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Jewish World Review August 11, 1999 /29 Av 5759

Bruce Williams

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It's your job to shop around


http://www.jewishworldreview.com -- DEAR BRUCE: I live in Las Vegas, and would like to buy a $30,000 studio condominium. Everyone I speak with has a different pitch -- points, no points, origination fees, no fees. I am peeved! Because my loan amount is low, I'll be penalized to a higher rate. The rich get money cheap, and the poor pay extra. It's worse than dealing with a used-car salesman! How come V.A. loans are 7-1/2 percent and a 30-year conventional loan is slightly under that? I thought that the V.A.'s rates were supposed to be a little lower. -- L.H., via e-mail

DEAR L.H.: Contrary to your thoughts, generally the V.A. is just slightly higher than a conventional mortgage. The advantage is that you can buy with little or no money down. As long as you can find a mortgage somewhere that is in the competitive range, I don't think that you have much to quarrel with. I grant you that because of the competitive nature of loan grantors, there are all kinds of deals out there, and one has to take the time to analyze them to determine which is the best deal. If you are going to be in and out in a couple of years, you might be better off paying a higher interest rate with no points. If you are planning on being there for a lengthy period of time -- say, 15 years, then pay the points that are required to reduce the interest rate to its lowest possible level. These are decisions that have to be made on an individual basis. I don't think that there is much substance in your statement that the rich get better rates than others do. On a small mortgage, the paperwork is just as great as on a mortgage 10 times as large. The lenders would rather handle a larger loan because of the efficiency generated by the larger number.

DEAR BRUCE: I was accepted for a one-year insurance policy for rental property. I paid the premium, and two weeks later the broker informed me that I was being dropped because of my credit history. Four of the five items on the credit history have been cleared and one is in dispute. Can they do such a thing? -- G.S., via e-mail

DEAR G.S.: An insurance company can adopt whatever underwriting standards they choose as long as it is not contrary to law (for example, they can't "red-line" a district and they can't exclude clients for ethnicity, national origin, etc.). While their underwriting may seem harsh, it is their right to exclude, for whatever reason, anything other than pristine credit. Whether this is a good business practice is something else again.

DEAR BRUCE: My wife and I each have 401(k)s, and I continue to contribute. My wife is no longer contributing to hers. Should we open a regular IRA or a Roth IRA? I am 56 and my wife is 42. We have money in regular savings, mutual funds and savings bonds. I would like to scale down. I am looking for a way to save tax-deferred money. -- E.B., via e-mail

DEAR E.B.: A Roth IRA doesn't give you tax-deferred money, it gives you tax-free money. Given the disparity of your ages, I think that your wife should contribute to an IRA, enter into a 401(k) as much as possible and contribute $2,000 of after-tax dollars to a Roth IRA. Elsewhere in your letter you mentioned that you had a pension -- however, you didn't mention if it will continue after your demise, which is likely to be a good many years before your wife's. Finally, the fact that you have money in savings bonds should be revisited. With the very tiny interest rate they pay, you are better off in some other investment.



Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).

Up

08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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