Guest Post: Scott Mathew - Securing a second mortgage loan post bankruptcy – What are my prospects?

Scott Mathew operates several financial websites to help improve the knowledge and financial stability of the general public. Some of his work can be found at the following websites:

http://www.newwealthcreationblog.com

http://blog.wiserwallet.com

http://www.moneymindblog.com

So without further ado:

Securing a second mortgage loan post bankruptcy – What are my prospects?

Are you a struggling homeowner who has gone through a messy bankruptcy and is also stuck in a cycle of rent and release? If answered yes, you must be dealing with the issues of financing your home and dealing with the band of creditors and lenders who are questioning about your bankruptcy status on your credit report. Well, getting a mortgage loan after bankruptcy is certainly a tough process as it tanks your credit score to a large extent, but it’s not impossible. A second mortgage loan is a home equity loan that is lent on the basis of the equity that you’ve tapped in your home. This is a secured loan and this means that the lender will foreclose your home if you’re unable to repay the loan on time. Have a look at the steps that you must take if you want to secure a second mortgage loan post-bankruptcy.

1. Pull out copies of your credit report: The first step that you must take before applying for a home equity loan is to pull out a free copy of your credit report so that you get to know what the credit bureaus have to say about you and what your credit score right now is. You need to make sure that all the debts that are included in bankruptcy are displayed in your report or else this will lower your DTI (debt-to-income) ratio. Take the needed steps to remove any erroneous information on your credit report so that you can boost the score to some extent.

2. Gather as much paperwork as you can: You must gather all kinds of paperwork that will prove that you’ve paid off all your bills on time since you’ve filed bankruptcy. This paperwork may include your recent credit card statements, utility bill payments, auto loan statements and other such papers. Make sure that no document shows late payment as this will lessen the chance of getting a home equity loan.

3. Shop around different mortgage lenders: You need to contact multiple mortgage lenders and tell them about your present financial situation. You have to tell them that you’ve recently filed bankruptcy and hearing this some mortgage lenders will agree to work with you and some may not. The longer you wait after bankruptcy, the longer it may take to find out a worthy mortgage lender. If you had filed Chapter 7 bankruptcy, it will stay on your credit report for 10 years and a Chapter 13 will disappear by 7 years.

4. Determine the equity in your home: Go for an appraisal and determine the equity that you have in your home so that you’re sure about the exact amount that you’re going to borrow from your lender. You must also factor closing costs as they often come in with a home equity loan.

5. Fill out the paperwork and send them to your lender: The next thing that you need to do is to fill out the paperwork and send the last 3 month’s copies of your paychecks, the recent federal income tax return and the checking account statements in order to analyze your gross monthly income.

After you’re done with all the above mentioned steps, you have to sign the closing documents so that officially your mortgage lender approves the application. Make sure you repay the second mortgage loan on time to avoid any kind of future financial discrepancies.

Making the Most of your W-4

A commonly misunderstood practice is the filling out of your W-4 for your employer. Some people would like to have more money withheld from their paycheck so they can get a "bigger" return at the end of the year. In actuality, the ideal situation is to take out exactly enough to cover your taxes and not a cent more. Having more money withheld is essentially giving the government an interest-free loan.

With that in mind, how do you know how many personal allowances to put on your W-4? I have looked into several calculators for this purpose, and I will share with you the one that I found most accurate. It takes some time to do, but is definitely worth it!

Visit the IRS website to calculate how many personal allowances to put on your W-4. CLICK HERE Then click the link at the bottom of the page that says "continue to withholding calculator."

Let me know how it goes for you!

9 Years Or 41?

I came across this little fact today:

If you contribute the same amount of money into an account every month for 9 years, and then nothing more . . .

. . . you would have the same amount of money if you contributed nothing for 9 years and then the same amount of money for the next 41 years.

The power of compound interest!

So, start saving as soon as you can! Every month you wait can cost you money!

Financial Calculators

I came across the best collection of financial calculators here.

It not only answers specific questions like "How soon could I pay off all of my debts," but it also gives you graphs and additional information. Have exploring that today as you plan your financial future!

Store Credit Cards

You may have experienced this scenario:

You: Thanks for ringing up my items today!

Cashier: No problem! That’s why they pay me the big bucks.

You: Haha

Cashier: By the way, you can save 20% on your purchase today if you sign up for our store credit card!

You: Goodie goodie! I have been to 46 stores today and they ALL offered me this same thing! And I signed up for ALL of them! Now I have 46 credit cards-one for each of my favorite stores (including Van Gogh’s Ear)!

Well, maybe not this exact scenario.

How do you know which cards to get and which to avoid, or should you avoid them all together?

Do Your Research

I found the following website helpful in finding information about any store credit card you can imagine:

http://www.bessed.com/departmentstorecreditcards/

There you will find links to the “Top 46” department store cards. A brief description of each is given. Now to answer a specific question posed by everyone’s favorite Bolivian Blogger:

“Can you compare a couple different store credit cards? For instance, we recently got a Nordstrom credit card (because [Mr. “Everyone’s Favorite Bolivian Blogger”] buys clothes there) and we are considering getting a Costco Am Ex card but I am wondering what the benefits and costs are to signing up for cards like that. Also, can you look into Banana Republic cards because . . . a friend of mine is wondering if she made a mistake. Okay thanks stefuinvesting. Happy transactions!”

Thanks for your question!

Nordstrom (Ranked #13 on the above-mentioned website)

(Good)

– This card offers you 2 “reward points” for every dollar spent at Nordstrom.

- The Visa Signature and Visa Signature cards also offer 1 “reward point” for every dollar spent anywhere else.

- 2,000 “reward points” means a $20 Nordstrom gift card. (Depending on where you racked up your points, that is about a 2% return on your spending).

- No annual fee

(Bad)

- If you only have the regular Nordstrom Retail card, you get no additional points for using it outside of the Nordstrom stores. You’ll have to spend $1,000 at Nordstrom to get your $20 (oh, and you only have 3 years before those points expire).

- Minimum APR of 18.9%

Costco AMEX (Ranked #3)

(Good)

- 3% cash back for money spent on gasoline and restaurant purchases

- 2% cash back for money spent on “travel.”

- 1% cash back on everything else!

- No limit to the cash back earned

- Cash back is actually CASH!

- No late fee if balance is under $250.

- No annual fee

(Bad)

- Although there is no annual fee, you must pay for a Costco membership.

- 15.24% APR. (Plus a 0% APR for the first 6 months).

Banana Republic (Ranked #42)

(Good)

- 5 Reward points for every $1 spent at Banana Republic, Gap, Old Navy, Piperlime, and Athleta.

- 1 Reward point for every $1 spent everywhere else.

- 1,000 points gets you a $10 gift card. (If you got all those points at one of the BR stores, that’s a 5% return on your spending).

(Bad)

- Between 17% - 23% APR depending on the type of card (Visa vs. “Banana Republic Credit Card.”)

- Late fee is $15 even if you only have a $15 balance.

Hope that all helps.

In General

One more comment about getting credit cards. A lot of people aren’t sure how just having a credit card will affect their credit score (even if you never use it). Here’s a hint: when checking your credit, creditors look at all of your credit cards and pretend that they are completely maxed out to their limits. So even if all of your cards are empty, having too many can still hurt. Specifically, creditors don’t want your “debt-to-income” ratio to be over around 37%. Take all of your monthly debt obligations (including rent) and divide by your monthly income. To get the same number that the creditors will look at, make sure to estimate what your monthly credit card payments would be IF you were pretending that they were maxed out.

How to Pick a Stock: Lesson 1

First Things First: Know your Risk Tolerance

How does your stomach handle the possibility of losing your entire investment?

This question is hard to really answer. The trouble is: quantifying risk can be tricky. I found this little quiz that gives you a general idea of your risk appetite:

http://moneycentral.msn.com/investor/calcs/n_riskq/main.asp

It will give you a score for your Risk Capacity and your Risk Tolerance.

Risk Capacity refers to the amount of risk you should be willing to take given your current situation in life.

Risk Tolerance refers to the amount of risk you are willing to take given your personality.

Go take the quiz and we’ll see you next time!

Getting Involved in Multi-level Marketing Companies

A multi-level marketing company is a company which uses “distributors” or “salesmen” to find customers and other distributors which get put at the bottom of a chain or pyramid. Usually in companies like this, only those few at the very top are able to make much money in the company.

Some people equate multi-level marketing companies with pyramid schemes. That isn’t necessarily true. Here are two things to find out before becoming involved in any “multi-level” marketing company.

1- Does the company make at least 70% of its sales to people that are NOT going to become "distributors"?

2- If they have promised huge monetary returns to you, did they disclose the actual average earnings of ALL distributors as well as the percentage of distributors that HAVE earned the promised returns?

All multi-level marketing organizations are legally required to disclose this information.

If they don't make at least 70% of sales to non-distributors, then it is most assuredly a scam. And if they can't promise reasonable compensation for you (rule 2), then I wouldn't get involved if I were you.