Posted by Money Tips Staff

Government backed loans from the Federal Housing Administration (FHA) may seem like a godsend for those that are trying to purchase a home despite a low income or credit problems in the past.  And while they have helped upwards of 30 million people to get homes since their inception in the 1930s, it’s not like the government is handing them out like candy.  There are requirements you’ll have to meet before you can be approved.  So here are just a few benefits and drawbacks that could help you decide if this is the type of loan you want to shoot for.

PROS:

1. Lower insurance premiums.  The FHA bases their insurance rates on your closing costs, but they operate on the assumption that you are a low-income borrower, you have had prior difficulties with your credit history, or you have little down payment.  As a result, they tend to offer lower rates than private mortgage insurance providers (like Allstate, State Farm, and so on).
2. Eligibility.  Even banks that turn you down initially for a home loan may show interest when you get approved for an FHA loan.  Not only will this provide incentive for the bank to offer you a loan (because they know they’ll get their money); it also means that if you can’t make payments for some reason, the FHA will take steps to help you stay in your home and get you back on track to make the payments on your own.  All you have to do is meet FHA criteria.
3. Affordable financing.  Because the FHA is making you a safer bet for lenders, they expect lenders to help you get a loan you can actually afford to pay.  They do this in two ways.  First, you cannot be approved for FHA mortgage backing unless you get a loan with monthly payments that are no more than 31% of your gross income (including mortgage, interest, and insurance).  So lenders won’t be able to approve you for more than you can reasonably afford to pay.  In addition, they encourage lenders that work with them to work with you to create financing that is affordable (they want to make sure you can make the payments).  The result is that you have a better chance of getting a loan and actually paying it off.

CONS:

1. Steady employment.  One of the main requirements to obtain FHA approval is steady employment, generally for a minimum of two years with the same employer.  And during that time the salary cannot be reduced.  So the ongoing recession (complete with salary cuts and layoffs) could mean a lot of applicants are no longer eligible.
2. Clean credit history.  Believe it or not, you can qualify for an FHA loan even if you’ve had a bankruptcy or foreclosure.  But you must have a minimum of two years clean credit history with a bankruptcy (and have disbursed any court ordered payments that resulted) and three years clean credit for a foreclosure.  That means no defaults or even late payments for the last 2-3 years.
3. FHA inspection.  Because of the price range of homes that generally fall within the low-income category, securing FHA loans requires an FHA inspection and approval of any property in question before the sale can go through.  So even if the house clears the lender’s required inspection, or a homeowner is willing to take a fixer-upper as is, the FHA may not approve, thus tanking the deal.

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Posted by Emily Hunter

There are a million tried and true proven ways to save money. Many of them involve owning our personal debts and taking steps to search out every available opportunity to save money on goods and services. This site is devoted to ideas and tips which will help you responsibly save money. What about the ones that didn’t make the cut? What about the ways to save which are too crazy or too extreme to have made the cut? Even though many of these suggestions are not recommended, this post is dedicated to the crazy ways to save money.

Stiff Your Friends
When the bill comes and you’re within a group of friends, pretend that you didn’t bring your billfold or wallet with you. Your friends will probably grumble at you as they pay your tab, but they’re more than likely to forgive you. This is something that should be tried only once in a while when you’re really needing to save the dough, because you will have to pay in social capital.

Take one minute showers
Want to save water? See how short you can make your morning shower. While you probably have more than enough hot water, you can save a few bucks on the bill by shortening your shower to a minute or two. In fact, one way that you can facilitate this is by pre-lathering your hair while it’s dry before you jump into the shower. You have to make the determination about whether the couple bucks that you save are worth it.

Scour Parking Lots
People are constantly dropping change in parking lots. A few cents might drop out of a pocket. A purse might fall and coins run underneath the car. These coins have your name written all over them. You can, in fact, make a full time job out of scouring mall parking lots for loose change. Your best time will be after the stores are closed and before the sweepers hit the lot.

Kill Your Breakers
Instead of waiting for the power company to turn off your power, kill all of the breakers except for the one to the refrigerator. Certainly, you have plenty of candles around the house specifically for when the power goes out by natural causes. This will teach the value of reading, and let you know how prepared you are in the event of an actual emergency. Depending on your normal usage, this will save around $20.

Don’t Buy Condiments
Instead, fast food places are wonderful sources for all of your condiments. Gas stations are great for this as well, since many are now offering hot dogs and other convenience foods to their customers. You’ll be stuck with whatever brands these places have chosen, though the money that you’re saving will more than make up for that.

None of these crazy tips are suggested for casual use, but they can be employed every once in a while to save a couple of dollars. Your friends probably do not want to be considered your sole support system, nor do you want to live in candlelight very often. Crazy or no, they still save money.

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Emily Hunter blogs at , a blog dedicated to finding a million ways to save money. She is also a freelance writer, caretaker of a kitten, and a self proclaimed rabble rouser.

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How to Rebuild Your Credit Rating With a Credit Card

Posted by Andy Boyd

Many people have gone through economic hardships because of loss of a job, medical expenses or other unexpected financial circumstances which have had a negative impact on personal credit reports and ratings. During the recent recession an unprecedented number of people were forced into foreclosure or bankruptcy and watched their credit scores plummet from the high 700s to the 500s. Do not despair. Even with a bankruptcy, you can start rebuilding your credit report immediately by using the following tips.

• Obtain a credit card designed for the purpose of rebuilding your credit – There are several of these types of cards available such as Capitol One, Orchard Bank, First Premiere, Barclay Bank, or Merrick Bank. Or, find a prepaid Visa or MasterCard that reports to credit bureaus. Fees and interest rates can vary widely on these cards. Select wisely to avoid exorbitant costs. You will pay more fees and interests to obtain one of these cards, but once your credit rating increases you will be eligible for regular credit cards and can switch at that point.
• Obtain a copy of your credit report – You are entitled to receive one free copy per year from each of the three main credit bureaus. Go to: www.AnnualCreditReport.com to obtain a report from each of the three bureaus. Get all three because the information may vary on each report. Note any errors or incomplete information and make corrections immediately. Even if a previous address is incomplete or you have never lived there, correct the information. Bureaus and credit grantors look for stability and if more addresses are listed than you have ever lived at you look as though you have moved around too often. It is especially important to have any debts that are not yours removed. The same applies to debts that are older than the statute of limitations in your state. One of the elements of creating your credit score is the ratio of debt you carry. If you have debts listed that are not yours, or beyond the statute of limitations, your debt ratio will be unfavourably skewed.
• Manage your credit responsibly – Never use more than 50% of your available credit. As mentioned before, credit scores are based on the debt ratio you carry. It is much better to have two or three cards that have credit available to use than one card that is maxed out. Either pay your balance in full each month or pay more than the minimum payment due. Make sure that you pay on time each month. Creditors report if payments are on time and for the amount due. Late payments lower your credit rating.
• Trim your overhead – If you are living beyond your means you will fall into the same credit trap that you are trying to get out of. Never rely on credit cards to pay for essential items such as rent or utilities or food.
• Don’t fall for credit repair scams – They are costly and cannot accomplish more than you can by being diligent and following the above listed tips.

Andy co-founded Finance Choices, an up-and-coming comparison website for consumers in the UK. For more articles like this, visit their blog.

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