Q & A with Dottie Herman

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Q1 - I have a credit card which allows me to pay off large purchases over time. If I checked my credit score, would having that large balance decrease my score? Will the credit score remain OK because I consistently pay what I am supposed to pay each month in full?

A - The higher the credit card balance you carry, relative to your credit limit, the more likely it is to affect your three credit scores. A good rule of thumb is, whenever possible, to carry 50% or less of the credit limit on each card.  This practice will help to increase your credit scores, versus having only one credit card that is at or near its limit.

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Q2 - I am thinking of buying a home. I have been hearing that FHA loans are very hard to get and may not be around much longer. Is that true? How much would I need to put down?
 
A - Although the Federal Housing Administration (FHA) and the Dept. of Housing and Urban Development (HUD) have been "tightening" the FHA guidelines required to qualify and obtain an FHA loan, there have been no discussions with regard to the FHA loan being eliminated.  The discussions have been to reduce the maximum FHA loan amount from $729,750 to around $625,000 by September 30 of this year.  Currently, a borrower can still get an FHA loan with as little as a 3.5% down payment.  This may change to 5% down this year, but there has not been a definitive date set.

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Q3 - I want to take a home equity loan- do I have to live in the home for a certain length of time before I qualify? 

A - No.  It's not the length of time that's important, it's the amount of "equity" that you have in your home, and if you can qualify for the loan "income" and "credit-wise". Some lenders will use the lesser of the purchase price or appraised value for the first 6-12 months of ownership. Some lenders will require a minimum ownership period of 6 months to a year.

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Q4 - I took a 30K home equity loan- can I pay this back over time? Can I add it into my mortgage payment? What is the best way to pay this back?

A - Yes, your home equity loan can be paid off over time.  A Home Equity "Loan" can be paid back in equal installments of principal and interest over a 10, 15 or 20 year period.  A Home Equity "Line" of Credit also has monthly payments, but only the interest is due on each payment.  You can choose to add principal each month, thereby reducing the balance of the "line". It really depends on what works for your situation and which equity loan you have set up but it cannot be "added" to your mortgage payment as they are two separate notes. Assuming you have enough equity in your home, and that you qualify "income and credit-wise", the only way that you can add your home equity loan/line payment into your first mortgage would be to "refinance" your first mortgage, adding in the balance of the home equity loan/line, leaving you with a bigger first mortgage.  You have to consider the closing costs of the refinance into your calculations and analysis   I suggest you speak with your loan officer to discuss the specifics of your current loan and the best method of paying that off.

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

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