Everything you need to know before you borrow…
Unless you’re sitting on a pile of cash, chances are you’ll need to take out a mortgage when you’re ready to buy a home. But how do you know how much house you can afford? What should you look for in a loan? What kind of paperwork is needed . . . and how do you improve your odds of getting a great rate? Mortgages 101 eliminates the confusion and stress with clear-cut answers to all your questions.
Updated to reflect the enormous changes in the mortgage market in recent years, Mortgages 101 is the all-in-one reference you’ve been looking for. Covering a wide range of topics — from negotiating the best deal to saving on closing costs — this revised third edition provides the latest information on:
- Application procedures
- Online lenders
- New loan and government programs
- Qualifying requirements
- Credit strategies
- Down payment assistance and zero-down options
- Guidelines for self-employed borrowers
- Bankruptcies and waiting periods
- Refinancing and home equity loans
- Consumer Financial Protection Bureau rules
- The Ability-to-Repay mandate
- And much more
This is THE book you need to read before you sign on the dotted line.
Table of contents
- Half title
Section I Mortgage Fundamentals
Chapter 1 Introduction to Mortgages
- 1.1 How has the mortgage market changed since the last edition of Mortgages 101?
- 1.2 What’s the difference between buying and renting?
- 1.3 How do I know if it’s better to buy a home or continue renting?
- 1.4 How should I search for a house?
- 1.4a Why do I need an agent, anyway?
- 1.4b How do I find a good real estate agent?
- 1.5 When is a good time to buy a home?
- 1.6 What’s the difference between being prequalified and preapproved?
- 1.7 What is the preapproval process?
- 1.8 What are loan conditions?
- 1.9 What are Automated Underwriting Systems?
- 1.10 Who uses Automated Underwriting Systems?
- 1.11 If an Automated Underwriting System approves me, does that mean I get the loan?
- 1.12 What are the benefits of getting preapproved?
- 1.13 What are all these terms?
- 1.14 Who are the key people in a typical loan approval process?
- 1.15 What is the 1003?
- 1.16 What are the ten sections of the 1003?
- 1.17 What happens if the information I put on my application is wrong?
- 1.18 What happens after I fill out the 1003?
- 1.19 Are online applications the same as the five-page 1003?
- 1.20 What happens after I make an offer for a house?
Chapter 2 How to Know How Much Home to Buy
- 2.1 How do I know how much I can borrow?
- 2.2 What are debt ratios?
- 2.3 How do I calculate my debt ratios?
- 2.4 How much do debt ratios affect how much I can borrow?
- 2.5 How can lenders approve people with high debt ratios?
- 2.5a How to lower your debt ratios
- 2.6 Why do lenders use monthly tax and insurance payments in debt ratios?
- 2.6a What is an ability to repay?
- 2.7 Why is escrow a requirement for loans with less than 20 percent down?
- 2.8 If I have a choice, are escrows right for me?
Chapter 3 Getting Your Finances Together
- 3.1 What will the lender look for when examining my assets?
- 3.1a What is a financial gift and what do I need to do?
- 3.2 How do I document my assets?
- 3.3 How do I document my income?
- 3.4 If I just got my first job, how can I provide a W-2 from last year?
- 3.5 What do you mean by “how you’re paid”?
- 3.6 Why do lenders ask for the most recent 30-day pay stubs?
- 3.7 If I get paid in cash, how do I document that?
- 3.8 How do I calculate hourly wages?
- 3.9 How do I calculate overtime?
- 3.10 How are bonuses used to figure my income?
- 3.11 How do I figure my income if it is based solely on commissions?
- 3.12 How do I calculate my pay if I have both a salary and a bonus or a commission?
- 3.13 If I can deduct a lot of expenses from my income taxes, does that help gross monthly income?
- 3.14 How do I show expenses on my loan application?
- 3.15 How do I calculate my dividend and interest income?
- 3.15a What is the 4506-T and why do I have to sign it?
- 3.16 How do I calculate my income if I own my own business?
- 3.17 How do lenders determine whether my business income will have a likelihood of continuance?
Chapter 4 Down Payments and How They Impact Your Mortgage
- 4.1 What exactly is a down payment?
- 4.2 What are the risk elements?
- 4.3 How do I know how much to improve another risk element?
- 4.4 What kinds of accounts can I use to fund the down payment?
- 4.5 Can I borrow against my retirement account?
- 4.6 Can my family help me out with a down payment?
- 4.7 What do I do if I don’t have a down payment saved?
- 4.8 What is a “seller-assisted” DPAP?
- 4.9 How do I know if I qualify for a down payment assistance program?
- 4.10 Is there an ideal amount I should put down on a home?
- 4.11 How much is a mortgage insurance policy?
- 4.12 Can I deduct mortgage insurance from my income taxes?
- 4.13 Can I “borrow” my mortgage insurance?
- 4.14 Will PMI come off my mortgage automatically?
- 4.15 What about “zero-money-down” loans?
- 4.16 What is the Conventional 97 or HomeReady program?
- 4.17 How do I buy a house if I need to sell my house for my down payment?
- 4.18 Will I have to qualify with two mortgages?
Chapter 5 Getting Your Credit Together
- 5.1 What exactly is credit?
- 5.2 How were credit bureaus established?
- 5.3 What’s in my credit report?
- 5.4 What’s not in my credit report?
- 5.5 What’s the difference between a Chapter 7 and a Chapter 13?
- 5.6 Do lenders view a Chapter 7 or a Chapter 13 more favorably when reviewing a mortgage application?
- 5.7 What’s the difference between “good” and “bad” credit?
- 5.8 How do I establish good credit?
- 5.9 I’ve got great credit. How do I keep it that way?
- 5.10 I cosigned on my brother’s car, but he’s making the payments. Will this affect my credit?
- 5.11 What should I do first to improve my credit?
- 5.12 What happens if I find a mistake on my report?
- 5.13 Can’t I write a letter explaining my side of the story to the credit bureaus?
- 5.14 Can my lender help fix mistakes in my credit history?
- 5.15 What do I need in order to prove something is a mistake on my credit report?
- 5.16 What about mortgage companies that advertise “bad credit, no credit okay”?
- 5.17 What about a cosigner?
- 5.18 Can a seller ask for a copy of my credit report?
- 5.19 What is alternate credit?
- 5.20 I have bad credit and was contacted by a credit counseling company that wants to help reestablish my credit. Can they do that?
- 5.21 Can I erase my old credit report completely and start all over again?
- 5.22 I have great credit, but my spouse has terrible credit. What do I do?
- 5.23 My “ex” has screwed up my credit. What do I do?
- 5.24 How will lenders view our credit report if we’re not married?
- 5.25 How long do I have to wait in order to get approved for a mortgage if I declared bankruptcy in the past?
- 5.26 I filed a Chapter 13 bankruptcy and I’m still making the payments. Can I get a mortgage now?
Chapter 6 Credit Scores: What They Are, How They Work, and How to Improve Them
- 6.1 What are credit scores?
- 6.2 What makes up a score?
- 6.3 What things in my payment history affect my credit score?
- 6.4 What about my amounts owed? What is most important?
- 6.5 How do I find out what my score is?
- 6.6 How do I get a credit score?
- 6.7 What’s the minimum credit score I need to qualify for a mortgage loan?
- 6.8 What if my lender told me I couldn’t qualify because my credit score was too low?
- 6.9 How do I know how much to charge and how much to pay off?
- 6.10 What else affects my credit score?
- 6.11 How can I increase my available credit without opening up new accounts?
- 6.12 I’ve applied at more than one mortgage company. Will all those credit inquiries hurt my score?
- 6.13 How do I fix scores that are artificially low due to mistakes?
- 6.14 If there are several mistakes on my report, do I get them all corrected? How do I know which ones to correct?
- 6.15 I’m a single parent and a minority. Does this status help or hurt my credit score?
- 6.16 How do lenders choose which credit scores to use?
- 6.17 I have great credit scores, but my spouse has low credit scores. What happens?
- Chapter 1 Introduction to Mortgages
Section II The Right Mortgage
Chapter 7 Finding Your Home Loan
- 7.1 What kinds of loans are there?
- 7.2 When would I want a fixed rate?
- 7.3 When would I want an adjustable rate?
- 7.4 How do adjustable-rate mortgages work?
- 7.5 Are ARMs only helpful in the very near term?
- 7.6 What exactly is a hybrid loan?
- 7.7 What is a buydown?
- 7.8 Apart from choosing fixed or adjustable rates, what types of loan programs should I consider?
- 7.9 How are limits on conventional loans set?
- 7.10 Who or what are Fannie and Freddie?
- 7.11 What are special commitments?
- 7.12 What exactly is a jumbo mortgage?
- 7.13 Can I prepay my mortgage or pay it off early?
- 7.14 What are prepayment penalties?
- 7.15 Why do lenders have prepayment penalties on some of their loans?
- 7.15a What is a Qualified Mortgage?
- 7.16 What are VA loans? How do I get them?
- 7.17 Who’s eligible for a VA loan?
- 7.18 What is a VA “entitlement”?
- 7.19 How often can I use my VA eligibility?
- 7.20 What is a VA streamline refinance?
- 7.21 Do states have VA loan programs, too?
- 7.22 What about FHA loans?
- 7.23 Who sets FHA loan limits and how much are they?
- 7.24 Is FHA only for first-time home buyers?
- 7.25 When do I choose an FHA loan instead of any other?
- 7.26 Can I use a coborrower to help me qualify for an FHA loan?
- 7.27 Does FHA help me save money on closing costs?
- 7.27a What is the USDA Mortgage Program?
- 7.28 What about first-time home buyer loans?
- 7.29 What does “portfolio lending” mean?
- 7.30 What’s the difference between second homes and rental property?
- 7.31 How does the lender know that a property is a second home and not a rental unit?
- 7.32 Can I use rental income to qualify for a mortgage?
- 7.33 Are loan limits for rental properties the same as for primary residences?
- 7.34 What about seller financing?
- 7.35 How can I rent-to-own or use a lease-purchase to buy a house?
- 7.36 What’s a wraparound mortgage?
- 7.37 What is a biweekly loan program?
- 7.38 Are subprime mortgages gone?
- 7.39 What are HAMP and HARP?
Chapter 8 Loans for Good to Great Credit
- 8.1 What should I look for in a mortgage loan?
- 8.2 So everyone should first try for a conventional loan?
- 8.3 What if my loan isn’t a Fannie loan? What if it’s a jumbo or a portfolio?
- 8.4 Then how do I manage to find the loan that’s right for me?
- 8.5 Should I always try to put as much down as I can?
- 8.6 Do I have a choice in my loan term?
- 8.7 Why are payments higher on a 15-year loan even though the rate is lower?
- 8.8 Won’t my loan officer help me find the right mortgage?
- 8.9 Where are the “stated” income and “no documentation” loans?
- 8.10 Does the type of property affect the kind of loan I can have?
- 8.11 What types of property can I expect problems with?
Chapter 9 Refinancing and Home Equity Loans
- 9.1 Why would I want to refinance my mortgage?
- 9.2 Should I wait until the interest rate is 2 percent lower than my current one to refinance?
- 9.3 What is my rescission period?
- 9.4 How long should I wait to recover closing costs?
- 9.5 Do I have to close my loan within 30 days, or can I wait to see if rates drop further?
- 9.6 Why are there fees on a refinance?
- 9.7 Should I pay points for a refinance?
- 9.8 What about reducing my interest rate and also reducing my loan term?
- 9.9 Why not just pay extra each month instead of refinancing?
- 9.10 What’s a cash-out mortgage?
- 9.11 How do I get money out of my property without refinancing?
- 9.12 How do I refinance if I have both a first and a second mortgage?
- 9.13 Which is better, a cash-out refinance or a HELOC?
- 9.14 Why is my loan payoff higher than my principal balance?
- 9.15 My credit has been damaged since I bought the house. Will that hurt me?
- 9.16 How do I get a note modification?
- 9.17 What is a “recast” of my mortgage?
- 9.18 What happens when my loan is sold?
- 9.19 What’s a reverse mortgage?
- 9.20 Who qualifies for a reverse mortgage?
- 9.21 How much can I get with a reverse mortgage?
- 9.22 Why not do a cash-out refinance instead of a reverse mortgage?
- 9.23 Are the closing costs for a reverse mortgage the same as with a regular mortgage?
- 9.24 What are the rates for reverse mortgages?
- 9.25 I have a current mortgage on my house. Do I get to keep that?
- 9.26 How do I know if a reverse mortgage is right for me?
Chapter 10 Construction and Home Improvement Loans
- 10.1 Why would I want to build a home? Why can’t I just go out and buy one?
- 10.2 How do construction loans work?
- 10.3 Do I buy a home from a developer, or is it better to start from scratch?
- 10.4 How do I get approved for a construction loan?
- 10.5 How much do I need for a construction loan?
- 10.6 Does the lender approve my builder?
- 10.7 How does the mortgage lender know what the house is worth before it’s built?
- 10.8 What if I already own the land? Do I still include that amount in the construction loan?
- 10.9 What if I don’t want a permanent mortgage, but just a construction loan?
- 10.10 What choices do I have for construction loans?
- 10.11 Is a one-time close better than a two-time close?
- 10.12 What if rates drop during my one-time close loan?
- 10.13 What if my builder is financing the construction?
- 10.14 Do I have to use the builder’s mortgage company?
- 10.15 What are my options if I just want to build onto my current house?
- 10.16 How can I borrow enough to make major improvements on my home?
- 10.17 What is an FHA 203(k) loan?
- 10.18 I want a VA loan. Can I add in money for improvements with a VA loan?
- Chapter 7 Finding Your Home Loan
Section III The Right Lender and Rate
Chapter 11 Finding the Best Lender
- 11.1 I’ve decided on my loan. Now what?
- 11.2 How do I find the best lender?
- 11.3 But where do I get the names of all these lenders in the first place?
- 11.4 How do I know if I can trust these lenders?
- 11.5 Should I use my real estate agent’s mortgage company?
- 11.6 I thought all mortgage money came from the bank. Doesn’t it?
- 11.7 What is a mortgage broker?
- 11.8 Are mortgage brokers more expensive?
- 11.9 Why do mortgage companies use mortgage brokers?
- 11.10 How do mortgage brokers get paid?
- 11.11 How many lenders do mortgage brokers use?
- 11.12 Will the broker keep my lender a secret?
- 11.13 Is a mortgage broker my best choice?
- 11.14 Should I choose a broker or a banker?
- 11.15 What happens if I want to change lenders in the middle of my loan process?
Chapter 12 Finding the Best Loan Officer
- 12.1 How do I find the best loan officer?
- 12.2 How do I know if the loan officers my real estate agent suggests are any good?
- 12.3 What if my agent’s not a heavy hitter?
- 12.4 Do the best loan officers work with the biggest lenders?
- 12.5 What questions should I ask a potential loan officer?
- 12.6 How do loan officers get trained?
- 12.7 Are there requirements for being a loan officer?
- 12.8 How do loan officers get paid?
- 12.9 Do all loan officers charge 1 percent on every loan?
- 12.10 My loan officer isn’t any good. Can I change loan officers?
- 12.11 Where do I complain about my loan officer?
Chapter 13 Finding the Best Interest Rate
- 13.1 Who sets mortgage rates?
- 13.2 How does my loan officer quote rates?
- 13.3 But doesn’t the Fed set interest rates?
- 13.4 Are mortgage rates tied to the 30-year treasury and the 10-year treasury?
- 13.5 Who invests in bonds?
- 13.6 Where are rates headed?
- 13.7 What types of economic reports should I pay attention to?
- 13.8 Do I follow all of the economic reports?
- 13.9 When is the best time to get a rate quote?
- 13.10 Can I trust the interest rates in the newspaper or online?
- 13.11 Why are some lenders so much lower than everyone else?
- 13.12 How do I get a good rate quote from all my competing lenders?
- 13.13 What do I do with my two best quotes?
- 13.14 How do I lock in my mortgage rate?
- 13.15 Does my lock mean I’m approved?
- 13.16 What happens if my rate lock expires and I still haven’t closed my loan?
- 13.17 What happens if I lock and rates go down?
- 13.18 Will lenders drag their feet to make a lock expire?
Chapter 14 Closing Costs and How to Save on Them
- 14.1 What types of closing costs can I expect?
- 14.2 Why are there so many charges?
- 14.3 Why do lenders charge fees?
- 14.4 On which closing costs can I save and which ones can I forget about?
- 14.5 Are fees for purchases and refinances the same?
- 14.6 How can I save on my appraisal fees?
- 14.7 How can I save on my credit report?
- 14.8 How can I save on title insurance?
- 14.9 What exactly is the Good Faith Estimate?
- 14.10 How do I use a Loan Estimate to compare lenders?
- 14.11 What is APR, and does it really work?
- 14.12 How can I get the seller to pay for my closing costs?
- 14.13 Can a lender pay all my fees?
Chapter 15 Using the Internet the Right Way
- 15.1 How has the Internet helped mortgage lending?
- 15.2 Should I apply for a mortgage online or meet with a loan officer?
- 15.3 How can I use the Internet to find the best mortgage rate?
- 15.4 What about online companies that advertise they will have lenders “bid” on my mortgage loan?
- 15.5 What happens if I choose an online lender but the closing papers are all wrong?
- 15.6 Should I avoid online-only lenders?
- 15.7 I keep getting emails from companies with some very competitive offers. Shouldn’t I at least explore them?
- 15.8 Can I get my loan approval online?
- 15.9 Is there any way I can check on rates without contacting a lender?
- 15.10 Can I track my loan approval online?
- 15.11 What are some good websites consumers can use to help them?
- Chapter 11 Finding the Best Lender
- Appendix Monthly Payment Schedules
- About the Author
- Free Sample From The Real Estate Investor’s Pocket Calculator By Michael Thomsett
- About Amacom Books
- Title: Mortgages 101, 3rd Edition
- Release date: February 2018
- Publisher(s): AMACOM
- ISBN: 9780814438756
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