Financial tips for 2019

This was originally published on Monday, December 31, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

2018 is just about over. To prepare for the new year, take some time to review your insurance.

Update your insurance. Review your coverage. Does it still cover what is important to you? Did you make a large purchase in the past year? If you did, be sure that your insurance will cover it. If you use photos or videos to keep records of your belongings, it’s time to update them. You can easily store copies of photos and videos online in private accounts. If your computer and paper files become damaged, you will still be able to retrieve online copies from another computer.

Inspect your home. By inspecting your home annually for fire, theft, and flood hazards, and correcting the problems that you find, you can protect your family from perils. You will possibly prevent or limit damage to your home. Did you invest in a new anti-theft system? If you did, you may be able to lower your insurance costs.

Check your doors and windows for gaps where water and hot air can enter. It may take a simple act of weather stripping, but it will save you a lot in power costs and water damage. Look for fire hazards as well. Test your outlets and look for signs of electrical damage. Test your smoke detectors and replace the batteries if necessary.

Insurance discounts. Over the past year, you may have made improvements to your home to safeguard your structure and belongings against major perils. You may have installed smoke detectors, added typhoon shutters, or otherwise weatherproofed and secured your home. Not only do these actions protect your home and your family, but they also may make you eligible for a discount. Create a list of improvements to refer to when you visit or call your insurance broker or agent.

Update your car insurance. If a young driver moves away from home or no longer needs to drive the family car, an annual review can help remind you to adjust your coverage to your current number of drivers. You can also check for car insurance discounts if you have made any changes in the past year, such as installing a car alarm.  Some insurance companies will give discounts to students who have good grades as well.

Adjust your deductible. If you have saved up enough to cover a higher deductible for your car and home insurance, you can adjust your deductible upward to save money on premiums. But before you do this, it’s a good idea to move those funds away from the financial accounts that you use frequently, to a standalone emergency savings account. If it’s easy for you to transfer funds from your savings and into your checking account, you may be more tempted to spend your deductible before you need it.

Discuss your situation with your broker or agent. Your broker or agent can talk to you about the changes you have made over the past year, and help you find discounts of which you are unaware. He or she can also help you re-shop for insurance and find policies that are better suited to your needs and budget.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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Tips to de-stress your finances during the holiday season

This was originally published on Tuesday, December 25, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

It is the time of the year where we enjoy food, festivities, and gift-giving of the holidays.  Although it is supposed to be the most magical time of the year, it is also full of hard work and financial stress. De-stress your holiday season and get in a merry mood with these tips:

Set realistic expectations. We dream to find that special someone the perfect gift and stuff the bottom of the Christmas tree with gifts. In reality, sticking to a holiday budget is more practical and will alleviate the stress of paying the bills you need to pay. It is a season for giving, so give yourself peace of mind by budgeting within your means.

Make a shopping plan. Shopping is stressful enough during non-holidays, so avoid to do all your holiday shopping at once. If you have the time, divide your shopping into manageable pieces. If you can divide the list by the location of where you plan on buying the gifts it will save you a lot of driving time as well. Next year plan on holiday shopping all year long. It will reduce the last-minute stress and spread your expenses out.

Price compare. Sometimes that perfect gift can be above your budget. Take some time and look through store fliers to see if that item is on sale for a lower price. You can also do a quick internet search. Some stores can price-match. It cannot hurt to ask.

Use technology. Some of you still like to send Christmas cards with a year-in-review letter. Purchasing, printing and sending cards can add up. Sending e-cards with a letter and photos are just as well received and will cost you less. You can also send electronic gift certificates to favorite stores or shopping sites. You can also send money directly to their accounts. This will ensure they get exactly what they want and you will not have to stress out in holiday crowds. Technology will also speed up the process, so they get their gifts or cards in time.

Make homemade gifts. Use your talents to make their holiday bright. Make cookies or homemade products. The internet is full of ideas that you can create no matter your talent or budget. You can create gift certificates for lawn or car wash services. These types of gifts are great because they come from the heart.

Split the work. Who says the host needs to make all the food? Take some of the pressure off yourself by making your holiday get-togethers a group potluck. This also ensures your guests with specific food preferences or allergies will have something they can eat. It also relieves you from the financial stress of feeding all your guests.

Volunteer. Help improve the holidays for those who are most in need. Volunteer at a charity and you may find your mood lifting as you connect with others and give back to your local community. Some people will appreciate your time versus your money.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Additional costs to purchasing a home

This was originally published on Monday, December 10, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

When settling the purchase of a home, closing costs are charged to both the buyer and the seller to compensate the parties involved in funding, approving and insuring the sale. They are not included in the purchase price of the property. Before closing on your home, discuss what your closing costs are and how much the additional fees will total.  Here are more closing costs that you could be responsible, in addition to your final purchase price.

Loan origination fee. This fee covers the lender’s administrative costs of preparing the required documents for the loan and the closing paperwork. The average cost of the fee is usually 1 percent to 2 percent of the loan amount.

Pest inspection.  This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans. Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.

Private mortgage insurance. Depending on how much of a down payment you make, you may be required to purchase private mortgage insurance. In most cases, it will be rolled into your monthly mortgage payment. Your loan provider usually requires you to have private mortgage insurance to protect lenders against loss if a borrower defaults.

Recording charges. State and local governments charge this fee to record your deed, mortgage and loan documents regarding the sale.

Survey fee. A survey is a drawing or map showing the precise legal boundaries of a property and other details. If an existing survey of the land can’t be obtained, a new survey will have to be conducted. Your lender may require you to have the land surveyed to ensure the boundaries are where they are supposed to be and there are no legal issues.

Title insurance. On Guam, it’s common for property to be passed down from generation to generation without being recorded or going through the proper legal channels. Title insurance ensures the property you are buying is free and clear of any claims, taxes or property disputes.

Transfer taxes. This is the tax paid when the title passes from seller to buyer.

Underwriting fee.  This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Don’t forget about closing costs when buying a home

This was originally published on Monday, December 3, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

When calculating your mortgage, there is more to think about than just the down payment and the total mortgage payment. Most financial advisers calculate the average closing cost to be anywhere between 2 to 5 percent of the home value. Closing costs are fees that are associated with the purchase of your home. Closing is the point in time during your home purchasing process where the title of the property is transferred from the seller to the buyer. The cost of closing can be incurred by the buyer or the seller, or both.

The costs associated with the closing process are based on the property purchased and the type of loan you.  Here are some common fees that may be included in the closing of your home.

Application fee.  This fee covers the cost of the lender to process your application.  Sometimes it will cover the cost of running your credit check.

Appraisal fee. Lenders will require a potential buyer to hire an appraiser to determine the fair market of the home.   They consider similar properties in the area, market trends, house amenities, square footage, defects, and structural concerns.  The fee is usually paid by the buyer prior to the sale being finalized.  The appraised value could greatly impact your down payment, loan terms, monthly payments and, in some cases, even your ability to buy that house.

Attorney fee:  This pays for an attorney to prepare and/or review your closing documents and is not always required.  The attorney can work on the behalf of the buyer and lender.

Closing or escrow fees. An escrow company is a third-party that will hold the money while the buyer and seller finalize the contract. The escrow company will is the intermediary between the buyer and the seller. Generally, you’ll have a portion of the monthly mortgage payment held in escrow to pay for property taxes and insurance.

Credit report fees. Some loan institutions will charge a fee to check your credit history.

Down payment. The amount you contribute to your home will determine how much your total mortgage loan will cost. Depending on the type of loan you receive, you may be required to have up to 20 percent of the home’s sale price, in cash as a down payment.

Home inspection. You may decide to hire a home inspector to look at the integrity of the home. They will verify the condition of a property and determine if repairs are needed before purchase.  Hiring a home inspector works in your favor as the buyer.  They can spot costly repairs that may sway your decision. Also as the buyer, you can request the price be lowered or negotiate with the seller to fix any defects before you purchase the home.

Homeowner’s insurance. Many banks require a homeowner’s insurance policy be purchased before closing on the home. The policy covers personal liability and hazard insurance to cover the home and the contents. It may also cover special conditions which your house may be exposed, such as typhoon, flood or earthquakes. Ensure you read your policy carefully and understand exactly what it covers.  Your first year’s insurance is often paid at closing.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.

Securing a mortgage

This was originally published on Monday, November 26, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

Obtaining a mortgage is a crucial step in the home buying process. Securing a mortgage pre-qualification and a pre-approval are part of that crucial step. However, getting pre-qualified is much different than getting a pre-approval. So, before you start shopping for your home, it is important to know the difference between being pre-qualified and pre-approved for a mortgage.

Pre-qualification.  When a lender has evaluated your creditworthiness and decides that you will be eligible for a mortgage, you are being pre-qualified. To get pre-qualified you provide your lender some basic financial information and get an idea of what will be the maximum amount that you qualify. This amount is an approximation and not a promise of how much you can receive. A pre-qualification does not require a mortgage application. Usually, you do not have to pay a fee to receive a pre-qualification and it does not require a credit history check. Lenders do not consider the amount you will use as a down payment and will give you an estimated amount. Some lenders will provide interest rate information.

Pre-approval.  A pre-approval is a letter from a lender that states you qualify for a specific mortgage amount based on all your financial information such as your credit report, salary, assets, financial obligations, and your bank statements. Unlike a pre-qualification, a pre-approval requires that you submit a mortgage application. Most of the time, a fee is required to process the pre-approval. Lenders will consider how much of a down payment you will put toward your mortgage and give you a very specific amount that they will approve. Along with your pre-approved amount, lenders will also give you the interest rate.

By getting a pre-approval letter you receive a very clear snapshot of the houses you can afford. It will help eliminate houses that are not within your price range, therefore saving you time and effort. You will not have to keep going back to your lender to get an approval every time you find a home that interests you.

The best time to get pre-approved is before you even start house hunting. There is no need to get your heart set on a home you are unable to afford. Most pre-approvals are good for 60 to 90 days. Be careful, if your pre-approval expires, you will have to go back to your lender and request another one, which will place another inquiry on your credit report. This process will bring your credit score down and you may not be approved for the same amount. Before going to the back, check with your lender on what documents will be needed. Most lenders require you to show W2 forms from the past two years, three months of pay stubs, last two years of your personal tax returns, your Social Security Card, and your monthly debt and living expenses. If there is more than one person on the mortgage, each borrower will need to provide the same information.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Right steps to buying a home

This was originally published on Monday, November 19, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

As the year is quickly coming to an end, it is time to start thinking about your personal financial goals. If buying a house is something that you are working toward you should know your options and the right steps to the journey of your new home. Buying a home is a huge investment and will probably be the most significant purchase of your life.  Before you start down the road to homeownership, here are a few steps to take into consideration.

Improve your credit score. Before even beginning your search for your dream home, it is imperative to know your financial health. It is important to know what your credit score is to determine if you qualify for a loan and to secure the lowest mortgage rate. In some cases, just a half a point difference in your credit score can translate to tens of thousands of dollars saved. Credit score greatly affects the amount of interest you will pay. Many lenders will approve a minimum score of 600, if your credit score falls below 600 consider raising your credit score before applying for a loan. Most lenders consider scores from 550 and below as bad, 550 – 649 as poor, 650 – 699 as fair, 700 – 749 as good, and 750 and above as excellent.

Decide what you can afford. When calculating what you can afford, consider your household income, monthly debts (for example car loans, utilities, and credit card payments), and the amount of available savings for a down payment. It is vital to have a certain level of comfort. A good rule is to have at least three months of your mortgage and monthly expenses in reserves. Your bank will use a calculation called your debt-to-income (DTI) ratio to decide the amount of mortgage you can borrow. Your DTI is calculated by taking your total monthly debt and dividing it by your total monthly pre-tax income. The ratio or percentage you get is your DTI. Your total monthly spending for housing and debts should not exceed 36% of your monthly income.

Start saving for the down payment. A down payment is the cash you pay upfront and is deducted from the total amount of your mortgage. You can purchase a home with as little as 3% down. The optimal down payment is 20 percent so if your home costs $300,000, your down payment at 20 percent is $60,000. That is a lot, but you will receive a better interest rate, have more equity in your home upfront, and pay lower monthly payments.

Have a healthy savings account. Your lender will want to know that you are not living paycheck to paycheck. If you have at least three months’ worth of your mortgage set aside, you are more attractive to lenders. Lenders will give you more leeway on other criteria if they see that you have a sizable cash cushion.

Get a pre-qualified. A pre-qualification from your lender gives you an idea of how much house you can afford. Your pre-qualification is issued after your lender has evaluated your financial history which is based on your credit report and score. A pre-qualification also gives you a leg up when shopping for a home especially when there are other interested buyers.

Purchase your home. Take time and shop around for a house. Be certain that the house you are considering is the one that fits your family’s needs.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Housing loan options for veterans

This was originally published on Monday, November 12, 2018, in the Pacific Daily News.  Click here to subscribe to the PDN. 

Today we honor those who served in the military. When our service members, veterans and eligible surviving spouses are considering buying a home, the Department of Veterans Affairs has a program to assist them. The home loan guaranty program can assist in purchasing, building, and repairing a home. The loan is provided by private lenders and the VA will guarantee a portion of the loan. The program also helps those eligible with more favorable terms.

In researching this column, I asked a friend about some of the programs available. The benefits of a VA Home Loan Guarantee help those eligible purchase a home with competitive interest rates usually without a down payment. The VA also provides assistance when the borrower has difficulties renting their property or is trying to avoid foreclosure. If the VA home loan is in jeopardy, those eligible can apply for an Interest Rate Reduction Refinance Loan, IRRRL. An IRRRL can only be made to refinance a property on which a VA loan was used to purchase the home. The VA also has a cash-out refinance option that allows veterans to take out cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements.

Eligibility for VA home loan

Eligibility for the VA home loan depends on years of service, duty status, and character of service. For those that have certain total and permanent disabilities that are related to their military service, the VA has a loan that can help you adapt your home to your disabilities through their Adapted Housing Grants. Veterans must have satisfactory credit, sufficient income and a valid Certificate of Eligibility, or COE. A COE verifies to the lender that the veteran is eligible for the VA-backed loan. The COE can be obtained through the VA’s eBenefits website at www.ebenefits.va.gov or through the lender. You can also request a COE through the mail as well. The home must be for the borrower’s personal occupancy.

On Guam, the VA home loan limit for Jan. 1, 2018, through December 31, 2018, is $679,650. There are several banks on island that honor VA loans. The VA has certain requirements to be eligible for the VA loans programs. They can be found at the VA’s website, www.benefits.va.gov.

I thank service members and the families for all that you have done to keep our nation safe. Happy Veterans Day.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 24 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.