Moderator: Welcome to Viewpoint with our guest, Andrew Horowitz. Andy, we're glad to have you back, and let's get started.

Alexandria, Va.: When is the "right time" to consider refinancing? I have a one-and-a-half year-old mortgage at 7.75 percent. My property has increased in value substantially in that time, so I know I have a good amount of equity built up. But I may be selling in another one-and-a-half to two years. What are your thoughts?

Andrew Horowitz: Nice to be back, David. I always look forward to this forum.

The "right time" to refinance is an arbitrary statement. If you are seriously considering selling your home in two years then it depends on the size of the loan you have. If your loan amount is over $100,000 then it might make sense. The interest rate that you should be looking for should be one that has zero points, and minimal closing costs. The biggest problem is the time frame. You are what we refer to as a "tweener" -- it almost makes sense but it also does not. If you like, give me a call and we can discuss whether or not you should refinance your existing mortgage.

Washington, D.C.: Do you have to have perfect credit to get a home loan with your company? Does all your debt have to be paid in full?

Andrew Horowitz: Perfect credit -- what is that in today's society? There have been many programs developed with people with less than stellar credit. Be careful, though, there are many lenders out there who prey on lower credit standards and sell them sub-prime loans when they actually may qualify for a Fannie Mae loan with slightly higher rates.

Arlington, Va.: How do no-document loans work?

Andrew Horowitz: There are many varieties of no-document loans. We have what are known as no-income verifiers, which are simple: you tell us how much you make and we say okay. For this type of loan, most lenders will look to bank accounts to see if it makes sense. There is also No Income No Asset loans, where basically we verify nothing. The minimum down payments on these types of loans is 5 percent. But you must have very good to excellent credit and you will pay a premium to the rate. If you have any further questions call me at 1-800-784-1331.

Lorton, Va.: How do FICO scores work, and how good is 655? Thanks for coming on today!

Andrew Horowitz: FICO scores are the best and worst things to happen to the industry. We have had explanations about them from credit bureaus and from lenders, but none really explain how they are calculated. I do know that the more inquiries into your credit the lower the score. A score of 655 we would look at favorably.

Gaithersburg, Md.: If a person has not-so-good credit scores, can he/she get a mortgage at a higher rate for now, then refinance in six months or a year, for a better rate?

Andrew Horowitz: It all depends on what you think are not-so-good credit scores. Many people believe that their credit is poor when it actually shows up as not so bad. Have a lender pull your credit to check what kind of scores you are working with. You might be eligible for an expanded level program through either FNMA or FHLMC.

Washington, D.C.: What are the best types of lending programs for people that are just starting out as first-time home buyers, and can't put a lot of money down?

Andrew Horowitz: Look around for first-time home buyer programs sponsored by the state. The local banks sometimes offer these or you can always call the department of banking for the state you are in. You might also want to investigate going through FHA for a loan -- they have lower down payment requirements. The lowest down payment that we offer is 3 percent through a conventional program.

Tysons, Va.: What kind of interest rate premium can I expect on a loan due to a bad credit score? Because of an isolated incident (in 1999, a credit card in my name, being used by a relation who mismanaged it to the point where it was written off and sold to a collection agency -- I paid immediately when I found out) my credit score is poor -- somewhere in the 500s.
I am looking to buy a modest place. I have no other debt whatsoever, a good income, and should be putting collatoral down in the neighborhood of 30 to 50 percent. But I expect my credit score will cause me to pay more than the rates advertised. I'd like to know how much though, given good collatoral and capacity.
Also, how do they calculate credit scores for married couples? My girlfriend has spotless credit, though little capacity due to a modest amount of student loans, and a lower income. We may be married soon, and I was wondering if her good credit rating will result in my credit score being improved if she was a party to a mortgage application.
Thanks for your insight.

Andrew Horowitz: I want to respond because so much effort was put into the question. There is a possibility that you might be able to be approved for a rate with very little premium. There is an explanation for your credit situation, and that explanation should go a long way in an underwriter's view. That can be used to offset some of the negatives on your credit. If you are putting down that much on the property the underwriters may look a little bit more favorably on your case as well, due to the lesser risk for the bank. Your girlfriend's credit will also deflect your negatives; I would list her as the primary borrower and you the co-borrower. Good luck and congratulations on the marriage.

Centreville, Va.: I have signed a contract on a new house under construction. I have been in my current house for nine years and have little mortgage tax benefit. I have plenty of cash for down payment on the new house, but have read that carrying a large mortgage makes sense from a tax-benefit standpoint. I am in a high tax bracket and would like to know if this strategy makes sense to you. Thank you.

Andrew Horowitz: Remember, the only interest deduction that we still have left is the interest deduction. I am a proponent of higher mortgages and lesser down payments, provided you do not go over the 80 percent level and end up paying PMI.

Silver Spring, Md.: We currently own a home, but are thinking of moving. Should we get preapproved for a mortgage, the way we did when we bought our first house?
Also, is there any benefit to asking our current mortgage holder (Mellon Bank, for whom we think we've been a good mortgagee) to offer us a mortgage on our new house?
What is a good rule of thumb for calculating how much of a mortgage we can carry (can we figure something out from our salaries and how much downpayment we can make?) Thanks!

Andrew Horowitz: I always recommend to borrowers to try to get preapproved for a loan before they go out in search of their new dream home. Most realtors will recommend this as well, since they know that it is an excellent bargaining tool to help in your negotiations. We do preapprovals a little bit differently than most: we actually go through an entire application with our borrowers and issue commitment letters, rather than just doing what some lenders do, which is pre-qualify someone. A commitment in-hand gives the borrower a stronger negotiating point; you are in essence a cash buyer since you know your loan has already been completed.

Reston to Potomac Falls, Va.: We would like to take advantage of the current, low rates for a Jumbo 30-year fixed mortgage. However, our new home is new construction, to be delivered January to March 2003. Can and should we lock in now? If so: Who? What? When? Where? Why? How? How much will it cost?
Or should we get approved for a mortgage now and negotiate the rate (and points) when the time comes?
What if we are able to put down more (or less) of a down payment at settlement? Should we get approved for a $350K or $375K mortgage? Can you please explain paying-down a mortgage (including how to prevent pre-payment penalty)?

Andrew Horowitz: My best suggestion for someone looking for a settlement anywhere beyond 120 days from now is to just get the loan approved and worry about where interest rates are in four months. Most companies offer extended lock programs at a significant premium. With your settlement date being in 2003 I would not even consider locking. The premium to the rate would be too high. As far as getting approved for more or less most mortgage companies can make modifications to loans so I would apply for the $375K and wait to see if you are able to put down any more. Most loans do not come with prepayment penalties any longer, so paying them off early should not be a problem. Make sure you ask the lender specifically whether the loan has a pre pay penalty. None of our fixed products presently have prepay penalties.

Baltimore, Md.: My husband and I have found our dream house. By selling our current home we will net just enough for closing and 20 percent down but will have high payments. We are thinking of taking approximately $50,000 out of our retirement fund to lower the payments to a much more affordable level. Do you recommend this?

Andrew Horowitz: The most important part of this question is what makes you the most comfortable. If your payments are going to leave you distressed each month then take the money out of the retirement fund. Remember, you may have penalties for early withdrawal and I would check with your accountant about the tax ramifications. I would sit down before any final decision and discuss it to make sure what you are doing meets with your financial resources. If you like I would be more than happy to discuss all of these matters with you and try to help with this difficult decision. Please feel free to call me if you need an outside opinion at 1-800-784-1331.

Washington, D.C.: Hi, could you please explain how refinancing works? Do you have to go through a similar closing process that would include closing costs? Or is it just a process (like transfering credit card dedt to a card with a lower interest rate) to lower interest rates/monthly payments? Thank you.

Andrew Horowitz: A refinance is similar to when you first took out the loan. There are closing costs that you will have to incur that if done with a reputable company should be fairly reasonable. You can finance most of these costs into the new loan, provided there is enough equity in the house to support the new loan amount. What you want to be wary of is the new closing cost that many have developed. It is called a broker fee, and this is nothing different that points just with a new label.

Alexandria, Va.: I qualify for the special mortgage loan programs designed for first-time homebuyers. However, I have been told that in many local markets, home sellers only will look at bids from buyers who have the standard 30-year or ARM -- the other loans such as FHA "take too long" and it's a seller's market. What do you recommend to first-time homebuyers?

Andrew Horowitz: Unfortunately, we have heard that as well from other borrowers who have used our company because the sellers did not want the hassle of dealing with home buyer programs. It is a difficult time to be a first-time home buyer. If you are able to put down at least 3 percent maybe you should consider straight conventional financing. From what I have been told the rates on the programs are not that much lower.

Arlington, Va.: We are in the process of buying a new home and selling our current one. The new one is a stretch, so my instincts tell me to use all the proceeds from the sale of this house as a down payment for the new one. My lender, who has approved a much bigger loan than I am comfortable with, suggests that I keep some of the sale proceeds in savings so that I have liquid assets and can dip into that money should I come up short for a mortgage payment from time to time. What do you think?

Andrew Horowitz: Remember, we are all paid on commission and the larger the loan the more we make. If you are comfortable with a lower loan amount go with what makes you most comfortable. Last time I checked most originators are not financial planners nor are they accountants.

Upper Marlboro, Md.: Mr. Horowitz, I'm looking to build a custom home and the date for our "one-time closing" is next week. We've been told we can lock into a rate for our permanent financing when we are 60 days out from completion of the home. What's the best way to ensure that we'll lock in at the best rate? I know no one has a crystal ball. What I'm wondering is how do you track interest rates on a 30-year jumbo mortgage when you're looking to lock? Where should I check and when? By the time the rate is posted in the paper or on the news, it may be too late.

Andrew Horowitz: The best way to track interest rates is to keep an eye on the 10-year Treasury note. Most mortgages have started using that as a benchmark to replace the 30-year bonds.

Prince George's County: Hello, I am a 35-year-old single black female with excellent credit who does not have children. I am interested in buying a home but do not have any money to put down. I currently live in Prince George's County, Md. I have recently paid off at least 12 credit cards in an effort to prepare for buying a home. I do, however, have a large student loan that has been deferred for one year. My questions are, how can I buy a home without any money down and are there any programs in Maryland that can help someone like me, a federal government employee making $40,000 a year? Do you think that I could find a program to help me, and given the information that I have provided what do you think my chances are of buying a home in the very near future? Thanks.

Andrew Horowitz: I think your chances of buying are excellent. There are several programs available, but pay attention to what has been posted before about the first-time home buyer programs. You should have no problem.

Pittsburgh, Pa.: Will be relocating to Washington, D.C., and have heard of the use of "interest only" loans as a viable way to deal with the expensive market. Who is a good candiate for an "interest only" loan?

Andrew Horowitz: I am not a fan of interest only loans and would not recommend them to any of my borrowers. Now there are people out there, investors and financial planners, people who can make a better return in the stock market than I can, that say that these programs are the greatest. I don't think so.

Alexandria, Va.: I want to start investing in buying houses for rent. Is there any disadvantage or higher cost in buying the properties using a company or trust instead of my own personal name? I am interested in keeping my privacy.

Andrew Horowitz: Large disadvantage. By doing it in the name of a trust or company you pay commercial rates, not residential.

Boston, Mass.: Can one incident, like the one mentioned above -- the misuse of one credit card going to a collection agency -- affect your score that much?

Andrew Horowitz: Not just one incident, it was probably more than one occurence. If it went to collection it must have been paid late over the course of a prolonged period of time. Never allow others to use your credit; you have no idea no matter how trustworthy they are what they can do. If they miss a payment that goes delinquent more than 60 days it can have a major impact.

Arlington, Va.: I'm looking for my first home and have heard that you can deduct certain items when you file your taxes. What are they?

Andrew Horowitz: Check with an accountant on these. You should be able to deduct points, prepaid interest, taxes, and home owner's insurance.

Fairfax, Va.: When does it make sense to pay points?

Andrew Horowitz: If this is a purchase and if you plan on being in the home for more than five years pay points, if less than five years I would not pay points. If it is a refinance I would need to discuss and calculate further to determine the benefits. For a more detailed discussion you can call 1-800-784-1331

Washington, D.C.: Hi, I graduated last May and have been working full-time since Sept. 2001, and will hopefully be shopping around for a mortgage this summer. Will I be penalized rate-wise for the short employment history? If it matters, I was in grad school (JD) and my salary should be enough for a mortgage in my price range.
Thanks in advance!

Andrew Horowitz: Absolutely not. Most mortgage companies will just require a diploma and you would be able to purchase once you have secured a stable position in that field.

Leesburg, Va.: Do Stated Income mortgages have a higher interest rate than regular mortgages?

Andrew Horowitz: That depends on the amount a borrower is putting down on the property and the credit scores of the borrowers. In most cases slightly higher rates will apply.

Takoma Park, Md.: My husband and I are preparing to buy a house in the next few months. We will be receiving part of our down payment as a gift from my parents and the rest will be borrowed from my husband's business. We got online yesterday and filled out a couple online applications for preapproval. These were supposed to give an instant answer but we never heard anything. What does this mean? I am concerned we got rejected. My credit is fair but my husband's is clean.

Andrew Horowitz: Most companies are not doing the supposed instant approvals that they say they are. Our normal turn time for approvals is approximately three to four hours if there is a need for a rush. If you are planning on buying a home what you should do is contact a mortgage company directly, and do an application with a live body, not a keyboard.

Springfield, Va.: My husband and I recently had a really horrendous experience with a local Northern Virginia mortgage broker. With scores like 750 and 800 and over 20 percent to put down, we thought brokers would be happy to approve our loan. And they did, twice. However, on the day of settlement mysterious issues came up with verification of my husband's employment status. We suspect this was not entirely on the up-and-up as my husband has been gainfully employed with the same company for over four years and makes quite a lot of money. We feel at minimum we were treated disrespectfully (as in, my husband and his employer were accused of being "liars" and "intentionally misleading" the mortgage company) and at a maximum possibly criminally. Of course, we were neither misleading or elusive in our handling of the mortgage application. We were more than willing to go to settlement and provide all requested information to ease the process. I am wondering if there is any recourse for such treatment. Any one we should contact or report this experience to who would help other consumers be aware?

Andrew Horowitz: The Virginia Department of Banking has a thorough investigative branch. I would contact them immediately.

Stafford, Va.: I am a retiree with a fixed income coming in -- to include my retirement and my deceased husband's Social Security. Additionally, I have my husband's retirement coming in, but it is in my daughter's name. It is deposited into a joint banking account which she does not access. That said, I have over $150,000 in stable investments. My present house is paid for, with the value being about $120,000. Question: Assuming a satisfactory credit history, should I have a difficult time qualifying for a $150,000 mortgage? I plan to put at least 25 percent down on a $200,000 home.

Andrew Horowitz: I can't really answer this without knowing what type of income you are bringing in; it would be just a little bit relevant to telling you whether or not you would be approvable.

Columbia, Md.: I have a question about accelerating the payments on a mortgage. Is it better to make extra payments -- let's say 16 to 18 a year -- that include the escrow, interest and principal or is it better to just put that money as an extra principal payment in your 12 mortgage payments a year? I do not want to convert my mortgage to a 15-year versus my current 30- year, as should my employment situation change, I would still want the low payments that my current mortgage has. Thank you for your answer.

Andrew Horowitz: Either way of prepaying works, although I would just recommend sending in lump sums to the principal payments rather than slightly confusing the servicer on the loan.

Arlington, Va.: I expect to retire in five years. Should I pay cash for a smaller home and have no mortgage, or should I have some mortgage payment in order to get the interest deduction? I've heard both schools of thought on the subject.

Andrew Horowitz: Mortgages are good. Remember, I am in the business so they have to be. My belief is why be bricks rich? With interest rates as low as they are, in my opinion it would make more sense to take out some form of a mortgage and leave the cash available to invest and enjoy. If you are planning a retirement in five years the bricks are your supposed rainy day, enjoy your retirement, set up investments that pay monthly dividends and use that to pay the mortgage.

Andrew Horowitz: Thanks to all for the questions that I was able to get to and my apologies to those of you whose questions I was not able to answer. If you would like to discuss any of these issues further please call me at 1-800-784-1331. I am pretty much always here, so just reference this discussion and my staff will put you through.

Moderator: Our thanks to Andrew Horowitz, The National Financial News Services, Lighthouse Mortgage and all who participated.