Self-employment can be a viable option for all those who have lost their jobs due to the recent economic crisis. The best part of being self employed is that you will be your own boss and you will be able to take your own decisions. However, there are certain dis-advantages of being self employed. Self-employment becomes a huge problem when you apply for a mortgage.

What are the main problems faced by self employed while getting a loan?
The 2 main problems faced by the self-employed people while getting qualified for a mortgage are:

Proving income: It is quite important to prove your income with your tax returns when you apply for a mortgage.  Self-employed people won’t be able to provide this proof.

Declining income: Due to the severe economic crisis, income has declined for everyone. The self-employed people have been badly affected due to this. Though now some of them have stabilized income, the lender will take into consideration the average of two years of tax returns. It will show reduced income for the self employed.

Are stated income loans making a comeback?
Stated income loans are making a comeback in the secondary market. But not all can qualify for this loan.

Who will be eligible for stated income loans?
It will be available for only those borrowers who have credit scores above 720, a down payment of 30% or more and around 6 months of cash reserves to cover all monthly obligations. They’ll have to somehow prove that they’ll be able to pay the loan.

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A rebate credit card or a cash back credit card can be considered as a type of rewards card. However, it is a bit different from any other types of reward cards. In case of reward credit cards, your payments to the card issuer is refunded in kind. In case of other reward cards, the consumer will be rewarded through specific merchandise, points, miles, gift certificates, etc.

While choosing between a rebate credit card and a rewards credit card, here are few things which you should keep in mind:

• Requirements for cards: In order to reach the higher tier, you will have to make more purchases using your rebate cards. It is same with rewards card as well. In order to get to the next increment of points or miles, you will need to use it more. This will lead to unnecessary spending at times. If you don’t plan your purchases properly, it will lead to a financial crisis.

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A large number of people are planning to shift abroad due to slow-moving job market. There are different countries which offer good lifestyle and better job market compared to one’s own country and thus there is no harm in moving abroad. However, before leaving the home country, it’s better to take a stock of the financial implications that it will bring.

Here are 5 financial tips which you can take into consideration before you plan to live abroad:

1. Save money: When you decide to move abroad, never underestimate the importance of saving money. It is better to save money which will last you for at least the initial 7 - 9 months after you move abroad. The amount may vary depending upon a person’s family status, job, lifestyle, etc. This initial finance will actually help you build your life in abroad. In case, you get an opportunity to move abroad immediately, make sure you have funds to at least cover your immediate housing costs, emergency healthcare and repatriation expenses.

2. Plan a budget: Unless you’ve a proper knowledge of the cost of living abroad, you may face problems in building up your life there. Thus, you should research about the costs of housing, food, transportation, entertainment, utilities and insurance in the country where you’re planning to move. You should also figure the costs of going back to the old country in case of any emergency. Depending upon that you should plan a budget. You will find expat blogs and online cost-of-living calculators which will help you in planning a budget.
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In a recent development, some of the top US mortgage servicers, including JP Morgan and Bank of America, have decided to pay $5 billion so that they can settle the ongoing foreclosure probe by the state and the federal government against them.

Why was this probe initiated?
The probe was initiated in all the 50 states due to the faulty foreclosure practices after the collapse in the real estate market. Most of the lenders and mortgage servicers violated state laws while foreclosing properties.

What is the new proposal all about?
In the proposal, a fund will be established, which will, in part pay for principal write downs. This fund will be administered by state and federal officials. This fund could help repay the borrowers whose homes were improperly foreclosed by the banks.

Why was this proposal made?
The State Attorney Generals and the Federal officials, during a settlement talk, offered to revise settlement terms and proposed this option to the banks so that they could fund principal write-downs for homeowners.

Florida launched a billion-dollar mortgage bailout program during mid-April, 2011. It was the last state slated to get the Hardest Hit Funds. This bail-out program is mainly aimed for the unemployed homeowners. It is solely based on the hope that those who get this help will find jobs within the next six months.

Whom to contact for this bail-out program?
The Florida Housing Finance Corp. has already stated taking applications from struggling homeowners for assistance from the federal government’s Hardest Hit funds. The state-owned corporation will be providing around $35,000 over 18 months to each qualified homeowner.
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Credit card debts can create havoc in our lives and may ultimately lead to bankruptcy filing. In order to avoid such a situation, balance transfer method can be very effective. In this process, the balance amount in all the credit cards are transferred to a card which has a low interest rate. However, there are certain things that you should remember about balance transfers. Let’s take a look at them:

1. Good credit is a must to qualify: In order to qualify for a zero interest balance transfer cards you should have good or excellent credit. Unless you have excellent credit scores, none of the creditors will be ready to give you such a card. If they do so, it will become riskier for them.

2. Fees are unavoidable: In order to transfer a balance from a high interest credit card to a low interest one, you’ll always be charged a balance transfer fee. This balance transfer fee is determined as a percentage of the total amount that you’re transferring. These days, there are no caps on the fees charged for balance transfers. For example, on a transfer of $10,000 debt to a balance transfer card, you might have to pay a fee of around $300.

3. Introductory rates will expire: Normally, a balance transfer card will offer you an extra-low APR between 0-5%. However, this rate won’t last forever. After around 9 months – 1 year, the interest rates may change between 8-18%. If you make late payments, then your great rate will disappear even sooner.

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Home equity is the difference between the property value and what you owe on your mortgage. For example, if your property value is $2,50,000 and your mortgage balance is $1,50,000, then it means that you’ve a equity of $1,00,000 in your property. As you pay off the mortgage every month, your home equity will get increased.

Why is home equity tapped?
Home equity loans as well as home equity lines of credit have been used by the borrowers to fund property improvements. Such improvements include remodels and additions. A large number of people also tap their home equity in order to pay off their bills or consolidate their unsecured debts.

How can tapping equity affect the borrower?
Most of us find it very appealing to tap the equity in our homes to pay off other debts. Such loans are available at a lower interest rate compared to a credit card. Moreover, unlike credit cards, home equity loans are tax deductible. However, tapping home equity loans may have a negative impact on the borrower. It won’t help you in eliminating your debt. Rather, you’re jeopardizing your home for paying off the unsecured debts. Unlike credit card debts, a home equity loan will put your house at risk as it is a secured loan.

Thus, you should only go for a home equity loan to pay off your unsecured debts when you’re sure that you’ll be able to pay off your equity loan. If you’re unable to do so, your property will be foreclosed which will have greater negative impact on your credit report compared to credit card debts.

In a recent announcement, the IRS has announced that it will reduce the number of liens that it would place on property which are owned by people who are unable to pay their taxes. The IRS will also make it easier for taxpayers to get their existing liens withdrawn.

What is a tax lien?
A tax lien can be defined as a lien which is placed by law on a property in order to obtain the payment of delinquent taxes. A federal tax lien helps the IRS to claim a taxpayer’s property for the amount of an unpaid tax debt. A tax lien will reduce the taxpayer’s credit score significantly. It will be difficult for the person to sell the home unless the lien is paid off.

Why has the IRS become lenient on liens?
Since the start of the recession, tax liens have become very common. It has been increased by 60%. The IRS has decided to go lenient as it makes it quite difficult for any person to find a job, or get a mortgage or buy insurance if they have a tax lien on their property.

What changes have been introduced by IRS?
The changes that have been introduced regarding the lien filing practices include the following:

• Easy to obtain lien withdrawals after paying the delinquent taxes.
• Increase the dollar threshold when liens are issued leading to fewer tax liens.
• Easy access to Installment Agreements for small businesses.
• Remove the liens when the taxpayer enters into a Direct Debit Installment Agreement.
• Expand the streamlined “Offer in Compromise” program to include more taxpayers.

This is an important step in the right direction taken by the IRS. Let’s hope that these steps finally have a positive impact on the economy.

The year 2011 is already 2 months old now. Many of us have taken a resolution of building up some wealth this year. Most of us now agree that it is very important to get rid of our debt and increase our income or build some financial security.

Here are 5 ways in which you’ll be able to build up your credit:

1. Get rid of high interest credit cards: In order to build wealth, you should make sure that you reduce the money that you pay off as interest payments. Thus, you should get rid of your high interest credit cards. You should draft your own personal spending plan with the help from a certified credit counselor. If you’re able to stick to that plan, it will be easier for you to begin the process for building wealth.
2. Fund your retirement: If you save 2% of the money which you pay in Federal Insurance Contributions Act. You should use this extra money to fund your 401k account. You can speak to your human resource department and change the deductions. Thus, you’ll be able to save a little more than you normally do.
3. Invest money in mutual funds: Investing money in low-cost mutual funds is considered to be one of the best ways to build wealth. However, there is always a risk of losing money in stocks. So, you should take professional help in order to invest money in mutual funds.
4. Take out a mortgage: Buying a home is also a good way of building wealth. Mortgage is known as good debt. The mortgage rates are going quite low. You can invest your money in it and also live in the property. You won’t have to rent a property and drain your money as rental payments. Moreover, with time, you will build up equity in your property. Thus, you can cash in the equity in the form of cash out refinance whenever you require it.
5. Start a business of your own: Using your free time to start a side business will help you in building your wealth. You should choose such a field which you’re passionate about so that you can give time to it after your job gets over. This is a good option for the unemployed people as well.

In order to trim down the debt of $3.8 trillion dollars, National Commission on Fiscal Responsibility and Reform is thinking of reducing income tax deduction for mortgage interest payments. The Commission is planning to eliminate second homes, mortgages of more than $500,000, and home-equity loans from receiving any kind of tax deductions.

If thus new rule is passed into law, it will affect the mortgage market in a negative way. Lets take a look:

• With an unemployment rate of 21%, the new rule will lead to a further downfall of the housing market.

• Reducing or ending deductions may further lower the home prices leading to an increase in number of underwater properties.

Most experts are concerned about the federal deficit but also believe that reducing or ending mortgage interest deductions will have negative affect on the consumers. Most of them believe that limiting deductions is a good idea but it will result in lower home prices. Thus, it’s better to not implement this new rule unless the market becomes stable.