In this Issue: Protect Your Home from Natural Disasters New Rules for Overdraft Fees What is a Good Credit Score for Refinancing   (Please leave us a comment at the bottom of the newsletter.)

Protect Your Home from Natural Disasters
Typhoons and earthquakes in Asia, floods in Iowa, wildfires in California and hurricanes in Florida and the Gulf make us cringe just thinking about them. Mother Nature does not discriminate nor give much warning. Most of us can relate to a natural disaster, know someone or has family and relatives who have undergone it and watched its aftermath on television.Because of this, you might ask yourself if your home is prepared if these things happen. Disasters such as fires and earthquakes normally prompt upgrades on building codes as more and more people are becoming aware of the dangers nature can do. However, even the most updated building codes can still be vulnerable and insufficient to protect your home against major disasters. Older homes suffer even worst fate since they are usually built before engineers and builders paid more attention to strengthening them against calamities.Here are some upgrades that help protect your home when disasters strike:1. Floods destroy your property and your homeowner’s insurance does not cover it. Provide added home protection by buying flood insurance from the federal government. You can get a maximum coverage for $300 to $600 per year in areas with moderate risks. Ask your insurance agent to apply an inflation guard on your policy that increases the amount of coverage by three to five percent every year. Have a professional replacement value appraisal accurately assess the replacement value of your home. (Note: As of the time this article was written, Congress still has not extended the Federal Flood Insurance Program. We'll keep you posted at this site on updates pertaining to flood insurance availability.)2. Get the main breaker, fuse box and the utility meters raised above the flooded level in your house so in the event that your home floods, your power utilities will not be damaged by water.3. Secure your roof by installing hurricane straps to keep them attached to the walls during strong winds.4. Use storm shutters to protect your windows and glass and use them when severe weather approaches. They also protect from flying debris like tree trunks and other things transmitted by strong winds.5. Bolt or strap your bookcases and cupboards to the walls and store heavy objects on the lower shelves to keep them from falling on someone. Also, make sure to strap the water heater to a wall to keep it from starting a fire or falling on someone.6. Use anchor bolts to bolt your home to the foundation. They cost about $2 each. They must be installed every six feet on the outer border of your house.7. Use flame-retardant shingles on your roof instead of the standard shingles or wood shakes. This lessens the possibility of burning debris in the air catching fire on the roof.8. Prepare a considerable emergency fund. Some states place large deductible on claims involving natural calamities like hurricanes and earthquakes. Make sure you have appropriate funds to cover your deductible with additional living expenses. The insurance company will let you shoulder the expense first and will reimburse you for it. Keep all your receipts for temporary housing, dining out and other additional expenses for being away from your home should you leave it for repairs.Nobody likes to think about a calamity striking his or her home and family, but it happens and you should ensure that your home and family are prepared to face it when it comes…New Rules for Overdraft Fees
In the past, if you tried to withdraw more money than you had in your bank account or made a debit card purchase with insufficient funds, a bank could charge hefty overdraft fees regardless of the charge amount and without a full explanation. Some consumers found themselves paying $10-$35 charges for an overdraft of a dollar or less. And the fees proved to be quite profitable; in 2009, banks made approximately $32 billion from charging consumers overdraft fees on debit card purchases, ATM withdrawals, and personal checks.Starting July 1, 2010, however, new federal rules change the way banks charge overdraft fees. The main change coming from the Federal Reserve Board requires banks to allow customers to opt out of overdraft protection—and clearly outline any fees associated with continuing overdraft coverage. This includes fees for ATM transactions as well as debit card purchases. Previously, customers were often automatically enrolled in banks’ overdraft protection program. In most cases, if you opt out of overdraft protection, the bank won’t honor your purchase and your card will be rejected, but you also won’t incur a $35 overdraft fee for a $2 cup of coffee.In March 2010, Bank of America got rid of overdraft fees associated with its customers’ debit card purchases. Now, if a BofA customer tries to make a debit card purchase without sufficient funds, the card will be declined and an overdraft fee will not be charged. At a BofA ATM, a customer will have to actively agree to a $35 overdraft fee before receiving cash that’s, well, not in the account.
We'd love to hear your comments about bank overdraft fees. Have you ever been hit with an overdraft fee on an item that cost $5 or less? How did you handle it with your bank? Did you try to negotiate with them to credit you the fee, or just pay it without any attempt to get the bank to credit you back for the overdraft fee? Tell us about it by using the comment link at the bottom of this newsletter. We'd love to hear from you…What is a Good Credit Score for Refinancing? Find out exactly what credit scores you need to refinance
A 620 credit score used to be considered the line between good and bad credit. What this meant is that anyone with a credit score below 620 could still refinance, but it would come at a higher interest rate. It also meant that any borrower with a credit score above 620 could be assured that they would qualify for a loan at the best interest rates, and therefore helping to lower their monthly mortgage payment.Unfortunately, at least for 2010, those days are over.The mortgage credit crisis of 2007 and 2008 resulted in nearly every mortgage loan source redefining "good" credit to mean a credit score of at least 680 and usually 700 or higher. Up until last year, those credit scores were considered excellent but they have become the minimums just to qualify for many programs.The one exception to these new rules is the FHA mortgage refinance program, which still defines good credit as any credit score above 620. In addition, borrowers with credit scores below 620 may still qualify for an FHA refinance mortgage loan if their loan is approved through the automated underwriting system. Here are details on credit scores needed for FHA refinance loans.FHA Loan Program for Lower Credit ScoresThe FHA loan program can help borrowers with lower credit scores, but that program does come with mortgage insurance which does add to your monthly payments. If you have less than 20% equity in your home when you refinance, then it definitely makes sense to use the FHA program to refinance if your credit score is below 700. Private mortgage insurance costs have increased dramatically for borrowers with credit scores below 700. In many cases it is not even available (e.g. for three and four unit properties). Also, private mortgage insurance qualifying requirements are so high right now that even the most qualified borrowers are having trouble obtaining private mortgage insurance.If you have more than 20% equity in your home when you refinance and your credit score is below 680, then you need to compare whether it is less expensive to refinance with the FHA program or with conventional fixed rate mortgages from Fannie Mae or Freddie Mac. While there is no mortgage insurance required when you have at least 20% equity for Fannie Mae or Freddie Mac loans, both agencies have significant rate add-ons for borrowers with credit scores between 620 and 680. So it makes sense to compare the two options.Improving your credit score for refinanceOf course, one option if your credit score is between 620 and 680 would be to work with a credit agency to find out why your score is low and take steps to get your credit score to a level above 680. The good news is that this process used to take months but now only takes weeks. One word of caution, however: while there are many legitimate credit repair agencies, there are also a number of less-than-scrupulous companies. Get a referral from someone who has used one or ask your mortgage loan officer for a suggestion to make sure you find someone qualified with whom you can work.For 2010 and the foreseeable future, 680 is the minimum credit score needed to refinance with Fannie Mae or Freddie Mac without having to get hit with a higher interest rate, and the FHA program is probably your best bet if your score is below 620 – especially if you are borrowing more than 80% of the value of your home.