Buying Your First Home

A Facebook fan, who wrote me saying she earns about $30,000 a year, asked about buying a home with little to no money down.

If you or someone you know is trying to become a first-time homeowner, and you don’t have a high salary or a lot of savings, there is financial assistance available if you don’t have a large down-payment or enough money for closing costs.

Over the past decade there has been a surge in first-time homebuyer initiatives designed to give people a helping hand in overcoming the down payment dilemma. In fact, in every state in America there are a broad range of first-time homebuyer assistance programs, including:

• Free grants and cash gifts for down payments – with funds ranging from $500 to as much as $40,000
• Money for closing costs, prepaid escrows and other mortgage expenses
• Grants or loans to fix up homes in need of repair
• 100% financing programs, so that you pay zero down on a home
• Home loans that feature 0% interest, low interest rates or below-market interest rates
• Mortgages with loan forgiveness benefits or no payments for a set period of time
• Federal and state housing tax credits
• Homebuyer workshops to teach you about the rights and responsibilities of being a homeowner
• Mortgage education classes that explain the mortgage process
• Budgeting, credit counseling, money-management and overall financial planning services

No matter where you reside or where you’re looking to settle down, if you’re a first-time homebuyer, there’s a program that can help you purchase a house. And virtually every type of residence is eligible under these programs, including single-family homes, condominiums, townhouses, modular homes, and manufactured housing. Many assistance programs have income limitations, particularly those that provide city, state or federal funding. But other programs have no income criteria. Also, certain housing assistance plans impose caps on the purchase price of the property you can buy. Despite these restrictions, you’ll find that taking advantage of a first-time homebuyers’ program is one of the smartest things you can do. It will allow you to get into a home sooner, save money in the process, and simultaneously build wealth.

Even if you’ve already been successful at saving on your own, I highly recommend that you utilize a first-time homebuyer program for three reasons. First, if you can get down payment assistance, and you combine that money with your own savings, you’ll walk into your new home with a greater piece of equity. Second, using funds from a first-time homeowners’ initiative can allow you to keep some of your own savings in the bank as cash reserves – rather than depleting all of your money for the down payment and closing costs. Finally, many first-time homebuyer programs have a mandatory homeownership counseling component. Consequently, the knowledge and skills you’ll gain from this counseling will make you better-educated and more prepared for homeownership as you make the transition from renter to owner.

Google the phrase “first-time homebuyer program” along with your city or state to find programs in your area. You can also pick up a copy of my book, Your First Home, for specific homeowner assistance programs in every state. Chapter 4 of Your First Home details eight sources of aid you can turn to for financial and educational assistance in buying a home. These eight sources include:

• Federal and/or National Programs
• State Aid
• County Initiatives
• Local/Municipal or City Efforts
• Non-Profit and Community-Based organizations
• Lender-Specific Programs
• Programs Based on Your Job or Occupation
• Employed Assisted Housing Initiatives

Becoming a first-time homebuyer is an exciting and commendable goal. Just make sure you’re truly ready for the rights and responsibilities of homeownership.

You can read about a similar article I have written on Associated Content on this link – http://www.associatedcontent.com/article/2230673/where_to_find_grants_and_free_money.html?cat=3

10 Ways to Save on Your Purchases — Reader Participation Required for Success

A step toward becoming debt free is to cut your spending and maintain your new lifestyle. Some people feel it is too hard, say, to stop smoking, cut coupons and then remember to use them, or do your own home maintenance. So start with what you can handle.

You know your own vices and where you waste money when you could be saving. I can tell you what to do, but sometimes in order to motivate yourself, you need to take charge. As a result, I am giving you an exercise to determine how you can save on purchases or cut your overall spending for your own household. Come up with 10 ways to save and share part or all of your list with other readers by leaving a comment. Here’s a list of three to get you started.

Charge only what you can pay off. Getting a low interest rate on your credit cards can save you hundreds, even thousands of dollars a year in interest, but you can save even more if you don’t carry a balance. When you make purchases on your credit cards, be aware what you have in your checking account. If you will not be able to pay off the entire balance at the end of the month when the bill is due, then don’t buy the item.

Choose take-out or eat at home. Have you ever paid more than $5 for an omelet when you know a dozen eggs cost under $2? What about $15 for a plate of pasta when a box of Rigatoni and a jar of Ragu at your grocery store would feed at least four people and cost you less than $7 total? Eating at home can save you a ton of money. However, if you feel you really crave restaurant food, try buying take-out, and save on tips. You can even double your savings by getting take-out at lunch time when many restaurants charge less for the same meal they serve during dinner hours. Just save your lunch take-out for dinner.

Buy generic brands. Buying generic brand products, especially staples such as cereal, sugar, flour and other items can save you several dollars at the checkout lane without compromising quality or taste. Opting for generic prescription medicines are also a great way to keep money in your pocket.

Starting Your Own Business

A Facebook fan asked for some tips on starting his own business. It does not come as a surprise that although America may be in a recession with a rising job less rate, many laid off workers are contemplating a life of entrepreneurship. If you’re thinking of becoming your own boss, there’s much to heed before you start dipping into your retirement savings or severance pay to launch your own business.

Here are six quick tips for entrepreneurs trying to finance a start-up or expand existing operations:

1. Do seek “trade credit” from vendors and suppliers. Too many entrepreneurs dream of going to a bank and getting a business loan or line of credit for their enterprise, but maybe you don’t need a traditional bank loan at all to launch or grow your business. If you can get your vendors and suppliers to agree to provide you with trade credit — i.e. the ability to pay for goods and services over time — you can creatively and more frugally run your operation.
2. Do request major funding long before you need it. Realize that getting money from “angel” investors and venture capitalists can be a longer-than-expected process; it often takes 6 to 12 months to secure. See the “How to Get Funding from Angel Investors” article from the Wall Street Journal.
3. Don’t feel compelled to buy everything. Ask yourself: Do I really need to purchase equipment, furniture, computers, etc? You may be able to get by, temporarily, by bartering, or even by renting and leasing equipment. And that’s OK!


When starting a business, do not feel compelled to buy everything.

4. Do get “buy in” from your spouse/partner. Many new (and veteran) entrepreneurs will tell you one of the biggest dream killers they’ve encountered is an un-supportive spouse. Make sure your partner is on board with your entrepreneurial ambitions. If not, you’ll face a host of financial arguments and money-battles that will be counter-productive to you building a business.
5. Don’t let your personal credit rating lapse. Amid the current environment, your credit standing is more important than ever. Guard it jealously. Pay all bills on time. Only take out loans/credit when you truly need it. The higher your FICO scores, the better loan rates and terms you’ll get when it is time to do business with a bank —or even just getting a corporate credit card. See more on how to get your financial house in order.
6. Don’t “bet the farm.” Smart entrepreneurs don’t “roll the dice” and risk everything. They take risks, but they’re calculated risks. Don’t gamble everything: 100% of your savings, your credit, putting your home up, etc. in the hopes that you’ll create a successful business. Be willing to invest in your business of course, but not foolishly, and and not at the expense of everything else.

School Loan Cancellation

A couple of Facebook fans who recently heard me on the Russ Parr Show have asked me to elaborate on the Student Loan Cancellation Program.

Under federal law, you can get your federal student loans canceled or discharged for many different circumstances.

Reasons for loan discharge:

• Death
• Total and permanent disability
• School-related issues or improper certification by your school
• Full-time teaching or public service work
• Military service
• Bankruptcy

Before I explain the nuts and bolts of what’s required for these various loan cancellations, let me first say that there are a multitude of scenarios that won’t get you a loan discharge.

Reasons that won‘t get you a loan discharge:

• If you dropped out of school for any reason
• Experienced personal problems that forced you to abandon your studies
• Didn’t like your instructors
• Couldn’t get a job after graduation
• Were plagued by financial difficulties
• If you thought the quality of the instruction you received was sub-par

None of those reasons will hold weight with the Department of Education.

Perseverance Required

Let me also caution you that getting a student loan canceled or discharged is rare and often requires tremendous perseverance, know-how, and work on your part.

Having said that, even though obtaining a discharge can be a big hassle, it is nevertheless certainly worth the effort and frustration you may experience in the process.

For more details, below are some links to previous articles which I have written regarding this topic:

• How to Qualify for a Student Loan Cancellation or a Student Loan Discharge
• Student Loan Cancellation Due to Death
• Student Loan Cancellation Due To Disability
• Student Loan Cancellations for School-Related Issues and False Certification
• Student Loan Cancellations for Teaching and Community Service
• Student Loan Cancellation and Discharge for Military Service
• Student Loan Cancellations In Bankruptcy Are Rare – But Possible
• Law School Loan Forgiveness
• Health-Care Related Loan Forgiveness

Why You Should Answer a Summons on Debt Collection

If you can’t pay a debt, creditors are willing to settle out of court with you for a lump sum payment of less than the amount you owe, or a monthly payment plan, but they also will not hesitate to sue you for the full amount of the money you owe them.

So what should you do if you receive a summons and complaint from a creditor? Answer it.

What Happens If You Do Not Answer the Complaint
If you choose not to answer the complaint, the Court will enter a judgment against you, determining that you owe the creditor whatever amount they asked for. You may even be told to pay their attorney fees. The creditor can then use that judgment to garnish your wages, take money from non-exempt bank accounts or put a lien on your property.

If You Do File An Answer
If you answer the complaint (and you usually have about 20 days to respond to the plaintiff’s claims), you preserve your right to be able to argue your position in Court. You also will be notified of any future Court dates. You can use your time in Court to state why you don’t owe the money they claim.

What If You Do Owe the Money they Claim
Even if you do know for sure that you owe the exact amount the debtor claims, you can still use your time in Court to state another amount that you can afford to pay. Although typically if you admit you that amount, you will receive a judgment against you for said amount. The real leverage comes simply by answering. The debtor does not want to appear in Court no more than you do. They simply want to get paid. Once they see how time-consuming this may become for them since they are not receiving a default judgment, they may be more willing to enter a settlement agreement with you.

Debtors will take you to court for their money

What If You Don’t Have the Money to Pay?
It doesn’t matter if you don’t have the money. The debtor can still sue and the Court can still enter a judgment against you. Being broke is not an excusable reason to back out of your financial responsibilities, as the debtor is willing to shake the money out of you if it could. In cases like that you might just want to consider filing for bankruptcy instead. However, if in your financial statement and affidavit you can show how you don’t have the funds to pay, nor have a steady income, the debtor may be more willing to negotiate with you for a settlement plan.

What If You Offer to Make Monthly Payments?
A debtor does not have to enter into a payment plan with you. They can reject your offer and then sue you for the full amount. A debtor is more likely to reject a payment plan if they believe you have the means to pay, you have wages they can garnish, property they can attach a lien to, or a bank account they can raid. It is often, however, in the debtor’s financial interest if they reach a settlement plan with you if you don’t have the means to pay.

Try to settle a debt

Negotiate Your Debt
You’re in a better position to negotiate your debt before you stop making payments. However, if you’re receiving debt collection notices, that means you’ve already stopped. So, the older your debt gets, the better your chances are to get a good deal on a lump sum payment. At some point some creditors may have “written off” your debt as a bad debt expense. If they’ve written it off but then you come to offer to make a payment, they should be willing to take almost any amount from you, as any amount is better than no amount. If you’re offering a lump sum, try offering one-quarter or one-third of what you owe. Be careful with offering a monthly payment plan. Because if you miss a payment, the clock can start all over again for the full amount of the debt you owe.

If you need further guidance, sign up for a free consultation about how you can improve your financial situation.

RELATED ARTICLES
Free Financial Guidance
Statute of Limitations on Debt
You Can Stop Debt Collector Harassment
5 Tips if You’re Facing Court Action from a Debt Collector

Home Affordable Modification Plan

Part of President Obama’s $75 billion mortgage rescue plan is aimed at helping people avoid foreclosure – by either refinancing their house notes or modifying their loans. Many lenders, large and small, are even agreeing to delay foreclosure proceedings for homeowners that meet certain criteria. To find out if you’re likely to qualify for government assistance under the Home Affordable Modification Plan, visit http://www.MakingHomeAffordable.gov. This is where you can find out if you qualify for a loan refinance or a loan modification under President Obama’s housing plan.

To be eligible for a loan modification, you have to meet at least five criteria:
- the home must be your primary residence
- you must owe less than $729,750 on the home (the federal limit)
- you must be having trouble making payments (but you don’t have to be late)
- your mortgage must have been received before Jan. 1, 2009; and
- your total housing payment (principal, interest, taxes & insurance) must now exceed 31% of your gross income

To be eligible for a loan refinance, your existing mortgage must also be owned or insured by Fannie Mae or Freddie Mac. (That is not a criteria for a loan modification). To find out if your home loan is owned or insured by Fannie or Freddie, contact:

• 1-800-7FANNIE (8am to 8pm EST)
• www.fanniemae.com/loanlookup

or

• 1-800-FREDDIE (8am to 8pm EST)
• www.freddiemac.com/mymortgage

Get your documents in order

Once you determine that you’re eligible for a loan modification, pull together a slew of paperwork: paycheck stubs, your last tax return, recent mortgage statements, an itemized list of your expenses, as well as anything that substantiates your financial hardship – such as those large medical bills, and a letter describing why you fell into trouble in the first place (i.e. a loss of income, etc.). You’ll need all these documents to backup your request for help. Only your current lender can modify the terms of an existing mortgage.

Be prepared for a slow process

One thing to keep in mind is that a loan modification is not mandatory. Lenders are doing these on a “voluntary” basis. Therefore, banks don’t have to reply to you in, say, 30 days, or even in 60 days. However, banks are getting “incentive” payments to do workouts/loan mods, so when President Obama launched this housing rescue plan, nearly all the major banks got on board and agreed to further postponements and freezes on foreclosures. Many of them signed agreements to participate. Here is a list of lenders/loan servicers on board with the program, according to the MakingHomeAffordable.gov website: http://www.makinghomeaffordable.gov/contact_servicer.html.

Free Financial Guidance

People struggling with their finances often ask me for personalized coaching to help solve their money issues. While I don’t do one-on-one coaching anymore (I stopped doing that about 3 years ago to focus on group seminars where I can reach larger numbers of people), I can offer some free financial guidance in other ways.

First, I have partnered with the National Foundation for Debt Management (NFDM), a reputable non-profit credit counseling agency which negotiates with creditors, gets your interest rates lowered, and creates a plan to quickly get you out of debt. Since I am a spokesperson for NFDM, they’ve agreed to provide a free on-one-one counseling session to my readers and fans. With NFDM, there is no obligation to buy anything, and there will be no pressure on you to do anything.  All you have to do is share your situation openly and honestly, and in return, I promise that you will get honest and real-world advice on how to handle your situation.  To arrange for your free counseling session, click on this link http://www.themoneycoach.net/gethelpnow.htm to sign up for your free consultation.

Additionally, I post articles and financial advice to social networking sites, such as Facebook and Twitter, as well as on my own website, blog, and in my newsletter at www.TheMoneyCoach.net. There you will find my tips on a host of topics ranging from budgeting, credit and debt, to student loans, taxes, insurance, investing and real estate. Lastly, you can get free information from my books, including Zero Debt: The Ultimate Guide to Financial Freedom, just by checking those books out from your local library.

5 Tips if You’re Facing Court Action from a Debt Collector

 

 

 

Comic by Dan Gibson @ DestroyDebt.com

 

 

Creditors can sell your debt. When your debt is sold to collectors, some might use the threat of court action to try to intimidate you in order to get you to pay up.  

Technically, it is illegal for collectors or creditors to threaten court action if they do not intend to carry through with it.  Taking you to court is time consuming and expensive for them, and there is no guarantee it will result in the outcome the creditor wants.  So typically, a court action is a tactic to get you to pay up, or to obtain a default judgment against you if you don’t respond to a summons and complaint.

Here are 5 things you should know in case you are presented with a court action.

1) Answer a summons and complaint.  If a creditor serves you with a summons and complaint, not merely a letter saying you owe debt, then you must answer within a certain timeframe set by your state laws (perhaps 10, 20 or 30 days), in order to avoid a default judgment. I’ll speak more on how to answer a summons in the coming days.

2) Know the statute of limitations. There is a time limit on how long creditors have in which to try to obtain a judgment against you for the money you may owe them.  That “statute of limitations” varies by state and type of debt.  Typically, it is anywhere from 3 years to 10 years. A creditor can use the limits in your state or the state where they are located. They will often use the state with the longest statute of limitations, because it is obviously beneficial for them. Click here for a state-by-state list of limitations timeframes for debt. 

3) Credit bureaus limits are not the same as debt statute of limitations. Federal law typically requires credit bureaus to drop negative information after about seven years from the date of your first missed payment. (There are exceptions, such as bankruptcies can stay on for 10 years, and tax liens can stay on for longer). If you live in a state with a 3-year statute of limitations on legal collection of debt, it will still show up on your credit report.  If live in a state that allows judgments to be entered for 10 years, it is possible the debt came off your credit report after 6 years.  So do not use your credit report to help you determine if you owe debt. You can use it, however, to check to see when the creditor first considered you to be delinquent.

4) Statute of limitations can start over. Please note that if you enter a payment agreement, make a payment — even a partial payment—, or promise to make a payment, you will restart the statute of limitations to day one.

5) Show up to court.  If you are sued, make sure you or legal representation on your behalf appear in court.  If you don’t, the court can issue a judgment against you for the full amount the creditor requests.  Even if you make a settlement agreement prior to court, don’t trust the debtor to notify the court that it has been settled. Appear in court for any date that was set and let the judge or trustee tell you to go home.

Statute of Limitations on Debt

Consumers often pay off debt for which creditors can no longer seek legal action because the Statute of Limitations has already expired for the account. Consumers pay off these accounts perhaps because the accounts still appear on their credit reports, they fear court action, or they simply don’t know their rights.  There are even cases of “Zombie debt” where agencies are claiming to collect a debt from years ago that one may have already paid off, or never owed in the first place.

Know the Statute of Limitations for your state or the state where a potential creditor is based.  The chart below provides links to various state laws.

 

STATUTE OF LIMITATIONS ON DEBT; STATE BY STATE

State	Oral	Written	Promissory	Open-ended Accounts	State Statute: Open Accounts
AL	6	6	6	3	§6-2-37
AR	5	5	5	3	§16-56-105
AK	6	6	3	3	§09.10.053
AZ	3	6	6	3	§12-543
CA	2	4	4	4	§337
CO	6	6	6	3	§13-80-101
CT	3	6	6	3	§52-581
DE	3	3	3	4	§2-725
DC	3	3	3	3	§12-301
FL	4	5	5	4	§95.11
GA	4	6	6	6 **	§9-3-25
HI	6	6	6	6	HRS 657-1(4)
IA	5	10	5	5	§614.5
ID	4	5	5	4	§5-222
IL	5	10	10	5	735 ILCS 5/13-205
IN	6	10	10	6	§34-11-2
KS	3	6	5	3	§84-3-118
KY	5	15	15	5	§413.120
LA	10	10	10	3	§3-118
ME	6	6	6	6	§5-511
MD	3	3	6	3	§5-101
MA	6	6	6	6	c.260, §2
MI	6	6	6	6	§600.5807
MN	6	6	6	6	§541.05
MO	5	10	10	5	§516.120
MS	3	3	3	3	§15-1-29
MT	3	8	8	5	27-2-202
NC	3	3	5	3	§1-52(1)
ND	6	6	6	6	28-01-16
NE	4	5	5	4	§25-206
NH	3	3	6	3	382-A:3-118
NJ	6	6	6	3	25:1-5
NM	4	6	6	4	§37-1-4
NV	4	6	3	4	NRS 11.190
NY	6	6	6	6	§2-213
OH	6	15	15	6	§2305.07
OK	3	5	5	3	§12-3-95
OR	6	6	6	6	§12.080
PA	4	4	4	4	§5525
RI	10	5	6	4	§6A-2-725
SC	3	3	3	3	SEC 15-3-530
SD	6	6	6	6	§15-2-13
TN	6	6	6	6	28-3-109
TX	4	4	4	4	§16.004
UT	4	6	6	4	70-09a
VA	3	5	6	3	8.01-246
VT	6	6	5	3	§3-118
WA	3	6	6	3	RCW 4.16.080
WI	6	6	10	6	893.43
WV	5	10	6	5	§55-2-6
WY	8	10	10	8	§1-3-102

** Georgia Court of Appeals came out with a decision on January 24, 2008 in Hill v. American Express that in Georgia the statute of limitations on a credit card is six years after the amount becomes due and payable

You Can Stop Debt Collector Harassment

Many people are well behind in paying their bills, but that doesn’t give debt collectors permission to harass you at work, late at night, after you’ve asked them to stop, or under other conditions.

What Debt Collectors Cannot Do

• Cannot contact you before 8 a.m. or after 9 p.m. your local time unless you give them permission or they have a court order to do so.
• Cannot call you at your job if you tell them your employer prohibits such calls.
• Cannot contact you if you tell them you have a lawyer representing you.

These, and other protections are spelled out in the Fair Debt Collections Protection Act (downloadable PDF file). I will highlight more of your rights over the course of this month.

Send a Cease & Desist Letter
To stop a debt collector from contacting you, write them a Cease and Desist letter telling them to stop all contact with you.

The first sentence of your letter should say: “I am unable to pay this bill because….” or “I refuse to pay this debt because….” and explain your reason. You also have the option of not giving a reason at all.

The second sentence should state: “I hearby assert my right under Section 805-C of the Fair Debt Collection Practices Act to request that you cease any further communication with me.”

After the debt collectors receive your “Cease & Desist” letter they cannot contact you except to indicate that the collection process against you has stopped or that legal action against you is moving forward.

For a sample Cease & Desist letter, see my book Zero Debt.