Victor Varma | Blog

Ask the expert: What is a USDA loan?

Posted on February 28, 2018January 30, 2018 by Victor Varma

Many people are currently hoping to live the American Dream of becoming a homeowner, and according to Nerd Wallet, the U.S. Department of Agriculture’s special home loan might just be the ticket they are seeking.

While this department might seem an unlikely place to find a loan for a new house, the point of the program is to help growth in the more rural parts of the country where incomes are typically lower than their urban counterparts. To spur that growth, USDA loans come with excellent benefits.

One of the most significant incentives for going after a USDA loan is that they require no money down at all to secure the loan and it guarantees lower interest rates. This will help young buyers or families that otherwise struggle to save up for a down payment on a traditional loan. Nearly 140,000 families were able to take advantage of this in 2014 alone.

The loans work in a couple of ways: loan guarantees and direct loans. With a loan guarantee, a buyer will use a local lender affiliated with the program. Then, the government will act as the guarantor on that loan so that the buyer will have access to better terms, much like how it would work using a co-signer. A direct loan is one issued straight from the USDA, and these are found among the low- and very low-income applicants to the program. Subsidies with direct loans can bring the interest rate down to as little as one percent.

The supply of houses that are eligible for the loan are located in rural areas. There are, however, some options in more suburban locations that could strike a right balance for daily commuters.

Applicants must also fall within some specific income, debt, and credit score thresholds and these vary from location to location. Typically, the monthly payment on the home cannot exceed 29 percent and credit scores should be at or above 660. USDA mortgage lenders will also be looking for a good payment history to other creditors, and applicants with a score under 580 will have to undergo a more thorough review.

Ransomware threat grows; small businesses at risk

Posted on February 20, 2018January 30, 2018 by Victor Varma

A recent uptick in hackers using ransomware to take their victims’ data hostage means that organizations should aggressively move to back up data — and teach employees how hackers work.

According to PC Magazine, in a ransomware attack criminals deploy malicious code through email or websites. The code then encrypts computer data so that the company can no longer access it.

Criminals then demand payment for unlocking it.

The technique has been very successful. Ransomware reports rose 35-fold from the last quarter of 2015 to the first quarter of 2016. Some extremely high profile cases have made big news, such as the U.K.’s National Health Service data that cost the organization $100,000 in ransom and an estimated $1 billion in damages.

However, small businesses are just as likely — or more likely — to have a ransomware attack. In fact, according to PC magazine, some criminals exclusively target small businesses, which rarely have the IT resources in place to prevent such attacks. One attack on a small business can not only disrupt commerce, but likely poison relationships with larger companies.

Employees themselves are often responsible for letting the hackers in by downloading malicious files through email. These email attachments can masquerade as innocuous pdfs, but, in fact, they are executable programs. No one should ever click on an attachment in email if they do not recognize the sender.

Even legitimate websites can often host malicious programs and one visit to such a website can mean ransomware infection. Malicious links are one way these programs take over. Users should never click links or popups to update extensions, for example.

Preparation is key. Constantly update all computers. Updates might be a pain, but they are critical since updates often address security issues. Cybercriminals love old operating systems. They know how they work. They may not know yet how to compromise the newest and best systems.

Experts recommend deploying so-called hosted endpoint security to manage computers, networks and mobile devices. These inexpensive programs are provided by companies such as F-secure, Webroot Secure, and Avast.

Finally, a great step to take in avoiding ransomware involves finding a backup solution to fall back on in case the defenses fail and the data is already being held for ransom. Sophisticated solutions exist that allow a company to maintain several layers of backups that can be rolled back to a time before hackers compromised the data just like nothing ever happened.

If you are attacked, should you pay? Experts say no — easy to say but not easy to do if you are facing catastrophic data loss. But remember, these are criminals. There is no guarantee they will restore your systems after you pay and every chance they won’t.

Keeping track of a child at a theme park

Posted on February 16, 2018January 30, 2018 by Victor Varma

One minute you are holding your kid’s hand, and the next, he’s gone.

At a crowded theme park, jostling crowds or just a busy kid can quickly turn a fun day into a terrifying experience for child and parent.

That was one mother’s fear as she struggled to hold on to her child at a theme park and she came up with a clever solution.

Michelle Walsh solved the problem that day by writing her cell phone number on her child’s arm. But later she improved upon the idea, creating the SafetyTat, a temporary tattoo for kids.

According to The Wall Street Journal, the plan worked well for one family touring a huge science center. In an instant, they lost track of their 4-year-old daughter. Then, just as quickly, the mother’s cell phone began ringing: Security had the child at the front desk. The tattoo worked.

SafetyTats are sold in children’s stores, amusement parks, travel stores, and online at safetytat.com.

You can get sticky labels with a place for a phone number and medical information.

Customized water-based tattoos can also be ordered online.

Renting out a room to travelers?

Posted on February 6, 2018January 30, 2018 by Victor Varma

Millions of people are renting rooms in private homes instead of hotels. And millions are doing the ‘hosting.’

Before you join the crowd to rent out a room for that extra dash of cash, review your homeowners insurance.

Likely, your homeowners insurance doesn’t cover damage or liability if you rent rooms, according to How Stuff Works. Once you rent a room, your home becomes a business.

Be sure to talk to your insurance agent before you rent out a room. You might be well advised to get a landlord policy to cover liability and damage. That is especially true if you have a pool.

Facts to teach your new teen driver

Posted on February 1, 2018January 30, 2018 by Victor Varma

Teen drivers are inexperienced, usually distracted, and impulsive, statistics show.

That’s every single teenager, from the A student to the wild child.

That won’t come as news to the insurance industry, which charges high rates for teen drivers. But, teens might not know the dangers of their own inexperience. Parents who are teaching their kids to drive might point out some sad truths.

First, teens have a lot of car accidents and car accidents kill.

Of all age groups, 16-year-olds have the highest crash rates, and a full third of all deaths among 13- to 19-year-olds are likely to occur in a car crash. In fact, more than 3,000 people die in car accidents every single day.

Second, teens are unusually distracted behind the wheel.

According to dosomething.org, more than half of teen drivers admit they use a phone while driving.

More worrisome is that texting can take eyes off the road for almost five seconds — a lot of time for something to go wrong. Car and Driver Magazine did a study on this and found texting while driving had the same effect as driving drunk.

Teens must learn to leave their phones unanswered while driving. That’s a lesson adults can learn too since 27 percent of adults have read or sent a text message while driving.

Third, driving around teen friends can be deadly. Fatality rates increase with each extra passengers in the car. It’s dangerous for the driver and for the teen rider. Fewer than half of teens say they would speak up if the driver was scaring them.

Teens must also recognize that their inexperience can get them into trouble. Driving in poor conditions such as snow, fog, or rain can be dangerous and teens must give the task their complete attention.

Why making websites mobile-friendly is important

Posted on January 26, 2018December 13, 2017 by Victor Varma

People are more attached to their smartphones than ever but recent analysis from Alliance Data shows that although 63 percent of millennials shop on them every day, only 39 percent of their total purchases are actually made online.

This trend is alarming news for online stores and vendors that are eager to get this targeted demographic to follow through on their online purchases. This data is also a little puzzling because this same age group is much more likely to use their phones to research products, comparison shop, and look for coupons online before heading into the physical store to buy the merchandise.

According to recent data from Osterman Research, online security could play a significant role in determining whether or not someone actually buys their goods online. They cite the 42.2 percent of millennials in America that have limited their purchases due to security concerns. Any data shared over the internet carries with it some risk of identity theft or fraud. In this case, increased use of security-focused shopping portals, coupled with better transparency of the website itself could help pave the way for peace of mind.

Perhaps more likely, CNET argues that many people turn to physical stores to complete their purchases simply because it can still be quite frustrating to input all the required information on a tiny smartphone keypad. Names, email addresses, passwords, physical addresses, and credit card numbers entered during checkout is a tedious process for all but the savviest users. Even using a desktop makes the process much more comfortable and the pictures are easier to view and navigate to boot.

For online retailers to secure their shoppers’ attention and wallets, the process of adding items to carts and checking out should be as seamless as possible. Integrating many different types of payment options, such as Paypal or Apple Pay, would also help entice people who trust a dedicated payment platform over an online storefront.

How Do I Buy A House Without A Down Payment?

Posted on January 19, 2018December 13, 2017 by Victor Varma

Many people are ready and eager to purchase a home, and can easily afford a mortgage payment; however, the concern is that they do not have a 20 percent down payment available and wonder if there are any options available for them.

The reality is that if you have good credit, you can probably get a loan. But, without a good down payment, your costs will go up.

To start with, you must have some cash to buy a home. There will be closing costs and you’ll have to pay for taxes and insurance.

But the key is that, without 20 percent down, you’ll have to pay for Private Mortgage Insurance. The idea is that people who put their savings into a property are much less likely to default on a loan. The lender wants insurance that you will pay on your mortgage.

PMI is expensive and the less you put down, the higher the mortgage insurance is. The cost of PMI depends on your credit score and the size of your down payment. According to Mortgage lender Freddie Mac, the cost is from $30 to $70 per month for each $100,000 borrowed. This is added to your monthly payment.

Still, if you want to buy now, you could get a loan from family members. Most lenders will accept this if the family members assert that money is a gift that doesn’t have to be repaid.

If you have 3 percent as a down payment, Fannie Mae and Freddie Mac will back the loan, assuming your credit is good. You will pay PMI.

FHA backs loans with down payments of 3.5 percent. It also has lower credit score requirements. Buyers will have to pay a mortgage insurance premium.

For veterans, a VA loan requires a funding fee of 2.15 percent of the loan up front, in lieu of PMI.

USDA will guarantee loans with nothing down in rural and suburban areas if your income qualifies. It charges a mortgage insurance premium of 2 percent of the loan plus a monthly charge, according to US News.

Investing experts often fail to beat the market

Posted on January 12, 2018December 23, 2017 by Victor Varma

For individuals, investing in the stock market can be a daunting task. Although many of these people trust expert fund managers to boost their returns, USA reports that the majority of firms paid to generate better-than-average returns often fail to beat the market. To be considered successful, a fund must show that it can provide better performance than benchmark indices like the S&P 500 on a consistent basis. If it can’t beat them, then using the service just isn’t worth the money.

According to data provided by the 2015 SPIVA Scorecard, large-cap fund managers, those trading some of the largest companies in the market, failed to beat the benchmark 66 percent of the time during that year, 84 percent of the time over five years, and 82 percent of the time over the last ten years. Small-cap and mid-cap managers had similarly disappointing performance in their areas. They point out that some managers have a proven track record of results, but even those firms that beat the market for a year or two tend to lose ground over time. Adding in the fund’s management fees can also turn a winning portfolio into a loser, and nobody wants to see their gains go from their retirement account to the manager.

The reasons for this lack of performance are hard to uncover, but Forbes magazine reminds readers that there are only a couple of ways to beat the market: access to information other people don’t have or being lucky. For most investors, luck is not something they would likely want to trust their money to, and even the experts don’t have infinite knowledge about every company and market trend. As for those with the best information, average investors won’t be able to discover which firms have it until long after the returns have already been generated.

Use a frugal month to catch up after the holidays

Posted on January 8, 2018December 13, 2017 by Victor Varma

The holidays are often filled with extra spending on things like travel, gifts, and food and many people end the year feeling weighed down in the financial department.

Popular blog Frugalwoods suggests that people make January an ‘uber frugal month’ by spending as little money as possible. Although the challenge sounds rather simple, it will require a bit of preparation.

Before starting, analyze all of the currently expected spending for the month. Then, divide those expenses into a discretionary list and a mandatory list. Rent, for instance, is non-negotiable, while a Starbucks latte can be easily skipped. Entire areas, such as entertainment, need a plan to decrease spending by substituting free or cheap options for the normal routines. Plan to stay frugal for the whole month for maximum savings. In the end, with the frugality meter reset, it will be up to participants to decide which behaviors they want to keep using in the future to save money over the long run.

According to Bankrate, using these no-spend periods isn’t just about saving money but also learning to control impulses. Being able to separate actual needs from simple wants will go a long way toward creating sustainable spending habits as well as provide an excellent jumpstart to a more frugal lifestyle.

For people that can’t manage a full month, blog Believe in a Budget recommends starting with a week or even a day. Their favorite, the no spend work week, allows a person to focus in on miscellaneous expenses that pop up during this time such as the before work coffee, expensive lunch at a restaurant, and unnecessary trips to the grocery store after work. It might feel a little strange bringing a bagged lunch to work, but it is also a great way to find more money for savings and investing in the things that are truly important.

Pop the cork on the bubbly! It’s a great time to sell (and buy)

Posted on January 2, 2018December 13, 2017 by Victor Varma

Everything is coming up champagne and roses for home sellers in 2018 as experts predict more home sales and rising home prices as Millennials appear to finally be buying.

For the new year, the real estate scene looks great for both sellers and buyers.

Buyers will benefit from low mortgage rates, ticking just past 3.9 to 4 percent in mid-November 2017 for a 30-year fixed rate mortgage.

Analysts do not expect those rates to rise much, if at all.

In many areas, the number of houses for sale is low and that drives prices up. On the other hand, prices are not as high as in the recession-era market. Experts say that should give buyers some confidence.

The construction industry appears to be addressing the problem of a low supply of homes for sale as new construction rose in mid-November 2017, according to the U.S. Census Bureau.

The overall economy also forecasts a healthy housing market, as more people are working and tax cuts may add money to the economy.