106 Mortgage Secrets All Borrowers Must Learn -- But Lenders Don't Tell, 2nd Edition

Preface to the Second Edition xi

Introduction: Use OPM to Achieve All That You Really Want xiii

1 Affordability Depends on You—Not a Lender 1

Secret #1 Affordability depends on you 1

Secret #2 How you choose your property and arrange financing can add (or subtract) tens (or even hundreds) of thousands of dollars to (from) your net worth 6

Secret #3 Separate the emotional from the financial 7

Secret #4 Align self-talk with your priorities 9

Secret #5 Envision the propert(ies) you would like to own 5, 10, or 15 years from now 15

2 Increase Your Borrowing Power 17

Secret #6 10,000 lenders set their own standards 17

Secret #7 You can make your qualifying ratios look better 20

Secret #8 Lift your qualifying income 23

Secret #9 Reduce your debt 27

Secret #10 Use compensating factors to justify higher qualifying ratios 30

Secret #11 Never fib to a lender 32

Secret #12 Can’t qualify? Enlist a cosigner, co-borrower, or co-owner 34

Secret #13 Let tenants pay your mortgage 36

Secret #14 Don’t change your loan status 42

3 Slash Your Cost of Interest 43

Secret #15 Many borrowers who want a fixed-rate loan should choose 15 years, not 30 or 40 44

Secret #16 Lower interest rates mean big savings 48

Secret #17 Lower rates magnify borrowing power 49

Secret #18 ARMs sometimes offer greater borrowing power, lower costs, with risk you can manage 51

Secret #19 State and local housing finance agencies offer lower-interest mortgage loans 53

Secret #20 Assume a low-interest-rate mortgage 54

Secret #21 “Assume” a nonassumable mortgage 57

Secret #22 Save $1,000s with a Mortgage Credit Certificate (MCC) 61

Secret #23 Seek employer assistance, or seek an employer who gives assistance 62

Secret #24 Obtain a lower interest rate; pay points 63

Secret #25 Negotiate a buydown with the sellers 64

Secret #26 New homebuilders offer mortgage incentives 66

Secret #27 How to borrow jumbo amounts without paying jumbo rates 66

Secret #28 Your after-tax cost of borrowing may not be as low as you’ve been told 69

4 The Risks and Rewards of ARMs 73

Secret #29 ARMs do not necessarily present more risk than fixed-rate loans 73

Secret #30 For the short term, ARMs usually cost less 78

Secret #31 ARMs for the long run: How to lower costs and alleviate risk 80

Secret #32 You can (sort of) forecast interest rates 81

Secret #33 Low teaser rates: Bait or bargain? 84

Secret #34 Your start (teaser) rate isn’t your contract rate 86

Secret #35 There’s no one best index 88

Secret #36 Don’t ignore the margin 91

Secret #37 All caps aren’t created equal 92

Secret #38 That flashy convertible could prove a clunker 93

Secret #39 APRs tell you nothing about ARMs—and very little about fixed rates 94

5 Perfect Your Credit Profile 97

Secret #40 Emphasize all eight Cs of loan approval 98

Secret #41 Credit scores influence, but do not determine, the terms and costs of your loan 103

Secret #42 Your credit score doesn’t necessarily represent your credit strength 104

Secret #43 Discover your credit scores 105

Secret #44 Improve your credit scores 107

Secret #45 Garbage in, garbage out (GIGO) 109

Secret #46 Most credit repair firms (or deceptive tactics) can’t fix your credit or boost your credit scores 113

Secret #47 Bogus credit counselors can scam you, too 114

Secret #48 Credit counselors and debt management firms do not improve your credit record or boost your credit scores 115

Secret #49 Bankruptcy (Chapter 7) doesn’t necessarily ruin your credit 116

Secret #50 Your ex-spouse can ruin your credit (and other tales of double counting) 118

6 The Lowdown on Low Downs 121

Secret #51 You can buy with little or nothing down 121

Secret #52 No matter how much you earn, FHA may hold the key to your financing needs 122

Secret #53 Discover FHA’s best-kept Secret: The 203(k) program 126

Secret #54 Too many vets pass up VA loans 129

Secret #55 The USDA offers a prime choice for low- to moderate-income homebuyers 131

Secret #56 Community lending goes mainstream 131

Secret #57 Not-for-profit housing groups help moderate-income people own their own homes 134

Secret #58 Local governments assist with down payments 136

Secret #59 Even Fannie and Freddie accept little- or nothing-down loans 138

Secret #60 Cut the cost of PMI by learning where rates break 138

Secret #61 Before you obtain a PMI little- or nothing-down loan, understand the cost you’ll pay 139

Secret #62 Reduce the higher cost of low down payments with a second mortgage (piggyback loan) 141

Secret #63 Use pledged collateral to eliminate PMI 142

Secret #64 Search for sellers with low-equity assumables loans 144

Secret #65 Avoid PMI with a higher interest rate mortgage 144

7 Win Big Savings with Seller Financing, Foreclosures, or REOs 147

Secret #66 Sellers can nearly always beat the banks at their own game, but you must do more than ask 151

Secret #67 Ask the seller and lender to cooperate with a refiblend 153

Secret #68 Bridge the assumable gap with a seller second 154

Secret #69 Avoid the bang of a bursting balloon 155

Secret #70 Buy on the installment plan 156

Secret #71 Try it before you buy it 159

Secret #72 Buy and lease simultaneously 161

Secret #73 Beat high interest rates with wraparound financing 164

Secret #74 Don’t dillydally with due diligence 165

Secret #75 Negotiate a preforeclosure workout 168

Secret #76 Buy (carefully) at a foreclosure sale 171

Secret #77 Locate a foreclosure pro 171

Secret #78 HUD may hold the keys to your home or investment property 173

Secret #79 VA offers REO deals (with financing) to both veterans and nonveterans 175

Secret #80 Let Fannie or Freddie treat you to below-market financing 177

Secret #81 Buy and finance directly with a lender 179

8 Beware of Those Fine Print “Gotchas” 183

Secret #82 It’s a jungle out there 184

Secret #83 Tell your loan rep to take out the garbage 187

Secret #84 Don’t place blind faith in the good faith estimate 189

Secret #85 What’s the real cost of a no-cost mortgage? 191

Secret #86 Can you prepay without restriction or penalty? 193

Secret #87 An assumable loan may offer less than you’ve assumed 196

Secret #88 Appraised value doesn’t necessarily equal market value 198

Secret #89 Sometimes lenders signal appraisers to lowball their value estimates 200

Secret #90 Appraisals do not forecast the future 202

9 Achieve the Lowest Interest Rate Available 205

Secret #91 Refuse to yield to oversized yield-spread premiums (YSPs) 205

Secret #92 Red and yellow, black and white, do lenders treat them all alike? 207

Secret #93 Rate quotes: Fact or fiction? 208

Secret #94 What rate will you get at closing? 210

Secret #95 Achieve your best rate 213

Secret #96 Industry pros and government agencies need your help 215

Secret #97 How to (almost) vanquish tricks of the trade 220

10 Manage Your Property and Financing for Maximum Return 225

Secret #98 Treat your home and your financing as an investment 226

Secret #99 Monitor opportunities to refinance 233

Secret #100 Use refinancing to create other benefits 236

Secret #101 Refinance and invest the proceeds 238

Secret #102 Never buy biweekly baloney 243

Secret #103 Cancel your PMI—Get a refund from FHA 246

Secret #104 Should you negotiate out of escrow? 248

Secret #105 Just say no to home equity loans 250

Secret #106 Trouble, trouble, what to do? 254

Conclusion: You Can Live on the House 259

Index 265