In order to create lasting security you must learn to stand in your truth. You must recognize, embrace, and be honest about what is real for you today and allow that understanding to inform the choices you make. Only then will you be able to build the future of your dreams.
Money Lesson: To maintain or better your FICO score, always pay your newest bills first. The older bills have already impacted your score.
Is there someone in your life from whom you are hiding money or debt? Do you suspect someone is hiding money or debt from you? Don’t suffer from financial infidelity! Talk to your loved ones about money issues. Work together to plan during this economic downturn, and stop being a financial cheater and stand in your truth!
Learn how to prioritize all your debt. And did you know student loan debt is the most dangerous debt any of us can have? Because in most cases it is not dischargeable in bankruptcy - making it the most important debt that you can pay.
Ask for Help: If you need help, contact the nonprofit agency the Consumer Credit Counseling Service; they can be reached by calling 1-800-388-2227. They will help you organize and consolidate your debt.
Money Lesson: Give to yourself as much as you give of yourself! This means you have to put yourself first.
BUYING A HOME
For renters who are eager to buy now that prices have come down, and for owners who are looking to make a move, there are rules for you to follow so your new housing dream will give you security, not stress.
Money Lesson: Live below your means but within your needs.
UNDERWATER ON YOUR MORTGAGE
There are many homeowners who purchased a home during the bubble - often with little or no down payment cushion - who currently have a mortgage that is higher than the market value of their home. If you can’t afford your mortgage and you are underwater, I want you to stand in the truth and realize that walking away may be the right and honest move for you and your family.
Tools: Mortgage Terminology
Loan Modification: Your lender agrees to reduce your payments to an affordable level.
Short Sale: The lender agrees that you will sell your home for whatever it can get in today’s market. If the sale price is less than the outstanding balance of your mortgage, the lender will forgive that amount.
Deed in Lieu of foreclosure: You hand the house back to the lender, and the lender agrees to not go through the foreclosure process. A lender will typically require you to attempt a short sale before considering a deed in lieu of foreclosure.
Foreclosure: The lender takes back your house and sells it. Depending on your state the lender may be able to sue you for any loss it incurs if the sale price is less than the outstanding mortgage balance.
Loan modification: Lessens payments but "LATE" status lowers your FICO score. When a lender offers you a trial modification, your monthly payment will be reduced. That’s the good news. The bad news is that this will have a negative impact on your credit score. The reason for this is because even though the bank agrees to lower the payment, it must still report the fact that you are no longer paying the full amount due. So, if you go for loan ' ' modification and have been current on your mortgage and other payments, and you enter a trial modification, be aware that your credit score is going to take a tumble.
Tools: If your home is 50% - 100% or more underwater, here are your steps to determine if you should walk away:
1. Ask your lender to modify the loan and reduce the principal owed.
2. If you lender refuses, your next course of action is to ask for a short sale. If they don't agree to that, try a deed-in-lieu of foreclosure.
3. Still get a "No?" You should, most likely, walk away at this point, and you shouldn't feel bad about it since you asked your lender for help and they refused.
For example, if you purchased a home for $500,000 but it's current value is $125,000, then it's more than 50% - 100% underwater. If you lender will not work with you to modify the loan or you cannot get a short sale then you should consider walking away.
Money Lesson: You are never to touch your retirement savings to keep up with a mortgage you can no longer afford.
Disclaimer: This information is for discussion purposes only. It is speculative and based on assumptions that may not be correct or complete. OWN: Oprah Winfrey Network and its affiliated entities and Suze Orman and her affiliated entities do not represent or warrant its accuracy. This is not a legally binding commitment and OWN: Oprah Winfrey Network and its affiliated entities and Suze Orman and her affiliated entities shall have no liability, and disclaim all direct, indirect, consequential, punitive or other damages, for the use of, or reliance on, this information.