Q & A with Dottie Herman

Q & A with Dottie Herman

» Featured Columnists | By Dottie Herman | July 27, 2012 8:30 AM ET

Q1 - I recently opened an investment account and was wondering if/how that affects my credit?

A - There are many different types of investment accounts. It would be helpful to ask the company you opened the account with whether the account is updated on your credit and whether a credit review occurred prior to approval of the account. You may also want to check any documents that you signed with them, because prior to a company reviewing your credit, they must first get authorization.

If the account has a credit extension or line attached, it may be on your credit report and show as revolving credit, but more likely it will not show, unless you defaulted on the credit aspect of the account. If the investment company did review your credit for approval of the account, and this review was the only one you have had in the past year, your score could drop about 2-5  points.

Q2 - I haven't paid my mortgage in over a year and they just put a foreclosure letter on my door! I have tried to talk to the mortgage company and they will not help me...they told me to just do what I am doing. What can I do to resolve this?

A - A foreclosure is a legal proceeding, so you should certainly consult an attorney to ensure that your rights are protected. You may also want to consider trying a short sale, which for some people is a good alternative to a full foreclosure proceeding. If you would like further information on short selling, you might want to do some further reading on the subject here

Q3 - We live in Tennessee and hate it. We experienced a bad tornado last year, and now there have been tornado warnings issued again. We paid more for our house than it was worth, and have a very high mortgage, but both my husband and I are retired. All in all, it's a big mess, and we want out of our house; however, we purchased in 2008 and received an $8,000 tax credit and have read that we're obligated to repay it if we move out of the house before 3 years are up. We spoke to the IRS, and they said that if we walk away from the home and it goes into a short sale, it might take a while and likely take us past that 3-year mark. How can we get out of this property? We are so confused.

A - You should consult your tax advisor with respect to repayment of the tax credit, but generally, the new home buyer credits did require that you live in the home as a primary residence for a minimum period of time, typically 3 years, but there may be exceptions. Doing a short sale might be the best option if you are in financial hardship, but it will affect your credit. Consult a local lawyer who can help you structure a short sale and negotiate with the bank.

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