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 Find a great home for less than $500,000 Dec. 18: TODAY’s Ann Curry talks to TODAY real estate expert Barbara Corcoran about some great deals for homes across America that cost less than a half-million dollars. |
Q: Is there any type of help from the stimulus package or housing bill to help homeowners that are making their payments on time but can't take advantage of their interest rates? We bought our house at a peak in the market in May 07 and now the appraised value has dropped by almost $50,000. — Shawn
Carmen Wong Ulrich: Shawn, the Housing Plan has two parts: The first to keep people in threat of foreclosure in their homes with loan modifications. And then a refinancing part of the plan for those who, like you, have been making all their payments on time and can continue to do so, but don't have the at least 20 percent equity in their homes necessary to refinance and lock in a lower interest rate. To qualify you must be not more than 5 percent underwater, meaning your mortgage is only 5 percent bigger than the current value of your home, and your loan must be backed or guaranteed by Fannie Mae or Freddie Mac, like 50 percent of American homeowners.
Head to FinancialStability.gov to get the qualifying paperwork and list of items you'll need to bring to your lender to apply. If you do not fall under those guidelines today, make note that the president's Housing Plan has a three-year term, so you may be able to apply next year or in the third year. And if you're much more than 5 percent underwater, you may have to stay put in your home until you have more equity to avoid PMI. Remember, PMI is insurance that mortgage companies ask you to pay to insure their investment in your home. When there's less than 20 percent equity in a home, lenders know that the loan is riskier, so they pass along the cost of this insurance.
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Q: My husband and I are 30 years old. Together we have $13,000 in credit card debt at 8 percent interest and $65,000 in student loans at about 4 percent interest. We have a decent credit score and I am going to go back to school to get my master's degree while continuing to work. I will be eligible for student loans. Should I take out additional student loan money to pay off the credit cards?" — Casey, Kansas
March 18: From retirement savings to health care costs, money experts answer viewers’ most important financial questions.
David Bach: It's really a great question. If you look at it by just a numbers standpoint, it tends to make sense. The rate on a student loan is less than a high credit card — so take out a student loan to pay off the credit card and you swap a high interest rate for a lower one. But a lot of people just get themselves into more trouble. If you use new loans to pay off credit card debt, you don't get any better at just paying off your credit card each month responsibly. Mathematically, it makes sense, but the habit of pulling money out of your home or from student loans to pay off consumer debt is fundamentally wrong financial behavior. You want to avoid huge credit card debt to begin with. And you want to pay it off regularly. You cannot just pay the minimum. You have to pay off what you spend each month.
Student loans are actually supposed to be for student loan purposes. It's not supposed to be for other things. Don't treat it like a credit card for other things.
Q: We have been interested in buying a house. We both had some challenges in our 20s and managed to pay off all our credit issues. Now I really just need some advice on how we save for a house, pay all our monthly bills and improve our credit. We know that the First Time Home Buyer Tax Credit is only for this year so we won't be able to take advantage of that if we don't buy now. But we're worried that the housing market can keep getting worse over the next two years. Is it in our best interest to wait and keep renting? — Josephine, Florida
Carmen Wong Ulrich: Keep renting if only because it doesn't sound like you're ready. You need the 3 C's to buy a home: Great credit (sounds like you need more time to build this up); the capacity to pay the loan (solid income plus cash savings to cover several months of mortgage payments, after the down payment); and collateral (the down payment — hopefully of 20 percent). The best way to pay your monthly bills, improve your credit and save for the down payment (and first, an emergency fund) is to automate everything! Automate your banking completely. Bank online and set up automated payments for your bills (make sure you set the payments way before the due date so you leave plenty of time to meet the due date), as well as automated savings deducted from where your paycheck lands, going into a high-yield savings account or money market account. What you don't see in your checking account, you won't spend and won't be part of your monthly budget. By pay automating your bill-paying, you lessen the chances of being late on a bill and/or any bills slipping through the cracks. Just make sure you have a small cushion so no bills bounce.
Q: I was laid off from my job in December. I have been looking for a job, am on unemployment, and I have a son in his second year of college, on student loans. Our income has been cut almost in half. I have been all over the Web researching work-at-home businesses. Are any of these a legitimate and logical way to earn extra income? — Sharee
Jean Chatzky: They can be, but you have to be careful. There are a lot of sites out there looking to scam desperate job seekers, particularly now. Job opportunities that claim to allow you to make big bucks working from home, but ask you to hand over your credit card number, are a major red flag.
There are two Web sites I like for this: www.womenforhire.com and www.momcorps.com. Both offer work-from-home job listings, as well as other employment opportunities that may require some in-office face time. You can also look directly on the Web sites of large companies — many are offering work-from-home opportunities now because it cuts costs.
Finally, positions at direct sales companies like Tastefully Simple, Stella & Dot and Lia Sophia are really popular right now, and they largely seem to be recession proof. The New York Times had an article about this over the weekend, and reported that more and more sales consultants are signing on for the job. It's a great way to bring in cash while you're looking for a job, and the hours are flexible enough that you can continue with it part-time even after you've found a full-time position. Most sellers own a commission of 20-50 percent on their sales, depending on the company, by hosting in-home parties to sell everything from kitchen supplies to jewelry and food.
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