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



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

Gary W. Eldred

ISBN: 978-0-470-19151-4 December 2007 288 Pages


The only guidebook that shows you how to finance any property--with or without bank approval

Would you like to discover all of the many ways that you can finance real estate? Want to learn how to cut your financing costs, avoid pitfalls, and negotiate the best terms? Then let Gary Eldred's 106 Mortgage Secrets All Borrowers Must Learn--But Lenders Don't Tell, Second Edition guide you. Fully updated, this practical guide explains how today's changing mortgage market really works. Unlike other mortgage guides, this book goes beyond traditional bank-originated loans and shows you how to benefit with seller financing, assumables, subject-to, wraparounds, lease options, foreclosures, and other money-saving possibilities.

106 Mortgage Secrets also protects you from the sharp practices of loan reps that have recently sparked Congressional hearings and multiple state investigations. In addition, Eldred shows how and why the right financing decisions can add tens (and sometimes hundreds) of thousands of dollars to your long-term net worth. With these 106 secrets, you'll build the confidence and the knowledge to:

Increase your borrowing power

Obtain the lowest interest rate

Understand the true pros and cons of ARMs

Cut (or eliminate) the cost of mortgage insurance

Save big with seller financing, assumptions, foreclosures, and REOs

Strengthen your credit profile and credit score

Avoid getting taken... by the fine print and garbage fees

Steer clear of scams and unprincipled loan reps and lenders

Accumulate wealth through homeownership and investment properties

Simple, concise, and comprehensive, this book reveals everything property buyers need to know--especially the 106 financing secrets lenders too often omit.

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 refi blend. 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