Friday, March 28, 2014

$1 trillion and counting: Student loans carving a massive debt hole

Graphic courtesy of Bloomberg Businessweek

Reports have emerged recently with a daunting figure. Collectively, Americans now reportedly owe more than $1 trillion just in student-loan debt. Although part of the idea of getting degrees is to put yourself ahead by netting higher-paying jobs, debt payments are surpassing income levels for too many these days.

In turn, sky-high student-loan debt is preventing some from fulfilling the "American dream" by getting a mortgage for a house. New regulations mandated in January of this year allow no more than 43 percent of a borrower's monthly income be used to pay debt obligations. With an economy still in recovery mode, crippling debt ratios have caused many to put other plans on hold, such as purchasing a new home.

What's the answer to this student-loan debt conundrum? Analysts will debate the alternatives on end, but for graduates already in the hole, you would probably benefit from consulting a financial adviser for counseling specific to your situation. If you are in the planning stages for your children's education, you can take advantage of a 529 plan to receive tax benefits and other incentives so you and your offspring aren't overburdened by debt.

There are still plenty of statistics out there supporting the case for a college education, but there's no denying it isn't as affordable as it used to be. It is well worth the time to research all of your degree options and comparative costs, as well as factoring in existing debt, before getting yourself into a debt hole that prevents you from fulfilling other goals.

Wednesday, March 19, 2014

Monthly Fed meeting: More of the same

Chart courtesy of
The Federal Reserve board announced on Wednesday afternoon what many had expected: Interest rates will continue to remain low for an extended amount of time, even if unemployment rates drop below 6.5 percent. The Fed will instead rely on a variety of other economic indicators to determine when to raise interest rates.

Fed officials have stated they are looking for key factors such as wage growth, inflation and more house-building permits as signs of a more robust economy before thinking about raising interest rates.

With that being said, however, the Fed is moving ahead with plans to continue tapering its monthly purchases of bonds and treasuries, down to $55 billion a month in April. These monthly bond purchases, initially set at $85 billion a month, were intended to help jumpstart a sluggish economy. Last month's jobs report was better than anticipated, but still suggest an economy in recovery period.

As far as mortgage rates, they will continue to mirror changes in the stock market. After Fed chief Janet Yellen made her remarks today, stocks fell and, along with them, mortgage rates. It appears the markets will continue waiting for more concrete signs of economic improvement before rates rise again.

Confusing data? If you have any questions about getting a mortgage for a new purchase or refinance, contact a Vertex loan officer to help you navigate the process and lock in the best rate for you.

Friday, March 14, 2014

Before the flood comes, get your home ready

Colorado officials expect hazardous spring runoff

 Photo of 2013 flood damage courtesy of
October through April heavy snow showers bring...spring flood season? Here in Colorado, meeting winter snowpack levels teeters between a very fine balance of not enough vs. too much. To illustrate this point, last year the state endured both record-breaking wildfires and flooding within the span of a few months. Mother Nature came in like a furious wrecking ball, taking out thousands of homes in its wake.

This spring, the Rocky Mountain state again is bracing itself for massive flooding potential. In a fairly unprecedented pre-emptive move, the U.S. Department of Housing and Urban Development granted nearly $200 million in recovery funds to flood-damaged Colorado communities, anticipating the possibility of more devastation after a heavy snow year. Many areas in Boulder, Weld and Larimer counties are still recovering from September's flooding deluge.

So, how protected are you from flooding? Many people do not realize that their standard homeowner's insurance policy does not cover flood damage. Separate flood insurance is needed to cover these losses, and just about anyone is eligible to buy it. While purchase of a flood insurance policy is only mandated in designated flood plains, in light of previously unaffected areas (i.e. Colorado's Front Range and most of the East Coast after Hurricane Sandy) getting insured before catastrophe hits could save you thousands.

Areas previously wiped out by fires also are particularly susceptible to flash flooding because there is little foliage left to absorb the precipitation - as was the case in Waldo Canyon last year near Colorado Springs. With Colorado wildfires increasing in intensity, one can only expect increased flood risk to follow.

Fortunately, whether you rent or own a single-family house or condo, you can protect your home and belongings with flood insurance. The National Flood Insurance Program offers a wealth of information on how to obtain insurance and file claims after a flood hits. You may not be able to control Mother Nature's volatility, but you can minimize your losses by being prepared.

Friday, March 7, 2014

February report shows more U.S. jobs, but what does that mean?

Graph courtesy of

The U.S. government released its monthly jobs report today, and the results seemed mixed. Jobs added to the economy were higher than expected at 175,000, yet the unemployment rate remained at best steady at 6.7 percent, up slightly from January's 6.6 percent. Seems a little conflicting, right?

There are many factors at play to explain the jobs report data - even including rough winter weather keeping people home from work - but the overall question is how the Fed chiefs will act on the data. February's added number of jobs showed a steady, growing economy, and this is more than likely enough evidence to keep the Fed on its stimulus tapering track.

The Fed will meet later this month and is expected to drop another $10 billion a month in its bond-buying program to a total of $55 billion per month. Despite a weak/mixed jobs report in January, Fed leaders forged ahead with the plan to continue tapering its monthly bond buying. It's likely only a drastic economic change will stop this progression until no more bonds are purchased.

How does all this affect the mortgage industry? Interest rates have been dropping slightly on weak jobs data in 2014, hovering around 4.25 to 4.5 percent, currently at the lower end of that range. Of course the future is uncertain, but assuming the economy continues improving and interest rates rise, now could be a prime time to take advantage of historic low rates, saving you thousands of dollars in interest over the long term.