Homebuyer Education: The First Step to Buying a Home

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How well do you really understand the homebuying process? Taking a qualified homebuying class will do more than teach you how to get a mortgage or pull together a down payment. It will help you determine the amount of home you can afford without endangering other lifetime financial goals.

If you think this training is just for first-timers, think again. Real estate markets change, and so do homebuying environments. It is worth considering taking a class each time you’re making a home purchase, especially if it has been a significant number of years between purchases. The homebuying class can keep you up to date on what you’ll need to know this time around.

Where can you find these courses? Many private lenders offer their own training, but governments – local, state and federal – are the main source for instructional classes for homebuyers. In fact, on both the public and private side, these classes are often tied to special loans or funding assistance for the qualified.

Most homebuyer trainings are free – if you’re asked to pay, get an explanation for what those costs cover.

The U.S. Department of Housing and Urban Development (HUD) provides a list of approved state (http://portal.hud.gov/hudportal/HUD?src=/buying/localbuying) and local agencies (http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm) that offer a range of homebuyer education options – some even help first-time buyers obtain grants and other financial assistance with their down payments. HUD has backed up this effort with additional funding (http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2016/HUDNo_16-022) this year.

The Department of Veterans Affairs (VA), and Department of Agriculture (USDA) also offer assistance and educational programs for qualified buyers. Meanwhile, Fannie Mae and Freddie Mac (https://www.fanniemae.com/content/faq/home-buyer-education-policies-faqs.pdf), the two government-sponsored agencies that keep mortgage funding flowing through our lending system, also support their own homebuyer education options. In fact, a 2013 Freddie Mac study (http://www.freddiemac.com/news/blog/robert_tsien/20130415_getting_better.html) indicated that pre-purchased financial counseling may cut the likelihood of a first-time homebuyer becoming seriously delinquent by nearly 30 percent.

Here are some of the major topics a thorough homebuying class should cover:

1. Homebuying readiness. Explore the general questions around a homebuying decision, such as why you want to settle in a particular area, how long you plan to stay, what kind of property you’re considering and where you are in your career and lifestyle. You may also be asked to answer specific financial questions to support your thinking, which should not be shared with others. The best courses will help you determine answers to the big questions, such as whether you should buy a home or stick with renting.

2. Budgeting and credit. These courses will help you evaluate how you handle money. Do you have a budget? If not, do you know how to create one? Do you understand your credit rating and what goes into determining your score? If you have debt, how are your efforts going to pay it off? Essentially, what you don’t know about spending and borrowing can limit your ability to buy a home.

3. Preapproval for mortgage financing. Navigate the nitty-gritty of the loan process – what a mortgage is, the various types of mortgages, how they work and what it takes to be preapproved for a mortgage. Pre-approval involves filling out a full mortgage application, typically with a fee to cover an extensive credit check as if you were actually buying a home. Pre-approval, unlike prequalification, allows a potential borrower to receive a loan commitment for a specific amount, which can grease the wheels in a potential purchase.

4. Knowing what you can afford. Analyze the above and consider the reality of what kind of property you can really afford to buy. Look at price limits and locations and ways to get more for your money, including specific local, state and federal borrowing programs (http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home) you may qualify for. Buying your dream home can seem nice, but it can turn into a nightmare if you can’t afford the home while living within your means.

5. Your home search. Determine how, when and where to shop for specific properties within the neighborhoods you are interested in and how to get the best overall deal for what you’re buying.

6. What you’ll need to close a home sale in your chosen community. Buying a home can also include an introduction to the specific regulatory and cost environment where you’re planning to live. For example, your course should take you through such things as community-specific housing laws and zoning restrictions that could affect what you’ll be investing in the property, property tax issues (particularly if an assessment is pending), your home titling (http://www.bankrate.com/finance/mortgages/understanding-the-closing-process-1.aspx) process, inspection requirements and the other costs linked to legal processes and paperwork.

7. The aftermath. A solid homebuying class should give you a wide picture of the costs you’ll face after the sale and how to manage them so you don’t put the rest of your finances in jeopardy. Being too “house poor” not only puts you at a risk of losing the property, it can threaten other important financial goals.

If you have your eye on particular lenders in your community, call them to see whether homebuying education can be a helpful factor in getting approved for a loan. Ask them to explain how they evaluate such training and what courses they recommend. Always ask whether any homebuyer class has a fee and why. Also, get a second opinion – if you work with a qualified financial professional, ask what he or she thinks about the course and its benefits.

As you consider such a course, don’t think narrowly about what you can get out of it. It’s not just about getting the mortgage. It’s a chance to ask about how a home purchase may affect other aspects of your financial life – all personal finance goals should be considered equally.

Bottom line: Since the mortgage industry collapse in 2008, it’s been a new day in residential homebuying. Whether you’re buying your first home or beyond, taking a homebuyer education class can help you understand the mortgage process, improve your credit and shop smarter for a home you can actually afford.

 

By Nathaniel Sillin

Government Imposters Bring Bad Business to Small Businesses

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You’ve started a new business and want to ensure you’re doing everything right. So, when people claiming to be with the government call you to say you’re violating the law, you may be inclined to do whatever they say to fix it…right?

Slow down. Government imposters are counting on that reaction — because that’s their business.

Recently, the FTC asked a judge to stop D&S Marketing Solutions from allegedly tricking and intimidating small businesses into paying up to $200 for government regulation posters that are actually free from the Occupational Health and Safety Administration (OSHA). The FTC says D&S telemarketers called newly registered small businesses, claiming to be with OSHA or another government agency. Using official-sounding names like the “Occupational Compliance and Safety Administration,” D&S allegedly told businesses they were violating federal law because they hadn’t purchased posters about occupational safety, first aid, labor law, or other topics. In fact, says the FTC’s complaint, D&S threatened businesses with fines or a shut-down unless they bought posters immediately. Many unsuspecting businesses complied, paying as much as $200 for the otherwise free posters. The FTC says D&S raked in more than $1.3 million from this scheme.

A few tips for avoiding government imposter scams:
•Get it in writing. Government agencies typically contact you first via postal mail, rarely by phone or email.
•Don’t trust caller ID. Scammers can make a call seem like it’s coming from any area code and number on your caller ID.
•If someone calls asking for money or personal information, hang up. If you think the caller might be telling the truth, call back to a number you know is genuine.

Learn more about government imposters and file a complaint with the FTC if someone posing as the government tries to steal from your business.

by Lisa Lake
Consumer Education Specialist, FTC

How to Research and Reduce Healthcare Costs

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Whether you’re planning a future procedure or navigating care after a sudden illness or accident, smart consumers have a plan in place to avoid hidden costs and billing errors common to our ever-changing healthcare system. You should too.

The Affordable Care Act (http://www.hhs.gov/healthcare/) (ACA) made it possible for all Americans to get some form of healthcare coverage regardless of their medical history. That’s the good news. The bad news is that everyone’s personal health circumstances and solutions are different, and we’re still far away from the day when the coverage we buy – either individually or through our employers – can prevent us from getting unexpected bills for services and procedures our insurer didn’t cover or errors made in the billing process.

It’s also important to know that many health insurers are adjusting to the reality of universal coverage by narrowing the assortment of doctors in their networks, leaving more patients at risk of “surprise” (http://kff.org/private-insurance/issue-brief/surprise-medical-bills/) bills if they are treated by practitioners outside their insurer’s network.

There are some helpful resources – both public (https://www.medicare.gov/coverage/surgery-estimating-costs.html) and private (https://healthcarebluebook.com/) – which have emerged that price health procedures. Using those resources can help avoid some major out-of-pocket healthcare expenses. It’s also essential to determine what practitioners may be in or out of network, particularly if it’s an emergency.

So what can you do to prevent these unexpected health costs? If you are not on Medicare, (https://www.medicare.gov/what-medicare-covers/index.html) which tends to have more standardized pricing and coverage, you need to question practitioners (or their billing departments) and price-comparing procedures the way you would any major purchase. Depending on your local medical resources, you may have the option to conduct your research online. Here are some ways to begin.

Know how you’re covered for both emergencies and non-emergencies. It’s easier to plan for a hip replacement you’ll need in six months than for emergency surgery after an accident or sudden illness, but it’s important to think through how your coverage works in both situations:

  • Emergency: Emergencies are a challenge to price because it’s tough to know which practitioners and services you’ll actually need. The key is to make a plan for emergencies. Speak to your insurer now – and consult your primary care physician – to confirm that you have a good range of in-network emergency doctors at the hospital of your choice. If not, you might want to think about switching plans during your next enrollment period. Put an easy-to-find “in case of emergency” card in your wallet next to your health insurance card that makes your preferred hospital visible to first responders or other helpers. Also, list your primary care doctor’s and your health care power of attorney’s contact information. Finally, make sure the person you designate as your health care power of attorney has access to your insurance and physician network information so he or she can guide your care more affordably if you’re incapacitated.
  • Non-emergency: If your doctor is recommending a particular in-hospital or outpatient procedure in the coming weeks or months, you’ve got time to plan, so do it. Query your physician or his or her billing department about the cost of the procedure and what other practitioners (such as an anesthesiologist) might be involved. Then spend equal time speaking with your insurer about what you’ve learned and how extensively the procedure in question will be covered. Make sure you understand if your insurer covers the procedure on an inpatient (hospital) or outpatient (office) basis – some insurers are reportedly cutting back on outpatient coverage.

Know your deductible. The latest annual Kaiser Foundation employer health benefits survey indicated some whopping figures for health care deductibles – the out-of-pocket total you have to pay before the bulk of your health coverage kicks in. For example, if you have a $3,000 deductible that you haven’t touched this year, that’s the initial out-of-pocket amount you’re going to have to pay for any big procedure. Keep that figure in mind as you continue your research on medical options. That’s why it’s important to keep such amounts in an emergency fund or, if you have the option, set aside in a health savings account (https://www.irs.gov/publications/p969/ar02.html) where you can keep funds not only for the deductible, but for other potential out-of-pocket health costs.

Review bills closely. One recent study has reported significant errors in medical bills, particularly for hospital stays. Keep in mind that the price-comparison exercise doesn’t stop on the way in to a procedure. You need to keep an eye on pre- and post-procedure bills from practitioners, hospitals and your health insurer for accuracy. If you see an error, contact the appropriate party or parties immediately to correct the problem.

Bottom line: There are very few industries going through as much change as healthcare. Universal coverage is good, but it’s important to know exactly what it pays for before you need it. Set aside time to think through your health issues and do your research to help reduce healthcare costs that can impact your overall budget. Learning to save money now can preserve your budget later.

 

By Nathaniel Sillin

 

The FTC Gets Rachel the Robocaller… Again

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Have you gotten pre-recorded sales calls from Rachel from Cardholder Services? Or Bank Card Services or Credit Assistance Program? You’ve been reporting these illegal calls, and the FTC continues to take action.

Recently, the FTC and the state of Florida announced a lawsuit against Life Management Services, a company that the FTC says is behind hundreds of thousands of these calls.

According to the FTC, Life Management Services swindled people out of their money by offering two types of phony debt relief: credit card interest rate reduction services and credit card debt elimination services. The company promised lower interest rates or government funds to pay off debt, and asked people to make initial payments ranging from $500 to $20,000. But almost no one got the help that was promised.

This is one of six recent FTC cases that focus on illegal robocalls. How does the FTC build these cases? One critical tool is the FTC’s honeypot — a large bank of phone lines designed to attract robocalls. That lets FTC investigators interact with robocallers, record the calls, and make undercover purchases. The FTC uses its honeypot to identify companies placing illegal calls and collect evidence of their illegal activities. It was particularly useful in the Life Management case announced recently.

So, what do you do if you get another unwanted robocall?

  • Hang up. Don’t respond in any way. Pressing buttons to get you taken off a list could result in more unwanted calls.
  • Block the caller’s number. You have a few options for blocking unwanted calls, including call-blocking devices, mobile apps, cloud-based services, and services provided by your phone carrier.
  • Report it to the FTC at www.donotcall.gov or 1-888-382-1222.

Read on for more info and tips about robocalls.

by

Andrew Johnson
Division of Consumer and Business Education

Silver and Golden Opportunities?

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You may have seen TV ads that claim buying gold is an easy way to earn easy profits, or build a safe retirement investment. While buying gold might help diversify your investment portfolio, is it always a good way to build your retirement? Or might it be an investment scheme disguised as a golden opportunity?

According to a complaint filed by the FTC, DiscountMetalBrokers, Inc. advertised itself as a legitimate seller of gold and silver, yet failed to deliver on its promises. In national TV ads, the company portrayed gold as a safe retirement investment, urging people to be “smart investors” and “protect themselves” because “in today’s economy, you need to own gold and silver.” DiscountMetalBrokers, Inc. then flashed their toll-free number for people to call.

Here’s what the FTC says happened next: once people called, the company asked callers to pay a deposit by check or credit card. They then told callers to send the balance of the money by check or wire transfer. The FTC says that, even though company employees reassured people their orders would ship soon, hundreds of people never received the promised gold or silver. Plus, they lost the money they paid to the company.

If a seller presses you to wire money, that’s a sign of a scam. And, if you’re thinking of investing, learn about what questions to ask and what to avoid.

Have you spotted a scam? Report it to the FTC.

by Cristina Miranda
Consumer Education Specialist, FTC

A False Appeal to Your Sense of Charity

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If you get a call asking you to give to a charity, you might be tempted to say yes without a second thought. But as with any call you get from someone asking for money out of the blue, pause and do some research to avoid fraudsters who try to take advantage of your generosity.

Unfortunately, there are for-profit companies — like American Handicapped and Disadvantaged Workers, Inc. (AHDW) — that pretend to be charitable organizations and lie about how they use donations. The FTC sued AHDW for deceiving people — and shut them down.

Here’s the story: AHDW’s telemarketers called and asked people to donate — either by giving money or buying overpriced household products from them. These telemarketers, often falsely claiming to be disabled themselves, implied that most of the money raised would be used to pay wages to disabled employees at the company. And as a bonus, people were told they’d get a free gift in the mail for donating.

In reality, most of the telemarketers weren’t disabled, and only a small portion of the company’s earnings were paid to AHDW’s few disabled employees. And those free gifts people got in the mail? They came with invoices, followed by harassing calls demanding payment for products people never ordered.

If you get a call about buying overpriced products to support a charity:
•Do some research. Confirm an organization is really a charity before committing to spend extra money. That “charity” might be a for-profit company trying to trick you into overpaying for things you routinely buy. You can search for names on this list of tax-exempt organizations from the IRS, or check with the BBB or your state Attorney General.
•Don’t pay for unordered merchandise. You can keep any gifts you get in the mail from a charitable organization that asks for contributions. If you didn’t order it, you don’t have to pay for it — even if someone sends a bill or calls you saying otherwise.

It’s legal for charities to call and ask for donations, even if your number is on the Do Not Call Registry. But it’s against the law for telemarketers to imply they’re from a charitable organization when they’re not. For more tips on spotting a charity scam, check out the FTC’s article Before Giving to a Charity.

by Aditi Jhaveri
Consumer Education Specialist, FTC