How Long Do Inquiries Stay on Your Credit Report & Affect Your Score?

Your credit score is an important part of your financial life. Good credit can help you qualify for loans and credit cards and secure lower interest rates on those loans. Poor credit can make it expensive to borrow money and make some lenders refuse to lend you any money at all.

Usually, when you apply for a loan or credit card, the lender looks at a copy of your credit report. This places an inquiry on your report, which drops your score by a few points.

Understanding the impact of credit inquiries and how long the impact lasts can help you manage your credit score while applying for loans.

Calculating Your Credit Score

Your credit score is a three-digit number that lenders can use to quickly gauge your trustworthiness as a borrower. Scores range from a low of 300 to a high of 850, with higher scores being better. Generally, anything above 760 is seen as an excellent score while scores above 700 are good.

There are three major credit bureaus: Experian, Equifax, and Transunion. Each tracks your interactions with debt and credit to build a credit report for you. Using the information on those reports, as well as a formula from FICO, they calculate your credit score, often called your FICO score.

There are five factors that affect your credit score.

1. Payment History

Your payment history is the most important part of your credit score, determining more than a third of it alone. It tracks your history of timely vs late and missed payments. Making timely payments helps your score. Missed and late payments hurt your score.

One missed or late payment has a much larger impact on your credit than a single timely payment, so it’s essential that you work to never miss a due date if you want to have good credit.

2. Credit Utilization

Your credit utilization measures two things, your total amount of debt and the amount of credit card debt you have in relation to your credit card’s combined limits. The less debt you have, the better it is for your credit score.

3. Length of Credit History

The length of your credit history is also composed of two factors. One is the total amount of time you’ve had access to credit. A longer credit history means more experience with debt, which can help your score.

The other is the average age of your credit accounts. Lenders prefer borrowers who stick with credit cards and loans over those who bounce from account to account. The older your average account, the better it will be for your score.

4. Credit Mix

The more different types of loans you’ve had, such as mortgages, auto loans, and student loans, the better it will be for your credit score. Dealing with different types of debt shows that you can handle all the different types of credit.

5. New Credit

New credit looks at both any new accounts that you’ve opened as well as new loans you’ve applied for. This is where credit inquiries appear on your report. Each inquiry can decrease your credit score slightly.


What Is a Credit Inquiry & How Long Does It Affect Your Credit?

When you apply for a new credit card or a loan, the lender wants to know whether you’ll repay your debts.

Typically the lender asks one or more of the credit bureaus to send a copy of your credit report. When a credit bureau receives the request, it makes a note of the inquiry on your credit report. Each credit inquiry decreases your score by a few points.

Credit inquiries reduce your score because applying for new loans on a regular basis can indicate a risky borrower. If someone asks a lender if they can borrow $25,000 to buy a car, that is a relatively reasonable request.

But if someone asks to borrow $25,000 for a car, then needs another $10,000 personal loan the next week, and $50,000 the week after that, and then a new credit card a day later, it can throw up red flags. The person might be sending in so many applications because they’re running into financial trouble or because they don’t plan to repay those debts.

A single inquiry on your credit report can reduce your score between five and 10 points. It’s not a huge impact, but it’s noticeable for someone who is right on the border between good and excellent credit or fair and good credit.

Each additional inquiry drops your score, so applying for multiple loans can cause your credit score to drop quickly.

The impact of each credit inquiry reduces over time. If the rest of your credit report is good, your score will return almost to normal within a few months. Inquiries completely fall off your report after two years.


Hard Inquiries vs. Soft Inquiries

When someone checks your credit report, it can place an inquiry on the report and drop your score. This can sound scary to people who use a credit monitoring service to keep an eye on their credit score.

The good news is that not every inquiry will hurt your credit score. When you apply for credit, lenders typically make something called a hard inquiry when asking the credit bureaus for a copy of your report. The bureaus take note of hard inquiries and put them on your credit report.

By contrast, soft inquiries are used by credit monitoring services or companies offering promotional credit offers or those helping you check if you’re pre-approved for certain products.

The credit bureaus don’t record soft inquiries into your credit, which means that soft inquiries have no effect on your credit score.

In simple terms, applying for a new loan or credit card usually involves a hard inquiry. Checking your credit without actually applying for a loan or credit card usually involves a soft inquiry.


What About Rate Shopping?

One of the best ways to save money on a loan — especially a large loan like a mortgage or an auto loan — is to shop around. If you get quotes from multiple lenders, you can choose the one with the lowest interest rate and fees to minimize your costs.

If each application results in a hard inquiry that hurts your credit score, rate shopping too extensively could damage your credit.

The good news for borrowers is that the FICO scoring formula accounts for the importance of rate shopping. For large loans like mortgages, auto loans, and student loans, all inquiries that occur within a short span — 14 to 45 days depending on the formula used — are treated as a single inquiry when calculating your score.

That means that you can safely compare rates from multiple lenders, as long as you get your quotes within a short period.


Final Word

Applying for credit cards or loans can place credit inquiries on your credit report, which can drop your score. To make sure you keep your score healthy, do your best to only apply for loans that you need.

As long as you use your credit responsibly and don’t apply for too many accounts in a short period, you shouldn’t have to worry about the impact that inquiries have on your credit score.

Source: moneycrashers.com

The Pros & Cons of Offering Owner Financing (When You Sell Your Home)

Sometimes, home sellers find a buyer eager to purchase but unable to finance the property with traditional mortgage financing. Sellers then have a choice: lose the buyer, or lend the mortgage to the buyer themselves.

If you want to sell a property you own free and clear, with no mortgage, you can theoretically finance a buyer’s full first mortgage. Alternatively, you could offer just a second mortgage, to bridge the gap between what the buyer can borrow from a conventional lender and the cash they can put down.

Should you ever consider offering financing? What’s in it for you? And most importantly, how do you protect yourself against losses?

Before taking the plunge to offer seller financing, make sure you understand all the pros, cons, and options available to you as “the bank” when lending money to a buyer.

Advantages to Offering Seller Financing

Although most sellers never even consider offering financing, a few find themselves forced to contemplate it.

For some sellers, it could be that their home lies in a cool market with little demand. Others own unique properties that appeal only to a specific type of buyer or that conventional mortgage lenders are wary to touch. Or the house may need repairs in order to meet habitability requirements for conventional loans.

Sometimes the buyer may simply be unable to qualify for a conventional loan, but you might know they’re good for the money if you have an existing relationship with them.

There are plenty of perks in it for the seller to offer financing. Consider these pros as you weigh the decision to extend seller financing.

1. Attract & Convert More Buyers

The simplest advantage is the one already outlined: You can settle on your home even when conventional mortgage lenders decline the buyer.

Beyond salvaging a lost deal, sellers can also potentially attract more buyers. “Seller Financing Available” can make an effective marketing bullet in your property listing.

If you want to sell your home in 30 days, offering seller financing can draw in more showings and offers.

Bear in mind that seller financing doesn’t only appeal to buyers with shoddy credit. Many buyers simply prefer the flexibility of negotiating a custom loan with the seller rather than trying to fit into the square peg of a loan program.

2. Earn Ongoing Income

As a lender, you get the benefit of ongoing monthly interest payments, just like a bank.

It’s a source of passive income, rather than a one-time payout. In one fell swoop, you not only sell your home but also invest the proceeds for a return.

Best of all, it’s a return you get to determine yourself.

3. You Set the Interest Rate

It’s your loan, which means you get to call the shots on what you charge. You may decide seller financing is only worth your while at 6% interest, or 8%, or 10%.

Of course, the buyer will likely try to negotiate the interest rate. After all, nearly everything in life is negotiable, and the terms of seller financing are no exception.

4. You Can Charge Upfront Fees

Mortgage lenders earn more than just interest on their loans. They charge a slew of one-time, upfront fees as well.

Those fees start with the origination fee, better known as “points.” One point is equal to 1% of the mortgage loan, so they add up fast. Two points on a $250,000 mortgage comes to $5,000, for example.

But lenders don’t stop at points. They also slap a laundry list of fixed fees on top, often surpassing $1,000 in total. These include fees such as a “processing fee,” “underwriting fee,” “document preparation fee,” “wire transfer fee,” and whatever other fees they can plausibly charge.

When you’re acting as the bank, you can charge these fees too. Be fair and transparent about fees, but keep in mind that you can charge comparable fees to your “competition.”

5. Simple Interest Amortization Front-Loads the Interest

Most loans, from mortgage loans to auto loans and beyond, calculate interest based on something called “simple interest amortization.” There’s nothing simple about it, and it very much favors the lender.

In short, it front-loads the interest on the loan, so the borrower pays most of the interest in the beginning of the loan and most of the principal at the end of the loan.

For example, if you borrow $300,000 at 8% interest, your mortgage payment for a 30-year loan would be $2,201.29. But the breakdown of principal versus interest changes dramatically over those 30 years.

  • Your first monthly payment would divide as $2,000 going toward interest, with only $201.29 going toward paying down your principal balance.
  • At the end of the loan, the final monthly payment divides as $14.58 going toward interest and $2,186.72 going toward principal.

It’s why mortgage lenders are so keen to keep refinancing your loan. They earn most of their money at the beginning of the loan term.

The same benefit applies to you, as you earn a disproportionate amount of interest in the first few years of the loan. You can also structure these lucrative early years to be the only years of the loan.

6. You Can Set a Time Limit

Not many sellers want to hold a mortgage loan for the next 30 years. So they don’t.

Instead, they structure the loan as a balloon mortgage. While the monthly payment is calculated as if the loan is amortized over the full 15 or 30 years, the loan must be paid in full within a certain time limit.

That means the buyer must either sell the property within that time limit or refinance the mortgage to pay off your loan.

Say you sign a $300,000 mortgage, amortized over 30 years but with a three-year balloon. The monthly payment would still be $2,201.29, but the buyer must pay you back the full remaining balance within three years of buying the property from you.

You get to earn interest on your money, and you still get your full payment within three years.

7. No Appraisal

Lenders require a home appraisal to determine the property’s value and condition.

If the property fails to appraise for the contract sales price, the lender either declines the loan or bases the loan on the appraised value rather than the sales price — which usually drives the borrower to either reduce or withdraw their offer.

As the seller offering financing, you don’t need an appraisal. You know the condition of the home, and you want to sell the home for as much as possible, regardless of what an appraiser thinks.

Foregoing the appraisal saves the buyer money and saves everyone time.

8. No Habitability Requirement

When mortgage lenders order an appraisal, the appraiser must declare the house to be either habitable or not.

If the house isn’t habitable, conventional and FHA lenders require the seller to make repairs to put it in habitable condition. Otherwise, they decline the loan, and the buyer must take out a renovation loan (such as an FHA 203k loan) instead.

That makes it difficult to sell fixer-uppers, and it puts downward pressure on the price. But if you want to sell your house as-is, without making any repairs, you can do so by offering to finance it yourself.

For certain buyers, such as handy buyers who plan to gradually make repairs themselves, seller financing can be a perfect solution.

9. Tax Implications

When you sell your primary residence, the IRS offers an exemption for the first $250,000 of capital gains if you’re single, or $500,000 if you’re married.

However, if you earn more than that exemption, or if you sell an investment property, you still have to pay capital gains tax. One way to reduce your capital gains tax is to spread your gains over time through seller financing.

It’s typically considered an installment sale for tax purposes, helping you spread the gains across multiple tax years. Speak with an accountant or other financial advisor about exactly how to structure your loan for the greatest tax benefits.


Drawbacks to Seller Financing

Seller financing comes with plenty of risks. Most of the risks center around the buyer-borrower defaulting, they don’t end there.

Make sure you understand each of these downsides in detail before you agree to and negotiate seller financing. You could potentially be risking hundreds of thousands of dollars in a single transaction.

1. Labor & Headaches to Arrange

Selling a home takes plenty of work on its own. But when you agree to provide the financing as well, you accept a whole new level of labor.

After negotiating the terms of financing on top of the price and other terms of sale, you then need to collect a loan application with all of the buyer’s information and screen their application carefully.

That includes collecting documentation like several years’ tax returns, several months’ pay stubs, bank statements, and more. You need to pull a credit report and pick through the buyer’s credit history with a proverbial fine-toothed comb.

You must also collect the buyer’s new homeowner insurance information, which must include you as the mortgagee.

You need to coordinate with a title company to handle the title search and settlement. They prepare the deed and transfer documents, but they still need direction from you as the lender.

Be sure to familiarize yourself with the home closing process, and remember you need to play two roles as both the seller and the lender.

Then there’s all the legal loan paperwork. Conventional lenders sometimes require hundreds of pages of it, all of which must be prepared and signed. Although you probably won’t go to the same extremes, somebody still needs to prepare it all.

2. Potential Legal Fees

Unless you have experience in the mortgage industry, you probably need to hire an attorney to prepare the legal documents such as the note and promise to pay. This means paying the legal fees.

Granted, you can pass those fees on to the borrower. But that limits what you can charge for your upfront loan fees.

Even hiring the attorney involves some work on your part. Keep this in mind before moving forward.

3. Loan Servicing Labor

Your responsibilities don’t end when the borrower signs on the dotted line.

You need to make sure the borrower pays on time every month, from now until either the balloon deadline or they repay the loan in full. If they fail to pay on time, you need to send late notices, charge them late fees, and track their balance.

You also have to confirm that they pay the property taxes on time and keep the homeowners insurance current. If they fail to do so, you then have to send demand letters and have a system in place to pay these bills on their behalf and charge them for it.

Every year, you also need to send the borrower 1098 tax statements for their mortgage interest paid.

In short, servicing a mortgage is work. It isn’t as simple as cashing a check each month.

4. Foreclosure

If the borrower fails to pay their mortgage, you have only one way to forcibly collect your loan: foreclosure.

The process is longer and more expensive than eviction and requires hiring an attorney. That costs money, and while you can legally add that cost to the borrower’s loan balance, you need to cough up the cash yourself to cover it initially.

And there’s no guarantee you’ll ever be able to collect that money from the defaulting borrower.

Foreclosure is an ugly experience all around, and one that takes months or even years to complete.

5. The Buyer Can Declare Bankruptcy on You

Say the borrower stops paying, you file a foreclosure, and eight months later, you finally get an auction date. Then the morning of the auction, the borrower declares bankruptcy to stop the foreclosure.

The auction is canceled, and the borrower works out a payment plan with the bankruptcy court judge, which they may or may not actually pay.

Should they fail to pay on their bankruptcy payment plan, you have to go through the process all over again, and all the while the borrowers are living in your old home without paying you a cent.

6. Risk of Losses

If the property goes to foreclosure auction, there’s no guarantee anyone will bid enough to cover the borrower’s loan debt.

You may have lent $300,000 and shelled out another $20,000 in legal fees. But the bidding at the foreclosure auction might only reach $220,000, leaving you with a $100,000 shortfall.

Unfortunately, you have nothing but bad options at that point. You can take the $100,000 loss, or you can take ownership of the property yourself.

Choosing the latter means more months of legal proceedings and filing eviction to remove the nonpaying buyer from the property. And if you choose to evict them, you may not like what you find when you remove them.

7. Risk of Property Damage

After the defaulting borrower makes you jump through all the hoops of foreclosing, holding an auction, taking the property back, and filing for eviction, don’t delude yourself that they’ll scrub and clean the property and leave it in sparkling condition for you.

Expect to walk into a disaster. At the very least, they probably haven’t performed any maintenance or upkeep on the property. In my experience, most evicted tenants leave massive amounts of trash behind and leave the property filthy.

In truly terrible scenarios, they intentionally sabotage the property. I’ve seen disgruntled tenants pour concrete down drains, systematically punch holes in every cabinet, and destroy every part of the property they can.

8. Collection Headaches & Risks

In all of the scenarios above where you come out behind, you can pursue the defaulting borrower for a deficiency judgment. But that means filing suit in court, winning it, and then actually collecting the judgment.

Collecting is not easy to do. There’s a reason why collection accounts sell for pennies on the dollar — most never get collected.

You can hire a collection agency to try collecting for you by garnishing the defaulted borrower’s wages or putting a lien against their car. But expect the collection agency to charge you 40% to 50% of all collected funds.

You might get lucky and see some of the judgment or you might never see a penny of it.


Options to Protect Yourself When Offering Seller Financing

Fortunately, you have a handful of options at your disposal to minimize the risks of seller financing.

Consider these steps carefully as you navigate the unfamiliar waters of seller financing, and try to speak with other sellers who have offered it to gain the benefit of their experience.

1. Offer a Second Mortgage Only

Instead of lending the borrower the primary mortgage loan for hundreds of thousands of dollars, another option is simply lending them a portion of the down payment.

Imagine you sell your house for $330,000 to a buyer who has $30,000 to put toward a down payment. You could lend the buyer $300,000 as the primary mortgage, with them putting down 10%.

Or you could let them get a loan for $270,000 from a conventional mortgage lender, and you could lend them another $30,000 to help them bridge the gap between what they have in cash and what the primary lender offers.

This strategy still leaves you with most of the purchase price at settlement and lets you risk less of your own money on a loan. But as a second mortgage holder, you accept second lien position

That means in the event of foreclosure, the first mortgagee gets paid first, and you only receive money after the first mortgage is paid in full.

2. Take Additional Collateral

Another way to protect yourself is to require more collateral from the buyer. That collateral could come in many forms. For example, you could put a lien against their car or another piece of real estate if they own one.

The benefits of this are twofold. First, in the event of default, you can take more than just the house itself to cover your losses. Second, the borrower knows they’ve put more on the line, so it serves as a stronger deterrent for defaults.

3. Screen Borrowers Thoroughly

There’s a reason why mortgage lenders are such sticklers for detail when underwriting loans. In a literal sense, as a lender, you are handing someone hundreds of thousands of dollars and saying, “Pay me back, pretty please.”

Only lend to borrowers with a long history of outstanding credit. If they have shoddy credit — or any red flags in their credit history — let them borrow from someone else. Be just as careful of borrowers with little in the way of credit history.

The only exception you should consider is accepting a cosigner with strong, established credit to reinforce a borrower with bad or no credit. For example, you might find a recent college graduate with minimal credit who wants to buy, and you could accept their parents as cosigners.

You also could require additional collateral from the cosigner, such as a lien against their home.

Also review the borrower’s income carefully, and calculate their debt-to-income ratios. The front-end ratio is the percentage of their monthly income required to cover all housing costs: principal and interest, property taxes, homeowner’s insurance, and any condominium or homeowners association fees.

For reference, conventional mortgage lenders allow a maximum front-end ratio of 28%.

The back-end ratio includes not just housing costs, but also overall debt obligations. That includes student loans, auto loans, credit card payments, and all other mandatory monthly debt payments.

Conventional mortgage loans typically allow 36% at most. Any more than that and the buyer probably can’t afford your home.

4. Charge Fees for Your Trouble

Mortgage lenders charge points and fees. If you’re serving as the lender, you should do the same.

It’s more work for you to put together all the loan paperwork. And you will almost certainly have to pay an attorney to help you, so make sure you pass those costs along to the borrower.

Beyond your own labor and costs, you also need to make sure you’re being compensated for your risk. This loan is an investment for you, so the rewards must justify the risk.

5. Set a Balloon

You don’t want to be holding this mortgage note 30 years from now. Or, for that matter, to force your heirs to sort out this mortgage on your behalf after you shuffle off this mortal coil.

Set a balloon date for the mortgage between three and five years from now. You get to collect mostly interest in the meantime, and then get the rest of your money once the buyer refinances or sells.

Besides, the shorter the loan term, the less opportunity there is for the buyer to face some financial crisis of their own and stop paying you.

6. Be Listed as the Mortgagee on the Insurance

Insurance companies issue a declarations page (or “dec page”) listing the mortgagee. In the event of damage to the property and an insurance claim, the mortgagee gets notified and has some rights and protections against losses.

Review the insurance policy carefully before greenlighting the settlement. Make sure your loan documents include a requirement that the borrower send you updated insurance documents every year and consequences if they fail to do so.

7. Hire a Loan Servicing Company

You may multitalented and an expert in several areas. But servicing mortgage loans probably isn’t one of them.

Consider outsourcing the loan servicing to a company that specializes in it. They send monthly statements, late notices, 1098 forms, and escrow statements (if you escrow for insurance and taxes), and verify that taxes and insurance are current each year. If the borrower defaults, they can hire a foreclosure attorney to handle the legal proceedings.

Examples of loan servicing companies include LoanCare and Note Servicing Center, both of whom accept seller-financing notes.

8. Offer Lease-to-Own Instead

The foreclosure process is significantly longer and more expensive than the eviction process.

In the case of seller financing, you sell the property to the buyer and only hold the mortgage note. But if you sign a lease-to-own agreement, you maintain ownership of the property and the buyer is actually a tenant who simply has a legal right to buy in the future.

They can work on improving their credit over the next year or two, and you can collect rent. When they’re ready, they can buy from you — financed with a conventional mortgage and paying you in full.

If the worst happens and they default, you can evict them and either rent or sell the property to someone else.

9. Explore a Wrap Mortgage

If you have an existing mortgage on the property, you may be able to leave it in place and keep paying it, even after selling the property and offering seller financing.

Wrap mortgages, or wraparound mortgages, are a bit trickier and come with some legal complications. But when executed right, they can be a win-win for both you and the buyer.

Say you have a 30-year mortgage for $250,000 at 3.5% interest. You sell the property for $330,000, and you offer seller financing of $300,000 for 6% interest. The buyer pays you $30,000 as a down payment.

Ordinarily, you would pay off your existing mortgage for $250,000 upon selling it. Most mortgages include a “due-on-sale” clause, requiring the loan to be paid in full upon selling the property.

But in some circumstances and some states, you may be able to avoid triggering the due-on-sale clause and leave the loan in place.

You keep paying your mortgage payment of $1,122.61, even as the borrower pays you $1,798.65 per month. In a couple of years when they refinance, they pay off your previous mortgage in full, plus the additional balance they owe you.

Of course, you still run the risk that the borrower stops paying you. Then you’re saddled with making your monthly mortgage payment on the property, even as you slog through the foreclosure process to try and recover your losses.


Final Word

Offering seller financing comes with risks. But those risks may be worth taking, especially for hard-to-sell properties.

Only you can decide what risk-reward ratio you can live with, and negotiate loan terms to ensure you come out on the right side of the ratio. For unique or other difficult-to-finance properties, seller financing may be the only way to sell for what the property’s worth.

Before you write off the returns as low, remember that your APR will be far higher than the interest rate charged.

Beyond the upfront fees you can charge, you’ll also benefit from simple interest amortization, which front-loads the interest so that nearly all of the monthly payment goes toward interest in the first few years — the only years you need to finance if you structure the loan as a balloon mortgage.

Just be sure to screen all borrowers extremely carefully, and to take as many precautions as you can. If the borrower can’t qualify for a conventional mortgage, consider that a glaring red flag. Seller financing involves risking many thousands of dollars in a single transaction, so take your time and get it right.

Source: moneycrashers.com

The psychology of being overworked and underpaid

Stressed woman with hands on her head looking at a laptop.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A competitive salary is something we all strive for in our careers, but for some, the salary we know we deserve doesn’t necessarily match our reality. An employee may put in extra hours, take on more responsibilities and go the extra mile, but they still may not be properly compensated for their work. 

Being overworked and underpaid isn’t as uncommon as we think. According to a poll conducted by Gallup, 43 percent of U.S. workers believe they are underpaid. 

Unfortunately, this can have a negative impact on a person’s productivity, mental health and even credit health. So, what can you do if you feel you’re not being fairly paid at work? 

Read on to find out the psychological impact of being overworked and underpaid and how you can combat this issue—or jump straight to the infographic below. 

Impacts of being overworked and underpaid

Sometimes we’re so eager to accept a job that we settle for whatever salary we’re offered, only to find out that what we’re given doesn’t match the responsibilities we’ve taken on. Or, you may have been at a company for a while and experienced an increase in your workload but seen little to no increase in pay. 

Being overworked and underpaid can ultimately lead to a multitude of feelings that can cause more harm than good. Here are three signs you shouldn’t ignore:

Decrease in productivity

Employees who work long hours and have heavier workloads aren’t necessarily the most productive. Some may think the more hours you work, the more you’ll get done, but for most, this can have the opposite effect.

The more work an employee takes on, the more prone they become to mistakes. This can lead to feelings of burnout, sleep deprivation and work-life imbalance due to stress and the inability to keep up with the heavy workload. On top of that, if you’re being underpaid, it can make it extremely difficult to stay motivated in your role. 

Gallup found that 23 percent of employees felt burnt out almost always at work, according to a study made up of 7,500 full time employees. When it becomes hard to juggle workplace stress, people can find it difficult to function and stay productive. The same study conducted by Gallup also found that 13 percent of workers are less confident in their work performance when experiencing symptoms of burnout.

13% of workers are less confident in their work performance when feeling burnt out. Source: Gallup.

Employees may start to feel disconnected from their work and may even have built up resentment toward their employer because of their lack of compensation, causing a never-ending cycle of stress, burnout and lack of productivity. These feelings can ultimately impact employees’ overall well-being and mental health. 

Negative effects on your mental well-being 

Most people spend the majority of their time in the workplace. Unfortunately for some, the stresses from work can be hard to shut off even when leaving the office for the day. According to a study conducted by Wrike, 94 percent of employees said they felt stress at work and 54 percent said the stresses from work negatively affect their home life.

57.9% of employees said work has impacted their mental health in some way. Source: Paychex.

Long work hours, an increase in work-related tasks and insufficient pay can all start to take a toll on a person’s physical and mental health. A survey conducted by Paychex found that 57.9 percent of employees said work impacted their mental health in some way. 

Damaged credit health  

Aside from mental health and productivity, being underpaid can start to hurt your financial standing. Though your income doesn’t have a direct impact on your credit score, lack of income can make it more difficult to pay your bills on time. A survey by WalletHub found that 30 percent of respondents missed credit card payments because they didn’t have enough money. 

30% of people missed credit card payments because they didn’t have enough money. Source: WalletHub.

A Gallup poll also found that 55 percent of women feel they are underpaid for the amount of work they do, which could play into why they hold nearly two-thirds of the student loan debt in the U.S. With women receiving lower-than-average wages, keeping up with student loans and other debt payments becomes harder, thus affecting their overall credit health. 

6 ways to handle being underpaid 

Being underpaid is a problem that many people find themselves in and struggle to get out of. The only way to get out of this predicament is to take matters into your own hands. Here are six ways you can get out of being underpaid: 

1. Negotiate a competitive raise

Present your employer with an exact dollar amount and provide documentation of your work and performance.

Asking for a raise can seem scary and intimidating, but it’s an important step toward solving your problem. Though it’s not always the easiest thing to do, you’ll never know if you don’t ask. 

When asking for a raise, make sure you do your research on your industry’s salary range and provide an exact number when meeting with your employer. Providing an exact dollar amount as opposed to a salary range will show your employer that you know what you want and will make the negotiation process easier. Try aiming a little higher than what you would like to leave room for negotiation. When researching salary ranges, tools like Salary.com and LinkedIn’s salary tool can be a huge help. 

To support your case, come to the meeting with documentation to show your work and accomplishments thus far. Provide hard data, numbers, positive feedback you’ve received in the past and all of the ways you have helped and plan to help increase the company’s bottom line. The more evidence you provide, the better chance you have at landing that raise. 

2. Review company growth path and policies 

Schedule an official performance review with your employer to discuss your progress and an increase in pay.

Most companies give performance reviews and have a growth path clearly noted, so it may be worth revisiting your company policies first. Growth paths are important in understanding what’s expected from your employer in order to progress within the company and earn a higher wage. 

If you haven’t received an official review, get one on the schedule with your boss. A 2018 report found that 68 percent of executives say they learn about employees’ concerns for the first time during performance reviews. If you’re concerned about your growth within the company, don’t wait for your employer to come to you about it. 

3. Start a conversation about your workload

Consider decreasing your hours to alleviate workplace stress and create a healthier work-life balance.

If you’re continuing to work long hours and find the pay still isn’t worth it, it might be beneficial to have an open and honest conversation about the amount of work you’ve taken on. If your employer is unable to give you a raise, you may want to discuss cutting back on your hours or workload.

The result may not be an increase in pay, but you may be happier in your role and be able to perform better if they ease up on your day-to-day tasks. Your pay sometimes isn’t worth being unhappy at work. In fact, one of our studies on employee happiness found that 60 percent of Americans said they would take a job they loved with half their current income over one they hated. 

Employers may not be aware of the impact the extra work is having on you, so always try your best to be transparent about your load to find a healthy compromise. 

4. Start exploring other options 

Aside from monetary benefits, take other factors into consideration, such as health insurance coverage and time-off policies.

If your request for a raise gets denied and you still find yourself in the same predicament, you might want to start exploring other options. In fact, those experiencing symptoms of burnout at work are 2.6 times as likely to actively be looking for another job. 

Though monetary benefits are usually of the utmost importance, remember to consider other factors like health insurance options, flexible hours, vacation policies and overall company culture. The issues you experience in your current position can help you determine what you’re looking for in your next role. 

5. Consider quitting your job 

Make sure you’re in a good financial standing and have at least 3 to 6 months of pay saved.

At the end of the day, no job is worth putting your mental health at risk. If your current employer isn’t paying you what you deserve and you don’t feel fulfilled in your role, consider moving on. Now that you’ve done extensive research on your industry’s salary range, you’ll know what range to keep in mind when applying for other positions. 

Before jumping the gun and resigning from a position, make sure you’re financially prepared. In these situations, it’s smart to have at least three to six months’ worth of pay saved to give you some cushion during your job search. It may become more difficult to get approved for a credit card without a job, so having saved up income can help ensure you’re able to pay your credit balance. 

6. Know your worth 

Use Glassdoor’s Know Your Worth tool to compare salary levels according to location, experience level and job title.

Understanding your own worth means being clear on the value you can bring to a company. When you know your worth, asking for a raise and vocalizing your concerns will start to come naturally to you. 

Assess your own skills and level of expertise and be realistic with yourself. Once you’ve analyzed your own skills and industry’s expectations, you’ll have a better understanding of an appropriate wage. Glassdoor has a Know Your Worth tool that can help you determine salary ranges by title, experience level and location. 

The most important thing to remember is to not sell yourself short. Research from Glassdoor found that 59 percent of employees did not negotiate salary and accepted the first offer they were given. Know your worth and don’t settle for less than what you deserve. 

Money isn’t everything when it comes to employment, but it can certainly start to impact your career and personal growth if it remains stagnant. If your paycheck isn’t reflecting your worth, take action and make sure you’re getting the compensation that will set you up for further financial success. 

For tips on how to handle being overworked and underpaid, check out our infographic below.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

12 Hidden Costs of Raising a Child – Expenses Parents Should Budget For

A USDA report pegs the total cost of raising a child at $233,610, or $284,570 if you factor in future inflation. That includes only the basics however, and excludes costs like helping with college education, birthday parties, and holiday gifts.

Include those, and you’re looking at $745,634, according to a report by NerdWallet — a jarring amount, no matter how much you earn.

Most of us know that kids come with extra costs like clothing, food, and possibly college tuition. But what about the hidden costs of raising a child? Kids require more than food and clothes, and often the less obvious costs get lost in estimates of just how much children cost to rear.

As you consider having children or plan your finances for an existing family, keep the following costs in mind. Just remember that although these expenses are common, they’re not written in stone, and you do ultimately control how much your own children cost you.

Hidden Costs of Raising a Child

Many parents, particularly mothers, take a career break to raise young children in their first years and often up to school age. It’s not like pressing the pause button and resuming play where you left it. Taking an extended break comes with significant costs, some less obvious than others.

1. Lost Income

On the obvious side, you lose out on the income from those years spent outside the workforce.

Imagine a family where both partners work, and upon having their first child, the mother decides to take a career break. They have a second child three years later, and the mom decides to stay at home until the youngest starts kindergarten at age 5.

That’s eight years of lost income. At a median full-time salary of $52,312 calculated by BLS, that comes to $419,496 in lost wages, not including wage growth over the next eight years.

This says nothing of lost retirement benefits, such as 401(k) matching, or lost returns on your own contributions to investments you could have made with that extra income. Compounded over the next 30 years, those lost returns can amount to millions of dollars.

2. Lost Career Momentum & Potential

Beyond the lost years of income, becoming a stay-at-home parent can stunt your career potential.

By the time you’re ready to reenter the workforce, you’ve fallen vastly behind your colleagues who have had many years to climb the corporate ladder. They’ve been advancing and winning promotions, while you’d be lucky to reenter your industry at the same level where you left.

The opportunity cost doesn’t end there, either. In today’s world of disruption and fast-paced change, eight years of falling out of touch with industry trends, best practices, and technological innovations puts you at a deep disadvantage compared to people still in the workforce and up to speed.

The bottom line: parents who take a break of several years from their career may reenter the workforce at a lower level than they left, and advance less over the remainder of their career. While there’s surprisingly little research on this effect, one study by Adzuna found that Brits who took a five-year career break took an average annual salary loss of £9,660 (about $12,500).

3. Less Time for Side Hustles

Even among parents who don’t take a career break, they simply don’t have the same free time to build extra income through a side hustle.

Historically, I spent much of my Saturdays working on either my business or writing. When my daughter was born, that came to an abrupt end, first because I was so sleep-deprived and later because my wife wouldn’t hear of it.

My father told me growing up that the 40-hour workweek was a baseline for survival, and it’s what you do outside those hours that determines your success, particularly in your 20s and 30s.

Although I believe in creating passive income streams and pursuing financial independence, you need to save a lot of money in the beginning to build momentum. That comes from a high savings rate and a high income, which often requires side gigs.

It’s not so easy to run a business on the side of your full-time job when you have young children.

4. Higher Housing Costs

A family of two can share a one-bedroom apartment. A family of three, four, or five? Not so comfortably.

At the time of this writing, Apartment Guide lists the average one-bedroom apartment rent at $1,621, compared to the average two-bedroom apartment rent of $1,878. That’s a difference of $257 per month, or $3,084 per year, just to add one more bedroom.

Larger homes cost more money, whether you rent or buy. And with the extra square footage comes higher utility costs to light, heat, cool, and power the property and everything in it.

They also require more maintenance for homeowners. The larger the roof, the more square footage there is to spring a leak. The larger the lawn and grounds, the more time and/or money they cost to maintain. And so on.

Expect to pay thousands of dollars more each year for a home that can accommodate your children, not just you and your spouse.

5. Transportation Costs

The same logic applies to transportation.

According to Kelley Blue Book, the average cost to buy a new compact car is around $20,000. The cost to buy a midsize SUV? A hefty $33,000, representing a 65% increase in cost.

As with housing, the difference in costs doesn’t end at the sticker price. It costs more to insure and fuel a beastly SUV than an efficient compact. When your kids reach their teenage years and start driving, they’ll need car insurance, which many parents pick up.

(Personally, I had to pay for my own as a teenager, and I recommend you do the same with your kids to give them practice earning and budgeting for real world expenses. But I digress.)

Some parents even go so far as to give their teenage kids a car, whether a hand-me-down or buying it for them as a gift.

Again, these costs remain voluntary. But it’s harder to drive your kids, their friends, and their gear to hockey practice in a sporty compact than in a minivan or SUV.

6. Medical Costs

People of all ages need medical care. And in the United States, medical care is expensive, no matter how you approach it.

Higher Health Insurance Premiums

Adding more people to your health insurance plan adds to your monthly premium. Period.

Well, not quite period. Some insurers, like Blue Cross Blue Shield, charge for each additional child up to the first three, then stop charging extra and only charge for the three oldest under the age of 21. Regardless, expect to pay more for family health insurance when you have children than you’d pay as a couple.

You may also decide you need more coverage as a family with kids than you did as a couple. For example, you may opt for dental coverage, or more inclusions, or a lower yearly ceiling on out-of-pocket expenses.

Higher Out-of-Pocket Expenses

Kids get into trouble, break their arms playing soccer, step on rusty nails while running around the neighborhood barefoot. And before they do that, babies require plenty of checkups and medical care of their own.

Every time they visit a doctor, need a prescription filled, or look cross-eyed at the health care system, you can expect to get hit with an out-of-pocket bill. Few health insurance plans cover 100% of all medical expenses with no deductible, and those few charge outrageous premiums.

And kids come with other medical costs. If you don’t want your kids to have crooked teeth, suddenly you find yourself with orthodontist bills. Eye exams, contact lenses, glasses — the list goes on.

Your kids will need plenty of medical care between birth and when they enter the workforce, and you’ll be on the hook for every penny.

7. Lessons, Tutoring, and Other Extracurriculars

If your child has dyslexia, they may need special tutoring to help them learn how to read. Many children need speech therapy as young kids. Many others require academic tutoring at some point or another.

If your kids want to learn an instrument, dive deeper into a sport, or pick up just about any hobby, they’ll need lessons.

Parents always forget to budget for these sorts of expenses until they strike, but kids — and just as often their parents — may want or need more than what resources their school offers for free. And when it happens, you need to be prepared to open your wallet.

8. Baby Paraphernalia

I was shocked and appalled at the amount of baby paraphernalia that flooded our apartment when we had a baby.

At every turn, I fought my wife to stop buying so much stuff. And at every turn, I lost the battle. She insisted on buying every gadget, every “cute” piece of baby clothing, every piece of nursery furniture she could get her hands on. From infrared baby monitors to smart chips that attach to diapers to track vital signs, we have it all.

As a minimalist, it drives me insane. Like so many middle-class parents, we have far more baby items than we need. Eventually, I stopped tallying the cost because it was pushing my cortisol levels through the roof.

You may consider yourself a reasonable human being, vigilant against unnecessary spending. But new parents get both anxious and excited — and their response to both is usually to buy more stuff. When you or your spouse gets pregnant, budget extra for spousal splurges when you try to predict how much it costs to have a baby.

9. Toys and Gifts

Again, parents all too often go wild buying gifts, toys, and unnecessary clothes, all in the name of spoiling their children.

It’s so insidious that many parents go into debt each holiday season. Between gifts, swag, and travel, the average American family spends $1,050 at the holidays according to a 2019 National Retail Federation study reported by USA Today.

You can and should fight the urge. But parents overspend on gifts and toys all the time, so it bears including here.

10. Electronics

Increasingly, kids need electronics for schoolwork, not just as frivolous gifts. In the era of COVID-19, they’ve become mandatory learning tools.

Laptops and tablets aren’t cheap though, and they come with notoriously short lifespans as they slip into obsolescence after a few short years. Between the time a child is old enough to use one and the time they move out and pay their own bills, they’ll likely go through dozens of devices between phones, tablets, laptops, and gadgets that haven’t been invented yet but will be all the rage 15 years from now.

Added together, that comes to tens of thousands of dollars.

11. Travel Costs

My wife and I once looked up the cheapest flights for the following week from our then home. We booked flights to Bulgaria for $160 round trip per person and spent only a few hundred dollars over the entire next week.

That doesn’t happen when you have kids, for several reasons.

First, you can’t just up and go during the travel offseason when you feel like it. Your kids have school, so you have to travel when everyone else and their mother travels: during school holidays. Which means always traveling during the expensive high season.

Second, you have to pay for more, well, everything. More airline tickets. More hotel rooms, or a larger home on Airbnb. And then come the meals, entertainment, entrance passes, and so forth. All of it costs more money.

When you travel with an infant, you can avoid many of those costs. But they don’t stay infants very long, and soon you find yourself traveling with teenagers who insist on doing the exact opposite of what you want to do. So you end up paying to do both.

And good luck doing low-key travel like backpacking or hiking trips with social media-addicted kids and teens.

If you really want to travel the way you used to with your spouse, you end up either having to hire a nanny or ship your kids off to summer camp — both of which cost an arm and a leg in themselves.

12. Life Insurance

Many couples can responsibly dodge life insurance, provided they both work. If the worst happens, the surviving spouse can still pay their bills, albeit with the possible need to downsize.

Add children to the mix, however, and you have more mouths to feed — plus all the other expenses outlined above. Losing one spouse, particularly a primary breadwinner, could tip the family into poverty or at the very least require a massive, painful change in lifestyle.

Having children doesn’t necessarily require you to buy life insurance. I don’t have it, as one of the many side benefits of the FIRE lifestyle. But when you have children, you need to plan for contingencies like losing a spouse, and making sure your family can survive without them.

Often that means a life insurance policy, and even when it doesn’t, you still need a plan in place.


Final Word

Having children is not all financial doom and gloom. Yes, some expenses remain unavoidable, no matter how frugally you live. But many of the expenses above represent average expenses among parents with little financial literacy. You can minimize many of them with a little more awareness, and avoid others entirely.

The costs of raising children also operate on an economy of scale. While you and your spouse don’t want to share a bedroom with your child after the first few months, you can put two children in the same second bedroom, for example. Younger children can benefit from hand-me-downs such as cribs, strollers, and clothes. And once you bite the bullet to buy a minivan, having a third child doesn’t change your transportation needs any further.

It doesn’t have to cost $745,634 to raise a child. But it certainly can if you’re not careful.

Source: moneycrashers.com

In the Market? Here’s What You Should Know About Contingencies

Home contingencies are aspects of home purchase contracts that protect buyers or sellers by establishing conditions that must be met before the purchase can be completed. There are a variety of contingencies that can be included in a contract; some required by third parties, and others potentially created by the buyer. While sellers in the current market prefer to have little to no contingencies, the vast majority of purchase contracts do include them, so here’s a primer to help you navigate any that come your way!

Financing Contingency

The most common type of contingency in a real estate contract is the financing contingency. While the number of homes that sold for cash more than doubled over the last 10 years, the majority of home purchases — 87% of them, in fact— are still financed through mortgage loans.

Why is this important? Because most real estate contracts provide a contingency clause that states the contract is binding only if the buyer is approved for the loan. If a contract is written as cash, in most cases, the financing contingency is removed.

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Why Does The Financing Contingency Exist?

This contingency exists to protect the buyer. If a buyer submits a winning offer, but can’t get approved for a loan to follow through with the purchase, this clause can protect the buyer from potential legal or financial ramifications.

Tip: Homeowners can, and should, request to see a buyer’s prequalification letter before accepting their offer.

Home Sale Contingency

For many repeat homebuyers, they must sell a property in order to afford a new home. Whether they’re relocating for work, moving to a larger home, or moving to a more rural area, 38% of home buyers in a recent survey reported using funds from a previous home to purchase a new one. This is where a home sale contingency comes into play; this clause states that the buyer must first sell their current home before they can proceed with purchasing a new one.

Why Does This Contingency Exist?

This is another contingency that exists to protect the buyer. If their current home sale doesn’t close, this clause can protect the buyer from being forced to purchase the new home. In other words, they can back out of the new home contract without consequence. Keep in mind that in a seller’s market, this type of contingency offer is less desirable to sellers; in fact,  they may rule out your offer completely if this is included.

TIP: In many situations, homeowners can negotiate escape clauses for the home sale which would allow them to solicit other offers and potentially bump the current buyer out of the picture.

Home Inspection Contingency

Not only is it common, it’s also wise to include a home inspection contingency in any offer. Whether it’s a new home or an existing home, there is no such thing as a flawless house. Home inspections can uncover hidden problems, detect deferred maintenance issues that may be costly down the road, or make the home less desirable to purchase completely. A home inspection contingency essentially states that the purchase of a home is dependent on the results from the home inspection.

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Why Does This Contingency Exist?

Whether it’s a roof in need of replacement or an unsafe fireplace, homebuyers need to know the maintenance and safety issues of the properties they’re interested in purchasing. If a home inspection report reveals significant (or scary!) findings, this protects the buyer from the financial burden that repairs would require. This is why agents will tell you it’s never a good idea for a home to be purchased without a home inspection contingency.

TIP: The findings from the report can usually be used to negotiate repairs or financial concessions from the seller.

Sight-Unseen Contingency

Especially during sellers markets, it’s not uncommon for a home to have dozens of showings within the first couple of days of listing. This breakneck pace can create a scenario in which homebuyers may not be able to coordinate their schedules to get a timely showing appointment. To help prevent missing out on the chance to buy a home, buyers in this situation will sometimes make offers on the home, sight unseen.

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There’s no sugarcoating it…this is a high-risk strategy with ample opportunity for negative consequences. However, if this strategy is used, many real estate agents will add a sight- unseen contingency to their offer. This contingency states that the offer for purchase is dependent on the buyer’s viewing of, and satisfaction with, the property.

Why Does This Contingency Exist?

In a market with shrinking inventory, desperate buyers want a fighting chance at a hot property; in some cases, that can only exist by submitting an offer before they can see it in person.

TIP: Sight unseen offers are also high risk to the seller. If you include this contingency in your offer, try to keep other seller requests to a minimum. 

Why Contingencies Can Be Positive

In a seller’s market, buyers may feel the pressure to remove as many contingencies as possible in order to compete. But, it’s important to remember that contingencies are actually safeguards in place to prevent buyer remorse, expensive future repairs, or financial calamity. It’s always crucial for buyers to hire a seasoned real estate agent who can advocate for their best interests, negotiate and strategize in safe and competitive ways, and advises them of the risks of each decision.

Looking to Buy? Don’t Go it Alone!

The homebuying process is a complex one, but that doesn’t mean you’re left with all the heavy lifting. Find your dream home and a local agent on Homes.com, then visit our “How to Buy” section for all the step-by-step insights for a smooth process.


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

8 Steps to Prevent a Foreclosure On Your Home

Is Foreclosing on Your Home Looming on the Horizon? Read This First!

No one goes into owning a home with the expectation that they will have their home foreclosed. But as any savvy homeowner understands, sometimes the unexpected just happens in life. Perhaps because of an emergency, a death in the family, or another financial crisis, things begin to go south when you miss payments. Before you know it, foreclosure is looming in the not-too-distant future.

Don’t panic. Dealing with a potential foreclosure is never easy, but it is possible to work your way through the process, and even stop it from happening at all. There are free resources available to help prevent foreclosure, and you can learn more about avoiding foreclosure when you review the following steps. This way, you’ll make more informed decisions, and whatever stage of the foreclosure process you find yourself in, you will be aware of your options.

learning about foreclosureslearning about foreclosures
  1. Understand What Foreclosure Actually Is

Understanding foreclosure is one of the first keys to preventing it from happening. Foreclosure is a legal process in which a lender moves to repossess a home from a borrower following missed mortgage payments. If the home is repossessed, the lender will likely sell the home in order to recover some of the debt.

Foreclosure is a long process that negatively affects the credit of the borrower, but is also undesirable and costly for the lender. This means that it is in the best interest of the lender to work with you to avoid foreclosure.

  1. Identify Which Stage of Foreclosure You Are In

Once you understand the process in more general terms, knowing what stage of foreclosure you’re in can help you to make appropriately informed decisions. With this in mind, there are four stages leading up to a foreclosure that you need to be aware of.

Missed Payments

The first stage is missing payments. For whatever reason, the mortgage bill goes unpaid. As soon as you realize that you cannot make your payment, you should get in touch with your lender. There are many options to changing your lending agreement.

Public Notice

After 3 to 6 months of missed payments, the public notice stage begins. At this point, your lender has filed a document called a Notice of Default (NOD) with the County Recorder’s Office. You should also receive a notice posted to your front door in order to make you aware of the potential foreclosure.

Pre-Foreclosure

After the Notice of Default has been posted, you will enter the pre-foreclosure stage. This notice activates a grace period of anywhere from 30 to 120 days, during which the borrower may pay the outstanding mortgage payments. If these payments are paid in full, the foreclosure is then dismissed.

Auction

Following the grace period, your home may be prepared for auction. Even at this stage, you still have options! Until the house has actually been sold, the borrower has something known as a Right of Redemption. This means that up until the moment at which the house is being sold at auction, the borrower can repay the debts and reclaim their home, thus ending the foreclosure.

If the home goes to auction, whether it is bought or not, it has still technically been foreclosed. In the event that a home is not purchased at auction, it then becomes a bank-owned property.

learning about foreclosureslearning about foreclosures
  1. Register With a Housing Counselor

If you’re still a little unclear about the process of foreclosure, the federal Housing and Urban Department provides free foreclosure prevention counseling. Foreclosure Avoidance Counseling is likely available at a location near you.

The HUD also provides a 24/7 Hotline through the Making Home Affordable program. This number is 1-888-995-HOPE (1-888-995-4673).

Working with a housing counselor can help you to understand your options and communicate better with your lender. By speaking to a counselor, you will gain greater understanding of your personal situation and options. Being better-informed helps you to make the best decisions for your specific situation.

  1. Get In Touch With Your Lender

No matter which stage of foreclosure you find yourself in, it’s always the right time to get in touch with your lender. Foreclosure is a costly process for lenders, so naturally, they prefer to avoid it. Your lender can help you to review potential payment-plan options or non-foreclosure alternatives that benefit you both more than the home actually being foreclosed. Talk to your lender about potential loan modifications, repayment plans, or lowering your interest rate.

  1. Avoid Scams

If you find yourself in the foreclosure process, cost-effective resources are available. Free federal and state government resources are available for foreclosure counseling, so if someone contacts you offering to help you for a fee, you’re wise to be be wary. Many scammers seek to profit from people who are in a desperate situation like this, and can be very convincing. You can find them anywhere, from the Internet to local newspapers, so remember to be vigilant.

Scammers may browse foreclosure notices posted locally and online to personally target borrowers. If someone contacts you directly, don’t accept help without first doing some research.

  1. Review Your Options

Working with your housing counselor and this guide, carefully review your options. Which stage of foreclosure are you in? What is your lender willing to do to help you both? Identify your choices and consider which options are best for you.

If you are in one of the later stages of foreclosure (either pre-foreclosure or leading up to the auction), you may want to consider a short sale. By selling your property for less than the amount of the unpaid mortgage, a short sale occurs. This is beneficial because even though a short sale isn’t good for your credit, it is far less damaging than a foreclosure. In some agreements, the short sale absolves you of the mortgage debt, and allows you to move forward relatively unscathed.

Also, be sure to talk to your counselor about a Deed In Lieu of Foreclosure. This agreement transfers the ownership of the property to the lender, and clears the borrower of mortgage debts.

If you’ve already worked with an MHA counselor and your lender, but you want more guidance, consider looking into state-specific foreclosure counseling.

  1. Assess your Assets

Do you have any assets that you can liquidate, like antiques, a second car, or an expensive stereo system? If anyone in your family can take a second job, you might consider this as a viable option. Even if the incoming cash from these assets may not be enough to make the full mortgage payments, it can still help you to avoid getting further behind. Plus, if your lender sees your efforts, they may be more likely to help you by adjusting the mortgage or working to develop a payment plan.

learning about foreclosureslearning about foreclosures
  1. Consider Filing for Bankruptcy

It’s a big decision and one that should definitely be discussed with your housing counselor, but filing for bankruptcy can be an option. This tactic comes in the stage leading up to auction, and acts as a hard break, because filing for bankruptcy temporarily halts the foreclosure process.

If you file for bankruptcy, your creditors must stop collection efforts. Because foreclosure is a collection effort, the foreclosure is technically stopped. However, bankruptcy does not dissolve the debt; it simply extends the collection period.

Filing for bankruptcy has other implications and is a serious decision for anyone. Talk to your housing counselor about whether or not filing for bankruptcy might be the right option for you.

You Have Options to Help You Avoid Foreclosure

Life sometimes throws curveballs, and you can’t always prepare for the unexpected when you’re a homeowner. If you find yourself headed for foreclosure, don’t panic. Don’t avoid the issue, and don’t go at it alone. By educating yourself on the support options available to you, you can make the best possible decisions to help prevent foreclosure.


Carson is a real estate agent based out of Phoenix, Arizona. Carson loves data and market research, and how readily available it is in today’s world. He is passionate about interpreting these insights to help his clients find and buy their perfect home. Carson got into the real estate industry because he loves the feeling of handing over the keys to a new home to happy clients. In his free time, he works on his backyard bonsai garden and spends time with his wife, Julia.

Source: homes.com

How Being A Veteran Can Help in The Home Buying Process

There are currently 18.2 million veterans in the US and due to their selfless service to our country, there are many benefits designated for veterans. One of the highly popular benefits is a VA Home Loan which is designed to assist veterans with the home buying process. Purchasing a home is a large expense, and the down payment is often one of the biggest hurdles. If you are a veteran, it’s important to fully understand the benefits available to you as you begin the homebuying process.

No Money Down

One of the most appealing benefits of a VA Home Loan is that veterans can avoid any down payment when purchasing a home.  Nick Smallwood, a Sergeant in the 1/142 Field Artillery Brigade of the Arkansas National Guard and Branch Manager with Hancock Mortgage, says “The VA loan (depending on remaining eligibility) allows a qualified Veteran or currently serving service member to buy a home for zero down up to the county loan limit.” Regardless of the size or location of the home, veterans can avoid paying even a penny in a down payment which helps make home ownership easier for the 18.2 million veterans.

Avoid PMI

In addition to avoiding a down payment, another benefit of VA loans is no private mortgage insurance. PMI is typically required when a homeowner is putting less than 20% down on a loan. While veterans are putting less than the standard 20% down, VA loans eliminate the PMI, an additional monthly charge. By avoiding PMI, veterans can enjoy a more affordable monthly mortgage amount.

What You Need to Know About VA Loans

Most banks and lenders offer VA loans, so finding a qualified lender is not a difficult process. However, before you pick your lender, it’s important to know what questions to ask of your lender. According to Mr. Smallwood with Hancock Mortgage, borrowers should inquire about the following items:

  • VA doesn’t have a minimum credit score requirement. Instead, lenders set minimum credit scores. Ask your lender what their minimum credit score requirement is for VA loans.
  • There are specific requirements for VA home loans. Find a lender that knows how to read and interpret the VA Handbook 26-7 to ensure the property and loan meet the requirements.
  • Borrowers are required to obtain a Certificate of Eligibility. It is crucial that the lender or Veteran/Service member get the Certificate of Eligibility (COE) early in the process.
  • It’s important that the lender is aware of the duty status of the individual. Depending on whether you are still serving or discharged, will depend on what type of documents you will need.
  • Not all veterans are eligible for VA loans. Unfortunately, not all Veterans are eligible for the VA loan. Eligibility depends on time in service, and type of character at discharge (honorable, general, other than honorable, and dishonorable). Active duty, Reservist, And National Guard members could be eligible.
  • VA loans are not just a one-time benefit for veterans. Instead, you can use the VA loan over and over again, as long as you have enough entitlement. 
  • You can begin the VA loan process and home search on Homes.com.

Inquire About Other Veteran Benefits

There are many steps in the home buying process, and while veterans utilizing a VA loan can avoid paying a down payment or PMI, there are still other expenses. For example, home inspections can be a few hundred dollars or more. It’s important to ask the home inspector if they offer any military discounts. In addition, some moving companies offer military discounts as well.


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com