As is usually the case, I ran out of time before I could answer all the questions submitted to my regular online discussions at www.washingtonpost.com. So here are a few recent queries I wanted to get to:
QThe value of my property has just about doubled. I owe $140,000 on my home. Folks are selling similar houses for more than $280,000. My credit rating is in the 500 range. Do I have any hope of being able to refinance? What type of institution would be best to contact for a refinance?
AAs the Rev. Jesse Jackson always says, "Keep hope alive." Even with a low credit score you can get a home loan these days. Many traditional and online lenders have loan programs for consumers with poor credit histories. However, with a score in the 500 range, you fall into the subprime lending category. That means your refinance rate won't be all that attractive.
Let's say you refinanced for a $200,000 loan. With a super-great credit score of 720 or above, you might qualify for a 30-year, fixed rate of 5.636 percent, making your monthly payment (excluding taxes) about $1,150 a month. But with a credit score of 500 to 559, the rate increases significantly, to 9.289 percent, or a monthly payment of more than $1,650. (The rates come from national mortgage averages obtained from www.myfico.com as of July 18).
"You have lenders that will go as low as 476, but it's going to cost you," said Deenice Galloway, a mortgage loan specialist based in Bowie.
But if your credit score is low because you have been late on your current mortgage payments, there may not be much hope for you to refinance, Galloway said.
"A lot of people don't realize that you can't be late on your mortgage and refinance," she said. "You do not want to be late on your mortgage in the last 12 months."
Each lender sets its own range of what constitutes a credit score worthy of the best rates. Typically, if you have a credit score in the 650 to 675 range, you're eligible for good rates, Galloway said. Scores of 620 to 649 are okay but may push you into subprime territory, depending on the lender.
If you want to see how your credit score affects which mortgage rate you get, go to the credit education section of myfico.com and click on the link for calculators. You want the "FICO score loan savings calculator."
I have had a bad financial year (worked for a start-up that crashed and burned). I'm young and about to start a new job for which I need to commute. My current car is on its very last legs. What is the best way to proceed financially? Should I lease, buy new or buy used?
First, don't you even think about leasing. Some people say this about leasing: "It makes sense because you don't want to buy a car, which is a depreciating asset."
Oh yeah? Then why not just rent everything you have to use -- furniture, clothes, washer and dryer? In the short term, a car lease may save you money every month. But buying a car and holding on to it for a while will save you more long-term.
If money is tight, buy a used car. People are getting great deals on reliable used cars with low mileage thanks in part to the knuckleheads who have to turn in their leased vehicles. As one financial planner told me, leasing a car for business purposes is okay, but never for personal use.
I'm hoping you can help me understand reverse mortgages. My mom is in her early sixties and has virtually no income because of a sluggish job market where she lives. Her area (Boston) also has an extremely expensive and quirky real estate market such that it doesn't make sense for her to sell the house. She lives in a modest house in a fancy neighborhood, so basically she's house-poor. What would be the pros and cons of a reverse mortgage for someone like her?
Reverse mortgages are available only to homeowners 62 and older. This type of loan allows seniors to convert the equity in their home into tax-free cash, without selling, giving up title or having to make a mortgage payment.
A reverse mortgage doesn't have to be repaid until the homeowner moves, sells or dies. Borrowers can take the loan as a line of credit, a lump-sum payment, fixed monthly payments or a combination.
The downside of this loan product is the high fees. To get an estimate of the fees you may be charged, try the reverse mortgage calculator at the National Reverse Mortgage Lenders Association's Web site (www.reversemortgage.org).
Before you contact a lender about a reverse mortgage, visit AARP's Web page on the topic (www.aarp.org/revmort). On the site, you can download AARP's free booklet "Home Made Money: A Consumer's Guide to Reverse Mortgages." To order a free copy of the guide by telephone, call 800-209-8085.
* On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org.
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