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Michelle Singletary
Washington Post Columnist
Thursday, October 25, 2007; 12:00 PM

Personal finance columnist Michelle Singletary hosts an online discussion with David Reed, author of "Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You" (American Management Association, $16.95) on Thursday, Oct. 25 at Noon ET.

In her column from Sept. 30, Michelle says that Reed serves as a good interpreter to understanding mortgage and refinancing costs.

She writes: "Mortgage Confidential" is like reading the Cliff's Notes for "Hamlet." You shouldn't substitute the notes for actually reading the play, but reading the notes beforehand can help you understand the language. You feel less intimidated.

The transcript follows.

Read Michelle's past Color of Money columns.

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Michelle Singletary: Welcome. We have so many questions so let's get started.

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Springfield, Va.: Hello Michelle and David!

My husband and I are always reminding each other, "But Michelle Singletary says..." we love your column and advice!

Here is my mortgage question: We have a fixed rate (5.875 percent) 30 year mortgage, plus an adjustable rate (currently at 8.00 percent) home equity line. Should we attempt to refinance both into one payment now, or just wait until we sell our home, hopefully within the next 6-9 months, and pay off the two with the sales proceeds, then get another fixed rate mortgage for the new house?

Thank you so much!

David Reed: I wouldn't do anything with your current mortgages...5.875% is pretty darned good and there will be fees when you refinance...I'd keep what ya got and pay them off when you sell... :)

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Gainesville,Va.: What is your opinion about the current situation with the subprime loans, also who do you blame for this situation Banks or consumer, and finally can you explain how come a Bank did approved a loan that the payment will be larger thatn the person salary.

David Reed: Subprime loans have been around for decades and they have a place in the market...sometimes bad things happen to good people but that shouldn't keep them out of homeownership..subprime lending is a way to help people get back on their feet.

Subprime by itself didn't cause this problem, what caused the current situation is subprime combined with no verficiation of income, assets,etc...lenders got too greedy and came up with some goofy loan programs...

I don't know how a bank would make a loan with payments higher than the salary other than the loan probably didn't require any income to be put on the application or was a "No Documentation" loan....

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Elkridge, Md.: In May of 2006 I purchased a townhouse with a 5/1 interest only arm. I would like to refinance to get out of the interest only mortgage. Is now a good time or should I wait till rates possibly go down? Is it smart to roll closing costs into the new mortgage? I would like to spend as little up front money as possible. Also, I currently have two loans, an 80/20 set up. Would it be wise to try to combine these when I refinance? I do not yet have 20 percent of the cost of my home in equity yet. Thank you, Liz

David Reed: It's a great time to refinance, rates are currently at lows not seen since last November...be prepared to have two notes once again though if you don't have twenty percent equity...you can always refiance the first and subordinate the second or if rates are lower for the second (they probably are) then refinance both notes....keep your costs low by not paying points or origination charges on a refinance...I see no reason not to roll closing costs in with your loan given sufficient equity... :)

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Charlottesville, Va.: Not a question about mortgages, but about credit reports. I was able to get a credit report and summary done recently. One of the three credit bureaus had my last name spelled incorrectly. It's only one letter wrong, and the resulting incorrect spelling actually is pronounced the same way. But is this something to worry about and take steps to fix? All the credit/account info was otherwise correct.

Michelle Singletary: I don't mind taking a question off topic. You should contact that credit bureau and let it know your name is misspelled. Because the information for a consumer whose name is spelled that way could end up in your file and affect your credit score.

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Alexandria, Va.: Getting married next year -- both myself and my fiance own condos and are both in 80/20 Interest only 5/1 ARM mortgages. My fiance's is resetting next year, mine will reset in 2010. We were planning on living in my condo once married and are looking at options such as renting her condo out and trying to make as much towards the payments as possible, rather than selling at a loss. Not sure if a refi on her condo or mine would make sense. Is there ever a point where you can make an informed decision that isn't going to hurt you since the housing market is so up-and-down these days?

David Reed: I would only refinance a property if I were to hold onto it...if the condo loan balance is more than the condo is worth you might not even have an opportunity to refinance it...if you do have equity and you are keeping the condo, then a fixed rate refinance looks like a good option for you....no one can predict the future but one can work to make prudent decisions for the present...

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Alexandria, Va.: What is the cheapest (lowest up-front costs) reverse mortgage I can obtain? What is the recommended pay-back period?

David Reed: Right now RMs are expensive, mainly because there are so few choices...if you can wait a few more months, rumors have it that new, cheaper RMs are on the horizon...

Michelle Singletary: Also, I recommend you read everything you can about reverse mortgages. Go to HUD's Website. In particular HUD has put together a top ten things you should know about reverse mortgages tip sheet. Here's the link

http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm

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Washington, D.C.: I'm in the rather enviable position of having a steady job that pays well with my only debt being my mortgage. I fully fund my Roth and 401k, but I have no idea what to do with extra money at the end of the month. Do I pay down my 200k mortgage in dribs and drabs, invest, or split it? If all my retirement savings are already in lifecycle funds, where should my other investment money be going?

Before you ask, I already have more than six months of living expenses saved up and have all the appropriate insurances. I do read personal finance books, but the ones I've read are all focused on getting out of debt, which isn't applicable in my situation. I realize that this issue seems insignificant compared to the real problems so many others suffer from, but I just don't know what to do. Any advice would be appreciated. Thank you.

Michelle Singletary: What a great problem to have. I would add one more fund to your list of things you have. A "Life Happens" Fund. This is an account (could be combined with emergency savings) that you use for the things in life that happens (car repairs, major home repairs, renovations, etc.) Fund it at whatever level you feel comfortable, anywhwere from $500 (if you are low income) to a few thousand dollars. This is so you don't have to tap your emergency fund.

Then if you don't have a car loan or don't have kids to put thu college I would pay down my mortgage. That's me.

But if you like you could pay down your mortgage (even just one extra payment a year will significantly reduce a 30-year) AND invest the rest for say paying cash for your next car or taking a major vacation, etc.

OR if you are so flushed with cash give some to a charity.

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Quantico, Va.: After filing bankruptcy, is it wise to get a mortgage? If no, why?

David Reed: You get a mortgage to buy a house, regardless of a bankruptcy. the difference is in your terms...recent bankruptcy discharges of less than two years will relegate you to subprime loans...there are a zillion reasons to own a home, mortgage interest deductions vs. rent, building equity, etc...just buy when you're ready to buy and don't rush it....

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Jacksonville, Fla.: Do you know of any mortgage amoritization tools that will allow you to add different additional payments over the years? For example I want to add $100 extra every month this year and continue to add an extra $50 to that every subsequent year ($150 extra a month in year 2, $200 extra a month in year 3) for the next 5 years and keep the extra payment amount steady after that. I haven't found a tool online that can handle that.

David Reed: Try hsh.com

Michelle Singletary: You can also try the mortgage pay down calculator at www.bankrate.com.

Here's the link

http://www.bankrate.com/brm/amortization-calculator.asp

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D.C.: I'm a new reader, so I apologize if you've addressed this question recently.

What's your view on making charitable contributions when you have debt? Specifically, although I carry no credit card debt, I have about 100K on a home equity line of credit (which I used to pay for a kitchen and bathroom renovation). I anticipate that I will be able to pay off that HELOC by the end of next year. Should I make my normal year-end charitable contributions? I say yes; my partner says no, that I should put that money toward paying off the HELOC. M income is high (allowing me to pay off that HELOC in just one year), and I feel it is part of my social obligation to give back at least a little. Your thoughts please?

Michelle Singletary: I believe in tithing -- 10 percent of my gross income. You should tithe even if you are in debt. I know to some it sounds crazy. But if your belief system says that tithing is required, you are obligated to do it.

BUT that doesn't mean you ignore your creditors or tithe and don't pay your debts. It means you have to rework your budget, cut expenses, increase income to honor all your obligations, even to God.

As for your situation, I side with you. If giving is important to you and I think it should be for everyone, then continue to give even as you are paying off your debt.

It's about what you believe and what matters to you. Heck if everybody waited until they were completely debt free -- no car loan, no mortgage -- imagine how charities would suffer.

So again, honor your debts but also give.

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D.C. suburbs: I read the other day that Countrywide is going to change a number of loans it made to people who cannot now poay them since the rates have reset.

What do you think about this?

washingtonpost.com: Countrywide To Offer To Rework 82,000 Loans (Post, Oct. 24)

David Reed: Better to rework them than foreclose on them...I don't see why more lenders don't get that concept...

Michelle Singletary: Also, please read the news stories carefully. They are only doing this for certain borrowers.

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Hughesville, Md.: Hello! My husband and I purchased a home about a year ago. We have a subprime loan. (yes, I know) We have two loans, the first is 30 year fixed at 7.3% (548,118.53) and the second is an ARM that will adjust in two more years. (137,032.23) We know now that we did all the WRONG things in buying a home, and quite frankly being wise with our money. We make about $200,000 a year and we are working very heard in trying to get our debts down. The house is appraised at $866,000. We were going to refinance, but found out that our monthly mortage increased dramatically if we combined the loans. I think we should wait 6 more months,continue getting our debts down (car) and try for the re-fi again. Any opinions?

David Reed: Not sure how your mortgage increases when you combine the two loans, you still should have the same amount just split up into two notes..unless I'm missing something...I like the current 7.3% fixed rate...jumbos above $650,000 right now are around that range today...

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Bethesda, Md.: Hi Michelle, I love your column and value your advice on finances tremendously.

My husband and I just purchased our first townhome with an FHA loan (30 year fixed). We received the 3 percent downpayment via a grant from the builder and also recieved alot of incentives/upgrades/all closing costs from the builder as well.

The home won't be finished until next spring so we haven't locked into a rate yet.

Right now, we're at 7.5 percent (our credit scores aren't the best) but our lender/broker is telling us to wait until December to lock in since the house won't be ready until March.

Is that good advice?

Thanks!

David Reed: FHA loan rates aren't risk-based. Even if your credit isn't spotless if you've been approved for an FHA loan and you're being quoted 7.50% personally I think you're getting screwed...that said however the cost to lock in that long term (6 months) isn't worth it, I wouldn't think about locking in until you're about 60 days out...find another broker, btw.

Michelle Singletary: Oh I so agree with David.

Please read the stories I've been running on Financial Independence Group, which now goes by CashFlo Strategies. It's a good lesson in getting a second opinion about the fees and interest rate you are being charged.

Here are the stories:

Aug. 26 A 400 Percent Return In 7 Days? Riiiight.

Aug. 30 A Mortgage Is for Paying Off

Sept. 9 Some Mortgage Originators Skip State Licensing

Sept. 16 Maryland Tells Unlicensed Mortgage Firm To Shut Down

Oct. 15 The Get-Rich Pitch, Then the Letdown

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Midwest: Just a word of encouragement for people whose adjustable rate mortgages are about to hit--I went through a bankruptcy 6 years ago, have a modest income, and was able to get 6 3/4 percent 30 year fixed for about the same rate I have been paying for the past 2 years. I was so afraid of losing my house--my payment was about to go up considerably, and I found a broker who worked hard to find many different ways to try to solve the problem until she found one that worked for me. There IS hope, don't give up!

Michelle Singletary: Thanks for those words of encouragement!!

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Washington, D.C.: When we purchased our house, we took out two loans - our primary loan and a second smaller one (home equity?). The entire process was somewhat confusing, and adding to it was the fact the loans were quickly sold to a larger lender. Here is my question: My first large loan is clear and they provided me an amortization schedule that shows how my payments are and will be divided between principle and interest. Fine. However, the second loan seems very different and a very small amount only goes to principle. And there is no schedule the company tells me that this amount is determined by the date they receive the check in the mail if they process it earlier or later than the "due date" then most ends up going towards interest. We are NEVER late on our payment, but it seems like if we are early we are penalized. Does this sound right and is there anything I can do? I am very confused why only $10, $20, or $30 goes towards principle each month, while over $300 goes to interest.

David Reed: Initial payments in a mortgage are chock-full of interest with very little going to principal. If your second mortgage is fixed, I'm not clear on the explanation your lender gives you. Interest is paid in arrears on a mortgage...when you make a Nov.1 payment you're paying for interest accrued in October...paying extra on a fixed rate loan should reduce the principal by the amount paid...

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D.C.: I am a 20-something try to buy my first home. I am living at home with parents now and opened a CD to accumulate a nest egg for the next 12 months, which my parents will match. I have a pretty good idea of what I can afford (about $150K) When I met with an agent who introduced me to a lender, the lender pre-approved me for 250K. How can that be? Also, what are the chances of me finding something (I am thinking 1-2 bedroom condo) under 200K in the DC area?

David Reed: Most every first time homebuyer I've ever worked with is absolutely floored when they find out how much a lender will loan them...don't bite...only buy what you feel comfortable in paying each month...can't answer the condo thing...a good Realtor can tho...

Michelle Singletary: Please, please don't just go by what a lender says you can "afford."

Do some figuring yourself. For example in every home purchase I've made, my husband and I include all the other expenses we have -- tithing, child care, college savings, retirement savings, etc. -- in our own calcualtion of what we can afford. So that we know including ALL of that and our mortgage we get idea of what we can afford. We know we can continue saving and such even with our mortgage.

The calculations the banks use don't include expenses or savings that isn't debt. So what you can "afford" by their standards doesn't include the way you actually spend.

So count those cost too, when deciding what mortgage you can afford.

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Alexandria, Va.: I'm fairly young (25 years old) and currently renting, but might be able to afford a 2-bedroom condo/townhouse if I rented out the second bedroom. Do you think this is a good idea?

David Reed: Most lenders won't allow you to use roomate rental income to qualify you...plus, what if you end up hating their guts...

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Greenbelt, Md.: Other than obviously life-cycle reasons like uncertain employment future or simple lack of money to buy one, under what circumstances could someone be better off never owning a home?

David Reed: If values never increased over time, then continuing to rent would make sense. Owning carries a certain amount of overhead (repairs, upkeep) so one would need to accumulate some equity to offset those charges...but given a stable, long term market, owning makes much more sense...plus, it just feels better. :)

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Gaithersburg, Md.: We have a good (not sub-prime) ARM. Since we've been in the house awhile, the balance is a lot less than $417k. Does this mean we should have no trouble refi-ing to prevailing rates when our teaser expires and our loan fully indexes?

David Reed: All other things being equal, sure. Why wait until it reaches fully indexed rate? Rates are very, very good right now.

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Ashburn, Va.: Hello Michelle and David, thank you for this chat. My fiance and I are starting to talk about buying a house after we get married. We don't currently live together now, but he has already bought his first "home" (a condo). Should we have me buy the new home, so that I can qualify for the first-time buyer's rate? If so, does this mean we should wait to merge our finances until after we close on a house? Thank you very much!

David Reed: Will you want the size of your first home to be qualified only on your income or would you rather use both incomes and buy a bigger place? First time homebuyer status is overblown unless you participate in some state-sponsored bond program...you can buy together now if you want, you don't have to be married to go on a loan together...

Michelle Singletary: Oh no David.

Don't tell them to shack up!!!

Don't do it.

Wait, buy the house together. I do agree with what he says about first-time buyer programs.

Wait, get married, buy the home together, merge your money.

But then I suspect you know that. So follow your very good instincts.

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Silver Spring, Md.: People always say you should "shop around" for a mortgage, but what, exactly, does that mean? I picture going around to different banks and telling them our plans and our financial situation. But how much information do you disclose? I wouldn't want credit reports run everytime as that would make my credit score go down. Thanks.

David Reed: To find the best loan officer you should find two or three of the best Realtors in town...those Realtors keep the best loan officers on their short list...if your credit is fine and you're employed, etc., all you need to do is call those loan officers and get quotes on their rates and fees...

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Alexandria, Va.: Hi, Michelle and David,

I'm trying to decide when to refinance my mortgages. I bought my townhouse in June, 2004. I have a 7/1 interest only first mortgage at 5.25 percent and a second at 7.38 percent. I have been increasing the payments on the second mortgage and should have it completely paid off by December, 2008. Should I plan on keeping the 5.25% until it expires in 2011 or should I start shopping for a new fixed-rate loan sooner? Thanks for your comments.

David Reed: Tough call. I'd keep paying down the second like you are...if rates approach 5.50% soon I would probably refinance.

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Washington, D.C.: What does a 40 year fixed balloon payment actually mean? I've been told that I won't have to come up with the balloon payment until the end of the note but that I am planning on selling the home within the next 10 years so I shouldn't be worried about the balloon part of this loan. What do you think?

David Reed: The 40 year is the amortization period, the balloon part is when you must pay off all the balance or refinance...I'm guessing your balloon period is 10-15 years...from what you've told me I wouldn't worry about it either.

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Silver Spring, Md.: My husband and I plan on buying our first home sometime early next spring. Are there any good, general books that we should read before doing this? We're looking specifically for information on the financing. Thanks!

David Reed: There are two books you should get...the best books on the market.

Mortgages 101 by David Reed

Mortgage Confidential by David Reed

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Washington, D.C.: For a buyer, which closing costs are negotiable? All? Are there specific costs that can be negotiated away completely?

David Reed: Different parts of the country have different closing cost protocols but the best place to start negotiating is with your lender and their junk fees such as processing, underwriting, etc...third party fees normally can't be negotiated such as attorney, title, etc...

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Princeton, N.J.: How and when will mortgage servicers/lenders be reeled on their practices? mortgagors have made tons of money but no interest in helping to bail out the consumer in tough times. I had an adjustable rate mortgage that jumped 4 points without warning not even after the fact.."hey you may have noticed that your rate adjusted." and in my quest to refinance they say they can only do 90% of the loan. i'm in a hard place but i'll make it but it seems like they set us-the consumer up to fail. most of us do not have millions at our finger tips. Is Washington D.C. taking notice of this?

David Reed: Actually lots of mortgage companies have been reeled in...they're bankrupt and out of business!

You might be a candidate for the new FHASecure program...find an FHA lender, not a mortgage broker, and ask them about the program. The FHASecure is a new government program that addresses your concerns and puts you into a solid, fixed government-backed rate.

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understanding equity: Really basic question here, but it's something I've never understood. People seem obsessed with "building equity" when they buy a home. How exactly are you doing that? As far as I'm concerned, I'm paying back a loan from when I bought the house so I'm paying off debt, not building anything. Or is it just an assumption that the house is rising in value even though there's no way to know that until you try to sell?

David Reed: Building equity comes in appreciation as well as paying down the loan amount. The lower the loan amount, the more equity you have...

Michelle Singletary: You know this is a really great basic question. Glad you asked.

I think so people people think the "equity" is theirs when they take out a home equity loan.

That loan isn't "your" money. It's a loan. If your equity goes away -- and people it can just read the paper everyday -- then you see plainly that it's borrowed dollars when they come to put your butt on the street because you can't pay the 1st mortgage, home equity loan AND your can't refinance because the value of your home has gone down -- meaning you don't have any "equity."

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Bowie, Md.: We have 1.5 years of 4.0 percent teaser left on our 5-yr ARM. We are in no way in trouble when the rate adjusts. Even if it was to hit it's lifetime cap of 10% we could make the payments just fine.

But obviously, we'd like to keep our 4% going as long as possible, while still protecting ourselves from rising rates in the future. Is there any kind of financial derivative, like a future, that we could buy that would track increases in interest rates between now and Spring 2009?

David Reed: Nope. :)

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Washington, D.C.: Hi Michelle and David,

My husband and I have no debt (we rent an apt), 6 months of living expenses saved, and fund our 403(b)funds now we're thinking of buying property.

I know you don't know what the market will do any more than anyone else, but, financially, is it better (if you are a buyer) to buy in early spring (Feb), or wait for better weather?

Should we put 20 percent down automatically?

Thank you very much.

David Reed: Can't answer the weather thing but when you put a minimum of twenty percent down you'll get the best rates at the cheapest cost...there are those who say put as little down as possible and invest the rest....but by putting down as little as possible you'll have a larger loan to pay off with higher rates or mortgage insurance...

Michelle Singletary: So true.

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Phoenix, Ariz.: Hey Michelle, I love your chats! I need some help getting out of some stupid debt. For a few years after college, I lived way beyond my means and racked up about $15,000 in credit card debt on 4 different cards. Then earlier this year I was without a job for a month or two and made a few late payments, and now I'm paying penalty rates of around 30% on all my cards. Now I've got a great, steady job making about $60k but I can barely make the minimums. I've called to ask them to lower the interest rates and they won't. I've drawn up a really lean budget and am trying to live as cheaply as possible, but I need to get those interest rates down. Should I do debt consolidation? How can I tell whether the company is reputable or not? Thank you!

Michelle Singletary: First, great you got a better job.

Second, good for you for trying to take control and calling the card sharks.

I would recommend you go to this Web site www.debtadvice.org

It's run by the National Foundation for Credit Counseling.

NFCC members, often known as Consumer Credit Counseling Service (CCCS) or other names, can be identified by the NFCC member seal.

Go to this site and type in your zip code and you will find an agency near you. You can also call 1-800-388-2227 for 24-hour automated office listings.

Generally the agencies that are part of this group don't charge a lot and will help you negotiate with the card companies.

Now given that SO many people are in debt trouble they may not get further than you do, but at least they are skilled at talking to these companies.

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Chicago, Ill.: Hi Michelle. I read somewhere (before I bought my apartment) that condo mortgages usually carry a slightly higher interest rate than single home mortgages because banks consider condos riskier. Is this true? Is so, does it vary by region? My broker told me I had the highest credit score they had ever seen and gave me a 6.625% rate in June '06 (for a 30 year fixed). I figured it was a little higher than the numbers I was seeing at places like Bankrate because I was buying a condo, but I really don't know for sure - they could have been scamming me a little. How do you ever know?

David Reed: All things being equal, you should've gotten a better rate...condos don't automatically carry higher rates...u n l e s s ....the condo was in between phases (not 100% completed) or otherwise "non-warrantable"....or perhaps you put less than 20% down...but no, banks don't charge higher rates for condos....rates are the same for a condo as they are for a single family residence.

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Plainsboro, N.J.: RE: mortgage pay down calculator

If you have Microsoft Excel, there is a great Excel amortization template on Microsoft.com that is very easy to use and incredibly informative.

Michelle Singletary: Thanks!

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Washington, D.C.: My mortgage is carried by Countrywide. However, it was/is not a subprime mortgage. It's 30-year fixed at 5.5 percent(after refi). I make 13 months worth of payments per year on it.

With Countrywide in the news lately, is there any cause for me to be concerned about the health of my mortgage? Any tricks I should look out for before some huge albatross climbs around my neck through no fault of my own?

David Reed: You're fine and you've got a great rate and nothing bad will happen.

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READ YOUR BOOK, RECOMMEND IT!: Mr.Reed,

I am a 24-year-old woman shopping around for my first home in Fort Worth, Texas.

Thank you for writing a candid, no-frills, to-the-point book on shopping for a mortgage.

I have recently read several other books on the mortgage shopping, and yours is at the top of my list.

I especially appreciate the information on avoiding points, the dangers of doing 100% financing (something lenders gloss over),and correspondent mortgage lenders.

Thank you!

David Reed: Wow, thanks!!!

Michelle Singletary: Ahem, don't I get credit for recommending it (smile).

It's why I do the Color of the Money Book Club every month. To bring to you books I think are so worth the money.

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Laurel, Md.: What do you think about Money Merge Accounts as a way of paying off a home mortgage quicker? I have been hearing a lot about them recently

David Reed: Not familiar with the term....

Michelle Singletary: I'm trying to learn about this. I hope to do a column on it in the next few months.

So far what I know doesn't sound worth the thousands of dollars to set it up. Basically folks it's a system that tells you how to pay down your mortgage so you can pay if off early. Involves the use of home equity loan and very expensive software.

But as I said, still learning about it.

If you have such an account, e-mail me at singletarym@washpost.com

AND PLEASE no e-mails from people selling the software or system that goes along with this type of account. I know where you stand -- to make money.

I want to hear from users not sellers!

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Denver, Colo.: I have an excellent 30 year fixed first mortgage at 5.375 and home equity line of credit at 8.5 good for $102,000 of which I have borrowed $90,000. I would like to refinance only the second. Are there lenders who will do that?

David Reed: Yes...you can begin with your current second lien lender for starters...

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Chantilly, Va.: How does a 30 Years Conv Jumbo ARM work?

My current Interest Rate is 5.625 percent. I am planning on living at my current home for a couple more years, not certain if I will move. Is it a good idea to refi?

Gabriela

David Reed: Is this fixed? If so, stay with what you've got, if it's an ARM and you're moving soon, you may want to wait it out....

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Rockville, Md.: We have an 80/20 loan with the larger at 5.2 percent however the other is at 8.25 percent. We have been paying extra $100 on the first loan but when I called the other loan company they said that I could not pay extra on it. Was wondering why this is. Thanks

David Reed: I'm not sure why you can't either unless it's got a "hard" prepayment penalty but I seriously doubt it....call again and ask for somebody else...you should be able to pay it off tomorrow if you wanted to.

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College Park, Md.: I recently found out that there is a collection on my credit report that is bringing my score way down. Everything else is essentially perfect on the credit report. The collection is from an old utility bill that happened after I moved out of a house almost four years ago so I don't owe the money. How do I improve my score?

David Reed: It just might be best to do nothing at all...I've seen people get competitive financing with old collection accounts....

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Atlanta, Ga.: I bought a home last year and have a (high) fixed rate for 36 months. The loan was a bank statement loan where I proved income with my bank statement. Credit score was around 620. I want to refinance the "right" way with my credit and husband's credit (score around 580) and income. We are planning to clean up his credit and my score has risen I'm sure. When do we need to apply for a loan to refinance and what would be the credit score we would need to have to get a lower interest rate? thinking of?

David Reed: Conventional loans do not have a minimum credit score requirement...some "botique" loans might but if you're wanting to refinance into a boring old conventional mortgage then I suggest applying for a mortgage now...especially if you've got some equity, it might be worth it to try....if however, you put little down, you may want to wait a few more months to let good payment patterns begin to affect your credit....

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Washington, D.C.: Hi Michele and David,

What is PMI? Do I have to have it? I do plan on taking out only a primary mortgage, but if I can avoid it, I'd like to.

Thank you

David Reed: PMI is Private Mortgage Insurance and is an insurance policy that covers the difference between twenty percent down and what you put down. In most cases it's tax deductible if you make less than $100,000 per year. If you put less than twenty percent down, you will either have a PMI payment each month or get two loans, the first mortgage at 80% of the sales price and the second to make up the difference

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Michelle Singletary: Well folks the time went by so fast. Fast-finger Reed answered a lot of your questions. I'm so grateful, as I'm sure many of you are.

So sorry for the questions we didn't get to. But David has agreed to answer some of the leftovers. So look for the answers in my print column and/or in my weekly e-letter, which I hope you ALL subscribe to. If you don't, just go to the biz section to sign up.

Thanks to you all who joined me today. Be safe out there and keep saving!

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