106 Mortgage Secrets All Borrowers Must Learn -- But Lenders Don't Tell

GARY W. ELDRED, PHD, has invested successfully in real estate for more than twenty years and has served on the graduate business faculty at Stanford University and the University of Virginia. He has authored many other real estate titles, including Make Money with Affordable Apartment Buildings and Commercial Properties, Second Edition; Trump University Real Estate 101; and Investing in Real Estate, Fifth Edition, all from Wiley.

• Preface to the Second Edition xiIntroduction: Use OPM to Achieve All That You Really Want xiii1 Affordability Depends on You—Not a Lender 1Secret #1 Affordability depends on you 1Secret #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 6Secret #3 Separate the emotional from the financial 7Secret #4 Align self-talk with your priorities 9Secret #5 Envision the propert(ies) you would like to own 5, 10, or 15 years from now 152 Increase Your Borrowing Power 17Secret #6 10,000 lenders set their own standards 17Secret #7 You can make your qualifying ratios look better 20Secret #8 Lift your qualifying income 23Secret #9 Reduce your debt 27Secret #10 Use compensating factors to justify higher qualifying ratios 30Secret #11 Never fib to a lender 32Secret #12 Can’t qualify? Enlist a cosigner, co-borrower, or co-owner 34Secret #13 Let tenants pay your mortgage 36Secret #14 Don’t change your loan status 423 Slash Your Cost of Interest 43Secret #15 Many borrowers who want a fixed-rate loan should choose 15 years, not 30 or 40 44Secret #16 Lower interest rates mean big savings 48Secret #17 Lower rates magnify borrowing power 49Secret #18 ARMs sometimes offer greater borrowing power, lower costs, with risk you can manage 51Secret #19 State and local housing finance agencies offer lower-interest mortgage loans 53Secret #20 Assume a low-interest-rate mortgage 54Secret #21 “Assume” a nonassumable mortgage 57Secret #22 Save $1,000s with a Mortgage Credit Certificate (MCC) 61Secret #23 Seek employer assistance, or seek an employer who gives assistance 62Secret #24 Obtain a lower interest rate; pay points 63Secret #25 Negotiate a buydown with the sellers 64Secret #26 New homebuilders offer mortgage incentives 66Secret #27 How to borrow jumbo amounts without paying jumbo rates 66Secret #28 Your after-tax cost of borrowing may not be as low as you’ve been told 694 The Risks and Rewards of ARMs 73Secret #29 ARMs do not necessarily present more risk than fixed-rate loans 73Secret #30 For the short term, ARMs usually cost less 78Secret #31 ARMs for the long run: How to lower costs and alleviate risk 80Secret #32 You can (sort of) forecast interest rates 81Secret #33 Low teaser rates: Bait or bargain? 84Secret #34 Your start (teaser) rate isn’t your contract rate 86Secret #35 There’s no one best index 88Secret #36 Don’t ignore the margin 91Secret #37 All caps aren’t created equal 92Secret #38 That flashy convertible could prove a clunker 93Secret #39 APRs tell you nothing about ARMs—and very little about fixed rates 945 Perfect Your Credit Profile 97Secret #40 Emphasize all eight Cs of loan approval 98Secret #41 Credit scores influence, but do not determine, the terms and costs of your loan 103Secret #42 Your credit score doesn’t necessarily represent your credit strength 104Secret #43 Discover your credit scores 105Secret #44 Improve your credit scores 107Secret #45 Garbage in, garbage out (GIGO) 109Secret #46 Most credit repair firms (or deceptive tactics) can’t fix your credit or boost your credit scores 113Secret #47 Bogus credit counselors can scam you, too 114Secret #48 Credit counselors and debt management firms do not improve your credit record or boost your credit scores 115Secret #49 Bankruptcy (Chapter 7) doesn’t necessarily ruin your credit 116Secret #50 Your ex-spouse can ruin your credit (and other tales of double counting) 1186 The Lowdown on Low Downs 121Secret #51 You can buy with little or nothing down 121Secret #52 No matter how much you earn, FHA may hold the key to your financing needs 122Secret #53 Discover FHA’s best-kept Secret: The 203(k) program 126Secret #54 Too many vets pass up VA loans 129Secret #55 The USDA offers a prime choice for low- to moderate-income homebuyers 131Secret #56 Community lending goes mainstream 131Secret #57 Not-for-profit housing groups help moderate-income people own their own homes 134Secret #58 Local governments assist with down payments 136Secret #59 Even Fannie and Freddie accept little- or nothing-down loans 138Secret #60 Cut the cost of PMI by learning where rates break 138Secret #61 Before you obtain a PMI little- or nothing-down loan, understand the cost you’ll pay 139Secret #62 Reduce the higher cost of low down payments with a second mortgage (piggyback loan) 141Secret #63 Use pledged collateral to eliminate PMI 142Secret #64 Search for sellers with low-equity assumables loans 144Secret #65 Avoid PMI with a higher interest rate mortgage 1447 Win Big Savings with Seller Financing, Foreclosures, or REOs 147Secret #66 Sellers can nearly always beat the banks at their own game, but you must do more than ask 151Secret #67 Ask the seller and lender to cooperate with a refiblend 153Secret #68 Bridge the assumable gap with a seller second 154Secret #69 Avoid the bang of a bursting balloon 155Secret #70 Buy on the installment plan 156Secret #71 Try it before you buy it 159Secret #72 Buy and lease simultaneously 161Secret #73 Beat high interest rates with wraparound financing 164Secret #74 Don’t dillydally with due diligence 165Secret #75 Negotiate a preforeclosure workout 168Secret #76 Buy (carefully) at a foreclosure sale 171Secret #77 Locate a foreclosure pro 171Secret #78 HUD may hold the keys to your home or investment property 173Secret #79 VA offers REO deals (with financing) to both veterans and nonveterans 175Secret #80 Let Fannie or Freddie treat you to below-market financing 177Secret #81 Buy and finance directly with a lender 1798 Beware of Those Fine Print “Gotchas” 183Secret #82 It’s a jungle out there 184Secret #83 Tell your loan rep to take out the garbage 187Secret #84 Don’t place blind faith in the good faith estimate 189Secret #85 What’s the real cost of a no-cost mortgage? 191Secret #86 Can you prepay without restriction or penalty? 193Secret #87 An assumable loan may offer less than you’ve assumed 196Secret #88 Appraised value doesn’t necessarily equal market value 198Secret #89 Sometimes lenders signal appraisers to lowball their value estimates 200Secret #90 Appraisals do not forecast the future 2029 Achieve the Lowest Interest Rate Available 205Secret #91 Refuse to yield to oversized yield-spread premiums (YSPs) 205Secret #92 Red and yellow, black and white, do lenders treat them all alike? 207Secret #93 Rate quotes: Fact or fiction? 208Secret #94 What rate will you get at closing? 210Secret #95 Achieve your best rate 213Secret #96 Industry pros and government agencies need your help 215Secret #97 How to (almost) vanquish tricks of the trade 22010 Manage Your Property and Financing for Maximum Return 225Secret #98 Treat your home and your financing as an investment 226Secret #99 Monitor opportunities to refinance 233Secret #100 Use refinancing to create other benefits 236Secret #101 Refinance and invest the proceeds 238Secret #102 Never buy biweekly baloney 243Secret #103 Cancel your PMI—Get a refund from FHA 246Secret #104 Should you negotiate out of escrow? 248Secret #105 Just say no to home equity loans 250Secret #106 Trouble, trouble, what to do? 254Conclusion: You Can Live on the House 259Index 265