Fed meeting April 30, 2008

Fed cuts key rate by quarter-point, says economy remains weak

WASHINGTON (AP) — The Federal Reserve cut a key interest rate by a quarter-point Wednesday, a smaller move than the aggressive easing it undertook earlier this year. There were signs the Fed may believe it has done enough to prevent a deep recession.

The Fed action, after a two-day meeting, pushed the federal funds rate down to 2 percent, the lowest level since late 2004. It marked the seventh rate cut by the central bank since it began easing credit conditions last September to combat the growing threat of a recession brought on by a severe housing slump and credit crisis.

Commercial banks immediately announced that they were cutting their prime lending rate to 5 percent. That will mean cheaper credit for the millions of business and consumer loans tied to the prime.

The Fed move, which was in line with expectations, sent the Dow Jones industrial average momentarily soaring above 13,000 for the first time since January. But the Dow quickly gave up those gains as traders began to wonder whether the Fed was closing the door to further rate cuts.

Many private economists said they believed a Fed statement was signaling that the central bank may be through cutting rates unless the economy weakens much more than now expected.

“They are saying that unless we are surprised by further weakness, this is it,” said David Jones, chief economist at DMJ Advisors.

Sung Won Sohn, an economics professor at California State University, said, “The Fed is telling us that this easing cycle is coming to an end fairly soon.”

Analysts said the central bank seemed to be balanced between worries about economic weakness and concerns that inflation pressures are increasing. The Fed noted that it had done quite a bit already.

“The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity,” Federal Reserve Chairman Ben Bernanke and his colleagues said in their statement.

There were two dissents from the move. Richard Fisher, president of the Dallas regional Fed bank, and Charles Plosser, head of the Philadelphia Fed, argued for no change in rates. Both officials had also dissented at the March 18 meeting when the Fed cut rates by three-fourths point.

The central bank is walking a tightrope, trying to jump-start economic growth while also confronting the risk that if it overdoes the credit easing it could make inflation worse down the road.

Many economists believe the country has fallen into a recession. However, the government reported Wednesday that the overall economy, as measured by the gross domestic product, managed to eke out a 0.6 percent growth rate in the January-March quarter, barely in positive territory.

On the overall economy, the Fed’s statement said, “Financial markets remain under considerable stress and tight credit conditions and deepening housing contractions are likely to weigh on economic growth over the next few quarters.”

While officials said they expected inflation to moderate in coming months, they also said “uncertainty about the inflation outlook remains high.”

The quarter-point move followed a string of more aggressive rate cuts ranging from a half-point to three-fourths-point in the first three months of this year as the central bank was battling to stabilize financial markets roiled by multibillion-dollar losses caused by rising mortgage defaults.

That turmoil claimed its biggest victim on March 16 when Bear Stearns came to the brink of bankruptcy and the Fed stepped forward with a $30 billion line of credit to facilitate a sale of the nation’s fifth largest investment bank to JP Morgan Chase.

Credit markets, while not back to normal, have stabilized and many analysts believe the worst may be over – although they caution that this forecast could prove too optimistic if the housing slump deepens, causing even more mortgage defaults than now expected.

Before the Fed made its first rate cut in September, the funds rate had stood at 5.25 percent.

By MARTIN CRUTSINGER

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AP Economics Writer
source: ap.org

Fed poised to cut rates; may take a break after that

WASHINGTON (AP) — Battling risky economic crosscurrents, the Federal Reserve is ready to bump down a key interest rate again to brace the wobbly economy. That rate cut could turn out to be the last one for a while as zooming energy and food prices heighten inflation concerns.

Fed Chairman Ben Bernanke and his colleagues are walking a tightrope. They are trying to shore up economic growth and at the same time they are mindful that they can’t let inflation get out of hand. It’s a bit of an economic dilemma: The very rate reductions the Fed depends on to energize the economy can also sow the seeds of inflation down the road.

“It’s a very challenging environment,” said John Silvia, chief economist at Wachovia.

In a nod to those conflicting forces, the Fed probably will opt for a moderate-sized rate reduction of one-quarter percentage point this week, Silvia and other economists predict.

At its previous meeting on March 18, the Fed slashed rates by a hefty three-quarters point. The action, however, drew opposition from two Fed members who favored a smaller reduction because of concerns about a potential inflation flare-up. It was a crack in the mostly unified front the Fed often shows the public.

The Fed, which has been cutting rates since last September, turned more forceful in January and March, when housing, credit and financial problems took a turn for the worse, threatening to plunge the country into a deep recession. The Fed’s rate cuts in January and March alone marked the most aggressive Fed intervention in a quarter-century.

This time around, though, the Fed is likely to go with a smaller rate cut at the end of its two-day meeting on Wednesday.

A quarter-point reduction would drop the Fed’s key rate for influencing national economic activity to 2 percent. This rate, called the federal funds rate, is what banks charge each other on overnight loans and affects a wide range of interest rates charged to people and businesses.

In turn, the prime lending rate for millions of consumers and businesses would fall by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates would be the lowest since late 2004.

Economists think the Fed may be inclined to leave rates at such low levels possibly through the rest of this year and maybe into next year – as long as the country is not hit with another blow to economic growth.

“We are entering the stage where it is time for the Fed to wind down and move to the sidelines,” said Greg McBride, senior financial analyst at Bankrate.com. “A quarter-point reduction is a nice segues to that transition. Short-term interest rates could stay low longer than many currently expect,” he added.

The Fed’s rate cuts – which take months to work their way through the economy and affect activity – along with the government’s $168 billion stimulus package of tax rebates for people and tax breaks for businesses – should help strengthen the economy in the second half of this year, Fed officials said.

It’s the first half of this year where damage from the housing, credit and financial debacles could be the worst. The economy may grow little, if at all, during this period and could actually shrink, Bernanke told Congress earlier this month. A recession, he said, was possible. It was Bernanke’s first public acknowledgment of such a scenario.

A growing number of economists now believe the economy probably will contract in the current April-to-June quarter. Many analysts also now think the economy will manage to eke out a barely noticeable 0.4 percent growth rate during the first three months of this year as opposed to falling into negative territory as some had previously thought. The government reports on the first quarter’s performance on Wednesday – the same day the Fed’s decides its next move on interest rates.

Even if the economy heals in the second half of this year and into 2009, the unemployment rate, now at 5.1 percent, is likely to rise, perhaps reaching close to 6 percent early next year, analysts said. Job losses for the first three months of this year neared the staggering quarter-million mark.

The Fed’s rate cuts ordered thus far would help to cushion the fallout.

On inflation, Bernanke said rising prices are a source of concern and must be monitored closely. Still, he is hopeful inflation will moderate in coming quarters.

Gasoline prices have shot up to record highs in recent days and could hit $4 a gallon this summer. Food prices are up 5.3 percent on an annualized basis in the first three months of this year, outpacing the 3.1 percent rise in overall inflation.

If the Fed does drop its key rate to 2 percent and holds it there for some time, that would still be low enough to provide relief to stressed homeowners facing a rate reset to their adjustable-rate mortgages, McBride said.

Trying to get the economy back to full throttle after its last recession in 2001, the Fed ratcheted down its key rate to 1 percent – the lowest in more than four decades. Then-chairman Alan Greenspan held the rate at that super-low level for a year, before the Fed began to bump it up. That action has since fueled criticism that Greenspan helped to create the very housing boom that has now gone bust, wreaking havoc on the economy. Foreclosures have surged to record highs, financial companies have wracked up multibillion losses and all the fallout has sent the economy reeling.

Even as economists predict the Fed is likely to wind down its rate-cutting campaign this year, they said the Fed would lower rates again if there were worrisome signs that the economy was faltering even more than expected.

“If the news is unremittingly bad, it will go down again. So the Fed has got plenty of ammunition if its needs it. But my guess is this will be about it,” said Bill Cheney, chief economist at John Hancock Financial Services.

Source: ap.org Apr 28, 3:56 AM EDT

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Question: Can I Improve My Credit Score?

Answer: Scoring models such as FICO generally evaluate the following types of information in your credit report and are weighted as suggested by the percent shown:

On Time Payment – 35% Have you paid your bills on time? Payment history typically is a significant factor. Your score will be affected negatively if you have paid bills late, had an account referred to collections, had repossession, or declared bankruptcy.

Amount Owed Versus Capacity – 30% What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit that is likely to have a negative effect on your score. Authorities suggest 30%-60% as desirable by creditors. Maintaining a low balance on multiple cards is better than high balances on one… but don’t run out for more cards to “even out” balances just before applying for a loan.

Length Of Credit History – 15% How long is your credit history? An insufficient credit history may have a negative effect on your score, but that can be offset by other factors, such as timely payments and low balances. If you are going to close an account try to maintain the oldest accounts as age of account matters.

New Credit Accounts – 10% Have you applied for new credit recently? If you have applied for too many new accounts recently or had to many recent inquiries, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “pre-screened” credit offers are not counted.

Types Of Credit In Use – 10% How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies (rather than a bank) may negatively affect your credit score.

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Weekly rate update

WASHINGTON (AP) — Rates on 30-year mortgages topped 6 percent for the first time in six weeks as financial markets grew more worried about rising inflation pressures.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 6.03 percent this week after three straight weeks at 5.88 percent. Rates on 30-year mortgages were last above 6 percent the week of March 16 when they averaged 6.13 percent.

“Average rates on mortgages increased across the board this last week as the most recent economic data raised inflationary concerns in the capital markets,” said Frank Nothaft, Freddie Mac’s chief economist.

Fueling those concerns was a bigger-than-expected 1.1 percent jump in wholesale prices and a renewed surge in energy costs, which have pushed gasoline and crude oil prices to record levels.

The Federal Reserve has been aggressively cutting interest rates to combat an economic slowdown that many economists believe has turned into a recession. However, analysts said that the Fed is likely to scale back its rate cuts to a quarter-point move at next week’s meeting as a way of signaling that it is also concerned about the threat of inflation.

Bill Hampel, chief economist for the Credit Union National Association, said while interest rates rose this week they still remain at historically favorable levels. He said that the bigger problem for the housing industry at the moment is the fact that many lenders have tightened up on credit standards in reaction to rising mortgage defaults, making it harder for prospective buyers to qualify for loans.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose this week to 5.62 percent, up from 5.40 percent last week.

Five-year adjustable-rate mortgages rose to 5.68 percent, up from 5.48 percent last week. One-year adjustable-rate mortgages rose to 5.28 percent compared with 5.10 percent last week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages, the nationwide average fee was 0.3 point while the average fee was 0.5 point for 5-year and one-year mortgages.

A year ago, rates on 30-year mortgages stood at 6.16 percent, 15-year mortgage rates averaged 5.87 percent, five-year adjustable-rate mortgages were 5.88 percent and one-year adjustable-rate mortgages were at 5.43 percent.

Apr 24, 2:53 PM EDT

By MARTIN CRUTSINGER
AP Economics Writer source: ap.org

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Certificates of Deposit: Tips for Savers

Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account with a bank or thrift institution that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $100,000.

Here’s how CDs work: When you purchase a CD, you invest a fixed sum of money for fixed period of time – six months, one year, five years, or more – and, in exchange, the issuing bank pays you interest, typically at regular intervals. When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest. But if you redeem your CD before it matures, you may have to pay an “early withdrawal” penalty or forfeit a portion of the interest you earned.

Although most investors have traditionally purchased CDs through local banks, many brokerage firms now offer CDs. These brokerage firms – known as “deposit brokers” – can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these “brokered CDs” to their customers.

At one time, most CDs paid a fixed interest rate until they reached maturity. But, like many other products in today’s markets, CDs have become more complicated. Investors may now choose among variable rate CDs, long-term CDs, and CDs with special redemption features in the event the owner dies.

Some long-term, high-yield CDs have “call” features, meaning that the issuing bank may choose to terminate – or call – the CD after only one year or some other fixed period of time. Only the issuing bank may call a CD, not the investor. For example, a bank might decide to call its high-yield CDs if interest rates fall. But if you’ve invested in a long-term CD and interest rates subsequently rise, you’ll be locked in at the lower rate.

Before you consider purchasing a CD from your bank or brokerage firm, make sure you fully understand all of its terms. Carefully read the disclosure statements, including any fine print. And don’t be dazzled by high yields. Ask questions – and demand answers – before you invest. These tips can help you assess what features make sense for you:

Find Out When the CD Matures – As simple as this sounds, many investors fail to confirm the maturity dates for their CDs and are later shocked to learn that they’ve tied up their money for five, ten, or even twenty years. Before you purchase a CD, ask to see the maturity date in writing.

For Brokered CDs, Identify the Issuer – Because federal deposit insurance is limited to a total aggregate amount of $100,000 for each depositor in each bank or thrift institution, it is very important that you know which bank or thrift issued your CD. In other words, find out where the deposit broker plans to deposit your money. Also be sure to ask what record-keeping procedures the deposit broker has in place to assure your CD will have federal deposit insurance. For more information about federal deposit insurance, read the FDIC’s publication Your Insured Deposits or call the FDIC’s Central Call Center at (877) 275-3342 or (877) ASK-FDIC. For the hearing impaired call 1-800-925-4618 or 1-703-562-2289 (7:00 am to 7:00 pm Eastern time)

Investigate Any Call Features – Callable CDs give the issuing bank the right to terminate the CD after a set period of time, but they do not give you that same right. If the bank calls or redeems your CD, you should receive the full amount of your original deposit plus any unpaid accrued interest.

Understand the Difference Between Call Features and Maturity – Don’t assume that a “federally insured one-year non-callable” CD matures in one year. If you have any doubt, ask the sales representative at your bank or brokerage firm to explain the CD’s call features and to confirm when it matures.

Confirm the Interest Rate You’ll Receive and How You’ll Be Paid – You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest – for example, monthly or semi-annually. And confirm how you’ll be paid – for example, by check or by an electronic transfer of funds.

Ask Whether the Interest Rate Ever Changes – If you’re considering investing in a variable-rate CD, make sure you understand when and how the rate can change. Some variable-rate CDs feature a “multi-step” or “bonus rate” structure in which interest rates increase or decrease over time according to a pre-set schedule. Other variable-rate CDs pay interest rates that track the performance of a specified market index, such as the S &P 500 or the Dow Jones Industrial Average.

Research Any Penalties for Early Withdrawal – Be sure to find out how much you’ll have to pay if you cash in your CD before maturity.

Ask Whether Your Broker Can Sell Your CD – Some brokered CDs are issued in the name of the “custodian” or deposit brokers. In some cases, the deposit broker may advertise that the CD does not have a prepayment penalty for early withdrawal. In those cases, the deposit broker will instead try to resell the CD for you if you want to redeem it before maturity. If interest rates have fallen since you purchased your CD and demand is high, you may be able to sell the CD for a profit. But if interest rates have risen, there may be less demand for your lower-yielding CD. That means you may have to sell the CD at a discount and lose some of your original deposit .

Find Out About Any Additional Features – For example, some CDs offer a death benefit that allows a CD owner’s heirs to redeem the CD without penalty when the owner dies.

The bottom-line question you should always ask yourself is: Does this investment make sense for me? A high-yield, long-term CD with a maturity date of 15 to 20 years may make sense for many younger investors who want to diversify their financial holdings. But it might not make sense for elderly investors.

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66 WAYS TO SAVE MONEY

For most kinds of purchases, you can get valuable advice and comparisons on the Internet. Ask a librarian or friends which Internet sites they think are helpful, or you can use a search engine like Google or Yahoo. Be aware that information you find is often biased. At many websites, the only products or sellers listed are ones that pay to advertise. Before buying anything on the Internet, check several websites and make sure you deal with reputable dealers.

Airline Fares

1. Compare low-cost carriers with major carriers that fly to your destination. Remember, the best fares may not be out of the airport closest to you.

2. You may save by including a Saturday evening stay-over or by purchasing the ticket at least 14 days in advance. Ask which days of the week and times of the day have the lowest fare.

3. Even if you are using a travel agent, check airline and Internet travel sites, and look for special deals. If you call, always ask for the lowest fare to your destination.

Car Rental

4. Since car rental rates can vary greatly, compare total price (including taxes and surcharge) and take advantage of any special offers and membership discounts.

5. Rental car companies offer various insurance and waiver options. Check with your automobile insurance agent and credit card company in advance to avoid duplicating any coverage you may already have.

New Cars

6. You can save thousands of dollars over the lifetime of a car by selecting a model that combines a low purchase price with low depreciation, financing, insurance, gasoline, maintenance, and repair costs. Ask your local librarian for new car guides that contain this information.

7. Having selected a model and options you are interested in, you can save hundreds of dollars by comparison shopping. Get price quotes from several dealers (over the phone or Internet) and let each know you are contacting the others.

8. Remember there is no “cooling off” period on new car sales. Once you have signed a contract, you are obligated to buy the car.

Used Cars

9. Before buying any used car:

• Compare the seller’s asking price with the average retail price in a “bluebook” or other guide to car prices which can be found at many libraries, banks, and credit unions.
• Have a mechanic you trust check the car, especially if the car is sold “as is.”

10. Consider purchasing a used car from an individual you know and trust. They are more likely than other sellers to charge a lower price and point out any problems with the car.

Auto Leasing

11. Don’t decide to lease a car just because the payments are lower than on a traditional auto loan. The leasing payments are lower because you don’t actually own the car.

12. Leasing a car is very complicated. When shopping, consider the price of the car (known as the capitalized cost), your trade-in allowance, any down payment, monthly payments, various fees (excess mileage, excess “wear and tear,” end-of- lease), and the cost of buying the car at the end of the lease. A valuable source of information about auto leasing can be found in Keys to Vehicle Leasing: A Consumer Guide, which is published by the Federal Reserve Board and Federal Trade Commission.

Gasoline

13. You can save hundreds of dollars a year by comparing prices at different stations, pumping gas yourself, and using the lowest-octane called for in your owner’s manual.

14. You can save up to $100 a year on gas by keeping your engine tuned and your tires inflated to their proper pressure.

Car Repairs

15. Consumers lose billions of dollars each year on unneeded or poorly done car repairs. The most important step that you can take to save money on these repairs is to find a skilled, honest mechanic. Before you need repairs, look for a mechanic who:

• is certified and well established;
• has done good work for someone you know; and
• communicates well about repair options and costs.

Auto Insurance

16. You can save several hundred dollars a year by purchasing auto insurance from a licensed, low-price insurer. Call your state insurance department for a publication showing typical prices charged by different companies. Then call at least four of the lowest-priced, licensed insurers to learn what they would charge you for the same coverage.

17. Talk to your agent or insurer about raising your deductibles on collision and comprehensive coverage to at least $500 or, if you have an old car, dropping this coverage altogether. This can save you hundreds of dollars on insurance premiums.

18. Make certain that your new policy is in effect before dropping your old one.

Homeowner/Renter Insurance

19. You can save several hundred dollars a year on homeowner insurance and up to $50 a year on renter insurance by purchasing insurance from a low-price, licensed insurer. Ask your state insurance department for a publication showing typical prices charged by different licensed companies. Then call at least four of the lowest priced insurers to learn what they would charge you. If such a publication is not available, it is even more important to call at least four insurers for price quotes.

20. Make certain you purchase enough coverage to replace the house and its contents. “Replacement” on the house means rebuilding to its current condition.

21. Make certain your new policy is in effect before dropping your old one.

Life Insurance

22. If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.

23. If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years. Canceling these policies after only a few years can more than double your life insurance costs.

24. Check the National Association of Insurance Commissioners website (www.naic.org/cis) or your local library for information on the financial soundness of insurance companies.

Checking Accounts and Debit Cards

25. You can save more than $100 a year in fees by selecting a free checking account or one with no minimum balance requirement. Request a complete list of fees that are charged on these accounts, including ATM and debit card fees.

26. See if you can get free or lower cost checking through direct deposit or agreeing to ATM only use. Be aware of charges for using an ATM not associated with your financial institution.

Savings Products

27. Before opening a savings account, find out whether the account is insured by the federal government (FDIC for banks or NCUA for credit unions). Financial institutions offer a number of products, such as mutual funds and annuities, which are not insured.

28. Once you select a type of savings account, use the telephone, newspaper, and Internet to compare rates and fees offered by different financial institutions-including those outside your city. These rates can vary a lot and, over time, can significantly affect interest earnings.

29. To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs) or U.S. Savings Bonds (Series I or EE).

Credit Cards

30. To avoid late payment fees and possible interest rate increases on your credit cards, make sure you send in your payment a week to ten days before the statement due date. Late payments on one card can increase fees and interest rates on other cards.

31. You can avoid interest charges, which may be considerable, by paying off your entire bill each month. If you are unable to pay off a large balance, pay as much as you can. Try to shift the remaining balance to a credit card with a lower annual percentage rate (APR). You can find listings of credit card plans, rates, and terms on the Internet, in personal finance magazines, and in newspapers.

32. Be aware that credit cards with rebates, cash back, travel awards, or other perks may carry higher rates or fees.

Auto Loans

33. To save as much as several thousand dollars in finance charges, pay for the car in cash or make a large down payment. Always get the shortest term loan possible as this will lower your interest rate.

34. Make certain to get a rate quote (or pre-approved loan) from your bank or credit union before seeking dealer financing. You can save as much as $1000 in finance charges by shopping for the cheapest loan.

35. Make certain to consider the dollar difference between low-rate financing and a lower sale price. Remember that getting zero or low-rate financing from a dealer may prevent you from getting the rebate.

First Mortgage Loans

36. Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. For each $100,000 you borrow at a 7% annual percentage rate (APR), for example, you will pay over $75,000 less in interest on a 15-year fixed rate mortgage than you would on a 30-year fixed rate mortgage.

37. You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year $100,000 fixed-rate mortgage, just lowering the APR from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan, and paying two points instead of three would save you an additional $1,000.

38. Check the Internet or your local newspaper for mortgage rate surveys, then call several lenders for information about their rates (APRs), points, and fees. If you choose a mortgage broker, make certain to compare their offers with those of direct lenders.

39. Be aware that the interest rate on most adjustable rate mortgages (ARMs) can vary a great deal over the lifetime of the loan. An increase of several percentage points might raise payments by hundreds of dollars a month, so ask the lender what the highest possible monthly payment might be.

Mortgage Refinancing

40. Consider refinancing your mortgage if you can get a rate that is lower than your existing mortgage rate and plan to keep the new mortgage for at least several years. Calculate precisely how much your new mortgage (including points, fees and closing costs) will cost and whether, in the long run, it will cost less than your current mortgage.

Home Equity Loans

41. Be cautious in taking out home equity loans. The loans reduce or may even eliminate the equity that you have built up in your home. (Equity is the cash you would have if you sold your house and paid off your mortgage loans.) If you are unable to make payments on home equity loans, you could lose your home.

42. Compare home equity loans offered by at least four reputable lending institutions. Consider the interest rate on the loan and the annual percentage rate (APR), which includes other costs, such as origination fees, discount points, mortgage insurance, and other fees. Ask if the rate changes, and if so, how it is calculated and how frequently, as this will affect the amount of your monthly payments.

Home Purchase

43. You can often negotiate a lower sale price by employing a buyer broker who works for you, not the seller. If the buyer broker or the broker’s firm also lists properties, there may be a conflict of interest, so ask them to tell you if they are showing you a property that they have listed.

44. Do not purchase any house until it has been examined by a home inspector that you selected.

Renting a Place to Live

45. Do not limit your rental housing search to classified ads or referrals from friends and acquaintances. Select buildings where you would like to live and contact their building manager or owner to see if anything is available.

46. Remember that signing a lease probably obligates you to make all monthly payments for the term of the agreement.

Home Improvement

47. Home repairs often cost thousands of dollars and are the subject of frequent complaints. Select from among several well established, licensed contractors who have submitted written, fixed-price bids for the work.

48. Do not sign any contract that requires full payment before satisfactory completion of the work.

Major Appliances

49. Consult Consumer Reports, available in most public libraries, for information about specific appliance brands and models and how to evaluate them, including energy use. There are often great price and quality differences. Look for the yellow Energy Guide label on products, and especially for products that have earned the government’s ENERGY STAR®, which can save up to 50% in energy use.

50. Once you’ve selected a specific brand and model, check the Internet or yellow pages to learn what stores carry the brand. Call at least four of these stores to compare prices and ask if that’s the lowest price they can offer you. This comparison shopping can save you as much as $100 or more.

Heating and Cooling

51. A home energy audit can identify ways to save up to hundreds of dollars a year on home heating (and air conditioning). Ask your electric or gas utility if they audit homes for free or for a reasonable charge. If they do not, ask them to refer you to a qualified professional.

52. Enrolling in load management programs and off-hour rate programs offered by your electric utility may save you up to $100 a year in electricity costs. Call your electric utility for information about these cost-saving programs.

Telephone Service

53. Once a year, review your phone bills for the previous three months to see what local, local toll, long distance, and international calls you normally make. Call several phone companies which provide service in your area (including wireless and cable), to find the cheapest calling plan that meets your needs. Consider a bundled package that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle.

54. Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don’t need. Each option you drop could save you $40 or more each year.

55. If you make very few toll or long distance calls, avoid calling plans with monthly fees or minimums. Or consider disconnecting the service altogether and use dial around services such as 10-10 numbers or prepaid phone cards for your calls. When shopping for dial around service, look for fees, call minimum, and per minute rates. Treat prepaid cards as cash and find out if there is an expiration date.

56. If you use a cell phone, make sure your calling plan matches the pattern of calls you typically make. Understand peak calling periods, area coverage, roaming, and termination charges. Contracts offered by most carriers will provide you with a trial period of 14 days or more. Use that time to make sure the service provides coverage in all the places you will be using the phone (home, work etc.). Prepaid wireless plans tend to have higher per minute rates and fees but may be a better option if you use the phone only occasionally.

57. Before making calls when away from home, compare per minute rates and surcharges for cell phones, prepaid phone cards, and calling card plans to find how to save the most money.

58. Dial your long distance calls directly. Using an operator to place the call can cost you up to $10 extra. To save money on information calls, look the number up on the Internet, or in the directory.

Food Purchased at Markets

59. You can save hundreds of dollars a year by shopping at lower-priced food stores. Convenience stores often charge the highest price.

60. You will spend less on food if you shop with a list, take advantage of sales, and purchase basic ingredients, rather than pre-packaged components or ready-made items.

61. You can save hundreds of dollars a year by comparing price-per-ounce or other unit prices on shelf labels. Stock up on those items with low per-unit costs.

Prescription Drugs

62. Since brand name drugs are usually much more expensive than their generic equivalents, ask your physician and pharmacist if a less expensive generic or an over the counter alternative is available.

63. Since pharmacies may charge widely different prices for the same medicine, call several. When taking a drug for a long time, also consider calling mail-order pharmacies, which often charge lower prices.

Funeral Arrangements

64. Plan ahead, making your wishes known about your funeral, memorial, or burial arrangements in writing to save your family or estate unnecessary expense.

65. For information about the least costly options, which may save you several thousand dollars, contact a local Funeral Consumer Alliance or memorial society, which are usually listed in the Yellow Pages under funeral services.

66. Before selecting a funeral home, call several and ask for prices of specific goods and services, or visit them to obtain an itemized price list. You are entitled to this information by law.
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66 Ways to Save Money was developed by a working group of representatives from government agencies, consumer groups, business organizations, and educational institutions that sought to develop and publicize money-saving tips. The initiative was managed by the non-profit Consumer Federation of America (CFA).

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Tips for Avoiding Foreclosure

 Are you having trouble keeping up with your mortgage payments? Have you received a notice from your lender asking you to contact them?

• Don’t ignore the letters from your lender
• Contact your lender immediately
• Contact a HUD-approved Housing Counseling Agency
• Toll FREE (800) 569-4287
• TTY (800) 877-8339

If you are unable to make your mortgage payment:

1. Don’t ignore the problem.

The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

2. Contact your lender as soon as you realize that you have a problem.

Lenders do not want your house. They have options to help borrowers through difficult financial times.  

3. Open and respond to all mail from your lender.

The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems.  Later mail may include important notice of pending legal action.  Your failure to open the mail will not be an excuse in foreclosure court.

4. Know your mortgage rights.

Find your loan documents and read them so you know what your lender may do if you can’t make your payments.  Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.  

5. Understand foreclosure prevention options.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov/foreclosure/index.cfm.

6. Contact a HUD-approved housing counselor.

The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide.  Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

7. Prioritize your spending.After healthcare, keeping your house should be your first priority.  Review your finances and see where you can cut spending in order to make your mortgage payment.  Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other “unsecured” debt until you have paid your mortgage.

8. Use your assets.  

Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income?  Even if these efforts don’t significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.  

9. Avoid foreclosure prevention companies.

You don’t need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender.  While these may be legitimate businesses, they will charge you a hefty fee (often two or three month’s mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.

10. Don’t lose your house to foreclosure recovery scams!

If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home!  Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor.

 

 

source: http://www.hud.gov/foreclosure/index.cfm

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Top 10 Ways To Prepare For Retirement

Know Your Retirement Needs

Retirement is expensive. Experts estimate that you’ll need about 70 percent of your preretirement income – lower earners, 90 percent or more – to maintain your standard of living when you stop working. Take charge of your financial future. Start by requesting Savings Fitness: A Guide to Your Money and Your Financial Future.

Find Out About Your Social Security Benefits

Social Security pays the average retiree about 40 percent of preretirement earnings. Call the Social Security Administration at 1.800.772.1213 for a free Social Security Statement and find out more about your benefits at www.socialsecurity.gov.

Learn About Your Employer’s Pension Or Profit Sharing Plan

If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. Find out if you will be entitled to benefits from your spouse’s plan. For a free booklet about protecting your pension, request What You Should Know about Your Retirement Plan.

Contribute To A Tax-Sheltered Savings Plan

 If your employer offers a tax-sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.

Ask Your Employer To Start A Plan

If your employer doesn’t offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers. For information on simplified employment pensions, order Internal Revenue Service Publication 590 by calling 1.800.829.3676. Or you can view a copy on the IRS Web site. You may also want to request a copy of Choosing a Retirement Solution for Your Small Business.

Put Your Money Into An Individual Retirement Account

You can put up to $4,000 a year into an Individual Retirement Account (IRA) and gain tax advantages. This chart illustrates the way your account can grow in an IRA.

When you open an IRA, you have two options – a traditional IRA or the newer Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, you should know that the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose.

Don’t Touch Your Savings

Don’t dip into your retirement savings. You’ll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer’s retirement plan.

Start Now, Set Goals, And Stick To Them

Start early. The sooner you start saving, the more time your money has to grow. Put time on your side. Make retirement savings a high priority. Devise a plan, stick to it, and set goals for yourself. Remember, it’s never too early or too late to start saving. So start now, whatever your age!

Consider Basic Investment Principles

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.

Ask Questions

These tips point you in the right direction. But you’ll need more information. Talk to your employer, your bank, your union, or a financial advisor. Ask questions and make sure the answers make sense to you. Get practical advice and act now.

Financial security doesn’t just happen. It takes planning and commitment and, yes, money.

Facts

• Today, only 42 percent of Americans have calculated how much they need to save for retirement.

• In 2005, of those who had 401(k) coverage available, 25 percent didn’t participate.

• The average American spends 18 years in retirement.

Putting money away for retirement is a habit we can all live with. Remember … Saving Matters!

source: http://www.federalreserve.gov/consumerinfo/savingsresources.htm

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Today’s Rates

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Why you should lock in your rate now!!!

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 5.88 percent this week, where they have been for the past three weeks.

The 30-year rate, which had been at 5.85 percent the week of March 27, edged up slightly to 5.88 percent the following week and has stayed at that level, remaining below the 6 percent level for five straight weeks.

But other rates showed declines, which analysts attributed to rising hopes that the Federal Reserve, responding to weak economic data, will move at the end of this month to cut interest rates again.

“March’s housing starts were the lowest since March 1991 and consumer sentiment in April fell to a 26-year low while home builder confidence remains near record lows,” said Frank Nothaft, chief economist at Freddie Mac.

He said these and other statistics suggesting the economy may be in a recession are prompting investors to expect a further rate cut when Fed officials next meet on April 29-30.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, dipped to 5.40 percent, down from 5.42 percent last week.

Five-year adjustable-rate mortgages dropped slightly to 5.48 percent, down from 5.56 percent last week. Rates on one-year adjustable-rate mortgages slipped to 5.10 percent, compared to 5.18 percent last week.

The mortgage rates do not include add-on fees known as points. For 30-year mortgages, the nationwide average fee was 0.4 point while the average fee was 0.5 point for 15-year mortgages. The average fee was 0.6 point for five-year adjustable-rate mortgages and one-year ARMs.

A year ago, rates on 30-year mortgages stood at 6.17 percent, 15-year mortgage rates averaged 5.89 percent, five-year adjustable-rate mortgages were 5.92 percent and one-year adjustable-rate mortgages were at 5.45 percent.

Many economists believe the country has fallen into a recession, something that hasn’t occurred since 2001. The country is being hurt by a combination of a prolonged housing slump, a severe credit crisis and now, rising unemployment.
Source: ap.org

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