Q & A with Dottie Herman

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Q1 - My husband and I have some debt we want to get rid of. At the same time we would like to modify our loan as our current rate is 5.25 and we know how they are in the high 3's. Is there a way to get a loan modification and cash out at the same time so we can pay off one of our large credit card bills? We just want to bring the total owed back up to our original mortgage amount.

A - I am not aware of any modification programs that allow for cash-out.  The intention of a modification is to change the terms of the current loan into a more manageable payment.  Unfortunately, it is completely centered around the mortgage itself and not the overall lifestyle a person is looking to improve.  However, you are correct about the interest rates and, depending on the lender, a refinance may not be a very expensive undertaking.  Furthermore, with the right loan officer with the right company, it can be a very reasonable experience.  The only question then is the appraisal. 

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Q2 - How much equity do I need in my home in order to take a second mortgage?

A - That actually varies lender to lender as second mortgages are not governed by the overriding guidelines that exist for first mortgages.  However, depending on the type of second mortgage you are looking to take (a line of credit vs. a loan), lenders can go as high as 85-90% of the value of the home.

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Q3 - How do I decide which mortgage is right for me? How do I decide between an ARM or fixed?

A - This is a great question.  Everybody's situation is unique to them and the decision between taking an ARM versus a fixed is one of comfort.  ARM's are great for people with financial savvy or someone staying in a home for a shorter amount of time as ARM's have limited periods where they act the same as fixed rates.  The great thing about a fixed rate is there's never a concern about what will happen to the rate and payment so, as long as it is comfortable, you're in good shape.  With rates being where they are now, fixed rates are extremely popular, but there are certainly plenty of people preferring ARM's in certain circumstances.

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Q4 - Do you think rates will rise in the coming months? My wife and I want to buy a home and if the rates are going to rise we will probably jump now so we can get an even more expensive house. What are the rates right now?

A - Rates are likely to rise as we head later in the year.  In fact, rates have actually jumped in the last couple of weeks into the upper 3's.  That's certainly nothing to be concerned about from a historical standpoint, but it's obviously higher than the lowest we've seen.  Think about the fact that rates rise due to a number of factors: improving economy, higher inflation, money moving from safe-haven markets like bonds and commodities (gold) into the stock market.  If you consider those factors, you can understand why rates have already popped up a little bit and why rates are likely to move higher as we move forward.  Now, nothing goes in a straight line up or down.  There may still be pockets of time to hop on a very low rate as we ultimately seem to be moving higher.

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