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From CEO, Brad Canfield
  • Undocumented Income and Mortgages for the Self-Employed

    Apr 30, 2013
    In the aftermath of the burst real estate bubble, lending standards have become much stricter. No longer can you qualify for a $500,000 loan with no documentation of your income; it’s simply too risky for lenders.
     
    That can create challenges for software engineers and other professionals who may be self-employed in Silicon Valley. If you’re looking to buy real estate in Silicon Valley in the near future, you’ll need to keep a few things in mind as you create an American-style life here.
     

    Tax Deductions vs. Stated Income

     
    Self-employed software engineers traditionally take advantage of as many tax deductions as possible to decrease their income tax liabilities, but that’s the precise strategy that will damage their ability to qualify for a mortgage. Tax deductions taken by self-employed workers can drop their official income level below the threshold that credit unions and other lenders want to see from potential borrowers.
     
    As suggested by FOXBusiness columnist Donna Fuscaldo, self-employed homebuyers should consult with their accountant to figure out the appropriate amount of tax deductions so they don’t disqualify themselves from a mortgage.
     

    Two Years Required for Self-Employed Job

     
    Another obstacle can emerge after software engineers leave a corporate job to start their own Silicon Valley software consulting business but haven’t been on their own for two years. Tighter lending standards mean mortgage underwriters want to see at least two years of self-employment history as part of their analysis of your financial background.
     
    In general, borrowers encounter more paperwork and documentation requirements today than they did during the housing boom, and the self-employed face even more hurdles. Forbes provides another handy set of tips for qualifying for a mortgage when you’re self-employed.

    At KeyPoint, we’re eager to work with Silicon Valley software engineers and everyone to meet their mortgage needs with a variety of great products. Contact us today to discuss your options. 
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  • Inactive Credit Cards Might Drag Down Your Score

    Apr 23, 2013
    Figuring out what impacts your credit score and why it moves up and down can be confusing, but it’s an important concept to understand. If you’re a software engineer new to Silicon Valley or new to the country and you’re thinking of purchasing Silicon Valley real estate in the near future, you need to know how your credit score will affect that transaction. A lower credit score can saddle you with a higher interest rate from your mortgage lender and force you to pay tens of thousands of dollars more in interest charges over the life of the mortgage.
     
    As I’ve discussed this month, there are strategies to establish a credit history and also to repair your credit score if it has taken a hit. People wonder if not using a credit card at all is a good way to improve their score because there’s no way they’ll fall behind on payments or accumulate a crushing debt load.
     

    Use Your Credit Card Responsibly to Prove You Can

     
    But inactivity is NOT the answer to improving your score, and inactive cards actually can bring down your credit score. Leslie McFadden at Bankrate.com talks about credit card utilization and how it measures your debt-to-credit limit ratio. The lower your ratio, the higher your score. But you need to show that you’re actively keeping your ratio low by using your credit card and paying off balances in full; there’s no way to accurately gauge your ability to use credit responsibly if you don’t actually use your credit card.

    As McFadden notes, “Utilization contributes toward the amounts-owed portion of your FICO score, a scoring model commonly used by lenders. The amounts-owed factor counts for 30 percent of your score.” So as you settle into Silicon Valley and an American-style life, be aware that using credit intelligently will benefit your credit score in the long run.
     

    The Effect of Inactivity

     
    So what happens if your credit cards are inactive? Jim Wang at U.S. News & World Report says the research isn’t crystal clear at this point and more research is necessary. But just as we know that canceling a credit card (especially one that you have held for a long time) can hurt your credit score, there are some indications that simply not using a credit card also can negatively impact your score. It’s not necessarily a direct correlation, but some credit card companies will cancel your credit card if they deem it inactive because they’re not making money off you in the form of interest payments or interchange fees they charge merchants when you use your card. And a credit card cancelled by the company and not by you could be a significant black mark against you.
     
    As a software engineer new to the country and establishing your life in Silicon Valley, remember you can turn to KeyPoint Credit Union for credit cards that offer low rates and valuable features.
     

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  • Here’s How to Improve a Sinking Credit Score

    Apr 16, 2013
    We’ve probably all been there before. You’re late paying a bill and your creditor tacks on a fee. As annoying as it is to pay extra fees, you’re also paying extra because your credit score is diminished by late payments. In the long run, a lower credit score can mean paying higher interest rates on loans and that costs you more money.
     
    And if you’re a software engineer who’s new to Silicon Valley and the country, moving your family half-way across the world might mean that some of your payment obligations slipped through the cracks. When you’re researching opportunity to purchase Silicon Valley real estate, you don’t want your credit score to hamper your ability to get a good deal.
     
    So what type of credit score needs to be repaired? If your FICO score is below 620, it’s difficult to get credit cards and loans with reasonable rates, says Liz Weston at MSN Money. And if your score is below 760, that means you have room for improvement. But keep in mind that repairing your credit takes time. If you hear advertisements on TV and radio about companies promising to immediately erase your bad credit, beware a scam in the works, according to attorneys at the Federal Trade Commission.
     

    Scour Your Credit Report for Incorrect Information

     
    After you find out your credit score, get a copy of your credit report and make sure that all of the information is correct. Even seemingly minor mistakes, such as your name being misspelled, can affect your credit score. You cannot erase legitimate bad marks in your payment history, but if you find mistakes and wrong information, you have every right to contact the creditor to resolve the issue. The Federal Trade Commission offers a helpful credit repair guide, which includes a sample letter for disputing information in your file.

    Take a Disciplined Approach to Debt Management

     
    Once you’ve reconciled your credit report, you’ll need to invest time and discipline into repairing your credit. If you’re a serial late payer, set up payment reminders so that you don’t miss any more due dates on your bills. The key to repairing your credit is to steadily pay down your debt on credit cards and loans. Reducing your debt through timely payments is a key factor in improving your credit score. Responsibly managing credit doesn’t mean asking creditors to lower your credit availability, though; in fact, that can lower your credit score because it will reduce the margin between your debt and your debt ceiling. If you have more padding between those two elements, your credit score will benefit. FICO provides additional tips to repair credit and improve your FICO credit score.

    A message to all software engineers here in Silicon Valley and fellow residents, you can take control of your credit score by researching your file and disputing incorrect information. After that, a steady approach to managing your credit and debt load is required. And KeyPoint provides credit cards and loan products that can help you improve your credit score. Contact us today to learn more.

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  • From the East Bay to the Peninsula, What’s Your Commute Like?

    Apr 09, 2013
    If you’re an engineer commuting from the East Bay to the Peninsula, how do you spend that time in traffic?
     
    With so many responsibilities and a busy schedule, I’m always looking for opportunities to find some extra time. Often, it’s when I’m alone in a car. I’ll catch up on an audiobook or listen to a favorite radio show or just sit in silence with my thoughts. I can only imagine what it’s like for an engineer who is new to Silicon Valley or new to the country driving to work every day while thinking about how family members are adjusting to an American-style life.
     

    A Time to Figure Out Finances, and Other Stuff


    Time is precious, and the older I get the more I try to eliminate things in my life that require more time than they’re worth. Sometimes when I’m driving to and from work I’ll listen to National Public Radio and a financial story on “Marketplace” or “Morning Edition” will spark a thought in my head about personal finance or money management. When the story ends, I’ll often just turn off the radio (I can always access archived stories from that show online) and devote some time to thinking about the issue or trying to solve a challenge. To me, that’s a worthwhile use of personal time before I’m pulled in different directions at work or at home.
     
    You can’t always resolve everything in your car. If you’re shopping for a new Peninsula home or contemplating something similarly complex, you’ll likely have to revisit the topic later in the day or evening. But taking time to work through some thoughts and ideas is a real benefit of that daily drive.  

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  • How to Establish and Improve Your Credit Score

    Apr 02, 2013
    Your credit score will go a long way toward determining how much money you can borrow and the interest rates you will receive, so understanding how to establish and improve your credit score is vital to your financial situation.
     
    Maybe you’re an engineer new to the country or the United States with plans to purchase a home in Milpitas, Santa Clara, Union City or San Mateo. A good credit score will help you secure the American-style life in the Silicon Valley that you seek. Or maybe you have younger family members who do not have a lengthy credit history and you want to help them establish one.
     
    If you want to receive a free copy of your credit report or want to know about finding your credit score, check out the Consumer Financial Protection Bureau.

    Ways to Improve or Establish Your Credit

    KeyPoint Credit Union offers several products designed to meet your current financial needs while improving your credit score through responsible money management. A great way to establish and build up your credit score is through one of our secured loans, which allow you to borrow money using your certificates of deposit, savings account or personal stocks as collateral. Plus, you can earn interest with this loan.
     
    If you have encountered financial difficulties recently, our NewPoint partial secured loans and lines of credit might be the perfect financial fit for you. And, of course, if you’re looking for a credit card, KeyPoint Credit Union offers two different Visa® cards with low introductory Annual Percentage Rates (APR) to help you establish or repair your credit score.
     
    Getting a credit card from your credit union is one of the steps Investopedia suggests taking to establish your credit history. Typically, you want to get your credit score up in to the 700s, and money guru Liz Weston at MSN Money offers some valuable pointers on how to get there. And if you have a teenager in your home or someone with a short credit history, CreditCards.com offers 10 useful tips for building good credit.
     
    If you have any questions about your credit score or how KeyPoint Credit Union can help you, please reach out to us! We’re happy to assist.
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