Thursday, December 1, 2011
Obama’s Student Debt Relief Plan,
First-Time Homebuyer Mistakes,
Congratulations to This Month's Winner,
Major Mistakes of Landlords,
Connect with Orion
Obama’s Student Debt Relief Plan
At the end of October, President Barack Obama announced a plan that has the potential to provide relief for millions of people who struggle with student loan repayment. While the President agrees that college is extremely important, he also understands that the cost of getting an education has become astronomical. He stressed that his plan will not only help those with student loan debt, but also the nation, because the money saved on monthly loans could be put towards the purchase of a home or other potential economy boosting investments.
Currently student loans are the number two source of household debt. Obama’s plan will speed up the measure passed by Congress that reduces the maximum required payment on student loans from 15% of discretionary income annually to 10%. This measure was scheduled to go into effect in 2014, but Obama’s plan will push it into effect in 2012. Additionally the remaining debt would be forgiven after 20 years instead of 25. As many as 1.6 million borrowers could be affected.
In addition, the plan will also allow those with a loan from the Federal Family Education Loan Program and a loan from the government to consolidate those loans into one payment. This would carry a half percentage point lower interest rate and could affect 5.8 million borrowers. The plan is said to carry no additional cost to taxpayers.
First-Time Homebuyer Mistakes
Buying a home can be very daunting to first-time homebuyers. Many first-timers don’t know what to expect and, according to realtors, can make many costly mistakes if not guided properly through the purchase decision. The ultimate goal is to have a home you love at a price you can afford. Realtors advise the following tips:
1. Know what you can afford to pay. What you are comfortable paying for your mortgage each month and what the bank says can be two different things. Don’t look outside your own personal mortgage range, even if the bank says you can afford it. You know your budget; stick to it!
2. Don’t skip the mortgage pre-qualification process. Don’t make an offer on a home without being pre-qualified. You are wasting the owner’s time and your own.
3. Don’t be too picky. You need to remember not only what you can afford but also the quality of the house. Remember you want a sturdy house with good resell potential. Ugly wallpaper can be torn down, and crown molding can be added later.
4. Compromise, but not too much. Remember that unless you have unlimited financial resources, you will have to compromise. But don’t sacrifice things you know you will need. If you are planning on having a large family, a two bedroom home won’t do. Hold out for that three or four bedroom home in your price range, and make compromises on things such as granite counter tops that you can add later.
5. You must have an inspection! Knowing what shape your home is in before you purchase is critical in avoiding costly repairs.
6. Have an agent. Not having an agent or using a seller’s agent can be detrimental. Find an agent you trust with good references who will work for your best interest.
7. Taxes. Don’t forget to ask about property taxes. Some cities are notorious for high tax rates.
Following these simple tips can help any first-time homebuyer save money and avoid financial headaches in the future. A general rule is when in doubt, opt out!
Congratulations to This Month's Winner
Major Mistakes of Landlords
Recently, the Obama administration asked for proposals on how foreclosed homes can be converted into rental properties in order to stave off some of the huge inventories. While much is left to be determined, many people who are still financially sound are wondering if investing in a rental property would make sense.
Surprisingly, rental properties can yield big returns in today’s economy, especially if done properly. According to an article on www.MSN.com, “6 Mistakes Landlords Make”, by Karen Blumenthal of the Wall Street Journal, it was common not so long ago for investors to expect rents that were 1% of the purchase price of a home. Now investors are getting as much as 2% of the purchase price for rent each month. It is important to remember, however, that after expenses returns can be much less.
Here are some important things that many landlords forget during the purchase or management of a rental property.
1. Cheap deals aren’t necessarily the best ones. If a home is a great deal, but isn’t in a good school system or a nice area, chances are you aren’t going to attract good renters, if any at all.
2. Forgetting about the extra expenses is something that many landlords don’t consider until they are in the middle of multiple fixes. Underestimating the cost of repairs and/or replacement of major appliances can really hurt a landlord. Carpet should be replaced every five years. Walls should be repainted after every tenant leaves. The home should be professionally cleaned. Landscaping can become quite expensive, as can painting a house. These things cannot be overlooked. Most successful landlords have set aside at least six months of rent for unexpected and planned expenses.
3. Assuming a tenant will act like the landlord can truly be a problem. Some renters will want things taken care of that perhaps a landlord would not mind. For example, maybe the chipping paint on the back window of the house isn’t a big deal for the landlord, but the tenant may feel otherwise.
4. Assuming that the rent will always be paid is a critical mistake that landlords make. Tenants can lose jobs, stop paying rent, and move out (taking with them what they like) and many other scenarios. Potential renters should be thoroughly screened including references from previous landlords they have rented from.
5. Landlords should not forget to factor in closing costs of 3% to 6%, maintenance costs, and holding costs.
All of these things can have a big impact on the profitability of a property. Being a landlord isn’t as easy as it sounds. Potential landlords should expect a lot of work if they intend to get a return on their investment.
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