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Issue #1: America's Money - Everyday on CNN

NEW YORK (CNNMoney.com) -- Gerri Willis answers reader mail:

QUESTION 1:

What is your advice to a young person with no debt who wants to buy a house but is fearful of a mortgage and playing the debt game?

It's natural to feel hesitant about taking on debt, especially considering the current credit crisis and the number of foreclosures out there. But if you're ready to be a homeowner, you'll find some good deals out there now.

The trick to getting the right mortgage is to figure out how much house you can afford. Spend no more than one third of your income. When you're calculating your costs, don't forget all the other expenses that go into owning a home, like the maintenance, taxes and insurance.

You'll want to put together as much of a down payment as possible. Aim for at least 20%.

QUESTION 2:

I'm debating whether or not to use my rebate check to pay off debt. I hear we are supposed to spend this money and paying off debt is not "spending money." So, should I spend my $1200?

Well Laurie, those checks are going to be out in May. And while the government may say spending that check on say, a flat-screen TV or a new laptop is your patriotic duty, the smartest thing you can do is to pay down your high-interest debt.

That means targeting your highest interest credit card and paying down some of the principle. Maybe you want to knock out an extra mortgage payment.

Of course, that's not to say you can't go out and enjoy some of that money. But the bottom line is that your only obligation is to take care of yourself and your family.

QUESTION 3:

I have a combination of government student loans and private loans. I will be starting my payments next month. I would like to consolidate my private loans into one low rate. What's your advice?

You best bet to getting a low rate on your consolidated private loans is to wait until you're a few years out of college.

That's because your credit score determines what kind of interest rate you'll get on a private, consolidated loan according to Mark Kantrowitz of finaid.org.

So if you've just graduated, your credit score is probably low. Wait until you've been in the workforce for a year or two, when you've been paying your debts.

Your credit score will rise and your interest on your consolidation loan will be lower. Check out finaid.org for more information.

QUESTION 4:

How different is the impact on credit rating of a short sale versus a foreclosure?

To your credit report, a short sale and a foreclosure are basically the same thing.

It will be seen as a deficiency on your account. And both are devastating to your credit score says foreclosure attorney Mory Brenner.

"Look at your credit as a scale of one to ten," he says. "With a foreclosure, your score is 2. With a short sale, your score is a 3. But you'll need an 8 to qualify for a credit card. With either scenario, you're still very low," says Brenner.

Instead of focusing on the impact of a foreclosure or a short sale, concentrate on how you plan to build yourself back up. A strong credit-rebuilding plan can be more important than what you did in the first place.