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Daily Archives: July 11, 2012

Cities Where Paychecks Stretch the Furthest

When we think of places with high salaries, big metro areas like New York, Los Angeles or San Francisco are usually the first to spring to mind. But wages are just one part of the equation: High prices in those East and West Coast cities mean the fat paychecks aren’t necessarily getting the locals ahead. When cost of living is factored in, most of the places that boast the highest effective pay turn out to be in the less celebrated and less expensive middle part of the country.

No. 1: Houston

In first place is Houston, where the average annual wage in 2011 was $59,838, eighth highest in the nation. What puts Houston at the top of the list is the region’s relatively low cost of living, which includes such things as consumer prices and services, utilities and transportation costs and, most important, housing prices: The ratio of the median home price to median annual household income in Houston is only 2.9, remarkably low for such a dynamic urban region; in San Francisco a house goes for 6.7 times the median local household income. Adjusted for cost of living, the average Houston wage of $59,838 is worth $66,933, tops in the nation.

No. 2: Silicon Valley

Only two expensive metro areas made the top 10 list. One is Silicon Valley (San Jose-Sunnyvale-Santa Clara), where the average annual wage last year of $92,556, the highest in the nation, makes up for its high costs, which includes the worst housing affordability among the 51 metro areas we considered: housing prices are nearly 7 times the local median income. Adjusted for cost of living, that $92,556 paycheck is worth $61,581, placing the Valley second on our list.

No. 3: Detroit area

One major surprise is the metro area in third place: Detroit-Warren-Livonia, Mich. This can be explained by the relatively high wages paid in the resurgent auto industry and, as reported earlier, a huge surge in well-paying STEM (science, technology, engineering and math-related) jobs. Combine this with some of the most affordable housing in the nation and sizable reductions in unemployment — down 5% in Michigan over the past two years, the largest such drop in the nation.

The rest

Most of the rest of the top 10 are relatively buoyant economies with relatively low costs of living. These include Memphis (fourth), Dallas-Fort Worth (fifth), Charlotte, N.C. (sixth), Cincinnati (seventh), Austin, Texas (eighth), and Columbus, Ohio (10th). These areas all also have housing affordability rates below 3.0 except for Austin, which clocks in at 3.5. Similar situations down the list include such mid-sized cities as Nashville (11th), St. Louis (12th), Pittsburgh (13th), Denver (15th) and New Orleans (16th).

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The Secret to Getting a Mortgage/Refinance Rate near 3%

The headlines are buzzing: Mortgage interest rates have dropped to 3.875 percent for a 30-year fixed rate loan. Can you get a 3.875 percent interest rate? First, you have to understand that not every lender offers a loan carrying a super-low interest rate, and only people with the best credit need apply.

But there’s more to the story. If you want to land the best loan with the best rate and terms, you’ll need two things: credit and cash.

Your credit

Many borrowers don’t understand the direct link between your credit and your loan. The better your credit history and the higher your credit score, the lower your interest rate and the better your terms.

If you’ve missed some payments – or even if you’re only 30 days late on one bill – your credit history is tarnished, your credit score reduced, and your interest rate will be far higher.

Your cash outlay

But don’t forget about cash. These days, lenders want to see you walk through the door with at least 20 percent to put down on the property. If you don’t have at least 20 percent equity (if you’re refinancing) or 20 percent in cash for your down payment, your interest rate will be higher.

For example, if your credit score is 760 to 850 and you have at least 20 percent equity, you’re in the highest credit tier, which means you might qualify for an interest rate at 3.282 percent on a 30-year fixed rate loan or less than 3 percent on a 15-year fixed rate mortgage.

But if your credit score drops into the second-highest tier (700 to 759), you might only qualify for a 30-year loan at 3.504 percent. To be sure, a loan at 3.5 is still a historically amazing rate. In fact, today’s interest rates are so low that you might qualify for a loan below 4 percent even if your credit score is a 660. But you may need to have as much as 50 percent in equity or for your cash down payment.

The right lender

The key to finding a great loan with a terrific interest rate is finding the right mortgage lender to give it to you. But here’s where it gets a little sticky. There are plenty of lenders who don’t want your business. They might be overweighed with bad real estate loans, or they might not need any loans from people with less than perfect credit scores, even if you have plenty of equity in the property.

But instead of telling you they don’t want your business, they’ll just quote you an interest rate or loan terms that are, shall we say, less than palatable. By comparison, these quotes will look downright expensive.

Of course, if you don’t shop around for a lender, you won’t know that you’re being quoted an interest rate that’s too high or offered a loan program that doesn’t make sense for your finances. So talk to a variety of lenders and make sure you understand exactly what you need to do to close on a loan that offers an interest rate for less than 4 percent.

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