Bankruptcy, Home & Mortgage, Money Management

Ask Chuck: How Can I Disaster Proof My Finances?

By Chuck Bentley, Crown Financial Ministries

Dear Chuck,

I have several friends who are in deep financial trouble in the early years of their marriage. I want to avoid the stress they’re experiencing. Do you have any helpful tips so that I can guard my home and marriage?

Avoiding Disaster

Dear Avoiding Disaster, 

Being under constant financial stress is terrible at any age, but it is especially dangerous in the “early years.” This is a time when most couples are vulnerable to separation and divorce. 

I assume your friends are struggling with debt due to being unprepared for their lifestyle. It usually occurs in a series of small mistakes, as a result of one huge accident, or because of the assumption that “this is just the way it’s done.” Since I don’t really know what happened to your friends, I will give you some financial advice and also some general principles so that you can avoid the five most common causes of debt.  

1. Allowing a Get-Rich-Quick Mentality to Govern Decisions
If people only invested in get-rich-quick schemes with available cash, they would be more cautious. Somehow, it is easier to risk borrowed money because it appears to be free money. Like purchasing consumer goods on a credit card, it is easy to justify borrowing money to invest, especially when you think your returns are “guaranteed.” Speculating on the future is a practice in surety, which the Bible warns against. It’s presumptuous since no one can rightly predict financial markets.

Believers are particularly vulnerable, trusting so-called “Christians” who claim to have a special revelation from God when selling their scheme. My advice: Stay with what you know. Thoroughly investigate the product, company, and person presenting the offer. Make no hasty decisions. Always wait 24 hours, and pray before investing a dime. Borrowing money to speculate is not investing. It is a high-risk gamble.

2. Ignoring the Primary God-Given Advisor: A Spouse
Since opposites tend to attract, couples will not agree on everything. Learn to communicate respectfully to reach reasonable compromises. Husbands are to love their wives. That includes seeking and listening to their advice before making any financial decisions. Wives are to honor their husbands and to respectfully give their opinions. God created a husband and wife to function as a single working unit. This enables them to capitalize on each other’s strengths and avoid errors in judgment.

3. Failing to Schedule All Expenses
Plan on financial disaster if you fail to plan for unexpected expenses. These are often things that have yet to come due or the unexpected costs of maintenance, repairs, or health issues. Anyone with a car, home, children, or pets understands this. Ignoring the inevitable or not working expenses into a budget creates credit card dependency. Adjust the budget to include setting aside money into an Emergency Account. Though temporarily uncomfortable, it is very wise long-term. It is best to have 3-6 months of your monthly expenses in an Emergency Fund.

If you are struggling with credit card debt now, contact our friends at Christian Credit Counselors. This should be done before you dig a deep hole.

4. Buying a Home You Cannot Afford
Purchasing a home too early in marriage or paying too much for one creates problems. A house payment for the average family’s budget should not exceed 40% of net spendable income after giving and taxes. Include the mortgage, utilities, HOA fees, property tax, maintenance, and repairs. Destroying the budget to get into a home is not logical. It restricts the ability to give, save, and invest. Only purchase if the numbers work, preferably based on one income only. If you cannot put 20% down before you take on a mortgage, it is best to rent and save until you can.

5. Buying a Car You Cannot Afford
Most people look at the monthly payments for a car instead of the overall price. Interest translates into paying significantly more than the asking price and being burdened by the debt for years. Unlike a house, a car depreciates in value the moment you drive it off the lot. So, do not finance something that will lose money. Save, and buy reliable used cars with cash.

Disaster Proofing the Marriage  

There is no silver bullet to protect “your home and marriage” from a disaster. Satan prowls around seeking to cause havoc in all relationships including the best marriages. Having your finances under God’s control is a sign of wisdom, and I highly recommend it. At the same time, let me give you a few tips that have helped us through the hard days.

Pray together, often. This took us years to get comfortable with, but it is now a way of life. Often, we take long walks and pray aloud together the entire time. 

Seek to grow as Christ’s disciples. When you are both pursuing this goal, you will experience the fruit of the Spirit which is a glue to make any marriage even better. 

Invite your spouse to be your most intimate, trusted advisor on all decisions. This trusting submission builds confidence and leads to better outcomes in all things as you work in unity. 

Be humble, gentle, and quick to apologize. Nobody escapes hurting their spouse in a marriage. We can escape becoming indifferent about it by showing mercy, kindness, and grace when we are offended. 

A good marriage is a financial benefit. A divorce is emotionally and financially devastating. My wife and I wrote an entire book on the topic of money and marriage, called Money Problems, Marriage Solutions. It is a step-by-step guide to growing in unity. You can get your copy here.

I made many of the mistakes that you are hoping to avoid. By God’s grace, He kept our marriage together, and we worked through the mistakes. Today, we are in a much better place and stronger because of our ability to work together. There is always hope when you fully trust Him and apply the principles of God’s economy.

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Home & Mortgage, Loans, Mortgage, Student Loans

COVID-19 Financial Relief and Protections Extended

By: CFPB

Are you struggling during the pandemic? The federal government is extending relief and protections for many student loan borrowers, renters, and homeowners who are having trouble making payments during the COVID-19 pandemic.

Keep reading to learn more about these important updates that may help you. But, remember the COVID-19 pandemic and relief efforts continue to change and develop. Check our COVID-19 webpage for more information.

Payments suspended for federally-owned student loans

Principal and interest payments on federally-held student loans are automatically suspended through September 30, 2021.

If you have federally owned student loans, you don’t need to contact your student loan servicer or take any action. However, make sure your servicer has your up-to-date contact information and continue to check your mail or email for updates or information about your loans.

Suspended payments through September 30, 2021, will count towards any student loan forgiveness programs, as long as all other requirements are met.

Learn more about protections for student loan borrowers.

Protection from evictions for renters

The Centers for Disease Control and Prevention (CDC) has announced an extension to their current order that halts certain residential evictions. The extension stops evictions until at least March 31, 2021.

If you already get rental help from HUD, and your income has changed, ask for income recertification.

Learn about help for renters and what you can do.

Mortgage relief protections and options

There are two primary federal protections: forbearance and a foreclosure moratorium.

Forbearance

If you have a mortgage-backed by VA, USDA, FHA, Fannie Mae, or Freddie Mac, you have the right to request an initial forbearance of up to 180 days on your mortgage and a forbearance extension for up to 180 days if you have a COVID-related financial hardship.

  • For mortgages backed by the FHA, USDA or, VA, the deadline to request an initial forbearance is June 30, 2021.
  • Mortgages backed by Fannie Mae and Freddie Mac do not currently have a deadline for requesting an initial forbearance.

If you are already in forbearance and need more time:

  • If your mortgage is backed by Fannie Mae or Freddie Mac: You may request one additional three-month extension, up to a maximum of 15 months of total forbearance. But to qualify, you must be in a COVID forbearance plan as of February 28, 2021, so don’t delay contacting your servicer if you’re having trouble paying your mortgage and are not in a forbearance plan.
  • If your mortgage is backed by FHA, USDA, or VA, you may request two additional three-month extensions, up to a maximum of 18 months of total forbearance. But to qualify, you must have received your initial forbearance on or before June 30, 2020. Check with your servicer about the options available.

Foreclosure

  • If your mortgage is backed by Fannie Mae or Freddie Mac, your lender or loan servicer cannot foreclose on your home until after March 31, 2021.
  • If your mortgage is backed by FHA, USDA, or VA, your lender or loan servicer cannot foreclose on your home until after June 30, 2021.

Learn about mortgage relief and options you may have.

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Home, Home & Mortgage, House, Loans, Mortgage

Mortgage Loan Types – Home Buying

Home Buyers and First Loans

Buying your first home? You may be thinking the hardest decision you have to make is picking a house.  However, the hardest decision you will be making in this process is what mortgage loan to sign for.  The main types of loans are: fixed rate, adjustable rate, interest only and reverse.

Federal Housing Administration (FHA) Loans

For first time home buyers, Federal Housing Administration (FHA) Loans may be the best option.  This program offers competitive interest rates, allows smaller down payments and has easier qualifications.  The typical down payment required with this program is 3.5 percent of the purchase price of the home.  FHA mortgage loans also require insurance, but they do offer a refund on it.

Fixed Rate Mortgage

A fixed rate mortgage is also referred to as PITI, Principal Interest Tax Insurance.  With this mortgage everything is included: principal, tax, interest and insurance.  For example, if you have a fixed mortgage, you don’t have to worry about forking over extra cash during tax season because you already paid this tax along with your mortgage. Usually a fixed mortgage is for 30 years, but you can also get a 15 year mortgage, depending on your finances.  If you do qualify for a 15-year mortgage you can expect a lower interest rate, but higher monthly payments.

Adjustable Mortgage

An adjustable mortgage has lower payments at the beginning of the loan.  You can get this mortgage for 15 or 30 years.  During this time, payments can be adjusted upward; as the market changes so do your payments.  This type of loan comes with more risk because your payments change regardless of whether your income increases.

Interest Only Loan

An interest only loan usually takes 5 or 10 years to pay off, during this time your entire payment is going to pay off the interest.  It’s a waste because although you are making monthly payments, you are not paying off your home.  The only positive aspect about this loan is that it allows customers who expect to increase their income in the future to take out a bigger loan than they can currently afford.  This type of loan comes with a high risk.

Reverse Mortgage

Reverse mortgage is especially made for those over the age of 62 and it was created through the government program HUD.  These citizens get a portion of their equity and receive a payment every month.  To become a part of this program there is no income or credit requirement.  However, the cost to enroll in this program can be more than $8,000.  Also, once the borrower dies, the bank settles the debt with the heirs.

A Debt Free American Dream

Achieving the American Dream without getting further into debt is possible.  Regardless of which mortgage you sign for make sure you know the details.  The key to avoiding traps is knowledge.  Be realistic and buy a house within your means.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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