannot, and should not, be the only game in town" to stimulate the economy.

Italy on Wednesday announced 25 billion euros of support to its economy and the European Union has also mobilized up to 25 billion euros.

Chancellor Angela Merkel even signalled Wednesday that Germany could abandon its balanced-budget dogma.

source: news.abs-cbn.com

China's credit push to small firms falters in factory heartland

China's campaign to boost loans to small firms was supposed to support the economy during its biggest slowdown in decades, but banks' reluctance to lend has left exporters and manufacturers in its southern industrial belt struggling to pay the bills.

Despite prodding from Beijing, several bankers have told Reuters they have little appetite to lend to smaller companies due to the uncertain economic outlook, the US-China trade war and a years-long drive to purge risks from the financial system.

That has chilled credit flows to private sector firms, undermining stimulus measures that were designed to cushion the impact of slowing demand.

In the southern city of Dongguan in Guangdong province, one of the country's major manufacturing hubs, some small firms are moving production overseas in the face of operational and financing challenges.

"These days the most discussed topic - something that we always talk about in meetings - is whether we should move to Vietnam. Many of my clients have moved there," Li Jiajun, the chief financial officer at Guangdong LiShun Yuan Intelligent Automation Co., told Reuters.

LiShun, which makes paper box packaging machinery, lost financing from two of its four banks in the second quarter, halving its total credit line to 10 million yuan ($1.5 million).

One of those 2 banks - both are mid-sized - blamed its tighter lending policy on the first half's economic climate, while the other said its local branch was banned from approving new loans due to a spike in bad debts, he said.

As a result, the company, which expects to generate 250 million yuan in revenue this year, is delaying orders worth nearly 20 million yuan following the cut and taking "defensive measures" – slashing its payroll by 40 percent and selling equity to raise funds.

"Government policy and implementation on the ground are still somehow disconnected. It's not so easy - at least, I haven't enjoyed much benefits so far," Li said of China's efforts to boost lending.

TIGHTENED RISK CONTROL

In China, the state sector has long absorbed the lion's share of corporate lending from an industry dominated by government-controlled banks, forcing smaller borrowers across the country to rely on non-bank "shadow" lenders, which have been squeezed in the crackdown on financial risk.

"We are better than we used to be, but far from serving so many small companies in need," Bao Jiehan, vice president of the Dongguan branch of China Construction Bank, the country's second-largest lender, told Reuters.

Only 26 percent of China's tax-paying businesses have bank loans, leaving "plenty of room" for banks to lend, a banking regulatory official said.

Financing is especially tough for exporters who have been squeezed by the trade war, as banks tighten scrutiny and impose stricter risk controls, bankers and companies said.

Chen Xiuxia, chairwoman of Guangzhou-based Choice International, said lenders have gradually halved its credit line to 30 million yuan since President Xi Jinping's 2017 call for banks to curb financial risks.

Her efforts to secure more lending have not succeeded so far, with banks demanding heavy collateral and many non-bank lenders shut down.

"De-leveraging is aimed at the financial system but businesses like us are hit as a knock-on effect," said Chen, whose company exports goods like air conditioners and cars to Africa and expects to generate $100 million in revenue this year.

Luo Zhiquan, chairman of Dongguan Gowin Import & Export, is trying to obtain a 5 million yuan loan using an office building as collateral to add to his 10 million yuan credit line. His bank will only lend 50 percent of the property's value.

That was due to strict bank risk control over wobbling exporters amid the US-China trade war. Gowin, which trades for 200 local manufacturers, saw its annual order value drop by 10 percent this year due to a 50 percent plunge in exports by his clients to US buyers.

"Some banks just do not want to do business with trading companies anymore," said Luo, recalling what a Dongguan-based rural commercial bank told him when stopping his credit line.

FLOCK OF GEESE

Chinese policymakers are calling on the Big Five state banks to be "lead geese in the flock" in the push to boost lending.

Outstanding bank loans issued to small firms rose 21 percent on-year to 10.3 trillion yuan at end-May, driven mostly by the Big Five, which have extended more credit at cheaper rates.

In April, China's State Council set a target requiring the Big Five to increase such loans by 30 percent this year and cut their rates by 1 percentage point.

In Guangdong, CCB said it has hiked small business lending by 45% to 97.1 billion yuan in the first half of 2019.

Its main strategy is to increase the numbers of borrowers while reducing the average loan per company to rein in risk, bankers said. The average amount is 630,000 yuan for the bank's 140,000 small business loan borrowers in Guangdong, said Liu Lele, vice head of small business lending at CCB Guangdong.

In the past, most small business loans averaged 10-20 million yuan per borrower, said Bao of CCB Dongguan.

Small business loans are priced at 5.3 percent on average, from 6 percent last year, said Liu, following the government's April mandate requiring the Big Five to cut small firms' financing costs.

Overall the Big Five's lending to small business rose 23.7 percent in the first five months, while their average interest rate decreased by 0.65 percentage point to 4.79 percent.

"We are trying to break even. Profit is very thin, definitely less than 1 percent," said Liu, who hopes to adopt a more market-oriented approach to pricing loans in the future.

Although analysts see risks to banks' profitability and asset quality from the government's lending drive, state bankers say this is not an immediate concern for big banks and regulators who have set a higher tolerance for small firms' bad loans.

Some smaller-sized banks, however, are more conservative in their lending.

"We are still going through de-leveraging and structural changes of the economy," said a senior executive at a lender based in northern China that is active in Dongguan.

"In an economic downturn, banks' risk appetite is low."

WEAKENING DEMAND

At the same time, some small companies' appetite to borrow has diminished as economic prospects dim.

Guangdong Songqing Intelligent Technology Co, an industrial robotics maker, has cut this year's sales target as clients delay purchase orders in a wait-and-see approach, chairman Xiao Yongxiang told Reuters. Last year, the company closed its low-end mechanical arm business as demand shrank.

Xiao said he wants to raise 20 million yuan by selling equity to pay back half of his bank loans and ease the pressure from 120,000 yuan in monthly interest repayments.

Several bankers across China told Reuters that loan demand from qualified borrowers has weakened this year.

"Clients tell me labour costs and rent are high, trade frictions are hurting exports, their profits are getting thinner and thinner, and it's just getting harder and harder to do business," said Sun Shanming, vice general manager of the small business lending department of CCB's Guangzhou branch.

($1 = 6.8859 Chinese yuan) 

source: news.abs-cbn.com

Three held as $1.8 billion fraud ripples through Indian banks

NEW DELHI/MUMBAI - India's federal police detained two employees of Punjab National Bank, the state-run lender that says it has been the victim of a $1.77 billion fraud, in the first arrests in a fast-widening probe into the country's biggest-ever bank scam.

Gokulnath Shetty and Manoj Kharat are suspected of steering fraudulent loans to companies linked to billionaire jeweler Nirav Modi and entities tied to jewelry retailer Gitanjali, which is led by Modi's uncle, Mehul Choksi.

India's Income Tax department warned in an internal note seen by Reuters that domestic banks could take a hit of more than $3 billion from loans and corporate guarantees provided to Modi and Choksi.

The arrests, late on Friday, came 2 days after India's second-largest state-run lender said it had been hit by massive fraud, sending its share price tumbling.

The accusations against the 2 relatively junior PNB officials were detailed in the lender's disclosure, and also contained in a preliminary police report.

The Central Bureau of Investigation (CBI) also arrested a third person, Hemant Bhat, whom a source described as the "authorised signatory" of the companies tied to Nirav Modi.

All three appeared before a hot, packed courtroom in Mumbai on Saturday afternoon, where they were ordered to remain under police custody until March 3 to allow the CBI to continue its investigation. No charges have yet been laid.

"CBI must get fair chance to investigate this very serious offence, which has consequences for the country's economy," said judge S R Tamboli, as PNB employee Shetty shifted nervously and blinked frequently. The other 2 stood passively.

Family members of the accused present at the court defended them, saying they were innocent.

Kharat's uncle told Reuters the PNB employee was "just following orders of superiors" and added "he wasn't aware of what he is doing".

PROBE WIDENS 

A police source said six more PNB employees were "being examined" after the CBI conducted additional searches at the PNB's branch in southern Mumbai where the alleged fraud took place.

Police sources say Modi, whose high-end jewellery has been worn by Hollywood stars including Kate Winslet, and Choksi left India last month and their whereabouts are unknown. Neither Modi nor Choksi have so far commented on the allegations.

Gitanjali has previously denied Choksi's involvement in the fraud and said he would take "necessary legal action" to get his name removed from the police case.

TV station NDTV on Friday reported Modi was at a suite in a New York hotel, citing household staff who answered the door.

On Saturday, a police source said that the CBI had sent a notice through Interpol in a bid to help locate Modi.

Meanwhile the Enforcement Directorate, India's financial crime agency, said on Saturday it conducted additional searches at 21 locations of companies tied to Modi, seizing 250 million rupees ($3.89 million) in precious stones, metals and jewellery.

Both authorities have conducted dozens of raids since PNB disclosed the fraud, targeting PNB, Modi and Choksi, with the Enforcement Directorate now having seized diamonds, gold and jewellery worth 56.7 billion rupees.

A tax department spokeswoman told Reuters officials had seized 29 properties and 105 bank accounts linked to Modi.

FINANCIAL IMPACT 

The biggest bank fraud in India's history has sent rumbles through India's financial system, raising fears about the scale of problems in the banking sector that is already saddled with $147 billion of soured debt.

PNB said on Friday it was running an audit of its systems to prevent a recurrence of such a fraud, but did not see a long-term hit to its operations. The bank, which has $120 billion in total assets, has lost more than a fifth of its market value since it disclosed the fraud.

The Hindu newspaper reported on Saturday that the Central Vigilance Commission, which investigations corruption in the government, has summoned senior officials of the Reserve Bank of India and the Finance Ministry to assess how all internal checks and balances failed to detect the fraud.

PNB officials were also summoned, the report said, citing an official aware of the development.

The RBI did not reply to an emailed request for comment. A Finance Ministry spokesman was not immediately reachable.

Scrutiny of banks' technical systems will intensify even further after India's City Union Bank Ltd on Saturday said it had suffered 3 "fraudulent remittances" of nearly $2 million that had been pushed through the SWIFT financial platform.

The case was reminiscent of the $81 million cyber heist that hit Bangladesh's central bank in 2016.

source: news.abs-cbn.com

What To Do When Comparing Personal Loans

MANILA - Looking to get a personal loan? You may be looking for alternative sources of funding for big life purchases, such as your child’s tuition or a long holiday abroad. You may be looking for extra funds to start a business or for some long-overdue home repairs.

Banks and lending agencies can surely help. Provided that your financial history meets their expectations, you can borrow the money you need with a personal loan.

Personal loans work very differently from other types of debt, such as credit cards and mortgages. Here, we give you the most important details you should look for when shopping for a personal loan:

source: news.abs-cbn.com

An FHA-to-Conventional Refinance May Allow You to Ditch MIP

While refinance applications seem to be taking a backseat to purchase applications, there are still some good reasons to refinance your mortgage, even if rates aren’t currently at their best.

First off, let me preface this with the fact that mortgage rates are still spectacular. Yes, the 30-year fixed used to be in the mid-3% range, but a rate of around 4% was relatively unheard of until recently (and is still available today).

Unfortunately, the recent increase in rates has dented refinance applications as the pool of eligible borrowers begins to dry up.

Today, the Mortgage Bankers Association noted that refis slid another 4% in the latest week, pushing the refi share of total mortgage activity down to just 42.6% from 44% a week earlier.

Most industry participants saw this coming, which explains the recent trend of mortgage companies cozying up with real estate agents. Hello Motto Mortgage and Redfin Mortgage, to name just a couple.

But there are still opportunities for both homeowners and mortgage lenders to pick up the refi slack.

Refinancing Out of FHA and Into Conventional


One such opportunity is refinancing an FHA loan into a conventional loan (such as a Fannie Mae or Freddie Mac loan), the main benefit being the removal of the mortgage insurance that must be paid on the former.

Thanks (or not thanks) to the FHA’s stringent mortgage insurance rules, the annual mortgage insurance premium (MIP) must be paid monthly regardless of whether the loan balance falls below 80% loan-to-value (LTV) unless the loan is a 15-year fixed or came with a 10%+ down payment. Or if it’s an older FHA loan.

Most FHA loans are 30-year fixed mortgages with minimal down payments, meaning MIP often stays in-force for all 30 years unless you refinance out of the FHA.

This adds to an otherwise low monthly mortgage payment, making even a great mortgage rate a little less attractive.

Many folks took out FHA loans several years ago to take advantage of the low 3.5% down payment requirement, and because home prices have increased so much since then, some of these borrowers may have the necessary equity to refinance into a conventional loan at 80% LTV or less.

Doing so will allow them to ditch the MIP and avoid PMI on the new conventional loan, which could equate to substantial savings.


Let’s take a look at an example:

Sales price: $300,000
Down payment: $10,500 (3.5%)
Loan amount: $294,566.25 (includes upfront MIP of $5,066.25)
FHA monthly MIP: $205.06

Instead of subjecting yourself to ~$200 in monthly mortgage insurance premiums, you might be able to refinance to a conventional loan at 80% LTV or less and rid yourself of that burden.

Tip: Note that the Upfront Mortgage Insurance Premium (UFMIP) is non-refundable if you refinance out of the FHA to a conventional loan. It may be refundable if you refinance to a new FHA-insured mortgage.

Two Things Need to Happen for the FHA-to-Conventional Refinance to Make Sense

Not just anyone can take advantage of this type of refinance. Only those who have gained enough equity and who can obtain a comparable (or better) mortgage rate will win here.

Using our example, the home must now be worth X amount to get that LTV down to where it needs to be. I say X because it depends how long you’ve had the loan.

A combination of home price increases and the natural amortization of the loan will tell you what the value needs to be.

The loan balance above would drop to $277,000 in just three years, requiring a house value of $346,250 to get the job done.

Fortunately, home prices have surged in the past several years, so for many lucky borrowers the appreciation alone can push a relatively young loan to the magical 80% LTV mark upon refinancing.

Assuming you’re good to go there, you’ll need to consider the mortgage rate. That is, your former mortgage rate and the refinance mortgage rate.

If you previously had a rate of 3.75% on a 30-year fixed, and the best available rate today is 4.125%, you have to take into account that .375% bump in rate.

The good news is that it shouldn’t affect the mortgage payment by too much.

The old principal and mortgage payment was $1,322.73 plus $205.06 with MIP, making it $1,527.80 out the door (don’t forget taxes and insurance too!).

If the rate were 4.125% instead, the monthly P&I payment would be (based on a slightly lower outstanding balance of $277,000) $1,342.48.

Yes, it’s a bit higher than the old P&I payment, by around $20, but you no longer have to pay the $200 in MIP. That’s a significant amount of monthly savings.

In reality, you might actually do even better if you started out with a higher mortgage rate thanks to a low credit score and/or high LTV, and have since improved upon those things.

250,000 Homeowners Expected to Refinance from FHA to Conventional This Year

CoreLogic recently noted that thanks to the FHA policy change of requiring mortgage insurance for life, FHA to conventional refinances have soared.

Last year, such refis accounted for about 8% of all refinance transactions, with about 20,000 loans originated per month.

In 2010, that rate was about 4,000 FHA-to-conventional refis per month, or just one percent of refinance transactions.

Since 2013, when the FHA’s mortgage insurance policy changed, about 2.9 million borrowers have taken out FHA loans. CoreLogic expects another 250,000 of these borrowers to go conventional in 2017, thanks in part to another 5% rise in home prices.

If you’re currently in an FHA loan, it might be time to consider a conventional loan instead if you stand to save a decent chunk of money each month.

Just be sure to take note of how long your FHA mortgage insurance will actually be in-force. Some borrowers with older FHA loans, 15-year fixed mortgages, or those who originally made large down payments might have more favorable insurance requirements.

(photo: Phil Leitch)

source: thetruthaboutmortgage.com

Trapped in debt? Here are 7 steps to free yourself

MANILA - Do you feel like you're drowning in debt? If you are, and you think there is no way to escape the debt trap, don't despair. With good planning, discipline, and a measure of sacrifice, you can retire your debt and be free from its burden.

Before you address your problem, try to look back and see how it started. You may be among thousands of Filipinos who are saddled with debt accumulated slowly over the years. This may be the result of living beyond one’s income, lack of planning, or sudden emergencies that force one to borrow, among many other factors.

For many, debt can creep up unknowingly. A personal loan here, a mortgage there, plus months of just paying the minimum amount due on your credit card, could add up until you one day find it beyond your control.

Whatever the cause, what’s important is that you take immediate action before debt paralyzes you financially and even legally. Your action will have to be on two levels – behavioral and financial – so that you can effectively cut down your debt.

 Here are seven steps to help you surmount your mounting debt:

1. Take a hard look at your finances.



This step is necessary since retiring debt calls for a sound plan that you can implement. Try to determine what you are paying for and how much. Just knowing how much you owe can surprise you. By doing this, you will also be able to determine which debt you have to prioritize, e.g. those that cost the most to maintain. You would like to retire the debt that charges you 20 percent a month ahead of the debt that charges you 12 percent a year. Understanding your finances will also allow you to come up with a workable solution.

2. Restructure the most expensive loans.

Today is a great time to restructure loans, given the low-interest rate environment. Are you paying credit card debt? Possibly with more than one credit card company? You will never get out of debt if you do not manage this. Talk to your credit card providers about restructuring the loan. You may also get a personal loan at a lower interest rate to help bring down your interest costs. Study all options available to you, while taking note of penalties and transaction fees.


3. Slash, not just cut, your monthly expenses.

Look at your lifestyle to find out where you can scale back. If you spend so much on entertainment, then cut this drastically. No more expensive night outs or fancy dinners for the time-being, unless you can find more affordable alternatives. Forget expensive vacations. Turn off the aircon and use an electric fan instead. Skip the expensive hair treatments. The cutbacks you can make will all count.

4. Sell assets. Raise cash to retire your loan by selling off assets, big and small.

Do you really need two cars? Do you need to stay in that very expensive house or would a smaller unit in a less luxurious part of town suit your purposes? Those diamond rings sitting in the closet may be your ticket to debt freedom. Even those expensive bags you picked up in your shopping sprees could fetch a fortune in the second-hand market. Selling off assets could help you bring down debt levels drastically.

5. Find additional income sources.
Find other cash sources so that you can put this toward retiring your debt. Are there additional projects you can take on or other jobs you can hold? Try tutoring children in your spare time, or baking cookies on weekends. Your creativity is your limit. This new income source will give you the elbow room to wiggle out of debt.

6. Live below, not just within, your means.

Sometimes you have to change your lifestyle drastically. You may need to dress simpler, consume less, and live a less luxurious life. You may look into selling your car and going back to taking public transportation to work, if your car loan is the cause of your debt burden. If living independently is causing you to bleed financially, think about moving back to your parents. Perhaps the kids could go to a less pricey school. The situation varies per individual, so take what is most appropriate for you.

7. Pay off as much as you can.

Try to retire as much debt as you can, to keep interest costs low and to hasten the debt retiring process. Pay more than the minimum amount due on your card. The longer you are in this situation, the more stressful it can get for you. Bite the bullet now and embrace the inconveniences and hardships it brings, knowing that this is necessary on your way to getting out of debt.

In all these, do not forget to stay focused. Don’t lose sight of your goal, which is to free yourself from debt that can affect you for life if you do not act on it now. By staying focused, you will be less tempted to spend on unnecessary items or to slack off in your debt retirement efforts.

Have a spreadsheet to help you monitor how close you are to your targets. Stay positive and remind yourself that freedom from debt will soon be at hand.

source: www.abs-cbnnews.com

How do I choose which online college to attend?

If you are confused about where to start, keep these things in mind during your selection process.

Word of Mouth – Ask around for suggestions. You probably know someone already attending that will recommend his or her online college. If not, check resources such as the public library, college search websites, and search engines.

Programs Offered – Check to see if they have the program you need for graduation. If you need a Master’s in Women’s Studies, then you need to eliminate the colleges that do not offer it.

Accreditation – This is a voluntary process that shows the institution has met certain academic standards. It also affects the school’s ability to offer federal financial aid. If you anticipate needing a federal loan, accreditation is probably necessary.

Time to Complete Certification – Generally, if a graphics design program takes 18 months to complete at one school, it will take 18 months at the next. However, classes at one school may be offered more than once a year making it easier to schedule classes around your workload. Ask advisors at the schools to explain your options.

Tuition – Your amount owed will be based on the number of credits you request. Before applying for a loan, check if your employer offers tuition reimbursement for certain classes or to a particular college.

Once you have your answers in front of you, you will be able to make an informed decision.

Doing a search for online colleges? Our US college search groups together quality schools in your area to help jumpstart your career. While you’re looking for online colleges, you can also search for online degrees as well. For additional information, use US College Search or find us on Facebook and Twitter as well as searching by zip code.

source: uscollegesearch.org

Yay or nay: 'Payday' loans for financial emergencies

MANILA - Availing a payday loan for financial emergencies may be convenient, but is it a wise move?

A payday loan is an amount of money lent at a high interest rate, on the agreement that it will be repaid when the borrower receives the next paycheck.

To pay for the loan, a borrower has to issue a post-dated check in the amount that he and lender has agreed upon. The lender then holds on to the check and cashes it on the agreed date, which is usually the borrower's next pay day.

Despite its convenience, Fitz Villafuerte, a registered financial planner, warned that payday loans can lead to more problems.

Whereas personal loans happen through credible, regulated financial institutions that are part of the system, getting a payday loan from people you don't know is an unpredictable practice that may leave you in a bad place.

Some lenders also require borrowers to surrender their ATMs, which can lead to problems, like lenders taking more money than what is borrowed from them.

For Villafuerte, if taking out a loan is unavoidable, then it is better to get one from your company or a bank.

"If there's a payday loan offered by the company, I would say that's the better option because at least, automatic deduction na siya sa salary mo. However, if your company does not offer that, then availing of one sa bank is also okay. However, make sure that the reason you're buying money is an emergency," he said.

He also said that building an emergency fund can help save one from living from paycheck to paycheck.

"The best way to really avoid getting a payday loan is to have money saved in the bank specifically for emergencies. It's good that payday loans are available, but make it as the last resort to get money if there is a financial emergency," Villafuerte said.

source: www.abs-cbnnews.com

Do Credit Repair Services Actually Work?

If your credit score is suffering, you’ll do practically anything to repair it. However, there are all sorts of scams out there that claim to improve your score. How are you supposed to know the difference? When you come across credit repair services on the internet, it’s not easy to know whether you’re looking at something legitimate.

Of course, credit repair services cost money as well, so you have to question whether they’re even worth it. Is it such a big deal to have a poor credit score? Well, we’re going to break this down for you today, and provide you with the information you need to know about credit repair services.

What Are Credit Repair Services?

A credit repair service is there to try and right the wrongs on your credit report. They’ll analyze your credit score to find out why it’s so low, and then try and improve it. They are experts in their field, so they know all the tricks of the trade and they’ll do their best to turn the problem around. In some cases, it might just be as simple as rectifying wrongs like basic errors in your personal information. Not many of us truly understand how credit works and what goes on the report, so these companies are there to help us out.

Why Do I Need To Repair My Credit, Anyway?

Good question! If you aren’t sure why you need to repair your credit, it’s a sure sign that you shouldn’t be trying to handle this task by yourself. Your credit is one of the most important things you need to get right. In the future, when you’re planning to buy houses or take out big loans, you credit score will come into play. If it isn’t up to scratch, you’ll miss out on many opportunities. But don’t fear! A poor credit score comes about as a result of failing to make payments. If this rarely happens to you, your credit score will probably be quite good! However, if you struggle to pay on time, your credit rating will slowly begin to decline. Eventually, it’ll get out of hand, and it’s a good idea to use a credit repair service before you get to that point.


I’ve Heard About Scams…

It’s true that some companies trading as “credit repair services” are merely a scam to provide false hope. Spotting one of these companies is simple as long as you know what you’re doing. Do you research ahead of time and read reviews about the company you intend to contact. For example, a quick glance of Sky Blue Credit Repair reviews shows plenty of positive feedback. You should never be in a position to get scammed as long as you’re taking the right measures to prepare in advance.


How Can They Help Me?

The most obvious way that a credit repair company can help is to speed up the process of improving your credit score. As previously mentioned, they can spot certain mistakes or errors which they can then challenge with the credit bureaus. You can’t always guarantee a positive result, even when the professionals are involved. Some services offer money back guarantees in case they can’t make any real progress. In a nutshell, these companies are there to do everything they can to clean up your credit score by identifying areas of improvement. They are a quick way of solving the problem, and they’ll be able to give you tips to manage your credit more effectively in the future.


Where Can I Find Them?

You’ll find the majority of credit repair services online. A quick Google search will present a vast number of potential options for you to consider, but remember what we’ve already spoken about. Before you go contacting anyone for assistance, make sure you do your research. What you’ll find in the listings of a search engine is not always reputable. As long as you’ve checked reviews beforehand and ensured it’s the right solution for you, you’ll get value for money.

So, it’s clear that credit repair services do work. The key factor in all of this is making sure you do the right preparation beforehand. You take it seriously with the right amount of care, as a good credit score is such an important thing to have. Even if you don’t intend to use it much right now, it’ll affect your future for things like mortgages and loans. Do what it takes to repair your credit score now, and you won’t ever have to worry about it when the time comes.

source: 20smoney.com

7 Mistakes to Avoid as a First-Time Home Buyer

First-time buyers are often a bit overwhelmed at the thought of buying a house.

The intention of this article is to help prepare you for what NOT to do when buying a house for the first time, and you’ll pick up some great information along the way.

Without further ado, let’s dive in…

1. Not educating yourself on the buying process


One of the best tips we can give to anyone who’s buying a house for the first time is to educate yourself on the steps involved when buying a house. Too many first-time home buyers are jumping into the housing market because it ‘feels’ right and this is a mistake. How can you know what feels right when you’ve never done it before?

Instead of buying a house based on feelings, you need to buy a house based on facts. Before committing to buy a home, you need to make sure that you’re ready to buy your first house.

Do you know what first time home buyer programs are available in your area? First-time home buyers have a number of benefits available to them that offer big time savings.

Find a top local Realtor in your area and ask them specifically to chat with other first time home buyers they’ve worked with in the past. Don’t hesitate to gather information on the experiences of others who have worked with them.

2. Not preparing to buy a house

Time to start saving. Once you think you have enough money saved, you are going to pay for the inspectors, the attorney, the appraiser, etc.

Not preparing properly is a common buyer mistake, especially one among first-time buyers who have never purchased a house before.

If you’re buying a house for yourself then you should have no problem putting together a list of your priorities. Those who are buying with a significant other will have to strategically prioritize what matters most to both people who will be living in the house. Those buying with the intentions of starting a family will have different priorities.

Knowing your priorities ahead of time is going to make for a much easier home search. The location should be priority #1 when buying a house – you can change the condition of a house, you can’t change the location (or the school district).

3. Finding the house before the location

A lot of time first time home buyers will wait to find the perfect house that will never hit the market. There are some things buyers MUST be willing to sacrifice in order to find a great home at a great price in an excellent location. If there is one thing a home buyer should never settle on, it’s location.

Buying a big house in a bad location is a common first-time buyer mistake. You should buy a house based on the priorities you have in a location, and narrow down your criteria before you start previewing homes.

One common mistake a first time home buyer will make is failing to buy a house in the location they want because they are ‘tempted’ to buy a mansion in a location that is less desirable. Once you start previewing homes outside of your desired area you’ll confuse yourself. For instance, someone with a budget of $300,000 will be able to buy a much bigger house in Durham, NC than they would if they bought a home in Cary, NC. The difference here is schools, amenities, safety, commute time and more.

4. Overextending on your budget

One of the worst mistakes a first-time buyer can make is overextending on your budget. Your home instantly becomes a burden instead of something you can enjoy. One of the best things you can do as a homebuyer is reverse-engineer your monthly costs before you buy a house.

If you can spend 3-6 months calculating an average cost to live, you can set budgets for how much you’re comfortable spending and saving. Whatever is left over is a comfortable monthly payment on a house (don’t forget about mortgage insurance).

For those purchasing a home with less than a 20% down payment, private mortgage insurance is likely to be included as a requirement in owning your home. Private mortgage insurance will typically go away once you have paid back 20% of the loan.

 5. Not having the right real estate team in place

Your real estate team is like a group of coaches for first-time home buyers. Everyone makes mistakes, it’s human nature. It’s your real estate team’s job to make sure they coach you through the mistakes proactively.

As a first time home buyer, it’s important you assemble the right real estate team. You’ll want to ensure you have the right mortgage lender, real estate agent, home inspector, and attorney.

Having the right real estate team in place will go a long way in your home purchase as they will be able to guide you throughout the process. Make sure you find a team that works well with you and works well together to ensure a smooth home buying experience!

6. Buying based on emotion

The best decisions you can make when buying a home are the ones based on facts. Too often I watch a buyer make an offer on a home they love only to be outbid by another offer. Hearing that the home sold to someone else is not easy. It’s one of the toughest things you can hear as a buyer, especially if it’s your first time.

Becoming depressed as a buyer is a common mistake first-timers make.

When you allow yourself to become depressed your body does two things typically. One, it shuts down completely and it no longer wants to buy a house because there was too much ‘pain’ experienced. Or two, you will buy anything just to feel better about missing out on the last home.

These are commons mistakes made by all sorts of buyers, not just first-time buyers.

If you make an offer and the home sells to someone else then treat it like a GOOD thing. You just picked out one of the most desirable homes on the market, meaning you recognize a good deal! Pat yourself on the back, and go find a better one!

7. Not calculating the true costs

Are you ready for all of the costs that come with buying your first house, and all the costs that come with homeownership? There is going to be a wake-up call for first-time home buyers who are looking at just their principal and interest monthly payments. There are many more costs that come with both purchasing a home and owning a home.

Looking at ‘what you can afford’ when buying a home is a common first-time buyer mistake.

What you can afford, and what you can afford while maintaining your current lifestyle are two entirely different numbers.

Some of the recurring costs you’ll want to be sure you include when buying a house are:

    Property Taxes
    Mortgage Insurance (If you put less than 20% down)
    Home Maintenance
    Homeowner’s Insurance
    Utility Bills

Final thoughts on mistakes made by first-time buyers:


It is imperative to factor loan origination fees, attorney fees, inspection fees, appraisal fees, mortgage insurance, and any other closing costs into your budget when buying a home. It is your job as a buyer to make sure you factor all the costs involved when purchasing a home. Your Total Mortgage loan officer or your realtor will be critical in helping you understand which fees apply to you, how much those fees will be, and what your options are.

I cannot stress to my buyers enough is that location is the most important part of a home. You can change the price, you can change conditions–you cannot change the location.

If you can avoid making these 7 mistakes when purchasing your first house, you are going to be in much better shape than most of the second and third-time home buyers out there!

source: totalmortgage.com

Why do I have a bad credit score and how to improve it?

It isn’t nice being rejected by a lender. You may have set your heart on a holiday or new car, or simply want to roll all of your monthly payments into one, but your plans could be wrecked if you have a bad credit score. When you get that credit rejection, it’s highly likely that there’s something the bank or other lender is seeing on your credit record which is acting as a big red flag. This can seem like the end of the world: a big setback that has wrecked your plans and put you back at square one.

But it doesn’t have to be like that. Hundreds of thousands of people in the UK suffer from poor or bad credit records and many of them have been able to take concrete steps to fix them. And once you have put yourself back on a sound footing with your credit record, it’s just a matter of discipline to ensure that you continue to manage your finances wisely and ultimately get access to more mainstream credit again.

What is a bad credit score?

The three major UK-based credit reference agencies – Experian, Equifax and CallCredit – maintain data on every borrower in the country as well as records on utility and insurance accounts as well as mobile phone contracts. The information held on each person includes a list of existing and past addresses, the history of payments on each credit account going back six years and whether those payments have regularly been made on time. If a person has any defaults registered against them, county court judgements (CCJs) or bankruptcies, this information will also be recorded on his or her credit record.

Anybody has the right to see their credit record. An individual can can apply to one or all of the reference agencies for a copy of the record in return for a small fee. Alternatively, all three of the agencies offer online subscription services where you get access to your credit record as it is updated every month. Once you get hold of your report, you should be able to spot exactly where you’re having trouble and what constitutes a bad credit record.

While you will be able to see immediately where your payments have been late or you have defaulted, figuring out how the agencies and lenders use the data can be more difficult. These organisations use a credit score – usually a figure between 300 and 900 although this can vary – which represents the risk that a particular individual might pose to a lender. In short, the lower the score, the higher the risk, while those with the best credit scores will have higher figures registered against them. Furthermore, that degree of risk might be expressed by one or more of the agencies as ‘very poor’, ‘poor’, ‘fair’, ‘good’ or ‘excellent’. If you have a rating of somewhere between 300 and 400 then this might be classed as ‘very poor’ or ‘poor’ while those with scores of between 650 and 900 may be judged to be ‘good’ or ‘excellent’ risks.

If you are in the bottom categories, then you may well find it difficult getting accepted for most mainstream forms of credit. These include loans, bank account overdrafts, mobile phone contracts and credit cards. In some circumstances, utility companies may be reluctant to set up new contracts and offer you pre-paid accounts instead.

There are some lenders who will offer credit to people in these categories but these may come with higher interest charges, lower capital sums and, occasionally, conditions about security or guarantors.

If your score is somewhere north of 400 but below 600, you will probably be classed as a moderate risk by lenders. That means that you will have access to loans and credit cards but you will probably face higher interest rates and lower credit limits than people with good or excellent records.

Those with the best credit records will be accepted for most or all loans that they apply for and will benefit from the lowest interest charges.

How to Improve Things
It is eminently possible to repair a bad credit score given time and good financial management. While there is no magic bullet, the experience of thousands of other people proves that even those with the worst credit records can find themselves back in the ‘excellent’ category within one to two years if they stick to some fairly simple steps:

    1. Always repaying on time, every time

Financial mistakes don’t stay on your record forever. They only last for a maximum of six years and so long as you make your repayments on time from this point on, this will start to outweigh any of the negatives on your record which will gradually get pushed down the list over time.

   2. Close accounts that you don’t use

Paying off loans or credit cards when you can afford to is sound financial management. It’s no good saving money if you have got debts that you can afford to clear. Rather than spending money on something you don’t actually need, look at the cards that you may have reached your credit limit on. If you pay these off or substantially reduce them, this will reduce your debt to income ratio and this is one of the most effective ways of improving your credit score quickly.

   3.  Consider a guarantor loan

While it may not be obvious, a guarantor loan is a great way to rebuild a bad credit record. It works because a borrower uses the good record of somebody else to borrow the money they need – be that person a family member or friend. This guarantor is the security that the loan will be repaid and will be liable to make repayments if the applicant slips up. But the great thing about guarantor loans is that every time the borrower makes a repayment on time, this goes on his or her credit record and will gradually improve even the worst record.

   4. Choose the right credit card

There are plenty of credit cards out there designed specifically for people with poor or bad credit records. These may be advertised as ‘credit builder’ or ‘credit repair’ cards. They are generally offered with higher interest rates and lower credit limits than other, more mainstream cards, but they give people the opportunity to build up a record of financial discipline by making repayments on time.

Article provided by Mike James, an independent content writer working together with technology-led finance broker Solution Loans, who were consulted over the information in this post.

source: 20smoney.com

Qualifying for a Mortgage When You’re Self-Employed

When John Kennedy observed that “life is unfair,” at a press conference in 1962 he wasn’t referring to the challenges self-employed workers would face getting a mortgage fifty years later—but he would have been right.

If you are one of the 14.6 million people in the US[1] who make a living working for yourself—about 10 percent of the total workforce—you don’t fit neatly into the profile of borrowers whose income can be easily documented for a mortgage application.

Tax returns don’t tell the whole story

It’s not impossible to get a mortgage if you are your own boss, but you’ve got to jump through some extra hoops to qualify.  That’s because self-employed borrowers typically have to provide two years’ worth of tax returns, which lenders will want to obtain directly from the IRS.

Yet tax returns often don’t accurately reflect their take-home pay.  Self-employed people typically take advantage of a slew of tax deductions related to their businesses, from retirement plans to home offices.  These reduce their taxable income, but they also reduce their adjusted gross income, which is what lenders look at for proof of income.

In some cases, mortgage lenders will allow certain deductions to be added back to the income such as depletion, depreciation or a large, nonrecurring item.

Plan ahead if you can

One solution is to plan ahead and write off fewer expenses for the two years leading up to applying for a mortgage, a strategy that could either cost you significantly at tax time or require you to refile you taxes after your mortgage is approved.

Another suggestion is to separate your personal funds from your business by using a credit card devoted to your business expenses, then convince a lender that the debt isn’t against you because it belongs to the business.  Finding the right lender could still be difficult, and you could still miss some of the most popular deductions, such as home businesses and cars used for business.

Timing is also important.  Self-employed workers typically have highly volatile businesses.  By using income averaging over 24 months, borrowers can avoid declines in income from one year to the next.

Reduce debt to improve your chances

The reason lenders want to see your income is because they need it to determine whether you have enough income to make you monthly debt obligations, a calculation expressed as your debt to income ratio. The median DTI for recurring debt on closed conventional purchase loans today is about 35 percent for recurring debt payments.[2]

By reducing or eliminating your recurrent debt payments, such as your car or student loans, you can reduce your DTI ratio, which will help you qualify for a larger mortgage.

source: totalmortgage.com

Know your monthly amortization through this home loan calculator

MANILA, Philippines – If you’re wondering how much your monthly amortization will be for a home you’re looking to buy, you’ll find a home loan calculator very helpful.

A home loan calculator computes the monthly amortization based on your inputs on different variables like type of home, interest rate, down payment and loan term.

Below is a home loan calculator from mass housing developer Deca Homes. Deca Homes started building communities in 2002 in Davao and expanded to different provinces in Luzon and Visayas in a span of seven years. A mid-rise condominium, 8990 Tower is now in the works in the metro.

Deca Homes offers both in-house financing called CTS Gold Financing at 11 percent interest rate and Pag-ibig Fund home loan at 6.5 percent. Use the calculator below to find out not only your monthly amortization but also the type of home loan that will work best for you.

source: philstar.com

Getting a Mortgage in 2016? Here’s What You Need to Know

As recently as two years ago, only 17 percent of all applications for a mortgage to buy a home were approved.[1]  Approval rates have improved greatly since then for two reasons.

First, borrowers are doing a much better job of getting their credit, debt, and documentation in order before they apply.  Second, lenders have slowly relaxed some of the standards they use to approve applications.

As you gear up to buy a house in 2016, here are a few things you should know about the mortgage industry.



More Easing of Credit Standards

Mortgage lenders expect to continue easing their standards in 2016, according to a fourth quarter survey of major lenders by Fannie Mae.[2]  The findings show that during the first quarter of the year, 16% of lenders expect to ease credit requirements for loans that conform to Fannie Mae’s and Freddie Mac’s underwriting standards and for government-backed loans like FHA and VA.

Meanwhile, the percentage expecting to tighten standards dropped to 2%.  However, for other loan types, such as conventional loans, fewer lenders said they would ease loans over the first quarter.

FHA and VA loans are already significantly easier to qualify for than conventional loans.  For example, the median FICO scores for purchase loans approved in December were 688 for FHA, 706 for VA and 754 for conventional—a huge difference.[3]  Based on the Fannie Mae survey, look for that difference to increase in the months ahead.

Rising interest rates

While standards slowly improve, interest rates are expected to slowly worsen for home buyers.  Most forecasts have rates ending the year between 4 and 5 percent on a 30-year fixed rate mortgage.

Ironically rates have actually fallen when most experts expected them to rise in the wake of the Federal Reserve’s decision in December to rates for the first time in nine years.  Though they will probably be higher a year from now than they are today, they will still be very low compared to historic rates.

Down Payments 

While easier lending standards and slowly rising rates don’t greatly increase the cost of buying a home, down payment requirements aren’t going to change much either.

The average down payment in the first quarter of last year was 14.8 percent of the purchase price, down from 15.5 percent a year ago to the lowest level since Q1 2012. However, the average down payment in dollars for 3.5 percent FHA purchase loans originated in the first quarter last year was $7,609 while the average down payment for conventional loans backed by Fannie Mae and Freddie Mac was $72,590.[4]

One of the reasons the average down payment declined last year was the popularity of low down payment loans.  Loans with 3 percent or lower down payments accounted for 27 percent of all purchase loans in the first quarter last year, up from 26 percent in the fourth quarter and also 26 percent a year ago to the highest share since Q2 2013. Low down payment loans accounted for 83 percent of FHA purchase loans originated in the first quarter, while 11 percent of conventional loans were low down payment loans.[5]

First-time buyers should check out the thousands of low or no down payment programs sponsored by state and local housing authorities.  Check out Down Payment Resource for more information.

Mortgage insurance in 2016

Fannie Mae and Freddie Mac both launched 3 percent down payment programs a year ago and these have been extended through 2016.  However, like FHA, they both require mortgage insurance, which adds to the monthly cost of homeownership.

To encourage first-time buyers, last year FHA announced a 50 percent reduction in the monthly mortgage insurance premium.  All three of these initiatives are being continued this year.  More good news: in the waning hours of 2015 Congress extended the deductibility of mortgage insurance payments; at least for 2016, you will be able to deduct your mortgage insurance premiums from your federal taxes, just like you mortgage interest.

This tax provision only has a one-year lifespan, but Congress has extended it for the past few years though there no guarantee it will continue in the future.


[1] Ellie Mae Origination Insights Report, January 2014

[2] http://fanniemae.com/portal/research-and-analysis/mortgage-lender-survey.html

[3] Ellie Mae Origination Insights Report, December 2015

[4] http://www.realtytrac.com/news/home-prices-and-sales/q1-2015-u-s-home-purchase-down-payment-report/

[5] Ibid

source: totalmortgage.com

How Much Equity Do You Have?

When people talk about housing being a good investment, they are referring to the profit that accumulates over time as home values rise. It’s called equity, and it’s easily calculated by subtracting the principal that you owe on your mortgage from the value of your home.

Your principal is easy to determine. Every month with your mortgage invoice, your lender sends you an accounting of the principal you still owe. Finding out what your house is worth is the tricky part.

Prices vs Values

Unlike other assets you own, such as securities or commodities, every home is unique. Location, condition, age, bedrooms, and lot size are some of the major factors that affect value. On the other hand, market forces like foreclosures, inventory shortages, or high levels of demand that create multi-bid situations have a huge impact on prices, but a limited impact on values.

Prices, like the numbers you see reported in the news, are from recent sales—only on about 3 to 4 percent of all single family homes in a given market. The other 97 percent of homes are also changing value based on market trends, but each home changes value at a different rate. Also, sales price reports cover large areas and hyperlocal trends resulting from the local factors like the construction of a new highway, the opening of a new shopping center or a rising crime rate are often below their radar.

Despite the old adage, houses are not necessarily worth what someone will pay for them. Lenders require appraisals to determine the value of a home and they limit the amount of the mortgage they will approve based on the appraisals.

Appraisers base their valuations on “comps”—recent sales of comparable properties. Sales contracts between buyers and sellers often are often higher than the appraisal, especially when sales prices in a market are rising, causing buyers to scramble for additional cash or risk losing their chance to buy the home.

At the end of the day, for the majority of buyers who finance their purchases, valuations based on appraisals rather than local sales prices determine what a house is worth

How to Determine Your Home’s Value

Web site AVMs. A number of sites offer services that give you a value when you enter your address. These are based on algorithms called “automated valuation models, or AVMs. Like any other computer model, the results they deliver are only as good as the data they access.

Try several of them. The results will vary by tens of thousands of dollars. AVMs are good for getting a start on valuing your home by giving a sense of the range that the actual value might fall.

More importantly, use the AVMs over time to get a sense of the direction that your home’s value is moving. Houses don’t change direction frequently—perhaps every 18 months or so. Discovering whether it is appreciating or depreciation help you anticipate its value months into the future.

“Big Data” Indexes. Using big data techniques, several real estate analytics firms have actually aggregated valuation data on as many as 100 million homes and developed statistical formulas based on repeat sales and comparable sales to update their valuations. These valuations are based on house-specific data rather than the computer models used by AVMs, so they may be more accurate.

However, even the best index can’t evaluate the condition of your house. Some valuation sites offer you the opportunity to alter your valuation based on condition, but it’s hard to assess how impartial owners are.

Appraisals. If you really want to know what your house is worth, the best way to find out is still to have it appraised by a licensed professional. If you are planning to refinance or to sell, a professional appraisal is worth the $500 or so that It will cost.

A tip: have your house appraised when you need the information, since appraisals begin to lose their accuracy in six months, or even less in volatile markets. Also, even if you have your own appraisal done, your buyer’s lender will probably order their own.

source: totalmortgage.com