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CNN Live Saturday

Demystifying Home-Buying

Aired April 17, 2004 - 16:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FREDERICKA WHITFIELD, CNN ANCHOR: DOLLAR SIGNS is coming up straight ahead. But first, here are the headlines.
A family's worst fear confirmed. The body of 22-year-old Dru Sjodin was found today nearly five months after she disappeared from a North Dakota shopping mall. Convicted sex offender Alfonso Rodriguez is in jail on $5 million bail. He was arrested in December and he has pleaded not guilty to kidnapping Sjodin.

An Israeli air strike today in Gaza City tore through the car of Hamas leader Abdel Aziz Rantisi. He was killed along with two of his bodyguards and two sons. TV coverage showed doctors frantically trying to save Rantisi. Israeli officials say the Hamas leader was killed to prevent future terrorist attacks. Chief Palestinian negotiator Saeb Erakat says Israel will be held accountable.

(BEGIN VIDEO CLIP)

SAEB ERAKAT, PALESTINIAN NEGOTIATOR: We condemn this in the strongest possible terms, this Israeli crime and state terror against the Palestinian people. This assassination will just add fuel to the fire, and we fully hold the Israeli government responsible for the consequences of such action.

Because at the end of the day, bullets will beat (ph) bullets, violence will beat violence, hate will generate more hate, and that's what the Israeli government is doing now.

And once again, we call upon the international community, instead of rewarding Israeli occupation and rewarding Israeli settlement activities in stealing Palestinian land and so on, to stand firm and to go back to a meaningful peace process that will end this Israeli occupation.

(END VIDEO CLIP)

WHITFIELD: Israeli military officials say one border police officer, he is dead and another three injured after a suicide attack there. It happened today inside the Erez industrial zone at the Israeli-Gaza border. Hamas military wing and the Al Aqsa Martyrs Brigade are both claiming responsibility.

Officials say three U.N. police officers were killed today after a shootout at a detention center in Kosovo. Two of the officers are from the United States. One is from Jordan. Police are investigating the circumstances of the shooting. Well, welcome to DOLLAR SIGNS, where we help you get the most for your money. Are you in the market for a new home? When you first start looking, the variety of houses and the floor plans available can be pretty intimidating. Well, today we're going to help you take some of the guesswork out of finding the right house for you.

(BEGIN VIDEOTAPE)

WHITFIELD (voice-over): In the market for a new address but don't know how to narrow the choices? Balance dream with reality? Unlocking some secrets for those bewildered buyers, leading Atlanta realtor Peggy Hibbert.

PEGGY HIBBERT, AUTHOR: They are looking at maybe what their needs are today, right this minute, and really what they need to be thinking about is how is the house going to work for them for about the next five years.

WHITFIELD (on camera): For example, you walk in a house like this. Why is the floor plan the first thing, one of the first things that someone needs to be cognizant of?

HIBBERT: And people really don't recognize that the floor plan is so integral to their use.

WHITFIELD: For example, can you kind of show and tell me a little bit this one. You walk into this great foyer, and then right away you almost have a bedroom-playroom.

HIBBERT: Well, the nice thing about -- this house is fairly new, five to six years old. When you walk in, this room on the left instantly gives us some flexibility because you can have a first floor bedroom, or if you need an office, it can be an office. Or if you wanted a study, a private study, or it can even be a formal living room.

WHITFIELD: Do you try to steer the client away from thinking about their existing home, that set-up while trying to choose what's best for them? Or do you want them to think about those things?

HIBBERT: I want them to think about what works and what doesn't, where they currently live. And the main thing I'm interested in is what's motivating their change.

WHITFIELD: So let's take a look. This might be the home for somebody who says I want new.

HIBBERT: Right. There are new home people, and there are old home people. And sometimes people don't know if they're new or old home people.

WHITFIELD (voice-over): But most buyers, says, Hibbert, do have strong convictions, to a fault sometimes, about something else, furniture.

HIBBERT: Well, are you buying the house for you, or are you buying the house for the dining room table?

(END VIDEOTAPE)

WHITFIELD: Well, our guests today have more tips on what to look for and how to get the best deal. Shelley O'Hara specializes in real estate in Indianapolis, Indiana, and she's written more than 30 books, including "The Complete Idiot's Guide to Buying & Selling a Home." And John Lowry is our money man here in Atlanta, and he is a mortgage broker.

All right. Good to see both of you guys.

All right, John, let me begin with you. The interest rates are so low, such great incentive for anyone to buy for the first time or perhaps even refinance. So what are you seeing most of, the refinancers or the new buyers?

JOHN LOWRY, MORTGAGE BROKER: We had a little bit of a dip in the rates here about a month ago, and the refinances came in for a little window of about three weeks. But right now, it's mostly purchases. The purchases are still coming through strong. This is a great time to be looking for a house.

WHITFIELD: And, Shelley, we saw from one Atlanta realtor some of the tips that she would give to buyers out there. What do you think is the most common mistake that some of these new buyers, particularly, seem to have when you work with them?

SHELLEY O'HARA, AUTHOR OF HOME BUYING BOOKS: Well, I think it's important to make sure your financial house is in order. And one of the things that you can do is check...

(AUDIO GAP)

O'HARA: ... and do that early on in the process. So if problems pop up on them, you can get it taken care of before the end crunch time.

WHITFIELD: All right, Shelley. And sorry to viewers. It's not your television set. We actually have a little audio problem there. But we're going to try and work through it, Shelley. All right, John, are you noticing that a lot of folks just -- you know, they just sometimes try to get financing for a house that really is just going to be too much house for them. They look at the sticker price and think, OK, great, that's the monthly. But they forget about insurance, the principle, interest, all that stuff.

LOWRY: Yes, when you look at the house all together, it's amazing today -- in today's market, with all of the different kinds of loans out there and all of the different ways that you can structure financing, it's very easy to kind of get in over your head. I'll tell some of my clients you'd be amazed at how much debt we can get you into, just because you qualify for it, you really need to look at your own personal comfort level.

WHITFIELD: All right. John Lowry and Shelley O'Hara, hold on a second, we're going to take a short break. We'll be right back taking some of your e-mail questions and your phone calls. E-mail the questions to dollarsigns@cnn.com, or you can call us at 1-800-807- 2620.

(COMMERCIAL BREAK)

WHITFIELD: If you don't own a home, isn't it everyone's dream to own your own home? Well, hopefully, we can try and help make things happen for you. Shelley O'Hara is a real estate expert, and she joins us from Indianapolis. And John Lowry is a mortgage broker here in Atlanta. And Dora Lee in Pittsburgh is on the telephone with us. And John, she has a question for you about predatory lenders. Dora Lee?

CALLER: Yes. Can you tell me what buyers can do to protect themselves from predatory lending practices?

LOWRY: Yes. The idea of predatory lending practices is people who will make loans to you knowing full well that you probably don't have the ability to pay them back. It's considered predatory, generally they'll do it in the form of second mortgages. People who aren't as savvy will sometimes not even realize what they're signing up for. A lot of states are enacting laws against predatory lending. We have fairly strong laws against that here in Georgia. I'm not sure about Pennsylvania.

You need to make sure that whatever payments that you have are something that's very comfortable for you. If you have any questions at all I'd get with some other party and have them review the terms quickly, try to make sure there's no prepayment penalties. If you're having to take a loan at a higher payment temporarily because of bad credit or whatever your situation is, you want to make sure you can get out of it as quickly as your credit situation improves.

The main thing you can do as a consumer is check with several different people and get several different opinions and don't get fast-talked into any kind of high interest rate loan or large prepayment penalty loan.

WHITFIELD: All right. Thanks a lot, Dora Lee. And you know, John, a lot of folks feel like they want to do a lot themselves. They're using the Internet. In fact, George from New York is on the phone. He's got a question about mortgage calculations by using the Internet -- George.

CALLER: Thanks for taking my call. I've used mortgage calculators on the Internet, and they seem to give me a higher price of a house I could afford than I'm comfortable with. And I've read that using 2 1/2 times your gross is also a good way. Which do you think is more accurate?

LOWRY: Well, it's kind of like saying, which do you like better, chocolate or vanilla? It's -- the 2 1/2 is a good rule of thumb, but with the rates as low as they are -- the 2 1/2 rule came out when rates are 8, 9 percent. Now you could probably go to 3 or 3 1/2 and have the same payment for your comfort level. Only you know where something fits in your comfort level. We can get -- brokers today have so many different loans available. We can get the loan for you, but you're the only one that can know whether that's in your comfort zone. There is -- no one's going to come through and say, you know, you really shouldn't get this house. Their job is to get you the loan if you want it, and you then need to tell them where your comfort level is.

WHITFIELD: All right. And, Shelley, you get to know your clients so well, a lot of times they reveal a whole lot of information, maybe sometimes too much information to you. Well, Mary in Connecticut is on the telephone. And she has a question that has become a fairly common question for a lot of people. How do you pay off your home loan fast, Mary?

CALLER: Yes. I was calling because I wanted to know what could you actually do once you've actually purchased a home and you're looking to pay your mortgage off as quickly as possible? Do you pay toward the principal, or do you just continue to send an extra payment?

WHITFIELD: Shelley, you want to take that?

O'HARA: You could do -- sure, I'll take that. You need to check with the terms of your loan specifically because that would tell you the best way, in your situation, how to handle it. But a lot of times, after you've made your payment, if you pay additionally on that, that will go towards the principal and bring it down further, what -- the amount that you owe.

WHITFIELD: All right. And it sounds like Rennie has a very similar kind of question that he e-mails from Yukon, Oklahoma. How can I get good deals on buying a home and financing for a first time home buyer? Really wanting to know how do I maximize the opportunities out there, John?

LOWRY: There are many programs out there for -- specifically for first-time home buyers. For whatever reason, the United States government is really trying to get everybody who wants a house to be able to afford a house. We have a lot of loans out there that require no down payment. We have a lot of loans that you don't have to have quite as excellent credit as it used to be in the past.

If you're buying in certain areas, there may be lenders that have special money available for certain parts of town. Here in Atlanta, there are some zip codes and some areas where there are special grants. There are things like that. You can check with all of your realtors and see what kind of programs are available. For first-time home buyers, a lot of times they'll have an income limit on what you can make, but most of the first time home buyers fit well within those guidelines.

WHITFIELD: All right. And John, we alluded to this a moment ago. I'm talking about insurance in your mortgage, in your monthly payment. Veronica in California has a more specific question for us -- Veronica.

CALLER: Hi. Me and my husband have been pre-qualified for a home, and my question was that when we were about to sign the paperwork, I asked about insurance, and they said it's already included with your payment.

LOWRY: Correct.

CALLER: But, however, they didn't give me the specifics on what was covered or anything. So is that a good thing, because I don't know about it?

LOWRY: Well, there's actually three kinds of insurance that involve homes. The main one is your homeowners insurance, or what's referred to as hazard insurance. That's something you'd get from Allstate or State Farm or any of the things that if the house burns down, somebody is going to pay off the lender and you and protect your valuables.

There's a second kind of insurance that protects the lender called private mortgage insurance. Now, it has nothing to do with your home. It just protects the lender if you default. And it is usually required on loans that don't have at least a 20 percent down payment. That may be what they're referring to because I believe, if they were talking about the hazard insurance, you would have gone out and picked the policy and picked your insurance agent and taken care of it.

The third kind of insurance that a lot of lenders will try to sell you is what's called -- well, it's basically life insurance that pays off the mortgage if you die. That's completely optional. That is something that they should never just put in automatically.

We generally don't recommend you get that from the lender because you're just paying a group policy and paying the highest possible premium, whereas you may be able to go out and find a life insurance policy because you're healthier or don't smoke or whatever. You should do that one on your own.

The only one I can think of they put in without your own knowledge would be the private mortgage insurance. And that would be, did you put a large down payment down, or was it a minimum down payment?

CALLER: No, actually, they said it was no down payment that was required, and we were pre-qualified. So when they talked about insurance...

LOWRY: Right, they -- generally, banks won't -- it used to be a long time ago they wouldn't make a loan to anybody that didn't put 20 percent down. And then they came up with this insurance company, and they said, if you'll go buy this insurance and pay for it, then insurance company will cover the first 20 percent of loss if this loan ever goes bad. So really to the lender it's an 80 percent risk. So with that insurance, they will go ahead and make a 100 percent loan.

WHITFIELD: Interesting.

LOWRY: So that loan there, they're referring to the mortgage insurance that allows them to make 100 percent financing. And yes, it is a good thing because without it, you wouldn't get 100 percent financing.

WHITFIELD: All right. Thanks a lot, Veronica, for your call. And John and Shelley, thanks also, just stick around for a minute. We're going to take a short break. And when we come back, we're going to try and find out if buying a home is actually seasonal? Look at this e-mail.

(COMMERCIAL BREAK)

WHITFIELD: Welcome back to DOLLAR SIGNS. Here's a question from one of our e-mails. Do you get a better buy on a house during certain times of the year? We asked that right before break. Shelley O'Hara and John Lowry have had a chance to think it over.

And in fact, the e-mail, this is exactly what it says, guys. Noah asks, is there a certain month that is better to buy a home than another to save money, Shelley?

O'HARA: I think there probably is. Right now we're in the peak of the real estate market, which is traditionally April through July. A lot of people that have children, whatever, want to move and get into the house before school starts. So there could be an advantage in purchasing a home or looking for a home in some of the off months, perhaps in wintertime, around the holidays, when people are anxious to move.

And I also wanted to make a comment about the private mortgage insurance for existing home buyers, is it's not automatically taken off. So once you have enough equity in your home, you don't necessarily have to have that. So if you own a home and have been in there for a while, it's one way that you could save some money by seeing if you can have that dropped from your loan...

WHITFIELD: Yes, a lot of times you need to call your lender -- you need to call you lender, don't you, and ask them, is it time to take it off? Because otherwise, they'll keep it on there.

O'HARA: Yes, they will. It doesn't happen automatically, exactly.

WHITFIELD: Yes. OK. John -- Jetlan (ph) in Florida is on the telephone. He wants to know to what extent will credit stand in the way of a purchase, Jetlan?

LOWRY: You want -- OK. Well, the credit's going to be an important part of it. Depending on the credit level, it could stand -- it could keep the whole thing from happening if the credit is not good enough. So it's a very important part of it. One of the things you can do to overcome bad credit is, one, get it cleaned up or try to work on anything that's a mistake to get cleared off it.

But also, the more money you put down, than the less they're going to compensate for the bad credit. It's tough to get 100 percent financing with terrible credit, but if you're putting 20 percent down or so forth, there's plenty of loans out there where you can get a fairly decent deal.

WHITFIELD: All right. Thanks, John. I don't know what happened to Jetlan on the line, but he's listening, hopefully, and got your answer. All right. Charlene in Virginia has a question, again, about PMIs. So Charlene, what's your question?

CALLER: I was recently looking into buying a home. My question is I was trying to get 100 percent financing. When I spoke to the lender, he spoke to me about, instead of doing the 100 percent financing with private mortgage insurance, he spoke to me about getting two loans, one loan for 80 percent of the down payment of the purchase price, and another loan for 20 percent of the purchase price, I really just wanted information about which way would be better.

LOWRY: It's harder to get the one with the 80 and the 20, what's referred to as an 80/20 or a combo loan. Generally, you have to have a little better credit, and they're a little tighter on the ratios. However, if you qualify for it, it is generally a better deal to go ahead and split the loans up into two pieces.

WHITFIELD: Is there a certain candidate, Shelley, that you think would really benefit from having that type of setup?

O'HARA: I think if you have really good credit, you know, as in anything, the better your credit the better you're going to be able to negotiate. The worse your credit, the fewer options you're going to have available.

WHITFIELD: OK. Here's a question e-mailed to us from Patricia in Hanford (ph), California. I've heard that a buyer-broker can be an effective way to locate the right property. How does this work, and how does this person get paid? Shelley, you probably know this well.

O'HARA: Yes.

(LAUGHTER)

O'HARA: This could vary depending on what the situation is. It used to be traditionally that -- and a lot of people didn't know this, is that your agent was actually representing the seller because that's who's paying their fees. But more recently, there have been buyer- type agreements, where you're just representing the buyer, and that could be paid on a commission. It could be paid a flat fee. Or a lot of times they'll negotiate with the seller to pay the commission out of that anyway since they're anticipating paying it, and they're going to bring a buyer to the home. So that's still a benefit.

WHITFIELD: OK, and...

O'HARA: So you need to be clear -- go ahead. I'm sorry.

WHITFIELD: No. You go ahead.

O'HARA: OK. They need to be clear on what type of agent that they're working for and whose interest they have and any kind of payment agreement right off the bat, right off the top. WHITFIELD: OK. And real quick, in maybe about 15 seconds or less, John. I'm going to ask you if you can kind of respond to the whole issue of HUD homes. When is it a good idea for someone to try and get a HUD home? Do you usually get it at a better deal, or is it in the end going to be a lot more work for you?

LOWRY: It could be a lot more work, but it is generally a better deal. A HUD home is just a home that has been backed by an FHA loan, and the loan has gone bad, and they foreclosed on it and they brought the property back into the Housing and Urban Development fold. And they're going to sell it. It's houses that have been foreclosed upon, or about to be foreclosed upon and you can usually get a good deal on those.

WHITFIELD: OK. John Lowry, a mortgage broker, joining us here in Atlanta, and Shelley O'Hara, a real estate expert from Indianapolis. Thanks very much to both of you.

LOWRY: Thank you.

O'HARA: Thank you.

WHITFIELD: Thanks for helping us to save money and perhaps even live the American dream, buy a home.

Well, that's all we have time for. Up next on PEOPLE ON THE NEWS: Christopher Reeves. We take a look at the accident that paralyzed him and we'll also look at how he's pushing the boundaries of medical science.

Then at 6:00 Eastern, we'll go live to Afghanistan, where our Nic Robertson has been on the trail with U.S. forces in the hunt for Osama bin Laden.

And at 7:00 Eastern, THE CAPITAL GANG, we'll have the headlines right after this.

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Aired April 17, 2004 - 16:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDERICKA WHITFIELD, CNN ANCHOR: DOLLAR SIGNS is coming up straight ahead. But first, here are the headlines.
A family's worst fear confirmed. The body of 22-year-old Dru Sjodin was found today nearly five months after she disappeared from a North Dakota shopping mall. Convicted sex offender Alfonso Rodriguez is in jail on $5 million bail. He was arrested in December and he has pleaded not guilty to kidnapping Sjodin.

An Israeli air strike today in Gaza City tore through the car of Hamas leader Abdel Aziz Rantisi. He was killed along with two of his bodyguards and two sons. TV coverage showed doctors frantically trying to save Rantisi. Israeli officials say the Hamas leader was killed to prevent future terrorist attacks. Chief Palestinian negotiator Saeb Erakat says Israel will be held accountable.

(BEGIN VIDEO CLIP)

SAEB ERAKAT, PALESTINIAN NEGOTIATOR: We condemn this in the strongest possible terms, this Israeli crime and state terror against the Palestinian people. This assassination will just add fuel to the fire, and we fully hold the Israeli government responsible for the consequences of such action.

Because at the end of the day, bullets will beat (ph) bullets, violence will beat violence, hate will generate more hate, and that's what the Israeli government is doing now.

And once again, we call upon the international community, instead of rewarding Israeli occupation and rewarding Israeli settlement activities in stealing Palestinian land and so on, to stand firm and to go back to a meaningful peace process that will end this Israeli occupation.

(END VIDEO CLIP)

WHITFIELD: Israeli military officials say one border police officer, he is dead and another three injured after a suicide attack there. It happened today inside the Erez industrial zone at the Israeli-Gaza border. Hamas military wing and the Al Aqsa Martyrs Brigade are both claiming responsibility.

Officials say three U.N. police officers were killed today after a shootout at a detention center in Kosovo. Two of the officers are from the United States. One is from Jordan. Police are investigating the circumstances of the shooting. Well, welcome to DOLLAR SIGNS, where we help you get the most for your money. Are you in the market for a new home? When you first start looking, the variety of houses and the floor plans available can be pretty intimidating. Well, today we're going to help you take some of the guesswork out of finding the right house for you.

(BEGIN VIDEOTAPE)

WHITFIELD (voice-over): In the market for a new address but don't know how to narrow the choices? Balance dream with reality? Unlocking some secrets for those bewildered buyers, leading Atlanta realtor Peggy Hibbert.

PEGGY HIBBERT, AUTHOR: They are looking at maybe what their needs are today, right this minute, and really what they need to be thinking about is how is the house going to work for them for about the next five years.

WHITFIELD (on camera): For example, you walk in a house like this. Why is the floor plan the first thing, one of the first things that someone needs to be cognizant of?

HIBBERT: And people really don't recognize that the floor plan is so integral to their use.

WHITFIELD: For example, can you kind of show and tell me a little bit this one. You walk into this great foyer, and then right away you almost have a bedroom-playroom.

HIBBERT: Well, the nice thing about -- this house is fairly new, five to six years old. When you walk in, this room on the left instantly gives us some flexibility because you can have a first floor bedroom, or if you need an office, it can be an office. Or if you wanted a study, a private study, or it can even be a formal living room.

WHITFIELD: Do you try to steer the client away from thinking about their existing home, that set-up while trying to choose what's best for them? Or do you want them to think about those things?

HIBBERT: I want them to think about what works and what doesn't, where they currently live. And the main thing I'm interested in is what's motivating their change.

WHITFIELD: So let's take a look. This might be the home for somebody who says I want new.

HIBBERT: Right. There are new home people, and there are old home people. And sometimes people don't know if they're new or old home people.

WHITFIELD (voice-over): But most buyers, says, Hibbert, do have strong convictions, to a fault sometimes, about something else, furniture.

HIBBERT: Well, are you buying the house for you, or are you buying the house for the dining room table?

(END VIDEOTAPE)

WHITFIELD: Well, our guests today have more tips on what to look for and how to get the best deal. Shelley O'Hara specializes in real estate in Indianapolis, Indiana, and she's written more than 30 books, including "The Complete Idiot's Guide to Buying & Selling a Home." And John Lowry is our money man here in Atlanta, and he is a mortgage broker.

All right. Good to see both of you guys.

All right, John, let me begin with you. The interest rates are so low, such great incentive for anyone to buy for the first time or perhaps even refinance. So what are you seeing most of, the refinancers or the new buyers?

JOHN LOWRY, MORTGAGE BROKER: We had a little bit of a dip in the rates here about a month ago, and the refinances came in for a little window of about three weeks. But right now, it's mostly purchases. The purchases are still coming through strong. This is a great time to be looking for a house.

WHITFIELD: And, Shelley, we saw from one Atlanta realtor some of the tips that she would give to buyers out there. What do you think is the most common mistake that some of these new buyers, particularly, seem to have when you work with them?

SHELLEY O'HARA, AUTHOR OF HOME BUYING BOOKS: Well, I think it's important to make sure your financial house is in order. And one of the things that you can do is check...

(AUDIO GAP)

O'HARA: ... and do that early on in the process. So if problems pop up on them, you can get it taken care of before the end crunch time.

WHITFIELD: All right, Shelley. And sorry to viewers. It's not your television set. We actually have a little audio problem there. But we're going to try and work through it, Shelley. All right, John, are you noticing that a lot of folks just -- you know, they just sometimes try to get financing for a house that really is just going to be too much house for them. They look at the sticker price and think, OK, great, that's the monthly. But they forget about insurance, the principle, interest, all that stuff.

LOWRY: Yes, when you look at the house all together, it's amazing today -- in today's market, with all of the different kinds of loans out there and all of the different ways that you can structure financing, it's very easy to kind of get in over your head. I'll tell some of my clients you'd be amazed at how much debt we can get you into, just because you qualify for it, you really need to look at your own personal comfort level.

WHITFIELD: All right. John Lowry and Shelley O'Hara, hold on a second, we're going to take a short break. We'll be right back taking some of your e-mail questions and your phone calls. E-mail the questions to dollarsigns@cnn.com, or you can call us at 1-800-807- 2620.

(COMMERCIAL BREAK)

WHITFIELD: If you don't own a home, isn't it everyone's dream to own your own home? Well, hopefully, we can try and help make things happen for you. Shelley O'Hara is a real estate expert, and she joins us from Indianapolis. And John Lowry is a mortgage broker here in Atlanta. And Dora Lee in Pittsburgh is on the telephone with us. And John, she has a question for you about predatory lenders. Dora Lee?

CALLER: Yes. Can you tell me what buyers can do to protect themselves from predatory lending practices?

LOWRY: Yes. The idea of predatory lending practices is people who will make loans to you knowing full well that you probably don't have the ability to pay them back. It's considered predatory, generally they'll do it in the form of second mortgages. People who aren't as savvy will sometimes not even realize what they're signing up for. A lot of states are enacting laws against predatory lending. We have fairly strong laws against that here in Georgia. I'm not sure about Pennsylvania.

You need to make sure that whatever payments that you have are something that's very comfortable for you. If you have any questions at all I'd get with some other party and have them review the terms quickly, try to make sure there's no prepayment penalties. If you're having to take a loan at a higher payment temporarily because of bad credit or whatever your situation is, you want to make sure you can get out of it as quickly as your credit situation improves.

The main thing you can do as a consumer is check with several different people and get several different opinions and don't get fast-talked into any kind of high interest rate loan or large prepayment penalty loan.

WHITFIELD: All right. Thanks a lot, Dora Lee. And you know, John, a lot of folks feel like they want to do a lot themselves. They're using the Internet. In fact, George from New York is on the phone. He's got a question about mortgage calculations by using the Internet -- George.

CALLER: Thanks for taking my call. I've used mortgage calculators on the Internet, and they seem to give me a higher price of a house I could afford than I'm comfortable with. And I've read that using 2 1/2 times your gross is also a good way. Which do you think is more accurate?

LOWRY: Well, it's kind of like saying, which do you like better, chocolate or vanilla? It's -- the 2 1/2 is a good rule of thumb, but with the rates as low as they are -- the 2 1/2 rule came out when rates are 8, 9 percent. Now you could probably go to 3 or 3 1/2 and have the same payment for your comfort level. Only you know where something fits in your comfort level. We can get -- brokers today have so many different loans available. We can get the loan for you, but you're the only one that can know whether that's in your comfort zone. There is -- no one's going to come through and say, you know, you really shouldn't get this house. Their job is to get you the loan if you want it, and you then need to tell them where your comfort level is.

WHITFIELD: All right. And, Shelley, you get to know your clients so well, a lot of times they reveal a whole lot of information, maybe sometimes too much information to you. Well, Mary in Connecticut is on the telephone. And she has a question that has become a fairly common question for a lot of people. How do you pay off your home loan fast, Mary?

CALLER: Yes. I was calling because I wanted to know what could you actually do once you've actually purchased a home and you're looking to pay your mortgage off as quickly as possible? Do you pay toward the principal, or do you just continue to send an extra payment?

WHITFIELD: Shelley, you want to take that?

O'HARA: You could do -- sure, I'll take that. You need to check with the terms of your loan specifically because that would tell you the best way, in your situation, how to handle it. But a lot of times, after you've made your payment, if you pay additionally on that, that will go towards the principal and bring it down further, what -- the amount that you owe.

WHITFIELD: All right. And it sounds like Rennie has a very similar kind of question that he e-mails from Yukon, Oklahoma. How can I get good deals on buying a home and financing for a first time home buyer? Really wanting to know how do I maximize the opportunities out there, John?

LOWRY: There are many programs out there for -- specifically for first-time home buyers. For whatever reason, the United States government is really trying to get everybody who wants a house to be able to afford a house. We have a lot of loans out there that require no down payment. We have a lot of loans that you don't have to have quite as excellent credit as it used to be in the past.

If you're buying in certain areas, there may be lenders that have special money available for certain parts of town. Here in Atlanta, there are some zip codes and some areas where there are special grants. There are things like that. You can check with all of your realtors and see what kind of programs are available. For first-time home buyers, a lot of times they'll have an income limit on what you can make, but most of the first time home buyers fit well within those guidelines.

WHITFIELD: All right. And John, we alluded to this a moment ago. I'm talking about insurance in your mortgage, in your monthly payment. Veronica in California has a more specific question for us -- Veronica.

CALLER: Hi. Me and my husband have been pre-qualified for a home, and my question was that when we were about to sign the paperwork, I asked about insurance, and they said it's already included with your payment.

LOWRY: Correct.

CALLER: But, however, they didn't give me the specifics on what was covered or anything. So is that a good thing, because I don't know about it?

LOWRY: Well, there's actually three kinds of insurance that involve homes. The main one is your homeowners insurance, or what's referred to as hazard insurance. That's something you'd get from Allstate or State Farm or any of the things that if the house burns down, somebody is going to pay off the lender and you and protect your valuables.

There's a second kind of insurance that protects the lender called private mortgage insurance. Now, it has nothing to do with your home. It just protects the lender if you default. And it is usually required on loans that don't have at least a 20 percent down payment. That may be what they're referring to because I believe, if they were talking about the hazard insurance, you would have gone out and picked the policy and picked your insurance agent and taken care of it.

The third kind of insurance that a lot of lenders will try to sell you is what's called -- well, it's basically life insurance that pays off the mortgage if you die. That's completely optional. That is something that they should never just put in automatically.

We generally don't recommend you get that from the lender because you're just paying a group policy and paying the highest possible premium, whereas you may be able to go out and find a life insurance policy because you're healthier or don't smoke or whatever. You should do that one on your own.

The only one I can think of they put in without your own knowledge would be the private mortgage insurance. And that would be, did you put a large down payment down, or was it a minimum down payment?

CALLER: No, actually, they said it was no down payment that was required, and we were pre-qualified. So when they talked about insurance...

LOWRY: Right, they -- generally, banks won't -- it used to be a long time ago they wouldn't make a loan to anybody that didn't put 20 percent down. And then they came up with this insurance company, and they said, if you'll go buy this insurance and pay for it, then insurance company will cover the first 20 percent of loss if this loan ever goes bad. So really to the lender it's an 80 percent risk. So with that insurance, they will go ahead and make a 100 percent loan.

WHITFIELD: Interesting.

LOWRY: So that loan there, they're referring to the mortgage insurance that allows them to make 100 percent financing. And yes, it is a good thing because without it, you wouldn't get 100 percent financing.

WHITFIELD: All right. Thanks a lot, Veronica, for your call. And John and Shelley, thanks also, just stick around for a minute. We're going to take a short break. And when we come back, we're going to try and find out if buying a home is actually seasonal? Look at this e-mail.

(COMMERCIAL BREAK)

WHITFIELD: Welcome back to DOLLAR SIGNS. Here's a question from one of our e-mails. Do you get a better buy on a house during certain times of the year? We asked that right before break. Shelley O'Hara and John Lowry have had a chance to think it over.

And in fact, the e-mail, this is exactly what it says, guys. Noah asks, is there a certain month that is better to buy a home than another to save money, Shelley?

O'HARA: I think there probably is. Right now we're in the peak of the real estate market, which is traditionally April through July. A lot of people that have children, whatever, want to move and get into the house before school starts. So there could be an advantage in purchasing a home or looking for a home in some of the off months, perhaps in wintertime, around the holidays, when people are anxious to move.

And I also wanted to make a comment about the private mortgage insurance for existing home buyers, is it's not automatically taken off. So once you have enough equity in your home, you don't necessarily have to have that. So if you own a home and have been in there for a while, it's one way that you could save some money by seeing if you can have that dropped from your loan...

WHITFIELD: Yes, a lot of times you need to call your lender -- you need to call you lender, don't you, and ask them, is it time to take it off? Because otherwise, they'll keep it on there.

O'HARA: Yes, they will. It doesn't happen automatically, exactly.

WHITFIELD: Yes. OK. John -- Jetlan (ph) in Florida is on the telephone. He wants to know to what extent will credit stand in the way of a purchase, Jetlan?

LOWRY: You want -- OK. Well, the credit's going to be an important part of it. Depending on the credit level, it could stand -- it could keep the whole thing from happening if the credit is not good enough. So it's a very important part of it. One of the things you can do to overcome bad credit is, one, get it cleaned up or try to work on anything that's a mistake to get cleared off it.

But also, the more money you put down, than the less they're going to compensate for the bad credit. It's tough to get 100 percent financing with terrible credit, but if you're putting 20 percent down or so forth, there's plenty of loans out there where you can get a fairly decent deal.

WHITFIELD: All right. Thanks, John. I don't know what happened to Jetlan on the line, but he's listening, hopefully, and got your answer. All right. Charlene in Virginia has a question, again, about PMIs. So Charlene, what's your question?

CALLER: I was recently looking into buying a home. My question is I was trying to get 100 percent financing. When I spoke to the lender, he spoke to me about, instead of doing the 100 percent financing with private mortgage insurance, he spoke to me about getting two loans, one loan for 80 percent of the down payment of the purchase price, and another loan for 20 percent of the purchase price, I really just wanted information about which way would be better.

LOWRY: It's harder to get the one with the 80 and the 20, what's referred to as an 80/20 or a combo loan. Generally, you have to have a little better credit, and they're a little tighter on the ratios. However, if you qualify for it, it is generally a better deal to go ahead and split the loans up into two pieces.

WHITFIELD: Is there a certain candidate, Shelley, that you think would really benefit from having that type of setup?

O'HARA: I think if you have really good credit, you know, as in anything, the better your credit the better you're going to be able to negotiate. The worse your credit, the fewer options you're going to have available.

WHITFIELD: OK. Here's a question e-mailed to us from Patricia in Hanford (ph), California. I've heard that a buyer-broker can be an effective way to locate the right property. How does this work, and how does this person get paid? Shelley, you probably know this well.

O'HARA: Yes.

(LAUGHTER)

O'HARA: This could vary depending on what the situation is. It used to be traditionally that -- and a lot of people didn't know this, is that your agent was actually representing the seller because that's who's paying their fees. But more recently, there have been buyer- type agreements, where you're just representing the buyer, and that could be paid on a commission. It could be paid a flat fee. Or a lot of times they'll negotiate with the seller to pay the commission out of that anyway since they're anticipating paying it, and they're going to bring a buyer to the home. So that's still a benefit.

WHITFIELD: OK, and...

O'HARA: So you need to be clear -- go ahead. I'm sorry.

WHITFIELD: No. You go ahead.

O'HARA: OK. They need to be clear on what type of agent that they're working for and whose interest they have and any kind of payment agreement right off the bat, right off the top. WHITFIELD: OK. And real quick, in maybe about 15 seconds or less, John. I'm going to ask you if you can kind of respond to the whole issue of HUD homes. When is it a good idea for someone to try and get a HUD home? Do you usually get it at a better deal, or is it in the end going to be a lot more work for you?

LOWRY: It could be a lot more work, but it is generally a better deal. A HUD home is just a home that has been backed by an FHA loan, and the loan has gone bad, and they foreclosed on it and they brought the property back into the Housing and Urban Development fold. And they're going to sell it. It's houses that have been foreclosed upon, or about to be foreclosed upon and you can usually get a good deal on those.

WHITFIELD: OK. John Lowry, a mortgage broker, joining us here in Atlanta, and Shelley O'Hara, a real estate expert from Indianapolis. Thanks very much to both of you.

LOWRY: Thank you.

O'HARA: Thank you.

WHITFIELD: Thanks for helping us to save money and perhaps even live the American dream, buy a home.

Well, that's all we have time for. Up next on PEOPLE ON THE NEWS: Christopher Reeves. We take a look at the accident that paralyzed him and we'll also look at how he's pushing the boundaries of medical science.

Then at 6:00 Eastern, we'll go live to Afghanistan, where our Nic Robertson has been on the trail with U.S. forces in the hunt for Osama bin Laden.

And at 7:00 Eastern, THE CAPITAL GANG, we'll have the headlines right after this.

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