nonprofits

How a Sale and Lease-Back Can Help a Homeowner Avoid Foreclosure

Toni Husbands — Mon, 29 Oct 2018 08:00:12 +0000

George Arnold bought his Chicago bungalow in 2009. This fixer-upper needed a lot of TLC, but was in a good neighborhood. He'd found a diamond in the rough. Arnold set to work bringing the home back to life through a series of major renovation projects. Soon after, his mother's health took a turn for the worse.

"I kept my mother out of the nursing home for two years before she passed away," he recalls. His devotion to his mother is admirable — but it caused him to fall behind on bills.

To avoid losing the home and all the money he'd invested, Arnold agreed to sell his home to an investor. He'll rent it from that investor for two years with the option to purchase the home again at a fair market price.

Losing your home to a foreclosure or tax sale is not the only option for struggling homeowners. A short sale lease-back allows a homeowner to sell their home and lease it back from the new buyer, forming a landlord-tenant relationship that lasts for the term of the lease.

There are several ways to get a short sale lease-back on your home. We'll discuss three below.

Investor short sale lease-back

Struggling homeowners might be able to save their homes by selling the home to an investor before the foreclosure. Investors looking for rental property profit from the steady income and potential discounted purchase price. The short sale will have to be approved through your lending institution. Once approved, the homeowner can avoid a credit-crushing foreclosure, rebuild their credit in the ensuing years, and stay in the home.

At some point in the future, the previous homeowner and investor can negotiate a fair sale price. This allows the homeowner to recover their property and the investor profits on the sale.

Lender short sale lease-back

Homeowners can also check on lease-backs available with their mortgage lenders. Some lenders or mortgage holders will accept a lease-back arrangement in lieu of foreclosure by handing over your deed. In this situation as well, a suitable purchase arrangement can be worked out in the future once the homeowner has been able to recover financially and can qualify for a loan on the original home.

Nonprofit short sale lease-back

Homeowners can also turn to nonprofits that are approved by the Department of Housing and Urban Development. These HUD-approved nonprofits have been given the green light to conduct lease-back transactions after a 2011 change in the Making Home Affordable program.

Homeowners may be required to attend financial management training as a requirement for participating in a short sale lease-back program through HUD-approved nonprofit organizations.

Sellers beware

Homeowners facing foreclosure can be particularly susceptible to mortgage rescue scams or people who will take undue advantage of a homeowner's distress. Sellers attempting to avoid foreclosure must be diligent to ensure they are dealing with reputable people or businesses.

Do your research

Check with your state attorney's office, the Better Business Bureau, or the local Chamber of Commerce to find information about anyone before conducting the transaction. As with predatory lending, unscrupulous investment companies are quick to prey on people in a desperate, high-emotion situation where they fear losing their home. A quick Google search may return reviews about the company on various message boards that you can use to help make a decision. Try to locate individuals who've had a personal dealing with the investors to ascertain whether the company is reputable or not. (See also: How to Protect Yourself From Predatory Lending)

Seek legal counsel

Shawn Kunkler, Realtor with Paragon Real Estate Group and author of the Insider's Guide to Home Buying, San Francisco Edition, advises homeowners to work with a real estate attorney to set up a proper lease-back agreement. "This is not difficult to include, but does need to follow the correct protocol," he says. Each state may have specific requirements that need to be followed. It's best to work with a real estate attorney who has experience with short sale lease-back transactions. Contact the Bar Association for your state for referrals.

Keep your word

Homeowners fall behind for many reasons. If you're able to avoid a foreclosure with a short sale lease-back agreement, resolve to keep this new agreement. Make that a priority. Kunkler notes that if an agreement is going to fail, it's most often because the leasing party fails to honor the agreement.

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This article is from Toni Husbands of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Alternatives to Charging Your Medical Bills

Kat Tretina — Fri, 23 Mar 2018 09:30:15 +0000

Last year, I ended up in the hospital. The experience was scary, but what was even scarier were the massive hospital bills that started pouring in once I got home. I quickly exhausted my emergency savings and, out of options, I turned to my credit cards to pay the remaining bills.

It was a costly mistake. The high interest rates on my credit cards caused my balance to balloon, and I ended up paying back far more than I originally owed. It was a hard-learned lesson that cost me thousands.

If you're like me and facing serious medical bills, it's important to know that there are other options available to you that are less costly. If you need help, here's what you need to know before handing over your credit card.

The high cost of using credit

The cost of health care is a serious problem for millions of Americans. According to the Kaiser Foundation, 26 percent of U.S. adults say that they or someone in their household had problems paying for a medical bill in the past year, or couldn't pay their bills at all.

For some, an inability to pay means they will put off necessary treatments. For those who went to the hospital, they could leave with huge amounts of medical debt, causing them to fall behind on their other bills or even file for bankruptcy.

Many people turn to credit cards to pay the hospital bills, but doing so is an expensive decision.

According to Bankrate, the average credit card interest rates are currently hovering above 16 percent. That means that the bill you charge can grow significantly over time, adding hundreds or even thousands to your credit card balance.

For example, if you used a credit card to pay for a $5,000 medical bill at 16 percent interest with a $150 minimum payment, it would take you 15 years to pay off your card. You'd pay back over $3,700 just in interest charges, making it harder to get out of debt. As interest accrues, it's easy to end up over your head. (See also: The 5 Biggest Dangers of Credit Card Debt)

The things you can do instead

When you don't have enough money in the bank, a credit card might feel like your only option. However, there are other resources you can use to pay your medical bills that are more cost-effective than a credit card.

1. Enroll in a payment plan

Some hospitals and health care practitioners offer payment plans for low-income patients. With a payment plan, you can split up your bill over several months or even years. You can pay your bill a little at a time, rather than coming up with thousands at once.

Some hospital payment plans might not even charge you interest, or will charge a low rate, making them a much cheaper option than using a credit card. (See also: What to Do If You're Hit With a Huge Medical Bill)

2. Ask about charitable funds

If you can't afford your bills even with a payment plan, ask the hospital's billing department about any charitable funds. Some places have money they set aside to pay for treatment of patients who can't afford to pay the bill themselves.

There will likely be a significant amount of paperwork to complete, and you'll have to submit documentation of your income and expenses. However, spending time completing the forms can end up saving you thousands over the long run. (See also: How to Handle a Massive Medical Bill)

3. Explore outside nonprofit organizations

If your hospital doesn't offer any financial assistance, you might be eligible for aid from a separate nonprofit. Organizations like HealthWell, Catholic Charities, and the Children's Health Fund may be able to help you with your with medical bills. Some offer upfront cash assistance or will even help you negotiate a lower bill.

You can contact United Way's 2-1-1 Information & Referral hotline to find out about programs in your area.

4. Negotiate your bill

Depending on your circumstances, you might be able to negotiate a lower bill. If you cannot afford the total balance, call the hospital's billing department and explain your situation. Ask if they'd be willing to accept a lower amount. In some cases, the hospital may agree to settle the debt for less than you were originally billed. (See also: 7 Ways to Negotiate Medical Bills)

5. Consider a personal loan

If you've exhausted your other options and still need help paying your bill, consider taking out a personal loan rather than using your credit card. If you have good credit and a stable income, you could qualify for a loan with an interest rate as low as 5 percent. And, you could choose a longer loan term, making your payments more affordable. (See also: 5 Times Personal Loans May Be Better Than Credit Cards)

Exploring your options

Before reaching for plastic, make sure you have researched all of your available payment options. Using a credit card to pay for your medical bills can end up costing you thousands more than you originally owed. (See also: Never Use Your Credit Card to Pay for These 10 Things)

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This article is from Kat Tretina of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Charities You Can Trust With Your Holiday Donations

Ashley Eneriz — Fri, 09 Dec 2016 11:00:15 +0000

'Tis the season for giving, and giving to charity is the perfect way to help those in need while also helping yourself to a tax break. But how do you know which charities are the best? There are thousands of great charities out there doing amazing things with donated money, but there are also shady charities that are just out to get your money.

Here we have collected some of the highest rated charities according to Consumer Reports and Charity Navigator. Whether you are an animal lover or want to help countries in need, there is a charity supporting that cause. Don't see a charity for you on the list? Check out Consumer Reports' full list of the highest and lowest rated charities in each category. (See also: Best Credit Cards That Give Back to Charity)

For Animal Lovers

Our furry friends need our help!

1. World Wildlife Fund

The World Wildlife Fund (WWF) allows animal lovers to donate money to help species of wild animals. A $55 donation allows you to help wildlife while also earning you a small animal plush of your choice, photo, adoption of certification, species card, and gift bag. This charity is a fun one if you are looking to give a donation in lieu of a gift, since the WWF donation comes with a little gift.

2. Petsmart Charities

Petsmart Charities is very upfront with how they use donations to make an impact in pets' lives. The site says they save 400,000 pets each year. In 2015, more than $29 million went to animal welfare groups and 214,000 spay/neuter surgeries were performed. They also used 90 cents of every dollar donated to help pets directly. Individuals can donate money or volunteer with Petsmart Charities.

For Environment Protectors

Because the Earth needs us to protect it.

3. Amazon Conservation Association

The Amazon Conservation Association received a perfect score through Charity Navigator, a website devoted to helping individuals find legitimate charities and avoid inefficient charities. The charity has been around for over 15 years and conserves the Amazon. The site says a $50 donation can plant about 50 trees in a highland Andean community.

For Helping People in Need

Not everyone has a roof over their head or enough food to eat.

4. Direct Relief

Direct Relief is a nonprofit, nonpartisan organization that seeks to help and improve the lives of those affected by poverty and emergency situations. It has been one of the top charities to help with Hurricane Matthew and Syrian refugees. It has been voted as a top charity by Forbes, Fast Company, and BBB. Direct Relief also has an option to donate in tribute to someone else, which is practical for holiday gift giving.

5. Compassion International

One of my favorite organizations to donate to is Compassion International because you are able to sponsor a child. Not only do you get to choose the child you sponsor and send money to, but you also can send letters, pictures, and small gifts to them. In return, you will be given a picture of the child, as well as updates, and sometimes thank you letters. Many donors have even had the opportunity to go and meet their sponsored child. (See also: 15 Ways to Give to Charity That Fit a Holiday Budget)

For Health Advancement

A cure is out there. We just need to give scientists the chance to find it.

6. Michael J. Fox Foundation for Parkinson's Research

The Michael J. Fox Foundation for Parkinson's Research goal is to eliminate Parkinson's disease. Over $87 million went straight to research programs in 2015. Overall the foundation has funded more than $650 million to find a cure.

For Veteran Support

After protecting our freedom, our veterans should have everything they need.

7. Homes for Our Troops

Homes For Our Troops (HFOT) is a privately funded 501(c)(3) nonprofit organization that builds mortgage-free homes for severely injured veterans. Since 2004, HFOT has spent 90 cents for every dollar donated on veterans. The organization has already built 226 homes and has another 80 projects underway nationwide.

8. Operation Homefront

Operation Homefront matches specific veterans needs with donors. Donors can donate money or in-kind gifts, such as services or items. Operation Homefront accepts donated in-kind services to include, but not limited to, legal support, automotive repair, heating and air conditioning services, roofing, and accounting services. Donated goods may be items such as gift cards, household items, children's books, furniture, computers, or any other non-monetary items that are new or like new.

How to Avoid a Charity Scam

There are several more amazing charities out there, so don't think that this list is the end all, be all. However, it is important that you know how to spot a charity scam. Here are some quick tips to keep in mind:

Charities should be upfront with what they are using the funds for.
Charities should have a federal tax ID number so you can write off your donations.
It's a huge red flag if they are pushing you for donations or ask you to wire the money.

This article is from Ashley Eneriz of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

403B vs. 401K: How Are They Different?

Dan Rafter — Tue, 01 Mar 2016 10:30:33 +0000

You've just taken a job as an administrator at a nonprofit hospital. Or maybe you've found a solid job at a tax-exempt religious organization. Now you're ready to start saving a portion of every paycheck for your retirement.

There's a wrinkle here, though: You won't be able to save in a 401K like employees of for-profit corporations can. Nonprofit, tax-exempt institutions don't offer 401K plans to their workers. Instead, they offer what are known as 403B plans.

The good news? These plans work much like 401K plans. And if you do set aside a portion of each of your paychecks for your 403B plan, you'll dramatically increase the odds of a financially stable retirement.

The Big Difference

The main difference between a 401K plan and a 403B plan is who offers them. Traditional for-profit corporations offer 401K plans. These are the retirement savings vehicles with which most U.S. workers are familiar: You set aside a percentage of each paycheck, and that money is deposited in your retirement account.

The money in that account can be invested in mutual funds or other investment vehicles. The money grows — hopefully — tax-free until employees withdraw their funds. Only then do they pay income taxes on it.

A 403B plan works the same way — only for-profit corporations don't offer them. Instead, these savings vehicles are only offered by institutions that are nonprofit and enjoy tax-exempt status. This usually means hospitals, public education providers, charities, and religious institutions.

Other Differences

There are some smaller differences between the two savings vehicles, too. Usually the biggest, and the most important to employees is that employers offering 401K plans often offer matching incentives.

An employer, for instance, might decide to match 50% of the first 6% of the salaries that employees contribute to their 401K plans each year. Say a typical worker with such an employer makes $50,000 a year and that worker has decided to contribute 6% of his or her annual salary to a 401K plan. The employer will match 50% of this worker's contributions, but only up to 3% of the employee's annual salary.

So each year, this worker would invest $3,000 to the 401K plan, 6% of this worker's $50,000 salary. The company would invest an additional $1,500 to the 401K plan as a match.

Company matches are a good way to boost retirement savings. But companies that offer 403B programs, though not prohibited from doing so, rarely offer matching benefits.

Corporations can also offer profit-sharing as part of their 401K programs. Under a profit-sharing arrangement, employers once a year can make a voluntary bonus contribution to their employees' 401K plans. This contribution can vary each year, often going up or down depending on how successful the company was.

Institutions offering 403B plans, though, can't offer a profit-sharing bonus. That's because the organizations offering these plans don't generate a profit.

Both Are Worthwhile

There is another big similarity between 401K and 403B programs: For both 401K and 403B plans in 2016, you can contribute a maximum of $18,000 if you have not yet hit your 50th birthday. If you are 50 or older, federal law allows you to contribute even more to these retirement accounts. You can make a yearly catch-up contribution of up to $6,000, meaning that if you are at least 50, you can contribute a total of $24,000 to your 403B or 401K plan.

Are you invested in a 401K or a 403b?

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: