■ Reverse mortgage
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By Suze Orman
I am 76 years old. I retired in August 2008
at age 75. Having two mortgages and credit-card debt, I filed for bankruptcy. Now I am
wondering how I can rebuild my credit. I
went to the bank and tried to get a secured
credit card and was refused. What is the
best solution for me?
ONE BANK SAYS no and you’re giving up? Come
on, you did not get to be 76 years young by giving
up so easily. If you want to rebuild your credit, it is
going to take more resolve than that. I don’t know
why the bank said no; secured credit cards are a
great solution for people in your situation. Because
your card is “secured” by a deposit you make, it protects the credit-card issuer if you don’t pay your bill.
My advice is to keep shopping for a secured card.
Forget banks. I prefer credit unions; their interest
rates and fees tend to be a lot lower than what banks
charge. Go to
www.creditcardconnection.org to search
for credit unions in your area. Then contact credit
unions that pop up on your search and ask if they
offer secured cards.
One final tip: Confirm that the card issuer will
report your payments to at least one of the credit
bureaus. Not all secured cards do this. Making sure
your on-time payments (you have turned over a
new leaf and will always pay on time, right?) are
recorded at a credit bureau is how you start to
rebuild your credit rating.
I recently tried to refinance my condo, which
has $90,000 in equity. I was charged a $425
application fee. Although my credit score
is 680 I was turned down, then was told it
was approved, then finally told it had been
turned down. Is there anything I can do to
get a refund for the application fee?
Culver City, CA
FIRST, I HAVE TO tell you that 680 is not a great
credit score. Any score below 700 is a signal to
lenders that somewhere along the line you have
tripped up. And, in this economic climate, that’s
enough reason not to want to do business with
you. Put your effort into boosting your FICO
credit score and you may get a different response
from lenders. (Your equity in the property and current income are also important factors.)
As for the application fee, does the paperwork
you signed say it is refundable if they turn you
down? I doubt it. What I would do is find out the
exact reasons you were turned down. Then ask the
lender if it will reconsider your application (without
charging you a new fee) if you address/fix the issues
within an agreed-upon amount of time.
My 67-year-old mother needs to retire and
has a nice home in the Los Angeles area.
The home has been appraised for more than
$1.3 million and she has a $620,000 mortgage. Long story short, she cannot afford
to make the payments on the mortgage and
is now just about out of cash and in danger
of foreclosure very soon. We’ve heard of
reverse mortgages and would like to understand what the qualification requirements
are and if it would be in her best interests to
apply. Do you have any suggestions on this
idea? We have contacted her bank, but they
say her loan balance is too high.
Redondo Beach, CA
TO QUALIFY FOR a reverse mortgage, you must
have zero mortgage debt, although you can use proceeds from the reverse to repay any remaining mortgage balance. The problem here may be that Federal
Housing Administration–insured reverse mortgages
have a 2010 maximum loan amount of $625,500.
That would be about 100 percent of the reverse, and
at your mother’s age she likely won’t qualify for
that big a loan: The math just doesn’t work. (You can
learn more about reverse mortgages, and the eligibility rules, at AARP’s Web site,
“reverse mortgage” in the search box.)
And if she can’t afford the mortgage, are you
sure she would be able to keep up with the property
tax and maintenance costs? You still must cover
those expenses when you have a reverse mortgage.
If she is cutting it so close now, I think the best
move for her is to move. What makes no sense here
is that you say she is on the verge of foreclosure, but
her home’s value is double her outstanding mortgage debt. So sell! Pay off the mortgage and she’ll
still have plenty of money to downsize into another,
affordable home. C
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