It’s in the news. Mortgage rates are hitting record lows – again. If you fall into any of the categories below, it may be time to consider your refinancing options.
You have a variable- or adjustable-rate mortgage (ARM) Loan.
If you’re currently in an adjustable-rate loan and you have at least 80% equity in your home, this is the time for you to refinance. Even if refinancing won’t lower your payment, fixing your interest rate and your payment could still save you a lot money in the long run.
Your rate is a half a percentage point above today’s rate.
As a rule of thumb, if your current loan is more than half a percentage point higher than current mortgage rates, you may save money by refinancing if you plan to stay in your home. Be sure to ask about closing costs and any points or fees associated with the loan. Those costs could reduce or eliminate your potential savings.
You have a balloon payment.
A loan with a balloon payment has a remaining balance that must be paid off or refinanced after your term is completed. For example, your payment is based on a 30-year amortization term; however, the loan itself is only for a term of 15 years. If you have a loan with a balloon payment, consider refinancing to a traditional fixed-term loan. It may not necessarily lower your monthly payment, but it will remove the balloon payment and help you lock in today’s low rates.
You have equity.
Home values are improving in most areas. People that couldn’t refinance even a year ago are finding that they can now. If you have been paying down your mortgage loan for some time and think you may now have at least 80% equity in your home, it’s worth the effort to lower your mortgage interest rate. Your lender should be able to quickly assess your home’s market value to determine if you will be eligible to refinance; however, ultimately, a professional appraiser will be required in most cases to complete loan processing and confirm your eligibility. Depending on your loan type, your lender’s requirements, and your approximate loan-to-value ratio, you may have to pay out of pocket for an appraisal. An appraisal typically costs $300 to $500.
Call your mortgage lender as a starting point, or better yet, a real estate specialist at Pacific Service CU. We’re happy to help.
by Hemlata, AVP, Real Estate
Current law allows consumers one free credit report each year. We encourage members, like you, to review your credit report annually. When accessing your report, however, you may find it complicated and not easily understandable. Here’s what you should look for and what it means to your credit.
Your credit report can help you gauge your financial picture from a lender’s perspective. However, more importantly, you should review the entire report for general accuracy. If you see any accounts that you didn’t open or any errors with existing accounts, you should contact the credit bureau to initiate the process to correct them.
Your credit report will show who has been accessing your credit report. These inquiries are categorized as “soft” or “hard.” Soft inquiries are when someone reviews your credit, but hasn’t asked for credit. For example, it’s considered a soft inquiry when you review your credit report annually or a lender receives a change in your credit status in relation to a credit card account. Soft inquiries do not affect your credit score.
Hard inquiries occur when a business has accessed your credit report with the intent to offer credit. For example, you’ll receive a hard inquiry on your report when you apply for a credit card or auto loan. Infrequent hard inquiries don’t normally affect your credit score that much. However, frequent hard inquiries indicate an increasing desire for credit and can adversely affect your credit score. If you see any hard inquiries that you don’t recognize, it may be an indicator that someone is trying to use your credit score or is committing identity theft. In that event, report the inquiry to the credit bureau.
Delinquent payments heavily influence your credit score. If you see that your bills have been paid 30, 60, 90 or 120 days late, that can be very damaging to your score and your future ability to get a loan. The greater the payment delinquency, the more it damages your credit score.
Timing also can be a decisive factor with late payments. For example, how long ago was the late payment? Was the late payment an exception? Have late payments been a regular occurrence? Over time, late payments will become less damaging, providing your recent payment history is consistently satisfactory.
Credit Utilization Ratios and Open Credit Card Accounts
Credit scoring programs also consider your debt-to-credit limit ratio, or utilization of available credit. This ratio compares your existing balances with your available credit limit. The ratio demonstrates to lenders whether or not you are living within your means. Generally a lower ratio has a more beneficial impact on your score. In addition, an excessive number of credit cards and available credit can lower your score. Lenders and credit bureaus want to see responsible spending to show that you can have the available credit, but not necessarily use it.
Accounts that have gone to collection departments or have been written off as a bad debt can stay on your credit report for up to seven years. Lenders will be more reluctant to give a loan to someone who has caused a loss.
Typically, members are aware of adverse credit experiences on their credit report and many are making efforts to pay the obligation through workout agreements or legal proceedings. It is not uncommon, though, for consumers to be unaware of low level or inactive collection activity, for example, a forgotten insurance deductible with an old medical bill. You can start to remedy this type of situation by contacting the creditor.
It’s also increasingly common to see a collection entry on a debt that is not yours. Should you encounter that situation, you must contact the credit bureau and have the entry removed from your report. Unfortunately, identity theft is a growing problem for consumers and makes the need for reviewing your credit report even more important.
Judgments, Liens, Bankruptcies
You’ll find these listings in the public records section of your credit report. These types of events are extremely damaging to your score and can stay on your credit report for up to 10 years. For further information, read more in “What is Bankruptcy?”
You can access your credit report at www.annualcreditreport.com to get started.
If you’re having difficulties repaying a debt or obligation, we recommend speaking to your creditor(s) as soon as possible.
by Chris, Vice President, Lending
Jenna, Vice President, Operations
Most of our new checking account holders switch to Pacific Service CU because they want to receive good value. But how do you know you’re getting a good deal? Here are five fees to consider when assessing a new checking account.
Typically, banks offer free ATM access to their own ATMs. However, be sure you look at the out-of-network ATM fees, the charge that results if you use your Bank of America ATM or debit card at a Chase or other bank ATM. Non-network ATM fees can range between $2 and $5 and can quickly add up over time.
You should also make note of monthly maintenance fees and requirements to avoid those fees. Sometimes the fee can be avoided simply by taking advantage of direct deposit. Often a minimum balance is required to avoid the fee. If so, be sure that the minimum is realistic for you. And finally, some checking account providers require certain activities to avoid the monthly fee; things like number of debit card uses per month or limiting to the number of checks you can write.
Generally speaking, try to avoid checking accounts that require you to pay to use or access your account. Look at the fee schedule for charges such as speaking with a phone representative or teller, limits on paper checks written or charging for paper statements.
Non-Sufficient Funds and Overdraft Protection Fees
When there are not enough funds in your checking account to cover a transaction, your financial institution may still pay the transaction using either an elected overdraft protection account or allowing you to temporarily overdraw your account. These types of services can be very reasonable, but often are very exorbitant.
We encourage our members to designate other credit union accounts to be used as an overdraft protection source in case your checking account becomes overdrawn. We will automatically transfer funds from the designated overdraft account(s) to help prevent checks from bouncing. At Pacific Service CU, this is a free service; however, we see these fees as high as $15 or more per transfer at other financial institutions.
Courtesy Pay Fees
Courtesy pay allows you to overdraw your account, up to your courtesy pay limit. For this service, a courtesy pay fee will apply because the institution is standing in for you. Our fee is a low $25. We often see courtesy pay fees at nearly $40 per transaction and some fees increase the more often you use the service.
If you regularly travel outside of the country, foreign fees should be a part of your decision-making process. Outside of the country, consumers typically pay a premium for ATM access, debit and credit card transactions and more. This can be a real differentiator for some consumers.
We pride ourselves on being a low-fee leader in the financial services marketplace. Our Fee Schedule is available online or in branch and we encourage you to compare and see how we stack up. Our low fees and great service are hard to beat!
One of the questions we hear from members is “Will a short sale damage my credit?”
In short, yes. In fact, there’s no real credit rating advantage to a short sale over a foreclosure. Credit will be negatively impacted after both. Your lender will report the financial loss as a major derogatory event on your credit record whether it’s a short sale or a foreclosure.
Here’s the difference:
A foreclosure occurs when a homebuyer doesn’t make their monthly payments on a mortgage loan. The lender then uses its legal right to foreclose on the home and take possession. The home is first offered for sale at auction. If there are no buyers willing to pay the opening bid, the house reverts back to the lender. The lender will use a traditional sale process and apply the sale proceeds to the unpaid mortgage balance to recover all or part of the loan amount.
A short sale is selling your home for less than the balance of the mortgage loan. The mortgage lender must approve this option in advance after the homebuyer provides a letter of hardship, proof of income, assets and bank accounts, along with a comparative market analysis to prove that the local property market does not support selling the home for the full mortgage loan amount.
There may, however, be differences in how a short sale and foreclosure impact your life and credit score.
When a lender forecloses, credit may be more severely damaged than with a short sale because of the impact of ongoing late payments prior to foreclosing. In a short sale, often the borrower hasn’t missed a payment.
In a short sale, the homeowner controls the transaction and can remain in the home through a traditional realtor-involved transaction. The lender is able to avoid the costly and lengthy process of a foreclosure and the borrower is able to avoid the unpleasant process of an eviction and a public sale of their home.
One big advantage in a short sale is how you may appear to a prospective lender. Credit bureau scoring models and lenders tend to be more forgiving if the loan is marked “settled,” as in a short sale, compared to a record of “default,” as in the event of a foreclosure. For a little perspective, in the event of a foreclosure, Fannie Mae and Freddie Mac typically won’t lend to you again for five years. However, in a short sale, that timeframe shortens to two years.
If you are struggling to make ends meet or are considering a foreclosure or short sale, we encourage you to reach out to your lender now. The sooner you act, the more time and flexibility you have for resolution. Fully explain your situation to your lender. Your lender doesn’t want your house, they want your payments. Show them you’re making an effort toward repayment and ask for options.
If you’re having difficulty making payments on a first or second mortgage loan with us, call one of our specialists for help. To determine the best way to assist you, we will work with you to review your financial situation and identify your options. Complete a Financial Worksheet and fax to (925) 609-3262.
by Chris, Vice President, Lending
Again this year, the IRS is making fraud and identity theft a top priority. They’ve ramped up their efforts with additional staff assigned to identity theft related issues and are significantly increasing their capacity for investigations. In 2012, their investigations were responsible for nearly 500 criminal indictments. Even with all of these efforts and improvements, however, tax identity theft continues to be on the rise and, ultimately, the burden falls on you to protect yourself.
Typically, we see tax scammers commit fraud in two ways. A tax scammer can steal your statements, W-2s and other personal financial information and beat you to filing your own return. They request that your refund is sent to them, often in the form of a pre-paid debit card, which can be used just like cash. Or, they can steal tax returns being sent by mail and use the extensive personal information included to commit identity theft and open credit in your name.
Here’s how to avoid becoming a victim:
Expect your tax forms. W-2s and tax forms must be sent by January 31st each year; however, they could arrive anytime in January. If you don’t receive your forms, reach out to your financial institution to find out when they were mailed. Many institutions offer an electronic tax form option, which may be safer than mail. If you suspect fraud, call the IRS Identity Protection Specialized Unit at 800-908-4490, ext. 245.
Expect your tax refund. Typically, the IRS will issue your refund in less than 21 calendar days of receiving your return. Knowing when to expect your refund is a good way to combat theft. The IRS offers a “Where’s My Refund?” online tool and mobile app so that you can track your return. Information is updated daily.
The IRS does NOT email or text. Don’t fall prey to fraudulent IRS emails or text scams. Attachments and website links contained within IRS emails could contain viruses or fraudulent methods to collect your personal information. If you receive an email from the IRS, forward it to email@example.com. They will pursue the source, if possible.
Choose direct deposit. Avoid the risk of lost or stolen checks by opting for direct deposit. Our Routing/ABA number is 121181743. Here is more information about setting up direct deposit with us. For more information or help with direct deposit, call a member service representative at (888) 858-6878.
Carefully choose your return method. Filing online is a safer option than by mail. If you choose to file by mail, do not put your tax return in an unsecured mailbox, a community mail drop or an outgoing mail bin at work. Instead, take the return to a post office. For extra protection, you may opt for certified mail.
Beware of suspicious pop-ups. If you are filing taxes online, be aware of out-of-the-ordinary pop-ups asking for personal or financial information. This could be an attempt to steal information for you.
For more information, www.IRS.gov Help and Resources is a great source.
by Michelle, AVP, Operations