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Myths The Credit Bureaus Want You To Believe  - Part III

-By Terrence Tormey

"Knowledge is Power"

Myths The Credit Bureaus Want You To Believe - Part II

-By Terrence Tormey

Myth No. 4 – The credit agency permits a 100-word paragraph to be entered on an account to explain the situation. Creditor’s take this statement into consideration when they’re weighing they’re options about extending credit.

This seems reasonable, but it’s not correct. When we talk about creditors, we’re talking about companies who are loaning money – for credit cards, mortgages, cars, department store credit cards. Very few of these companies will consider any information you submit in a paragraph explanation. The only items verified on the statement are the negative items on your report.

The first thing we want to delete from your credit file would be the 100-word explanation. In essence, the explanation is seen as an admission of guilt. It’s actually the last thing you want to do. It verifies that something happened. You don’t want to do that.

Myth No. 5 – Paying off a past-due account (like a collection account or a charge off) will change your account to a "paid" status and it will no longer reflect negatively.

It is nearly impossible to completely fix your credit unless you settle your unpaid debts. However, as strange as it may sound, paying off a debt can have a negative impact on your credit rating. Aside from bankruptcy, which can appear on your credit report for up to ten years, negative items may be kept on your report for up to seven years. The date of last activity starts the 7 or 10-year time period. Making a payment “resets” the clock because it is considered new activity. So if this item was two years old, when you make a payment on the collection, the two years are wiped away and you start at day one again. It appears to the credit scoring computer as an item that happened yesterday.

Anything that happened yesterday affects your credit score more than something from two years ago does. This will damage your report, as it looks like the credit bureau forced you to pay up. Since you can do more harm than good, even though your intentions are right, it is always best to work with a professional when trying to restore your credit.

Myth No. 6 – Some people believe that a poor credit report can be off-set by building new credit.

Even one negative item on your credit report can have serious negative consequences. In today's computer world, the decision to approve a new loan is rarely made by a human being. Your score is determined by a computer program. One negative item can send interest rates soaring.

You can have a small amount of negative credit a year or two ago. The last year or two has been great. A couple of those older accounts, regardless of how much good credit you now have, can cause you to be declined for additional credit, make you pay higher interest rates and waste thousands of your hard earned dollars.

Myth No. 7 – Credit bureaus are part of the government and are unquestionable.

The credit bureaus are in business to make an impression on their stockholders since they are publicly traded companies. They are NOT agencies of the government. In fact, the industry is one of the most heavily regulated. It has recently been revealed in a survey, by an independent group, that over 70% of all credit reports have an error on them. Due to the prevalence of mistakes, consumer protection legislation has been drawn up which allows the consumer the right to challenge the bureaus and force them to remove any incorrect data, information that is out-of-date or data that cannot be verified.

Terrence Tormey of "Benchmark Lending" specializes in helping release his clients from the “credit prison” that too many people find themselves in which denies them the ability to qualify for the best home and commercial mortgage loan programs and interest rates. When you or one of your friends finds yourself needing real answers and real solutions to credit issues, you can confidentially contact him at 732-993-3639 or at ttormey@BenchmarkLendingSolutionsUSA.com

www.BenchmarkLendingSolutionsUSA.com

"Knowledge is Power"

Myths The Credit Bureaus Want You To Believe

Myth No. 1 – It is easy to dispute a credit report. Consumer’s can resolve their own issues.

To be honest, it IS simple to challenge a credit report. However, as an everyday person, it’s amazingly difficult and frustrating to get results from the credit bureaus. Here’s why.

This is a little-known fact. More complaints to the Federal Trade Commission involve credit bureaus than any other type of company. The major credit bureaus have paid fines of $2.5 million over the years due to failure to respond properly to charges.

The main objective of credit bureaus is to protect their profits. They are NOT government agencies. They are for profit organizations. Anytime they have to investigate a consumer disputes it eats into those profits. Investigations take up time and energy too. The credit bureaus do everything in their power to make restoring your credit exceedingly difficult, short of sparking more massive lawsuits.

Attempting to restore your own credit means you must be willing to spend time learning about the process. This is why it is so difficult when you are inexperienced. It most cases you may be less effective than if you hired a professional. Realize that credit restoration will most likely take longer than you expected.

Myth No. 2 –A negative item that is successfully removed from your credit report will simply reappear again.

The reality is that a creditor has 30 days to verify a dispute. If the credit bureau has not heard from the creditor within that timeframe, they must delete the item from your report. Sometimes the bureaus will perform a soft delete. This is where they delete the item from your report but, will reinsert the item if they hear from the creditor within a week or two of the 30 days.

If this happens, the item can be disputed again. However, most of the time, once an item is deleted, it is gone for good. By using our preferred attorney’s, you can be sure your item will be disputed over and over again until it is removed. We have experienced a 96% success rate with this.

Myth No. 3 – Bankruptcies, foreclosures and tax liens can never be taken off your credit report.

Approached correctly, any negative listing can be removed. That is why it is best to work with a professional. They have the experience and know how to remove these items. 

"Knowledge is Power"

For most people checking their credit score is almost never done. They have always used credit wisely and have probably never been denied a loan. Long story short, they have never really had a good reason to worry about their credit score.

That is until NOW!!!

Why? Because banks are systematically lowering credit limits on credit cards and HELOCS (Home Equity Lines of Credit), even for borrowers with spotless credit records and this is negatively affecting their FICO credit scores and driving them lower.

When homeowners receive notification from their bank of a drop in their available credit, they usually don't think too much about it at first. They say to themselves that they had no plans to max out their credit cards anyway. And besides, they just got their HELOC as a financial safety net or they only used it to finance a new car at better rates with a nice tax deduction.

But what the banks are not telling them is the negative impact lowering their credit limits will have on their credit score.

As soon as a borrower's credit limit is lowered, it changes their Credit Utilization Rate, (CUR), which is a major component of their credit score. Credit Utilization Rates are calculated by dividing outstanding loan balances by the amount of credit available.

For example, if a borrower has $10,000 in credit card debt with an available credit limit of $40,000, their Credit Utilization Rate is 25%. But if their credit limit drops to $10,000, their CUR leaps to 100%.

The same thing happens when a bank freezes a HELOC (Home Equity Line of Credit).

As a direct result of the Banks reducing credit limits on credit cards and HELOCS, or in some cases closing HELOCS, millions of people who have never worried about their credit scores and who have spotless records are getting a rude surprise the next time they apply for a loan.

That's what Michael Isroff believes happened to him. He had a mortgage on his condominium in Chicago, plus a home equity line of credit with a balance of $12,000. This spring, National City froze his HELOC which had a credit limit of $100,000. National City wrote in a letter that Isroff wouldn't be allowed to borrow any more against his home's equity, and he would have to pay off the balance over time. In effect, his credit limit was reduced from $100,000 to the $12,000 that he owed.

Like most people, he didn't think too much about it at the time because he didn't really need it, it was just nice to have.

But when he went to refinance, his mortgage broker told him there was a problem. The best programs and rates were only available to borrowers with a credit score above 720 and he was two points short. He didn't know it then, but his credit score dropped overnight from 760 to 718.

And he's not alone!!!

There are millions of borrower's just like him throughout the USA who are going to be negatively affected and disadvantaged.  This will no doubt make it harder to purchase a home, rent a decent apartment, buy a new car, get insurance, buy a cell phone or even just get a good job.

What can you do about it?

Immediately go to www.AnnualCreditReport.com and request your Free Tri-Merged Credit Report showing your FICO credit scores from the three credit bureaus, Experian, Transunion and Equifax.  This free report will not show up on your credit report as an "inquiry" and it will not affect your present FICO score. Study the report carefully.  If you have any questions about what else you can do just call (732) 993-3639 and speak with Terrence Tormey from Benchmark Lending or e-mail him at ttormey@BenchmarkLendingSolutionsUSA.com.  Also, go to www.BenchmarkLendingSolutionsUSA.com to get more Free information on "Credit" and how to protect it.

"Knowledge is Power"  Act today and protect yourself and your future!!

5 BIG CREDIT MISTAKES ...DO THESE AND WILL YOU KILL YOUR CREDIT!

It's surprising how many consumers make the same credit scoring mistakes over and over again. In an effort to educate consumers on credit and credit scoring, we've compiled 5 common credit scoring mistakes into a list that defines each mistake and explains why they are bad and how to avoid them:

Credit Mistake #1: Closing Credit Cards Accounts

This is probably THE biggest credit mistake that consumers make. What you may find surprising is that closing credit card accounts can hurt your credit score almost as badly as missing a payment.

Not only is this the number one on the top five credit scoring mistakes, it's also number one on the list of credit myths.

Ironically, most consumers make this mistake based on poor advice from a mortgage lender as a strategy for improving their credit scores. A word of advice people, when you're dealing with something as sensitive as your credit and credit scores, make sure you do your homework before trusting some of these so called 'industry experts' before following through with their advice.

There are two important reasons why you should not close credit card accounts:

Why would this be a bad thing?

It's simple - you never want to get rid of old, positive information in your credit reports. This information actually helps your credit scores.

Credit scorers want to see this positive account information. They want to see your long, perfect history of making your payments on time because this information significantly helps your credit scores.

This information significantly helps your credit scores so why would you ever want that history to disappear? You wouldn't! Here's an analogy for you: let's say you made straight A's in high school. What if the record of that perfect scholastic accomplishment were permanently deleted seven years after you graduated? Would you ever want that history deleted? Of course you wouldn't. The same is true for the credit reporting environment.

So, what should you do with old credit cards that you don't use any longer?

What you don't want to do is to let the account become inactive. When this happens, the credit card companies aren't generating any revenue for your account.

Eventually they'll close the unused account because you're more of a liability than an asset. You can prevent this from happening by using the card every few months for low dollar purchases like dinner or a tank of gas.

When the bill comes in, just pay it in full. If you do this, it will ensure that the account will never be closed and you'll always get credit for your good payment history.

So how will closing unused credit cards hurt your credit score? When you close an account, the amount of available credit decreases, which could result in a higher revolving utilization and lower your score.

Let's use the example from above and close the second unused credit card account. When you close the account, you remove it from any utilization calculation and now you're stuck with one open credit card account with a $1,000 limit and a $500 balance.

This caused your utilization to go from 25% to 50%.

Remember, you divide the total balance by the total available limit so $500 divided by $1,000 is .50 or 50%. As this percentage increases, your credit score decreases.

When you're talking about several unused credit cards with high limits, you can just imagine what closing credit card accounts could do. I've seen consumers go from a 10% utilization to almost 100% utilization because they closed all of their credit card accounts except the one they were currently using.

Big mistake.

Credit Mistake #2: Missing Payments

It doesn't take a credit scoring expert to tell you that missing payments is a bad thing. The only reason I made missing payments second to Closing Credit Card Accounts is because this one is a no brainer.

It shouldn't take a credit expert to tell you that missing payments is bad. Common sense should tell you that missing payments is bad. Credit scores are designed to predict how likely you are to miss payments in the future.

This means that they look at your credit history to view how you've managed all of your credit obligations.

Missed payments is the most powerful predictor of future late payments. The FICO score evaluates previous late payments in three different layers:

How Severe - How severe is the late payment? It doesn't take a statistician to tell you that a 30-day late isn't as bad as a 90-day late. The more severe the late payment, the more damaging it is going to be to your credit scores.

Consumers who have missed payments by a few weeks and then bring their accounts current score much better than consumers that have gone 90+ days past due. In fact, a 90-day past due is the threshold that will wreak havoc on your scores.

If you are unable to avoid a late payment, the next best option is to get those accounts current as quickly as you can.

How Recent - How long ago did the late payment occur?

If you've read some of my previous articles on credit scoring, you'll know that the last 24 months of your credit history are critical because the FICO score places more emphasis on your recent credit patterns.

This means that a late payment 6 months ago is going to carry much more weight than a late payment from 4 years ago. To recover from late payments it's important that you get current and stay current.

How Frequent - How often have the late payments occurred? Consumers that miss payments frequently are penalized much more severely than those that have missed a payment here or there in their past.

If you have a tendency to make late payments your credit scores will reflect your bad habits. Make your payments on time and you'll never have to worry about losing points in this category.

Credit Mistake #3: Settling Accounts

One of the most common mistakes consumers make is assuming that 'settling' with a lender is a great way to save a little cash.

Unfortunately, they don't realize what that a 'settled' indicator in their credit reports is actually derogatory.

"Settling" is a term used in the consumer credit industry that means accepting less than the amount you owe on an account. For example, if you owe a credit card company $5,000 but you can't pay them the full amount then they will likely make you a deal for less than that full amount. They have "settled" for less than the full amount, which is likely much less than you contractually owe them.

This may seem like a good idea because you save quite a bit of money but as far as the credit scoring models are concerned, this is just as negative as other severe late payments.

The only way to avoid the damage to your credit scores is to arrange a deal with the lender to report the account as 'paid in full' as opposed to 'settled'. If they don't agree then it's in your best interest to figure out how to pay them in full or else be prepared to suffer the damage to your credit for the next 7 years.

It's also important to understand that if the account has already made it to the collection phase, the damage is already severe and settling won't really make a difference. Settling is only an option if the account has not already made it to a severe delinquency state. 

Credit Mistake #4: High Revolving Utilization on Your Credit Cards

Most consumers believe that making your payments on time is all it takes to have good credit and earn great credit scores.

What they don't realize is that almost a third of your score is determined by how much you owe on your credit card accounts. If you have high balances on your credit card accounts, you're credit scores could be severely impacted by your revolving utilization.

In order to score the most possible points in this category, I advise keeping your revolving utilization at 10% or less.

Don't be fooled when you hear some of these celebrity experts telling you that 50%, 30% or even 25% is best.

While 30% is considerably better than 50%, 10% or less is ideal. The lower the utilization percentage, the better your score will be. (*To read more about revolving utilization and how it's calculated, please read the revolving utilization bullet in Mistake #1.)

Credit Mistake #5: Excessively Applying for Credit

Whenever you apply for credit your application gives the lender permission to access your credit reports. When they pull your credit reports, it automatically posts an inquiry in your credit record. This inquiry is a record of who pulled your credit report and the date it occurred. 

Credit scoring models use inquires to determine if and when you shop for credit. Statistics show that consumers who have more inquiries are higher credit risks than those with fewer inquiries.

It is for this reason that the more inquiries you have, the more points you lose in the credit score calculation.

The exact point value of inquiries is a much argued topic and is impossible to give an exact point value because it really depends on all of the other information included in your individual credit file.

The best strategy would be to only apply for credit when you absolutely need to.

This means that you should avoid those in store offers of "10% off" in exchange for applying for a store credit card. This may sound like a great idea but the reality is that while you may save a few bucks on your purchase, those inquiries could end up costing you a lower credit score which could result in higher interest rates on auto or mortgage loans in the future.

There you have it. Now that you know the top 5 credit mistakes, you can avoid making the same mistakes that so many other consumers make.

When you are applying for a mortgage loan good credit is an essential ingredient.  In today's lending marketplace great weight is placed on your FICO credit score and your credit in general.  Gone are the days of loose loan underwriting standards and low credit score qualifying.  As lenders claw their way out from the rubble that is/was the subprime mess there will be a flight to quality.  Lenders will walk away from questionable loans with borrower's with shaky/bad credit.  That is the reality.  Knowing this then, is the key to your success.  Do not take chances with your credit.  Always work to improve your credit.  In order to get the best interest rates and loan programs available shoot for a target of 680 or higher for your mid FICO credit score.

For more information on credit improvement or questions generally related to credit or mortgage loans please contact Terrence Tormey from Benchmark Lending at (732) 993-3639 or by e-mail to ttormey@BenchmarkLendingSolutionsUSA.com and please do not forget to visit www.BenchmarkLendingSolutionsUSA.com to learn more about the loan process and to make application for your mortgage loan.

Special thanks are extended to author Edward Jamison, Esq. for his help and insight in writing this article.

I was recently asked the above question and thought to myself "how many other people are wondering the same thing."  There is a lot of misinformation circulating on this issue and as such the issue needs to be clarified.  So please read my response below and please do not hesitate to contact me with any other questions that you have.

"The credit rating companies, i.e. Equifax, Transunion and Experian have caught on to this trick.  In the past it worked to raise the score for the added party, assuming that the account was in good standing and paid on time.  However, not so much anymore.  Today the credit reporting companies are only evaluating the credit if the person is added on as a co-borrower.  As a co-borrower they are assuming responsibility for the repayment of all balances on the account.  Knowing this, if they are willing to assume such financial liability and if you are comfortable with the possibility that they can charge to that account because they are a "co-borrower" then yes this can raise their FICO credit score, assuming of course that this account is in good standing and paid on time.  If, on the other hand your account is delinquent or has a history of late payments, or other derogatory history this will also be attributed to the other party and lower their FICO credit score.  By the same token, if this person has "bad" credit and you put them on as a co-borrower then your credit card company may penalize you for the other person's bad credit and raise your interest rate.  Take the time to think this through weighing all the positives and negatives to "you" not the other party."

If you have any questions please contact me:

Terrence Tormey, Benchmark Lending - (732) 993-3639

ttormey@BenchmarkLendingSolutionsUSA.com

For More Information On Credit Evaluation in General Please Go To:

www.BenchmarkLendingSolutionsUSA.com, and click on the page links on the Home Page dealing with Credit including the Credit Resources identified therein.

The subject of this Blog arose from a question that a potential homebuyer asked.  Some additional details offered where that they believed that their credit was "bad", i.e. non mortgage late payments and unpaid consumer accounts, and they they wanted to make a downpayment of anywhere from 50-80%.  I thought that their question might approximate the position and concerns of other homebuyers out there and so I'm offering my response to this homebuyer in the hopes of addressing the concerns of other homebuyers.

"Without reviewing your present credit profile it is difficult to give you a definitive answer.  What you assume to be "bad" credit may not in fact be bad or it could be much worse.  At a minimum you need to know your middle FICO credit score.  If it is less than 580 then it is going to be very difficult to qualify for a loan even if you are going to put down a large downpayment.  Your credit profile and FICO credit score are what are going to drive the underwriting decision making for the most part and not the amount of your downpayment.  Necessarily your first place to start is evaluating your credit.  Please note that if you pay off some of your outstanding debt that may be reported on your credit report as being a "charge off" or that has been reduced to a "judgment" then this may in fact lower your credit score.  This issue must really be evaluated by a professional "before" you make application for a mortgage loan.  That said, if you make application for a loan before the credit issues are considered and addressed then you have put the "cart before the horse" possibly to your detriment.  On the issue of your downpayment, by no means should you put down more than 20% of the purchase price.  In the majority of locales within the real estate marketplace home prices are declining - some areas more than others.  By putting more money down as a downpayment you are putting more dollars into what may be a declining asset that you may never see again and which are not providing you with any income.  Your better choice is to put down the least amount of money that you can but in no event more than 20% and to invest the balance of your money in a safe and liquid investment that will pay you a market rate of return, i.e. 6% or higher.  In so doing you will also create liquidity for yourselves and increase your level of safety and security.  By way of example, in today's market if more people had more money in the bank then they could weather the storm in the event of job loss or disability, or an increased mortgage payment, etc., however, if you have less or no money in the bank then you cannot weather the storm and you chance losing your house.  The bottom line here is that you should speak with a mortgage professional that is specialized in "Mortgage Planning."  Not every loan officer that you speak with has this specialized training and knowledge."

For more Information please feel free to contact me.

Terrence Tormey - Office: (732) 993-3639 - ttormey@BenchmarkLendingSolutionsUSA.com

For an Interesting Article on "Mortgage Planning" please go to www.BenchmarkLendingSolutionsUSA.com and click on "Mortgage Planning" on the home page.

In a move to create uniformity will Fannie Mae follow the lead of FreddieMac and implement a rule that will mandate that in order to refinance a residential property that property must not have been held in the name of an LLC in the last six (6) months?  We'll see, but all signs say "Yes."  If this comes to pass then Real Estate Investors across the country will have an additional challenge when there is a need to refinance their real estate investment properties held in an LLC for liability protection...

Changes in Freddie Mac lending policy: Freddie Mac will not refinance a property that has been held in an LLC at any time in the previous 6 months. Fannie Mae is expected to follow suit. And in turn, this may require your lender to do the same.

For some of you this is may be no big deal - another change in policy to be dealt with. But for others this could cause a big problem.  So what are your options?  Well there appear to be six scenarios to consider. 

• If you are not planning to refinance your property in the next year, you can stand pat and leave the title to the property as it is. The LLC will continue to give you the benefits you expected when you set it up. Unless you have an ARM that really needs to be refinanced, you can stay with the same mortgage until you sell the property.
• Do not title new property acquisitions in the name of an LLC.
  
  
• You can retitle an existing property into your individual name and out of the LLC seven months before you set out to refinance it. Yes, you will have liability exposure during those seven months, so make sure your insurance is paid up and get an umbrella policy
• You can retitle an existing property into your individual name and out of the LLC seven months before you set out to refinance it, and put the property back into an LLC after the refinance is complete, assuming that this does not trigger the "due on sale clause" in your new Note because you have transferred a "beneficial interest" in the property to a party that was not a party to the original lending transaction and Note. Again, yes, you will have liability exposure during those seven months, so make sure your insurance is paid up and get an umbrella policy.
  
  
• You could find a lender that is willing to refinance the property inside an LLC and pay the higher interest rate.
  
  
• Or you could consider transferring the title to the property from your LLC to a trust, with the beneficial interest in the trust held by your LLC. You must, however, consult with your attorney to see if this will provide you with the same level of protection.  If you act before you consult your attorney and you are wrong this could cost you big time.  Better to be safe than sorry - so consult with your attorney!

Please note that in general real property held in trusts does not have court proven liability protection in the event of litigation and there is a risk of personal liability exposure to the real estate investor with this fourth option.

Questions remain as to whether this new rule applies to both owner-occupied and investor properties in the same way and manner.  Clearly there appears to be a difference between the two property types.  With regard to a true investment property that is designated as such on the 1003 Application it would seem to be an acceptable and prudent business practice to hold title in an LLC because this is in fact a business asset and there has been "true" and complete disclosure.  By contrast, and more problematic, a property identified as "owner-occupied" on the 1003 may in fact actually be an investment property where the owner is seeking to obtain the better financing rates for owner-occupied properties as opposed to non owner-occupied investment properties.  This is not to say that there are no legitimate reasons to title owner-occupied property in an LLC, but rather to highlight the possibility of an investor sham.  Necessarily, it seems that this new rule may well be intended to root out mortgage fraud. 

At this point in time the watch word is "be careful, be prudent and move slowly."  Consult with an attorney and make certain that you are on solid legal ground with whatever action you take.  Please note that nothing in this article is intended to be or is offered as advice of any kind, including legal advice.  Consult with your attorney and other professionals.

Terrence Tormey - Benchmark Lending - Office: (732) 993-3639 - Fax: (732) 280-6240 - terry.tormey@benchmarklending.com - www.BenchmarkLendingSolutionsUSA.com

DEVELOP YOUR "EASY NO SWEAT" PLAN FOR PAYING FOR COLLEGE TODAY IN ORDER TO MAKE IT A REALITY IN THE FUTURE

It has been said "that if you fail to plan then you plan to fail".  This is true in all aspects of life in general and in particular to planning for college for your children.  With the escalation in college tuition, prices for books, lab fees, and accommodation expenses you had better be prepared to pay a small fortune each and every year if you want your child to go to college, let alone any postgraduate schooling.  You must start planning today in order to achieve this goal and to achieve this goal with the least financial impact on yourself.  If you do not plan today then you had better be prepared to either fork over upwards of $30,000 a year or better or be prepared to tell your children that they cannot go to college because you failed to plan and therefore cannot afford it.  But where is the money going to come from each and every year?  Perhaps you will hit the lottery every year or perhaps you are relying on a "bonus" from your employer.  If either of these two things seems improbable and even silly then you must decide today to develop and implement your "College Plan" to meet these future expenses.  At Benchmark Lending we have our trademarked "College Planning Program Series,©™" to help you achieve your goal.  A little planning now will save you a lot of money and stress  in the future. 

In today's world, a college education is more important than ever. Many of the jobs that do not require a college degree have been outsourced to workers in other countries, or replaced by a computer or machine.

In addition, according to Fed Chairman Ben Bernanke, the income disparity between college grads and non-grads is growing every year. In 1979, college grads earned 38% more than those with only a high school diploma. But today, college grads earn 75% more than those without degrees!

The Cost of Higher Education

Let's face it: college is expensive. And with the cost inflating approximately 5% annually, the cost will only rise.

The type of college your child attends can also have a big effect on the cost too. For example, just one year of tuition, room and board at an average private college runs just over $30,000. On the other hand, a public out-of-state college runs around $19,000 per year. Finally, even a public in-state college is close to $13,000 annually.

So as a parent who wants your child to have the chance to attend college, what can you do? The answer: plan early!

A Tale of Two Families

Let's look at a tale of two parents to illustrate how important it is to get started right away.

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it, their kids would be off to college.

Taylor's parents are prepared. They recently sat down with a mortgage professional and learned that completely funding Taylor's four-year education at the local college would cost either $300 per month in savings or—by using the equity in their home—only $133 per month after tax. "What a relief to know it's all taken care of!" they commented to Max's parents. But Max's parents replied, "Hey, what's the rush? Look, the kids are only knee-high right now...we'll worry about this later."

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max's parents just learned that for him to attend the very same college as Taylor, it would now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor's parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow—but it's twice as much per month as Taylor's parents, who planned ahead and started earlier.

The Moral of the Story?

If you want to save for your child’s college expenses, start the investment early. The money you put away today will have more time to gain interest and multiply over time—which means you won’t have to struggle to save as much. Don’t be discouraged by the amount you think you can put away. I have a full array of financial tools at my disposal. Together, we can sit down and calculate a variety of scenarios that fit your budget and will help ensure that your child’s college costs are taken care of.

You should also encourage your children to invest and save too, with a portion of funds from their allowance or a side job like mowing the neighbors' lawn or babysitting. They will see how the value of their savings grows over time, and more importantly, will begin to understand importance of planning for the future.

Finally, as the college years approach, explore scholarships, financial aid, or federal direct aid, which is money that does not have to be repaid. Of course, when your children are young, you just don't know if they will be star athletes or straight “A” students—so it’s always better to plan ahead. If scholarship money does become available, then you’ll have more than enough money in savings, due to your good planning.

If you want to discuss options and strategies on saving for your child's college education, contact me. I’ll make sure the entire process is convenient and, more importantly, that we design a plan that fits your specific goals.

Call me today to make your child’s education a reality.

Terrence Tormey - Benchmark Lending - Office: (732) 993-3639, Fax: (732) 280-6240

terry.tormey@benchmarklends.com