« click here for more Liz Pulliam Weston
By LIZ PULLIAM WESTON
Groups Can Help You Keep Your Home
Dear Liz: I purchased my first home in December 2006 with no down payment, and closing costs were included in an adjustable-rate mortgage. The payment is already high and set to go even higher at the end of the year. I expected to refinance after the first year but it has not been possible. The property value has gone down and my refinance options no longer include closing costs or 100 percent financing.I know my case is similar to thousands of new homeowners', but I need to solve this problem. Are there any options except foreclosure? Should I just lose the house? I really do not know what to do.
Answer: Fortunately for you, there are several organizations trying to help homeowners avoid foreclosure. One is the Homeownership Preservation Foundation at www.995hope.org or (888) 995-4673. Another is the
Dear Liz: Recently someone attempted to charge a $6,500 tuition bill to a MasterCard we no longer use. The issuer's fraud department contacted us and confirmed that the charge wasn't legitimate, then issued us new cards. My wife and I are considering canceling the card but we're concerned that it will affect our credit score, which is 779.
Answer: Let's start with that last part: You don't have one credit score, you have many, and they change all the time. Furthermore, a couple can't have a joint credit score, just as they can't have joint credit reports. If the score you quoted is a FICO score, which ranges from 300 to 850, and if you have similar scores at all three bureaus (which you probably do), then your credit is in good shape. Closing a single account probably won't hurt that much unless this is one of your oldest or highest-limit cards.
But you needn't close the account because of identity theft concerns. As long as you monitor the account and report fraud within 60 days, you aren't held responsible for bogus charges. Many times the issuer will catch the fraud even before you do, as happened this time, and quickly issue you a new card. You also should avoid closing the account if you have only one other credit card. It's always good to have a backup to use while you wait for the other one to be replaced if it's lost, stolen or misused.
Dear Liz: I am 27 and have approximately $24,000 in student loan debt remaining. Part of the debt is a private loan for $11,000 that has a variable interest rate around eight percent. This loan can't be consolidated into a fixed-rate loan. The rest of the debt is consolidated at less than two percent. My husband and I hope to move in the next two years and purchase a home. We also hope to have our first child and for me to stay home for a year with the child. Should I be focusing on paying off my high-interest loan or should I be saving money, either for a down payment or for when I stop working? Would it be bad to incorporate the money I still owe into our mortgage when we get it?
Answer: Lenders will take your debt payments into account when determining the size of your eventual mortgage. But your student loan debt isn't large enough that it would be a significant hurdle. So don't worry about paying off the consolidated loan. The rate you're paying is minuscule and the interest may be tax-deductible. The variable-rate debt is a bigger concern, since the cost could shoot higher.
So here's what you do: Start living now as if you had only one income (your husband's). It will be a great trial run and free up lots of money to pay down this debt while saving for that down payment. If your expenses are too high to manage on just one income, then saving for the down payment should probably be your priority. Lenders are demanding more money down these days, so the bigger your down payment, the more options you'll have.
# # #
© 2008, No More Red Inc. Liz Pulliam Weston is author of the new book “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” She regrets that she cannot respond personally to inquiries, but questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., #238, Studio City, CA 91604, or use the “Contact Liz” form at her website, www.lizweston.com.