Q & A with Dottie Herman

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Q1 - I am behind on my mortgage payments.  Should I take money out of my 401K to stay current?  Call my lender?  What steps should I take?

A - Taking money out of your 401K  is probably not  the best decision.  You can be penalized and taxed.  You can call your lender to inquire about modifying your mortgage, or find out if you qualify for a refinance.

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Q2 - Can I get money for a renovation on my home? There is some urgent work that needs to be done and I don't have the cash?

A - There is an FHA 203K loan, which lets you purchase or refinance and rehabilitate a property with one loan closing. The projected rehabilitation costs are held in an escrow account and disbursed as work is inspected and completed. The loan amount is based on the projected market value following repairs.

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Q3 - What should I enter on my application if I am relocating because I have accepted a new job, but I have not started yet?

A - Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate receiving at your new location.

If your employment is with a new employer, complete the application as if your new employer is your current employer and indicate that you have been there for one month. The information about the employment you are leaving should be entered as a previous employer. Your mortgage professional sorts out the details after you submit your loan for approval.

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Q4 - What is a credit score and how does it affect my application?

A - A credit score is one of the pieces of information that your lender uses to evaluate your application. Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments.

A credit score is a compilation of all this information converted into a number that helps a lender determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit-worthiness.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use and the number of inquiries that have been made about your credit history in the recent past.

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments will not be paid as agreed. Using credit scores to evaluate your credit history allows your lender to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.

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