Arizona Mortgage Guru » Personal Finance

Basics for Newcomers to the Stock Market

justinmchood — Tue, 29 Mar 2011 17:03:34 +0000

If you live in Arizona then you’re probably familiar with the shaky housing market that has affected many people. Arizona still has a ways to go toward stability and with so many investing a large portion of their livelihood in the housing bubble, many lost big. As an article on State Press reported, houses are not stocks and it ís time that people stop using them as such. If you’re looking for ways to introduce more stable assets into your portfolio, consider investing in the stock market. If you’re looking to move your assets out of the housing and into the stock market, but youíre just not familiar with how it works, there are a few basics terms and principals to get you started.

Defining Stocks

A stock is capitol raised by a corporation through the issuing of shares. A share is a divided-up portion/unit of the value of a company. A stock is simply a share in the ownership of a company and is a representation of the company’s earnings and assets. The more stocks acquired in one company, the more ownership stakes a person possesses of any given company. Owners of stock are known as shareholders, and these shareholders are entitled to their share in the companyís earnings.

Why Most People Invest?

The overarching goal with stocks is to make money. Many people were lured into the housing market because they saw it as a similar opportunity but ended up loosing their livelihoods. Investing in real estate proved to be a volatile investment and it hurt a lot of people who bought into the hype. This isnít to say that stocks don’t carry a certain level of risk but you can more easily manage your assets than other types of investments because you have greater control. If you’re looking to shore up your investments then some wise planning and approaches could help any person in establishing finically stable future.

How Much Money Do You Need?

There are stocks sold through a formal stock exchange, such as AMEX or NASDEQ and there are also stocks known as “over-the-counter”. Over-the-counter stocks refer to stocks traded by a dealer network rather than a centralized exchange like the more traditional NASDEQ. The variety of stocks you can buy is extensive and the prices of stocks also vary considerably. A person can invest in stocks in upwards of $500 or as little as a $0.01. It all depends how much capital you have on hand to invest and what kind of companies you wan to invest in.

How to Buy Stocks?

Once you’ve done your research on which stocks you want to invest in, youíll need to have a broker or set up a brokerage account to handle your purchases. This can easily be done online. A broker will give you the stocket market help necessary to diversify your investment portfolio, and will determine whether you want to put your funds in long or short-term investments. Itís really up to the individual as to what kind of level of risk they’re comfortable with.

These basic terms and approaches will be helpful towards getting you started but for a more compressive understanding with the intricacies of the stock market, you’ll want to consult a market professional that can better guide you through the process and advise you on which stocks are right for your unique investment needs.

If you live in Arizona then youíre probably familiar with the shaky housing market that has affected many people. Arizona still has a ways to go toward stability and with so many investing a large portion of their livelihood in the housing bubble, many lost big. As an article on State Press reported, houses are not stocks and itís time that people stop using them as such. If youíre looking for ways to introduce more stable assets into your portfolio, consider investing in the stock market. If youíre looking to move your assets out of the housing and into the stock market, but youíre just not familiar with how it works, there are a few basics terms and principals to get you started.

Defining Stocks

A stock is capitol raised by a corporation through the issuing of shares. A share is a divided-up portion/unit of the value of a company. A stock is simply a share in the ownership of a company and is a representation of the companyís earnings and assets. The more stocks acquired in one company, the more ownership stakes a person possesses of any given company. Owners of stock are known as shareholders, and these shareholders are entitled to their share in the companyís earnings.

Why Most People Invest?

The overarching goal with stocks is to make money. Many people were lured into the housing market because they saw it as a similar opportunity but ended up loosing their livelihoods. Investing in real estate proved to be a volatile investment and it hurt a lot of people who bought into the hype. This isnít to say that stocks donít carry a certain level of risk but you can more easily manage your assets than other types of investments because you have greater control. If youíre looking to shore up your investments then some wise planning and approaches could help any person in establishing finically stable future.

How Much Money Do You Need?

There are stocks sold through a formal stock exchange, such as AMEX or NASDEQ and there are also stocks known as ìover-the-counterî. Over-the-counter stocks refer to stocks traded by a dealer network rather than a centralized exchange like the more traditional NASDEQ. The variety of stocks you can buy is extensive and the prices of stocks also vary considerably. A person can invest in stocks in upwards of $500 or as little as a $0.01. It all depends how much capital you have on hand to invest and what kind of companies you wan to invest in.

How to Buy Stocks?

Once youíve done your research on which stocks you want to invest in, youíll need to have a broker or set up a brokerage account to handle your purchases. This can easily be done online. A broker will give you the stocket market help necessary to diversify your investment portfolio, and will determine whether you want to put your funds in long or short-term investments. Itís really up to the individual as to what kind of level of risk theyíre comfortable with.

These basic terms and approaches will be helpful towards getting you started but for a more compressive understanding with the intricacies of the stock market, youíll want to consult a market professional that can better guide you through the process and advise you on which stocks are right for your unique investment needs.

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Arizona Payday Loans: Not For Everyone

jmchood — Wed, 02 Feb 2011 16:36:53 +0000

The popularity of borrowing against your next paycheck â what a payday loan is â suggests it is the fast cash solution for everyone in Arizona.

But if you live in Arizona, payday loloanare not necessarily the best way to cover emergency bills and surprise expenses. If you have a credit card with a sufficient credit limit and a low APR, that might be a better choice. Some people use a home equity line of credit for extra cash (although many financial experts caution against it). Of course, a short-term loan from a friend or family member might be a good idea as long as you honor a repayment date and add some interest or other âthank youâ fee.

But those options simply are not there for millions of people. For them, their best choice (assuming they have been employed for at least one month, are 18 years of age and have a bank account) is a cash advance against their paycheck.

What factors should be present in the Arizona life of payday loans borrowers?

Have a short-term need: An Arizona payday loan should not be used to purchase a home or car. These are for emergency expenses, including bill paying.
Can repay it in about 30 days: An Arizona payday loan should be thought of a short-term loan to be paid off very soon. A 30-days (or less) repayment period is ideal.
Are busily engaged in work and family: Within the other choices available, including the option to take out a car title loan, it might take hours to study where to find quick cash. In Arizona, payday loans are a simple, easy-to-understand and fast solution.

The process for getting such a loan is streamlined with the Internet. It is possible to apply entirely online, get your loan confirmation within an hour and the money is direct deposited into your account by the next business morning.

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A Look At Retirement: IRA’s and Roth IRA’s

justinmchood — Thu, 15 Jul 2010 15:42:01 +0000

No one can predict the future when it comes to retirement especially as we look at real estate, mortgage rates, savings rates or the stock market. While there are experts can anyone really predict with any great degree of accuracy what’s going to happen? Personally I don’t think so.

But based on past performance, one of the best investments for retirement is an Individual Retirement Account – IRA. There are many types of IRA’s and one of the first questions I know I asked when I started looking at them was which is better: Roth vs. Traditional IRAs.

What are the differences between them? Which one is better for you? Although I can’t tell you which one to choose, I can give you a mortgage guy’s rundown on what I know about each one to help you make your own decision. After you read this, your next step ought to be to call a financial planner or tax professional to fill in the gaps from what I have written about here.

Let’s start with Traditional IRAs

Basically, a Traditional IRA is a tax-deferred retirement account. That means contributions to a Traditional IRA may be tax deductible, depending on your income.

One advantage of the Traditional IRA is that, because the money is invested before taxes are paid on it, it potentially allows you to lower your tax bracket at the time of investments. Another advantage is that, when you retire you usually make less money and therefore the taxes you have to pay on your withdrawals will be less. Also, the money grows tax free until you withdraw it.

Here are a few more facts about the Traditional IRA:

Income limits – Everyone is eligible to own a Traditional IRA, but there are limits on tax deductions you can take.

Withdrawals – You can start withdrawing from your IRA at age 59 1/2, and your withdrawals will be taxed as regular income. You will pay a 10% penalty for early withdrawal, although there are exemptions to this rule.

Required minimum distributions – You must make withdrawals starting at age 70 1/2.

Disadvantages of the Traditional IRA include the required minimum distribution, which must be taken whether you need the money or not, and the fact that it isn’t easy to know in advance what your tax rate may be in retirement.

Now, let’s look at the Roth IRA

While the Traditional IRA is tax deductible, the Roth IRA is tax exempt. That means that, while contributions to the Roth are taxed, withdrawals made during retirement are tax-free. Another advantage is that there is no required minimum distribution.

Income limits – Unlike a traditional IRA, the Roth has income limits that limit who can participate in the program. Income limits can change every year. You will need to check with your financial planner to see whether you exceed the Roth IRA income limits in any given year.

Withdrawals – The minimum age to withdraw from a Roth IRA is 59 1/2. The principal can be withdrawn at any time without penalty, however if the interest is withdrawn early there can be penalties. One exemption to early withdrawal penalties is if the IRA owner uses the money as a down payment on a first home (I have had several mortgage customers take advantage of this program feature to buy a home). This is true for both the Roth and Traditional IRA.

So which one is better? Well, there are pros and cons to each. I can’t tell you what is going to be more advantageous to you, so maybe the best course of action would be to discuss it with a financial planner or tax professional.

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Details of Home Mortgage Assistance Plan

Az Mortgage Guru — Wed, 04 Mar 2009 17:23:03 +0000

Details of President Obama’s plan to help struggling homeowners was announced today. This plan was announced a few weeks ago as the Making Home Affordable initiative. From the details which were announced today this plan helps two types of homeowners and applies only to primary homes. This means you can not expect any help on your second (vacation) home or your investment property. To qualify you need to be either delinquent on your mortgage or be upside down on your home (owe more than your home is worth). The program applies to loans made on or before Jan. 1, 2009.

Here is how you can qualify if you are delinquent(or 60 days past due) on your mortgage:

You must have lost your job, suffered a pay cut or face higher mortgage payments.
You must meet the strict financial hardship guidelines of Fannie Mae or Freddie Mac
These guidelines mandate you fully document your income with pay stubs, tax returns and sign an affidavit attesting to “financial hardship
You need to go for counseling if your total household debt — including auto loans, credit cards and alimony — totals more than 55% of your income.
Your homes unpaid principal balance can not exceed $729,750
Have a Fannie or Freddie Mac loan (call your loan servicer to find out)

For those who are upside down on their mortgage the government will help refinance the loan in an effort to lower payment and make the home more affordable. Uncle Sam is willing to lend as much as 105% of your home’s market value. Now, I’m not sure how many people can benefit from this because many people are way above that level these days. Especially in the Greater Phoenix Metro area. The best way to start the process is by calling your mortgage loan servicer. They are the ones that will decide whether you qualify or not because the government has given them a financial incentive to help you.

Here are some additional things to consider (from the NYTimes):

A mortgage lender or mortgage-servicing company would first receive cash incentives to modify a borrowers’ loan so that the monthly housing payment declines to no more than 38 percent of the family’s gross monthly income. At that point, the government would match, dollar for dollar, the lender’s cost in reducing the payments as low as 31 percent of monthly income.

The reduced payments could come in the form of a lower interest rate, longer mortgage term or a reduction in the principal outstanding loan amount. The lender would have to make a calculation on whether its cost from reducing the monthly payments, after accounting for the government’s cost-sharing, would be less than the costs it would incur from foreclosing on the house.

The guidelines indicate that a lender would have to make the loan concessions if the subsidized cost of doing so would be lower than the cost of foreclosure. The decision would become voluntary if the estimated costs of the concessions appeared to be higher than the cost of foreclosure. If the lender decided not to offer the modification, such as in the case of a borrower who had become unemployed and whose income had largely disappeared, it would be required to examine alternatives to foreclosure before seizing the house.

The program will run until Dec. 31, 2012.

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Interest Credit Affects Your First Mortgage Payment Due Date

Az Mortgage Guru — Thu, 02 Oct 2008 22:16:54 +0000

A common question people ask me when I’m working on a loan is the date of their first payment. The way mortgage payments work, you make your payment at the end of the month. This is different than rent, where you pay at the beginning of the month. Meaning, you pre-pay for the month to come when you pay rent, but when you make your mortgage payment you’re paying for the month that just passed. The difference is that you’re paying interest on money you’ve borrowed when you make your mortgage payment. Naturally you don’t owe the payment until the money has been used and interest is due. This is oftentimes a very confusing concept for borrowers but is important to understand as it affects the date of your first mortgage payment.

You have pre-paid interest as part of your closing costs at the close of escrow. This is essentially your daily interest rated times the number of days remaining in the month. So, if you close in the 16th of the month (in a month with 30 days), you would have 15 days of interest due at the end of that month. Instead of asking you to make a payment that month, lenders will just ask you to pay upfront at close. This results in your first mortgage payment being due the 1st of the following month. So, if you closed on September 16th, your first payment would be due November 1st.

However, there is a feature called interest credit – where if you close within the first seven days (varies from lender to lender), instead of charging pre-paid interest the lender will give you an interest credit back for the number of days in the month. So, if you closed on the 4th – you would get four days of interest credit back at close. This of course results in you having to make your first mortgage payment at the end of the month. So, if you closed on September 4th and you received four days interest credit, your first payment would be due October 1st. A whole month earlier than in the prior example.

Be aware that you do have a choice on whether or not to accept an interest credit – but you need to mention this to the bank. Either way you’re paying – whether it is at close or in the form of a mortgage payment, but you need to be prepared. Purchasing a home entails lots of charges, so its easy to run into a cash flow problem if you are closing at the beginning of the month and your first payment is in a few weeks. The first payment is not one you want to miss – not that you want to miss any payment at all.

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$300,000,000,000.00 Rescue Package Passed

Shailesh Ghimire — Wed, 25 Jun 2008 02:50:26 +0000

Early in my mortgage career a sales veteran once told me that the best way to solve a customer problem was to throw money at it. I guess this is an even better solution when you’re the ones printing money.

Full story “Housing rescue plan passes key Senate test“.

My opinion:

Just to put things in perspective, I thought I’d put the faces of the folks who’ll be stuck with the bill:

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Congresswoman in Foreclosure

Shailesh Ghimire — Thu, 22 May 2008 15:03:10 +0000

I guess even folks in Congress are close to foreclosure on their homes. I really shouldn’t be surprised though. The guys on the Hill are so used to spending other people’s money like it grows on trees and I’m sure that mentality is bound to sink into their own personal finances at some point – at least if you’re a rookie which this Congresswoman seems to be. Here is the story from the LA Times this morning:

Update: California Rep. Laura Richardson today denied a published report that her $535,000 Sacramento home had slipped into foreclosure, saying she had renegotiated her loan to keep the home.

The house “… is not in foreclosure and has NOT been seized by the bank,” Richardson, a Democrat from Long Beach, said in a statement. “I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement — with no special provisions.” (Richardson’s entire statement is at the bottom of this article).

Earlier, Capitol Weekly reported that Richardson walked away from the mortgage on her $535,000 Sacramento home, letting the house slip into foreclosure and disrepair less than two years after she bought it with no money down.

“While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees,” the publication reported.

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Why You Should Never Co-sign For a Loan

Shailesh Ghimire — Mon, 19 Nov 2007 17:03:20 +0000

Recently, a past client contacted me to see if he could refinance his house. We looked at all the numbers and it seemed to make sense. The only problem was his credit. Not quite exactly his credit per se, but the co-signed loan on his credit. The infraction coming of course from his own daughter.

My client had co-signed for a vehicle purchase for his daughter a few years ago. This past year she has been having some problems making timely payments. He knew there were some issues but was really upset when he realized the extent of it and how it had wrecked his own credit. Now, the father and daughter are not speaking to each other.

However way you look at it, co-signing a loan is a bad idea. Even the Good Book advises us to stay away from putting up “security” for another man (Proverbs 27). It doesn’t matter if you’re related or in-love, at the end of the day relationships can be severely tested by this simple act of “compassion”.

From the bank’s perspective, if you co-sign, you’re telling them you’ll cover for the other party. That is why you have to understand why you’re being asked for this favor. Essentially, the bank has determined that the person in question is not credit worthy. They view this borrower to be too risky and do not believe will be able to pay the loan back. Banks usually know a little bit more about this kind of risk analysis than most.

Think of co-signing this way. When you co-sign you’re agreeing to take the loan and then hand the cash over to the person you’re singing for. In exchange you’re telling the bank that you’ll pay if that other person won’t. So, the bank lends the money based on your credit and also knowing the other person is too big of a risk. Basically, in the banks eyes, you’re the borrower.

I know of several situations where co-signed transaction have been led to very difficult situations. So, my advice to everyone is to never co-sign.

If this hasn’t been convincing enough, consider this. If the person you co-signed for declares bankruptcy, you’re still on the hook for the loan. Legally the other person is completely free from the debt. So, not only is your credit shot, legally, in a court of law you’ll be required to pay the bank back! Not quite what you had in mind when you extended a helping hand.

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Canadians Could Make a Killing in Arizona Real Estate

Shailesh Ghimire — Mon, 05 Nov 2007 23:21:47 +0000

I’m thinking out loud here. Since, the Canadian dollar is now at parity with the US greenback, I’ve been doing some number crunching. I’ve posted on what a 250,000 USD home in Arizona looks to a Canadian. It’s all good news for a Canadian seeking to purchase some Phoenix real estate.

What’s even better is looking at the 1972 to 1985 time period. After a period of parity in the 1970s, the Canadian dollar began to fall well into the mid-1980s. The increasing strength of the US dollar during that time period made instant profits for those holding US real estate.

I’m only showing this for pure historical reasons. I am not saying you should purchase real estate in Phoenix, and I am CERTINALY not giving you any kind of investment advice. I’m just looking at how currency fluctuations play a role in transnational investments.

In the above graph, the maximum was 349,600 CD reached on Dec. 18, 1985. The minimum was 250,600 CD on Jan 1st, 1972 . Between Jan 1, 1972 and Dec. 31, 1985 the 250,000 USD home increased 39.6% based only on the currency exchange rate. I don’t have the numbers on the increase in the real estate price. I’m confident that the 250,000 USD home had increased some in that time frame. So, this increase is conservative.

Again, as I said before, I am only thinking out loud. There are so many other factors to consider, such as mortgage interest rates etc. However, I can only imagine the kinds of gains a Canadian could realize in today’s market if the USD started to gain in value again over the next several years.

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Facing Foreclosure? 12 Things You Should Know When You Call Your Lender

Shailesh Ghimire — Tue, 16 Oct 2007 16:57:24 +0000

If you are having trouble making payments on your home then the first thing you should do is call your lender/servicer. For many people this can be a frightening proposition. You might be afraid you’ll end up saying something that will put your home in jeopardy. Or, you might not understand the different options the lender offers. Or, you may simply just not know what to say.

The Mortgage Bankers Association has created a foreclosure avoidance center website. Under this page it has published a twelve-step guide on the things you need to know when you call your lender. This should ease your fears a bit. Additionally, as you go through this guide you’ll realize that a successful resolution is in the lenders best interest as well. Contrary to public perception the bank does not want to own your home and bank executives do not go to bed at night salivating at the prospect of foreclosing on your home.

Below is a quick run down of the twelve steps, but read the “12 Things You Should Know When You Call Your Lender” page on their webpage for complete information.

Contact your servicer immediately
Ask your servicer about alternatives to foreclosure
Provide any information requested by your servicer
Be prepared to provide detailed financial information
Be ready to change your spending habits
If you’re uncomfortable calling your servicer, then call a reputable third party (see HUD website)
Open all mail you receive from the servicer or it’s law firm
Do not hesitate to ask critical questions
Resolve any payment issues on your escrow accounts (taxes and insurance)
Stay in contact with your servicer and/or counselor at all times
Be realistic about your own financial condition
Understand that the servicer wants a positive outcome

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