Is it Better to Pay Off Your Mortgage or Invest?

When it comes down to it, this is not a simple or straightforward question.

There are so many variables that you really need to whip out a calculator, talk to your CPA, visit a financial planner and/or retirement specialist, and so on and so forth.

It also depends on your mortgage rate, your tax bracket, how much you owe on your mortgage, what type of mortgage you’ve got, the term, how long it will take to pay it off, etc.

Does your employer provide a 401k match? Is your money better off in another type of retirement account? Do you have other high-APR debt? How much do you need to set aside for a rainy day?

Mortgages have a lot of desirable qualities that make them the best debt to carry. For example, very few loans come with extremely low fixed interest rates that are tax deductible and amortized over a long period of time.

So if there was ever a loan to hold onto, a mortgage would be it, especially with rates where they’re at now.

If we assume inflation picks up in coming years, your existing mortgage becomes even more attractive to hang onto, as opposed to paying down, seeing that the debt will be paid back in cheaper dollars from the future.

If rates happen to go down, you have the option to refinance to a lower rate, which also provides flexibility. And if you invest money early on instead of paying down your mortgage, your gains can be exponentially better.

Finally, there’s also the emotional element. Some folks like the idea of being debt-free, for better or worse, financially. Not everyone likes to invest in complicated securities or even seemingly benign blue chip stocks, so their goal might be to eliminate the debt overhang as quickly as possible.

In either case, it’s always smart to set aside some readily accessible funds in the case of an emergency, or even to replace your roof or handle some other household repairs.

The key is really finding a balance. There’s no rule for how much you need to pay other than your payment due. You can make an extra payment here and there or look into biweekly mortgage payments, or just pay on schedule and spread your money around as needed/desired.

Here are some pros of both options:

Pros of Paying Off the Mortgage

  • Pay less interest
  • Own your home free and clear faster
  • Get rid of mortgage insurance
  • Gain more home equity
  • If rates fall and you refinance, lower LTV = lower interest rate
  • You can sell your home more easily
  • Less risk of losing money in the stock market or elsewhere
  • Less work
  • No debt at retirement
  • Peace of mind

Pros of Investing Instead

  • Mortgage rates will never be this low again
  • Long-term low fixed rate a great deal
  • Mortgage interest deductible
  • Money remains liquid
  • Investment gains can exceed return on mortgage
  • Investing early can make for greater long-term returns
  • Ability to diversify your investments
  • Contributions to retirement account may be more beneficial
  • Inflation makes mortgage balance cheaper in the future
  • Home could lose value
  • Avoid throwing good money after bad if underwater on your mortgage

If you're interested in refinancing or applying for a new mortgage, contact my office at 702.331.8185. 

What Credit Score Do You Need to Qualify for a Mortgage?

If you’re thinking about purchasing a new home or refinancing your existing mortgage, you should know that your credit score is hugely important.

Banks and mortgage lenders use your credit score(s) to evaluate your creditworthiness, which translates to a higher or lower mortgage interest rate, and even determines eligibility.

Which Credit Score Do Mortgage Lenders Use?

First and foremost, you might be wondering which credit score mortgage lenders use, seeing that there’s no sense focusing on something they won’t actually look at to determine your creditworthiness.

The short answer is FICO scores, which are the industry standard and relied upon by just about everyone.

There are three FICO scores you need to be concerned with, including one from Equifax, one from Experian, and one from TransUnion, which are the three main credit bureaus.

Know Your Credit Scores Long Before Applying for a Mortgage

Before you actually head out to get a mortgage, it’s good practice to view your credit scores long before you apply. I’m talking several months in advance because any necessary credit score changes/improvements take time.

For example, any mistakes (or legitimate issues) holding your credit score down may take months to get cleared up. And you won’t want to leave anything to chance.  Yes, the credit bureaus are bureaucratic, so nothing happens all that quickly.

Also, be sure to go with a service that allows you to see all 3 credit scores, as mortgage lenders typically pull a tri-merge credit report, which includes credit scores from all three bureaus.

The bureaus each report information a little differently, so knowing just one score won’t do you (or your lender) much good.

As far as lenders are concerned, it basically allows them to triple-check your credit before making the decision to hand over a large sum of money.  They use the mid-score for pricing/qualification, so it’s imperative that all 3 credit scores are in tip-top shape.

For example, if your credit scores are 650, 680, and 720, a mortgage lender would use the 680 score, which is a decent but below-average credit score.

Lower Credit Score = Higher Mortgage Rate

Put simply, a lower credit score will lead to a higher mortgage rate, and vice versa. This all has to do with risk. The lower your credit score, the higher the chance you’ll default on your mortgage, at least that’s what the statistics say.

So if your credit score is too low, you probably won’t even get approved for a mortgage. Lenders simply won’t want your business. It’s just that risky.

Lately, banks and lenders have become even more stringent, requiring higher credit scores than they have in the past.

Credit Score Below 620 Considered Subprime

As far as conventional mortgage loans go, a credit score below 620 is typically considered subprime, meaning you’ll have a difficult time qualifying for a mortgage, and if you do, you’ll receive a subprime mortgage rate.

In general, you want a credit score above 720 to avoid any negative pricing adjustments, but a 760 credit score might be the new rule if you want the best possible terms and lowest rates. If you’ve got excellent credit, you can even get a reduced mortgage rate.

In summary, your credit score is probably the one thing you have complete control of, whereas things like job, income, and assets can be at the mercy of external forces. So do your best to strive for perfection in order to get the best deal on your mortgage.

Some Useful Credit Tips for Those Shopping for a Mortgage

  • Credit scores are the single most important factor in determining your mortgage rate
  • Aim for a 760+ credit score to get the best pricing and to avoid scrutiny
  • Credit scores aren’t everything, what’s on your credit report matters as well!
  • Know the contents of your credit report and what your scores are long before your lender does
  • Any mistakes or missteps can be corrected, but take time, often several months!
  • The FHA now requires a minimum credit score of 500, or 580 if you put less than 10% down
  • Conventional loans generally require a minimum credit score of 620
  • Credit scores below 620 are considered subprime and will be priced much higher
  • Lenders pull all three of your credit scores and use the median score for qualification
  • Low credit scores can also disqualify you for certain loan programs and/or limit your options
  • Don’t mess with your credit before or during the loan application process!

Why the Parent Team Made the Move to Supreme Lending

As a seasoned mortgage professional, it is extremely important to me that I leave a lasting impression on my community. My mindset is that every day is an opportunity to grow—not only in my career, but also in my own development. It has always been my honor to be a stepping stone in others’ lives on the road to accomplishing their goals, and my career has enabled me to do that in a big way. With almost twenty years of experience, I have had the opportunity to work with an array of clients, including first-time homebuyers, high net-worth individuals and local heroes such as: our beloved veterans, police, firefighters, teachers and medical workers. Being that no one transaction is the same, the exposure to such a vast assortment of scenarios has given me a level expertise that allows me to handle any situation.

In such a dynamic industry, it is an obvious understanding that an open and creative mind will generally succeed; so personally, I believe that my duty is to always keep an adaptive perspective. Because of that, I have made it a point to work with some of the greatest minds in the industry, including David Silverman, Rick Ruby, Todd Scrima and Josh Sigma. Influences such as theirs’ have helped pave my career path and push me to create one of the top mortgage origination teams in the country.

With that being said, I personally have made it my goal to pay it forward by serving my clients and helping them realize their dreams. So less than a month ago, the Parent Team made a ground-breaking decision to relocate to Supreme Lending. To say the least, it was not an easy choice. Personally, I grew to admire and truly respect NFM Lending’s CEO Mr. David Silverman and his humble approach to leadership. In the amount of time that I was there, I can honestly say that I not only became a better loan originator, but I also grew as a leader. Coincidentally, that is the reason that my team and I made the decision to start fresh with Supreme Lending.

My career has always been about creating lifelong relationships with my clients and referral partners. However, I quickly realized how unique the Las Vegas market was when I began having to turn away clients to other industry professionals. Not only was that not good for business, it prevented me from doing what I love. It is evident that my number one motivation is to help others, and that is exactly what this company allows me to do. Each region of the country demands very different things when it comes to real estate, and based on location, demographic and the overall demand of the community, specific companies have the ability to be very impactful in targeted areas. Las Vegas, Nevada—as a whole—is somewhat of a niche market, and it requires mortgage options that are tailored to its residents. As a nationwide top twenty-five company, it is obvious that Supreme Lending understands this. They are built on a foundation that boasts remarkable leadership and innovation, and they are able to provide the loan products that my team and I need to be able to serve our community to the fullest extent.
I am lucky enough to say that I have had many great experiences throughout my career, and each step has helped me grow immensely. So personally, it is difficult to express the full level of my excitement to start this new venture.

P.S. We are moving offices, too. Come check out our new location at: 5598 Fort Apache, Las Vegas, Nevada, 89148.

Derek Parent


Buying a Home When Your Partner Has Bad Credit

You pay all your bills on time and you work hard to earn more — so you can save more. Your credit score reflects your savvy money management skills, and you can proudly boast that you’re a member of the 730-and-up club.

Your partner? Not so much. Whether due to past actions or financial mistakes they’re currently working to correct, your love’s credit score is not something to write home about.

What’s a committed couple ready to settle down into a place of their own to do?

Before giving up on dreams of home ownership, take a look at the following options and determine what path makes the most sense for the two of you.

Ask why your partner’s credit score is low

Before trying to beg and plead with a lender to just give you the loan, ask why your partner’s credit score is less than stellar. If in the end you can chalk a bad credit score up to a mountain of consumer debt, you both might need to take a step back.

Buying a home isn’t a requirement — it’s an important decision, but it’s a big one — and trying to force the situation while one of you faces dire financial straits is a recipe for monetary disaster.

Step one: develop a debt repayment plan. Step two: look into home ownership later, when you each carry smaller liabilities.

If your partner has “bad” credit due to long-past transgressions, you each may benefit by taking action to improve their score before applying for a home loan. Start with these tips to boost a credit score (and score a better interest rate on that mortgage):

  • Check credit reports, look for mistakes, and correct errors if necessary
  • Make all future payments on time and in full
  • Keep your credit utilization ratio low (which means don’t run up a balance of $499 on a card with a $500 credit limit, even if you pay off that balance in full every month!)
  • Leave old accounts open, but don’t use them

Make the mortgage your own

Ready to buy a house now? It may make more sense to apply for a loan on your own instead of going in jointly with your partner.

Keep in mind that lenders look at your entire financial picture to determine whether you qualify. That means your own income, assets, and credit-worthiness need to meet the lender’s requirements without any help from other sources.

Before running down this road, ensure the monthly payments and other costs associated with home ownership are ones you can shoulder with your income alone.

While no one wants to think about worst-case scenarios, it’s your name on the dotted line — and you’re the one responsible for paying the mortgage if the two of you ever split up.

Plead your case

Although mortgage lenders may seem like faceless entities incapable of deviating from their set processes, there is room for you to explain your situation and provide all the facts.

If you can show your partner’s bad credit is due to factors that will not impact your reasonable ability to repay the home loan, the lender may approve a joint application despite a low score on one end.

Ask if you can write a letter of explanation for a low credit score. If the lender says it will consider your explanation, provide as much documentation to back up your reasons as possible. Consider including explanations and documents to show how, together, you and your love can reasonably make your monthly payments on your potential loan.

Consider a co-signer

If none of the above solutions works for your situation, you can consider asking someone to co-sign the home loan with you. Another person with a good credit score, sufficient income, and low debt-to-income ratio can help you qualify for the mortgage you want.

But you shouldn’t consider this option lightly. That other person will be financially responsible for the loan if you default.

To put it simply, co-signing can come with a lot of baggage. If co-signing makes sense for you, it’s an option — though you might want to think about other options first.

Love is blind, but mortgage lenders may not be so forgiving (or, well, blind to the realities of your financial situation). That doesn’t mean buying a home is out of the question, but do your research first.

If you can find a workable solution, take action and make your home-owning dreams a reality.

And if you both need to take some time to repair that bad credit score? Do that, and rest easier knowing your financial ducks will be in a row before you take on a mortgage.


4 Misconceptions about Real Estate & Capital Gains Tax

Walking away with a profit on your home sale is an exciting proposition. But there’s one thing that can suck the excitement right out of such a positive financial move:the threat of taxes on your investment gain — otherwise known as the dreaded capital gains tax.

Luckily, the Taxpayer Relief Act of 1997 helps many homeowners hold on to the gains earned on their home sale. Pre-1997, homeowners could only use a once-in-a-lifetime tax exemption of up to $125,000 on a home sale, or they would need to roll their earnings into the purchase of another home. Today the rules aren’t quite so stringent. As with all tax-related things, there are plenty of exceptions and loopholes to be aware of. So let’s break down a few misconceptions about capital gains and home sales.

Tax treatment: House flippers vs. homeowners

One common misconception when it comes to capital gains tax on real estate is that all home sales are treated equally. Unfortunately for house flippers, that’s simply not the case. To receive the best tax treatment on your gains, you must have used the home as your primary residence for two out of the five years preceding the sale. If the home was not used as a primary residence for the required time, profit on the sale is taxed as capital gains. However, for those who flip houses on an ongoing basis, homes are considered inventory instead of capital assets, and the profit earned is taxed as income. Long-term capital gains tax is 15% for most people, 20% for those in the top tax brackets. However, if the gains are taxed as  income, rates could range from 10% to 39.6% depending on the rest of your income. In addition, house flippers aren’t allowed to simply avoid the tax by rolling profits over into their next home purchase.

Exemption limits: Filing married vs. single

While the Taxpayer Relief Act did away with the once-in-a-lifetime tax exemption of $125,000, exemption limits haven’t completely fallen by the wayside. Now you can pocket up to $500,000 of each home sale profit tax-free if you’re married, or up to $250,000 if you’re single. But for some newly married couples, claiming this exemption can be a little tricky. If one person owned the house for the past two years, but their partner wasn’t added to the title until, say, the last two months, that’s OK. However, both parties must have lived in the residence for two years prior to the sale — even if only one was on the title before they were married. In addition, if one person sold a previous home within the last two years and cashed in on an exemption, the couple will have to wait until they are both out of that two-year window before pocketing any gains from their shared home.

Type of home: Primary residence vs. vacation home or rental property

If you aren’t flipping homes, but you do have a second home or a rental property you’d like to sell after living there for the required two years, it won’t be treated as a primary residence for tax purposes. Second homes and rental homes no longer receive the same tax shelter they did before a 2008 shift in the tax code — even if the home becomes your primary residence for a time. Instead, when tax time comes around, you will owe a prorated amount based on the number of years the property was rented out or used as a second home after 2008. If, for instance, you used your vacation home as your primary residence for five years starting in 2010, but you used it as a vacation home for 15 years before that, only 10% of the gains would be taxed: The two years post-2008 when it was used as a vacation home equals 10% of the total 20 years of homeownership. The rest of the profit wouldn’t be taxed as long as it fell within the exemption limits.

Profit: Large sale price vs. small sale price

Another common misconception is that the more a home sells for, the larger the tax bill will be. However, for tax purposes, what you owe doesn’t depend on the sale price — it’s based on how much profit you make from the sale. In fact, you could sell your home for $5 million and not owe a penny in taxes — as long as you didn’t make more than the allowed exemption amount on the sale.

Another important thing to note: Capital gains tax on real estate isn’t necessarily an all-or-nothing proposition. If you’re nearing the cap on exemptions, you could still qualify for a partial exemption — just be sure to consult a tax professional before you make any big moves.


The Truth About Bi-Weekly Mortgage Payment Plans

Traditionally, your mortgage payment is a monthly cost. You submit your payment once a month to the mortgage company, and your money is applied to principal, interest, and escrow. But many mortgage lenders also offer biweekly mortgage payment plans that allow you to pay in installments every two weeks instead of every month. Biweekly payment plans sound simple and straightforward: You pay biweekly instead of monthly and reduce the balance on your loan faster. In theory, by using one of these plans, you pay less interest over time, build equity faster, and get rid of your mortgage ahead of schedule.

But before you sign up for a biweekly mortgage payment plan, it’s important to understand the pitfalls — and consider whether putting this concept to work on your own makes more sense.

Should I sign up for a lender-sponsored biweekly mortgage payment plan?

Unfortunately, these mortgage payment plans don’t always work as well as they claim. What actually happens is that you send in your biweekly payment to the company servicing the loan, and then they hold your payment until the second one arrives. Only after the company has the full monthly payment amount do they apply the money to your mortgage — which means as far as the mortgage company is concerned, you’re still making one payment per month.

In effect, this saves you nothing in interest because your funds are still only being applied as if you were making monthly payments. Worse still, some biweekly mortgage payment plans can actually ending up costing you more money, because the companies that offer these plans often charge additional fees to handle and deliver the payments for you.

If they don’t help pay off a mortgage early, why do these payment plans exist?

Considering the potential costs for the borrower, it may seem silly for lenders to even offer this plan. What’s the point if using the payment plan is no different than if you paid on the regular monthly schedule? Consider this: Most lenders who originate loans don’t actually service those loans. A third party handles the payment and the processing. But that doesn’t mean you can’t make a plan to pay down your mortgage loan ahead of schedule. You just don’t need to set it up through a lender-originated plan.

How can I pay off my mortgage early on my own?

There’s nothing wrong with the idea of paying extra on your mortgage and accelerating the rate at which you pay off the loan. You can make extra payments at any time, and you can do so in a variety of ways. Consider adding a little more to each monthly payment you make to help pay off the mortgage early. If you know you have an extra $100 in your budget each month, tack that on to your payment. For example, on a $100,000 loan (assume a 30-year fixed mortgage and 4% interest), paying an extra $100 a month can cut approximately 8.5 years off the life of the loan — and save $22,463.76 in interest. That’s some serious cash.

Another option? Create your own biweekly payment plan. By skipping the third-party processing (and the fee they add on for doing so), you’ll end up making an extra payment each year that you wouldn’t make if you paid monthly. You can also continue to pay monthly but make one extra mortgage payment at some point during the year to get the same result. Anytime you have extra money on hand — from a tax return, bonus from work, or gift — you can apply these funds to your mortgage too.

Just be sure that any extra payments you make are applied to the principal of your loan, not just the interest. This ensures you’ll actually receive the full financial benefit of paying extra toward your mortgage and be on track to pay off the loan early. You’ll also want to ensure that the terms of your mortgage will not leave you with a prepayment penalty should you pay extra or early.


10 Questions to Ask Your Mortgage Lender

One of THE MOST important stages in the home-buying process is finding a reputable lender or mortgage broker to handle your transaction. A good lender will respect that you work hard for your money — and you want to spend it wisely.

After running a credit check, your lender will present you with options for what you may qualify to borrow. The mortgage amount can be different depending on two things: the product and interest rate. Since the interest rate determines what you’ll owe every month on that balance, understanding how different mortgage products work is key. Here are 10 questions to ask to make sure you’re getting the best rate (and the best deal).

  1. What is the interest rate?

Your lender will offer you an interest rate based on the loan and your credit. The interest rate, along with the mortgage balance and loan term, will determine your real monthly payment. A loan with a lower balance or a lower interest rate will make for a smaller monthly payment. If you’re not satisfied with the interest rates offered, work to clean up your credit so you can qualify for a lower interest rate.

  1. What is the monthly mortgage payment?

As you develop a budget for your new home, make sure you can afford this monthly mortgage payment — and be sure to include insurance and taxes in your monthly payment calculations. And don’t forget about short-term financial goals — say, saving up for a vacation or buying a new computer — and long-term retirement goals to consider. Your monthly mortgage payment shouldn’t be so high that your money can’t work toward your other financial goals.

  1. Is the mortgage fixed rate or an ARM?

Fixed-rate loans keep the same rate for the life of the loan, which can range between 10 and 30 years. Adjustable-rate mortgages, or ARMs, have interest rates that change after an initial period at regular intervals. If you don’t plan to stay in your home long-term, a hybrid ARM with an initial fixed-rate period may be a better choice, since this type of loan tends to have lower interest rates than fixed-rate mortgages.

If you do consider an ARM, make sure you ask (and understand!) when the rate will change and by how much. Ask how often the rate will change after the initial interest rate change, the index that it’s tied to, and the loan’s margin. There are usually caps to how much the interest rate can increase during one period and over the life of the loan, so recalculate the monthly payment to make sure you can afford that higher rate.

  1. What fees do I have to pay?

One-time fees, typically called “points,” are due at closing. For every point you pay, your lender will decrease your interest rate by 1%. You can also inquire about whether you might have the option of paying zero closing fees in exchange for a higher interest rate.

  1. Does the loan have any prepayment penalties?

If you’re saving up to make some extra mortgage payments to pay off your mortgage principal early, you may have to pay a fee. Don’t forget to ask this important question.

  1. When can I lock in the interest rate and points, and how much does this cost?

Your lender may be able to lock in your interest rate for a time, and for a fee. If rates go up, you’ll still be able to benefit from a lower rate on your mortgage.

  1. What are the qualifying guidelines for this loan?

The underwriting guidelines are different for every loan, as are income and reserve requirements. Along with requiring you to have sufficient funds for the down payment and closing costs, most mortgages require proof of income and reserves of up to six months of mortgage payments.

  1. What is the minimum down payment required for this loan?

Different loan products have different down payment requirements. Most mortgages require a 20% down payment, but if you qualify for an FHA loan, for example, your down payment could be as low as 3.5%. In general, loans with lower down payments cost more.

  1. Do I have to pay for mortgage insurance, and how much will this cost?

Putting down less than 20% on your purchase requires paying mortgage insurance until your loan-to-value, or LTV, ratio falls below 80%. Mortgage insurance premiums can be expensive, sometimes costing up to $100 per month for every $100,000 borrowed.

  1. Do you have other mortgage products with lower rates that I qualify for?

The best way to comparison-shop is to start with your current lender. They probably offer more than one type of loan, and these may have terms better suited to your financial situation.


5 Ways to Use a Mortgage Calculator

Whether you’re hoping to buy or planning to sell, a mortgage calculator can give you some valuable insights. Here are five questions a monthly mortgage calculator can help answer to make you more savvy about home buying.

Should you rent or buy?

There’s more to being a homeowner than just swapping a rent payment for a mortgage payment. You’ll have to consider additional costs like property taxes, and depending on your loan, you also may have to factor in fees like private mortgage insurance (PMI) — all of which can be estimated by a mortgage calculator. It’s a good way to compare the total cost of renting with the realistic costs of buying.

Is an adjustable-rate mortgage (ARM) right for you?

One way to keep a mortgage payment down and still get the house with all the bells and whistles is to choose an adjustable-rate mortgage with an interest rate lower than a fixed-rate loan’s. There are some risks involved, however: With an ARM, your payment could spike if the interest rate adjusts. With a mortgage calculator, you can see how interest rate assumptions can impact your monthly payment, and the total interest paid over the life of a loan with an ARM versus choosing a fixed-rate loan.

Can you cancel your PMI payments?

Private mortgage insurance is an additional cost for most buyers who don’t put down at least a 20% down payment. To stop paying this fee every month, you must owe less than 80% of the value of your home. You could qualify by either paying down your loan or seeing enough appreciation in your home to meet the threshold. A monthly mortgage calculator can help compare your home value with the loan amount and determine when you meet the requirements to request cancellation of your PMI payments.

Can you afford to pay off your mortgage early?

To find out, use a loan calculator to play around with the numbers. Plug in your original loan amount, interest rate, and date the loan was issued. Then include the amount you think you can add to your current monthly payment to determine how quickly you might be able to own your home outright.

Should you refinance?

A lower interest rate is usually a good thing, but depending on the amount you owe and the time remaining in the life of the loan, refinancing may end up costing you more than staying the course.

If you would like answers to these questions and more without using a mortgage calculator, contact my office at 702.331.8185. 

Will a New Bill in Congress Help You Qualify for a Mortgage?

A new bill in Congress could significantly impact your ability to secure a mortgage by changing the way lenders look at credit scores.

Known as the Credit Score Competition Act, the bill is in its first stage of the legislative process. Although it’s a long way from becoming a law, future homebuyers have good reason to keep an eye on this bill. The bill would push for a new credit-scoring system, one that could potentially allow more buyers to secure funding. This is a big deal for those who have a low FICO credit score but are otherwise good home-loan candidates.

People with credit scores that do not meet FICO’s standards of “good” or “excellent” could be evaluated under different credit-score systems and therefore have their credit rated differently. In theory, this could help those buyers receive approval for a mortgage they might otherwise have missed out on. Because Fannie Mae and Freddie Mac own about 90% of the secondary mortgage market, and they’re allowed to consider only FICO scores, there’s no room for competition in the credit-scoring industry.

With such low competition, there’s no reason for companies to innovate.

This matters because not everyone has access to traditional forms of credit that beef up your FICO credit score (think steady income, bank accounts, assets, and months of credit-building history). Proponents who argue Fannie Mae and Freddie Mac should be allowed to look at new credit-scoring systems say FICO’s way of formulating credit scores is unfair to a number of groups, including first-time homebuyers, lower-income families, and minorities. The model currently used to score borrowers is based on data from nearly 20 years ago and excludes millions of people that companies like Experian say are creditworthy but whose scores don’t reflect that under the system in place today.

Credit-scoring models currently used in the residential mortgage process judge someone’s creditworthiness on a strict set of criteria but leave out factors that may indicate financial responsibility. For example, right now, FICO generally doesn’t take into account factors such as whether you pay your rent on time. Sometimes, that’s the only way first-time homebuyers can demonstrate they’re capable of handling a monthly mortgage payment. The current credit-scoring model also effectively punishes borrowers who don’t have much of a credit history; a short or nonexistent credit history can drag down overall scores. With this system, if you’re financially responsible, a diligent saver, and debt-free, you could still miss out on a mortgage because you don’t utilize credit in your day-to-day life.

Stay tuned to Credit Score Competition Act’s journey through the legislative process!

Should You Combine Finances with Your Partner?

Depending on who you ask, combining finances with your significant other is either a positive step towards establishing a life together OR the worst idea ever. If you’re considering it, here are some pros and cons to weigh.


If you’re on the same page and your financial priorities are fully aligned, you’re likely looking beyond your own personal needs and wants and putting the needs of the relationship first. By combining all your assets and liabilities, you’re ultimately making the commitment to succeed or fail together, as a unit.

One of the benefits of joining accounts is that it makes bill paying and record keeping a whole lot easier (particularly if you’ve established a budget).

Furthermore, combining your loan accounts, such as credit cards, could help you get additional loans in the future.

And if you’re making consistent, timely payments, both of your credit scores will improve. If you had kept that credit account separate, only one of you would have the benefit of a higher score, which could hurt you down the road when you apply for additional credit.

Sure, filing separate returns may be beneficial in some instances. (For example, if one spouse has large medical bills and can meet the deduction threshold by considering only his or her income.)

But joint filing saves time, and possibly money, too — particularly if you both work and one of you makes considerably more than the other. Combining incomes could bring the higher earnings into a lower tax bracket.

Also, some tax credits are only available to a married couple when they file jointly. Talk to your accountant for additional information about minimizing the tax bite.


Some couples may not agree on certain issues, like creating a spending/saving plan, setting retirement goals, or even how much debt they should carry. After all, opposites do attract, and in many relationships, there is, in fact, a spender and a saver.

If your financial philosophies don’t align, and you’re combining your financial life with someone who has vastly different expectations, goals, systems, ideals and habits, this could bring challenges and unwelcome relationship conflict.

If you’ve been managing your money on your own for years, and have been relatively successful in doing so (from choosing your 401K funds to setting a budget to planning a vacation), you may not want to relinquish your financial autonomy.

Sure, there may be more bookkeeping for you to do if you keep your finances separate, and opt for more of a yours/mine/ours account type arrangement (commonly referred to as the “three pot system”), but it may ultimately provide you with the independence and comfort you desire.

You may be in la la land now, but what happens if the relationship doesn’t work out in the long run? Joint mortgages, credit cards, and bank accounts can be very difficult to separate, even with a formal court-ordered divorce decree.