Q & A with Dottie Herman

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Q1 - My husband and I are looking to make some home improvements. Is it better to refinance and take out some cash or do a separate loan for the remodel? The cost of the work we want to do is about 10 thousand dollars.

A - If you have a mortgage that you would want to refinance anyway for a better rate or term then it would be best to add the $10,000 to the new loan.  If this is not the case then you should pursue a Home Equity loan (HELOC) which is a line of credit on your home. With this loan you may be able to get HELOC for more than the monies you now need so it will always be available to you.  With this loan you can borrow, pay back the money, and borrow again.  The last option would be to take a personal loan from your bank and pay it back over a set period of time.  You should do some homework and look into these options so you can decide what is best for you.

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Q2 - I want to purchase a condo/townhouse. I currently work in a restaurant so most of my income is tips. How do I secure a loan if most of my income is tips?

A - A mortgage lender will qualify you using your adjusted gross income from your tax returns and pay stubs.  Earning most of your income from tips is not an issue, what will matter is how much of your income is represented on your tax return, and paystubs after write-offs and deductions.

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Q3 - Can I secure a home loan if I currently owe the IRS money?

A - If you have an IRS lien or judgment against you there may be a problem. If you just owe them money and it has not progressed to a legal action you should be OK.  Many government agency liens, such as the IRS, can be attached to your property, so in many cases the Title insurance company will not insure the mortgage until it is paid off.  This is because the lien has the potential to later be attached the house and dilutes the lenders security interest in the property.  Call or local Title company with your specifics, or your real estate attorney for more information.

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Q4 - If I need and receive a mortgage modification due to financial difficulties will it affect my credit score?
       
A - Yes this will be indicated as a modification and it will impact your credit for up to three years. However, It is much better than the alternative of a short sale or foreclosure.  If you maintain your other credit and stay current on the modification terms, your credit will increase steadily.  If you did not have any issue with your other obligations your credit may not be impacted that much at all.

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If you have a real estate question for Dottie, please send it to; Dottie@RealEstateChannel.com

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