Category: Money

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The Low Down on Zero Down Payment On A House

Purchasing a home is likely the biggest financial endeavor you will take on in your lifetime. It is vital that you understand the options and the consequences for owning a home upfront; otherwise, you can end up facing foreclosure or other personal financial difficulties.  Understanding your options for a zero down payment is essential if you don’t have a lot of cash reserves but still want to buy a home.

One of the chief components of buying a home involves the down payment. Lenders want to see that buyers have at least 10-20% of the home price to put down at closing. Essentially, the more you put down up front, the less you owe in the long run and the more likely you are able to be approved for financing. However, some potential home buyers are interested in moving into a home right away, without saving for an ample amount of time. Many are looking to move in immediately for a variety of reasons such as paying less than for a rental or simply because they are anxious to be homeowners. Another issue that makes a higher down payment difficult is the amount of closing costs that are involved during a home purchase.

There are financing options available for individuals with excellent credit and income levels that will not require a down payment. While 0% down may seem like a great idea at the time, it may become a problem in the future. There are lenders that will supply 0% down mortgages where the buyer can finance 100% of the purchase. Some lenders will even add in the closing costs for up to 105% in financing. The total amount is then included in the monthly installment payments.

The upside of zero down payments

When you are in need of a home and have not been able to adequately save money, a 0% down payment can be very tempting. It allows you the extra cash to pay for closing costs, new furniture, and other moving needs. Fully financing a first home may seem like the ideal situation but it can lead to payments that are too high and interest rates that are more than average.

This can also be a good idea for someone who is making a reasonable income but hasn’t had a chance to save up a down payment.  Maybe a recent medical school graduate for example.

The Downside of 0% Down Payments

Experts recommended avoiding a zero down loan at all costs. When you put 10% or more towards a home, financing is much easier to get. The proof that you are capable of saving money over time will indicate you will not have difficulties in keeping up with monthly payments. It may also allow the lender to deduce you can get financing from other resources and therefore give you better terms on your home loan. Add to that, a down payment will likely also afford you lower payment amounts on your mortgage loan. With 105% loans, there is a real possibility that monthly payments will become unmanageable especially if the home begins to need costly repairs and maintenance through the years.

Strive to Save

When you are interested in purchasing your first home, understand there typically is no ‘easy’ way. Start saving for a down payment as soon as you know you are looking to buy and be committed to reaching that goal before shopping for a new home or a home loan. In addition to saving, obtain a copy of your credit report and score to see where you stand in the eyes of lenders. Resist the temptation to get in to a new home for ‘free’. What may seem like a great deal can certainly cost you in the end. With the influx of foreclosures in recent years, the news has certainly added credibility to the need for a down payment savings plan and a suitable waiting period before taking on such a large financial burden.

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Money

Stimulus Check 2010 – Will There Be One?

A common question for most Americans is “Will there be another stimulus check in 2010?”.  This is a valid question since there was a general stimulus check issued in 2008 for the amount of $600 (maximum) for each person.  There was no general stimulus check in 2009 although there were some $250 stimulus checks for selected groups (Social Security and SSI).

At the moment there has been no proposals for a 2010 stimulus check which means that the odds of a check happening in 2010 are not very good.  However, it really depends on the economy and the willingness of the Obama administration to spend more money to prop up the economy.

Since Obama took office there have been quite a few stimulus efforts and a lot of money spent to help juice the economy.  There are limits to how much money can and should be spent to strengthen an economy and those limits might have already been reached.  Politically it is getting harder for Obama to get approval for more stimulus funding.

[Update – Jan 4 – Will there be another stimulus check in 2010?]

Stimulus Check in 2010?

At this point in time you should assume there will not be a stimulus check for 2010.  That way if there ends up being a stimulus check then it will be a nice bonus.  Sometimes people will go and spend money they don’t have because they think there is some extra money coming to them in the future in the form of a gift, bonus, stimulus check etc.  This is not a good way to manage your finances – never spend money you don’t have.

Will anyone get stimulus checks in 2010?

If you are a recipient of Social Security or SSI then you have a better chance of getting a stimulus check in 2010 since there is already a proposed stimulus check for those groups.  This has not been fully approved so even this check might not happen but at least the process has been started.

What is the point of a stimulus check?

The main reason for issuing stimulus checks is to give people more money to spend which will help stimulate the economy.  The economy has been in a recession and unemployment has hit double digits (10%) so anything the government can do to fix the economy should be attempted.  On the other hand if the government spends too much money stimulating the economy then it will increase the debt load which will have long term effects on the economy.  Another problem which doesn’t look all that likely at the moment is that sometimes governments will stimulate their economy to the point where things get overheated and high inflation can result.

Recap of recent stimulus checks

2008 – $600stimulus check for all taxpayers.
2009 – $250 stimulus check for Social Security and SSI plus a few others early in the year.
2010 – Proposed $250 stimulus check for Social Security and SSI in the first quarter of 2010.

There was no general stimulus check in 2009 despite rumors to the contrary.

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Money

Ally Bank Review – Best Online Interest Rates

Ally Bank is the old banking arm of GMAC, rebranded with a new, hip vibe and a minimalist approach to banking. It is not just the people’s bank, it is the people’s “ally” and so far it seems to have succeeded.

It is strictly an online bank, and it pays the highest interest rates in the country on its deposits only accounts such as the online savings account. Unlike a traditional bank, it does not extend loans nor offer checking accounts, although its money market account has enough features to act like a checking account.

Your money is safe with Ally Bank as it is FDIC insured, which covers up to $250,000 per depositor. Note: The FDIC deposit insurance coverage remains at $250,000 until 2013.

Note:  If you are Canadian and looking for an Ally Bank alternative – please check out the Best Canadian High Interest Savings Account comparison.

Why is Ally Bank different?

In the case of Ally Bank, less is more.  It has no physical branches, no minimum deposit, no monthly fees, no minimum balance.

Interest is compounded daily on the four types of deposit accounts, two of which are fixed rate and two are variable rate. In contrast, it is common for rival banks to compound monthly, quarterly or sometimes even yearly.

Ally pulls ahead of the pack by offering a 10 day guarantee for best rates, giving you the assurance that your deposits are earning the highest rate possible. What it means is that if you fund or renew your CD – for both high yield and no penalty – within 10 days of opening the account, you will get the highest rate of that 10-day span. Few among the competitors offer such a guarantee; with those, you will never earn more than the rate locked in on the day you open the CD account.

Types of accounts

There are 4 different accounts offered by Ally:

  • Online Savings Account.  This account offers one of the highest interest of any online savings accounts.
  • No penalty CDs.   These CDs offered with a competitive rate but there is no penalty for withdrawal.   The interest rate is higher than most online savings accounts so they are a great alternative.
  • Certificates of Deposit.  All the selection you need in CDs.
  • Money Market Account.

Here are some of the features of Ally Bank’s accounts

There are some pretty useful tools on each information page for the different account types. You can compare Ally’s prevailing interest rates with rival banks, calculate interest income on your deposits and figure out fees for services.

Yes, there are some fees, for bounced checks, outgoing wires and paper statements. It is part of Ally’s brand makeover that there are no rude surprises buried in unreadable fine print and no hidden costs. Everything is clearly laid out

Account Opening Process

In five simple steps, you can have an Ally Bank account. All you need is your social security number, and an address in the United States. You can open several accounts as single, joint or multiple owners; bear in mind each is separately covered by FDIC insurance.

Ally has a well thought-out, customer-friendly accounts creation process. Once you have established the account holders, you can open as many types of deposit accounts as you want, set your opening amounts and choose a nickname on a single screen. It is absolutely effortless and easy in a secure online environment.

When it first started, Ally Bank offered double the prevailing interest rates on its deposits. However, with pressure from the rest of the banking industry and regulators, it has inched its rates down. Nonetheless, its deposit rates remain unmatched.

There is a 24/7 customer service, and you will have someone to speak to regardless of the time zone you are in. An indicator on the upper right hand corner of the website informs you as to how long the wait time is. Customer reviews have been positive, and problems appear to be effectively and easily resolved within a couple of days at most.

Other bank account alternatives

SmartyPig Review – Online Savings Account

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Money

$250 Stimulus Check For 2010 – Is It Enough?

President Obama has proposed another $250 stimulus check for all recipients of Social Security as well as a $250 check for people on SSI.  This stimulus check was given out in 2009 and he has suggested that since SS and SSI payments are not increasing in 2010 because of low inflation, this check will help people pay their bills.

Is a $250 stimulus check enough?

The problem is that $250 doesn’t go as far as it used to!  Obviously everyone can use more money but the question to be answered is – is a $250 stimulus check enough to help people?  Given the costs of administrating this program and sending checks out – another good question is whether the program is worthwhile doing at all for a relatively small amount of money.

Here are some possible options for the government to consider:

Increase the amount of the stimulus check

Making the stimulus check larger to $500 would make it a lot more worthwhile considering the admin costs.  More money would be available to help stimulute the economy.  The downside of a larger check is of course the extra costs.  Giving out twice as much money will increase the government deficit and debt levels and clearly that is not a good thing.

Lower the amount of the stimulus check

Another option is to lower the check to a level around $100.  This would save the government and taxpayers money but doesn’t make a lot of sense since now the amount is way too low and it would be very pointless to handle giving out checks for only $100.

Don’t do any stimulus check in 2010

This last option is unfortunately a definite possibility since the bill hasn’t passed the house yet which means it could still die.  Not giving out a stimulus check would be the best thing for the government since it wouldn’t cost anything but what about the people on SS and SSI who need the money?  They would probably not like this option.

Keep it at $250

If there is any stimulus check then this is by far and away the most likely option.  The amount isn’t great but on the other hand, the cost is somewhat affordable to the government.  Plus, this is the same amount that was given last year so it makes sense in that context.

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Money

Cash For Caulkers – Make Your House Energy Efficient

A new government program was announced today which would provide “cash for caulkers” or more appropriately “cash for remodeling”.  The idea behind this program is to help improve the economy by encouraging home owners to spend money improving their homes by remodeling.

The improvements would have to fall under the “efficiency” category.  Things like insulation, windows and caulking would be eligible for the cash.  Improvements like new kitchen countertops would not be eligible.

This program might overlap with the cash for appliances program which gives money for buying more energy efficient appliances such as fridges, dryers etc.  Click here for the cash for appliances list of eligible appliances.

How much cash will be paid to the home owner?

According to Steve Nadel who is part of the initiative – the program might pay up to $12,000 in cash to each home owner.  This amount would be calculated according to how much work you have done to make your home more energy efficient.  To qualify for the maximum amount you would probably need a fairly energy-inefficient home in order to improve it a lot.

How will the cash grants be calculated?

The details of this program are not finalized but it is likely that there will be companies who will do an energy audit on your home before any work is done.  They will measure the energy efficiency of the home.  Then the home owner will add insulation, do some caulking etc and get another energy audit which will determine how much the remodeling has improved the energy efficiency of the home.  The grants would likely correspond to the increase in efficiency of the home.

One of the more specific details is that home owners might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000.   At this time there are no income restriction on who is eligible to receive grants from this program.

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Money

California Unemployment Benefit Extension – Another 20 Weeks

California currently has an unemployment rate of 12.5% which is one of the highest in the country. Given that it is the most populous state it also stands to reason that California has the highest number of unemployed people living there.

Like every other state, Californians have benefitted from the numerous unemployment benefit extensions that have been created by the federal government. The latest extension provided by bill H3548 will give long-term unemployed Californians an extra 20 weeks of unemployment benefits.

Because of this recent extension the maximum number of benefit weeks available for someone in California is now 99 weeks.

California unemployment benefits are as follows:

  • EUC Tier 1 – 20 weeks  (7 weeks plus 13 weeks)
  • EUC tier 2 – 14 weeks (used to be 13)
  • EB  – 20 weeks
  • EUC tier 3 (new with bill H3548) 13 weeks or 19 weeks (if unemployment rate is greater than 8.5%)

However the extra 20 weeks is divided into 3 parts. 1 week is added to Tier II EUC. 13 weeks are Tier 3 and 6 weeks are Tier 4. Since the latest extensions are set to expire on Dec 31, 2009 it will be virtually impossible for anybody to receive the last 6 weeks.

“How many of those 20 additional weeks you get depends on when you started your claim and the upcoming eligibility deadlines,” says Loree Levy, a spokesman for the California Employment Development Department. Under the deadlines as they now stand, it’s unlikely that anyone in California would get the final six weeks, she says.

It is very possible that Congress will revisit this issue before the end of the year and extend the expiry date so that the full extensions can be utilized.

There are currently thousands of people who have run out of benefits or will run out in the coming months:

Loree Levy, spokesperson for California’s Employment Development Department, said Monday that an estimated 92,000 residents had exhausted all of their available unemployment by the end of October, and roughly 285,000 will be eligible for the newly enacted benefits by the end of the year. Whether they can get 20 weeks or only 14, though, depends on whether Congress extends the filing deadline.


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Michigan Unemployment Benefits Extension – Bill H3548 – 20 More Weeks

Michigan has the dubious honor of highest unemployment rate in all of America.  At 15.1% as of October, it leads the pack by a full 2 percentage points.  Nevada (13.0%) and Rhode Island (12.9%) are the next highest state and California is the next large state at 12.5% unemployment rate.

The reason the unemployment rate is so high in Michigan is because of the concentration of auto and parts plants in that state.  This industry was part of a high-profile government bailout and GM ended up going bankrupt anyway.  Needless to say this provides for a spike in unemployment as the auto sector will probably take a while to stabilize.

Fortunately the federal government has authorized and funded several unemployment benefit extensions this year and the recent bill H3548 extension is the latest (and probably not the last).  These extensions are part of the national stimulus package for 2009.

Michigan unemployment benefits are as follows:

  • EUC Tier 1 – 20 weeks  (7 weeks plus 13 weeks)
  • EUC tier 2 – 14 weeks (used to be 13)
  • EB  – 20 weeks
  • EUC tier 3 (new with bill H3548) 13 weeks or 19 weeks (if unemployment rate is greater than 8.5%)

This adds up to a total of 99 weeks.

The new benefits were originally planned to start in mid-December:

“We still anticipate that payments will begin on this new extension by mid-December,” Isotalo said. “Letters should be going out with information and instructions about the new extension and what people need to do to report for these new benefit payments” by Nov. 25.

In actual fact payments have already started for Michigan residents and many will get their checks starting just after Thanksgiving Day weekend.

The way things are set up now – these latest extensions will expire at the end of the year which means that not many people will get the full 20 weeks.  You need to use the tier 3 up before Dember 31, 2009 in order to get tier 4 which at this point is difficult to do.  There have been reports in the press that congress will be looking to extend the expiry date before the end of the year.

“Now that we have acted on the extension, we must quickly take up legislation to continue the Emergency Unemployment Compensation program itself, otherwise millions will be left without this important insurance come January,” concluded Rep. Levin.

“The action today responds to the needs of 100,000 in Michigan and one million people nationwide who have exhausted their benefits or will have exhausted them by the end of the year,” said Rep. Levin.  “With six people competing for every available job, unemployed workers need insurance to feed their families and pay their bills.”

In Michigan there are 99,000 people who would have run out of benefits by the end of the year without the latest extension.

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Social Security Stimulus Check 2010 – FAQ

When will the $250 Social Security stimulus check be mailed?

This is not known at this time but if the bill passes Congress then it is expected that the checks will be mailed sometime in the first quarter of 2010.

Will Social Security Payments Be Paid If United States Defaults On Debt?

Will there be a stimulus check in 2010

Yes, there will be a $250 stimulus check for social security recipients as well as a $250 stimulus check for SSI recipients as well.

How much is the 2010 Social Security raise?

Unfortunately because inflation was so low in 2009 there is no cost of living increase or “raise” in the Social Security payments for 2010.  This has however given rise to the $250 Social Security stimulus check which will be payable in 2010.

Will seniors get the $250 stimulus check?

You have to be receiving Social Security, SSI and a few other select criteria in order to receive the check.

What should I do with my $250 check?

There are many options for this money.  Admittedly it’s not a huge pile of cash but every little bit counts!

  • Reduce debt – If you have any outstanding credit card debt or personal debts then $250 would probably help to pay it down.
  • Buy something – Need some new clothes or want to buy an consumer item?  If your finances allow this then the $250 can be used for that.
  • Donate it – If you don’t need the money then give it to someone who really needs it.  A charity, relative or friend would probably really appreciated the cash.

More info

Will the $250 stimulus check for 2010 be enough money?

Will there be a stimulus check in 2010?]

Will there be a $250 stimulus check in 2011 for Social Security Recipients?

Will there be a $250 stimulus check in 2011 for SSI Recipients?

2011 Social Security No Cost of living adjustment