Introduction 1 How This Book is Different 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond the Book 3 Where to Go from Here 3 Part 1: Getting Started with Mortgages 5 Chapter 1: Determining Your Borrowing Power 7 Only You Can Determine the Mortgage Debt You Can Afford 8 Acknowledge your need to save 8 Collect your spending data 9 Determine Your Potential Homeownership Expenses 10 Making your mortgage payments 10 Paying property taxes 12 Tracking your tax write-offs 13 Investing in insurance 14 Budgeting for closing costs 14 Managing maintenance costs 17 Financing home improvements and such 17 Consider the Impact of a New House on Your Financial Future 17 Acting upon your spending analysis 21 Establishing financial goals 22 Making down-payment decisions 23 Chapter 2: Qualifying for a Mortgage 25 Getting Preapproved for a Loan 25 The worst-case scenario 26 Loan prequalification usually isn''t good enough 26 Loan preapproval is the way to go 27 Evaluating Your Creditworthiness: The Underwriting Process 28 Traditional underwriting guidelines 29 New underwriting technology 32 Eyeing Predicament-Solving Strategies 34 Insufficient cash for a down payment 34 Excessive indebtedness 38 Insufficient income 39 Credit blemishes 40 Low appraisals 41 Problem properties 45 Chapter 3: Scoping Out Your Credit Score 47 Defining Credit Scores 48 Assessing Your Credit History 48 What goes into your credit report 49 Check your credit report 50 Understanding How Scores Work 51 FICO scores can differ between bureaus 51 What a FICO score considers 52 What FICO scores ignore 60 Interpreting scores 61 Getting your score 61 Managing your score 62 Part 2: Locating a Loan 63 Chapter 4: Fathoming the Fundamentals 65 Grasping Loan Basics: Principal, Interest, Term, and Amortization 66 Deciphering Mortgage Lingo 67 So what''s a mortgage? 67 How to scrutinize security instruments 68 Eyeing Classic Mortgage Jargon Duets 70 Fixed or adjustable loans 70 Government or conventional loans 71 Primary or secondary mortgage market 72 Conforming or jumbo loans 74 Long-term or short-term mortgages 75 Introducing the Punitive Ps 76 Prepayment penalties 76 Private mortgage insurance (PMI) 78 Chapter 5: Selecting the Best Home Purchase Loan 81 Three Questions to Help You Pick the Right Mortgage 82 How long do you plan to keep your mortgage? 82 How much financial risk can you accept? 83 How much money do you need? 84 Fixed-Rate Mortgages: No Surprises 85 Adjustable-Rate Mortgages (ARMs) 87 How an ARM''s interest rate is determined 88 How often does the interest rate adjust? 92 What are the limits on rate adjustments? 92 Does the loan have negative amortization? 93 Fine-Tuning Your Thought Process 96 Finding funds 96 Making the 30-year versus 15-year mortgage decision 97 Getting a Loan When Rates Are High 98 Chapter 6: Surveying Special Situation Loans 99 Understanding Home Equity Loans 100 Using home equity loans 100 Operating instructions 101 Considering tax consequences 103 Eyeing 100 Percent Home Equity Loans 104 Taking a Closer Look at Co-Op Loans 107 Identifying the legal structure of co-op loans 107 Dealing with deal-killing directors 108 Tracking down a loan 109 Grasping Balloon Loans 110 80-10-10 financing 110 Bridge loans 114 Construction loans 115 Renovation/remodel loans 116 Part 3: Landing a Lender 117 Chapter 7: Finding Your Best Lender 119 Going with a Mortgage Broker or Direct Lender? 120 Considerations when using brokers 120 Developing a list of brokers and lenders 122 Interviewing and working with mortgage brokers 124 Figuring out how to interview lenders 125 Seller Financing: The Trials and Tribulations 127 Considering/soliciting seller financing 127 Overcoming borrower problems 128 Negotiating loan terms 128 Deciding whether to provide seller financing 129 Chapter 8: Searching for Mortgage Information Online 131 Obeying Our Safe Surfing Tips 132 Shop to find out about rates and programs 132 Quality control is often insufficient 133 Beware simplistic affordability calculators 133 Don''t reveal confidential information unless 133 Be sure to shop offline 134 Beware of paid advertising masquerading as directories 135 Perusing Our Recommended Mortgage Websites 136 Useful government sites 136 Mortgage information and shopping sites 138 Chapter 9: Choosing Your Preferred Mortgage 141 Taking a Look at Loan Fees 142 The point and interest rate tradeoff 142 Annual percentage rates 144 Other lender fees 145 Avoiding Dangerous Loan Features 147 Prepayment penalties 147 Negative amortization 148 Comparing Lenders'' Programs 149 Fixed-rate mortgages interview worksheet 149 Adjustable-rate mortgages interview worksheet 153 Applying with One or More Lenders 158 Chapter 10: Managing Mortgage Paperwork 159 Pounding the Paperwork 159 Filling Out the Uniform Residential Loan Application 162 1 Borrower information 162 2 Financial information -- assets and liabilities 166 3 Financial information -- real estate 167 4 Loan and property information 168 5 Declarations 170 6 Acknowledgments and agreements 170 7 Demographic information 172 Introducing Other Typical Documents 173 Your right to receive a copy of the appraisal 173 Equal Credit Opportunity Act 175 Part 4: Profiting from Smart Mortgage Strategies 177 Chapter 11: Refinancing Your Mortgage 179 Refinancing Rationales 180 Cost-Cutting Refinances 181 Applying the 2 percent rule 182 Crunching the numbers 183 Restructuring Refinances 186 Restructuring when you need to 186 Getting a fixed-rate to avoid ARM phobia 188 Resetting ARM caps 188 Choosing the fast-forward mortgage 190 Cash-Out Refinances 190 Expediting Your Refi 192 Beating Borrower''s Remorse 194 Phase I borrower''s remorse 194 Phase II borrower''s remorse 195 Chapter 12: Paying Down Your Mortgage Quicker 197 One Size Doesn''t Fit All 198 Interest savings: The benefit of paying off your mortgage quicker 198 Quantifying the missed opportunity to invest those extra payments 198 Taxes matter but less than you think 199 Deciding Whether to Repay Your Mortgage Faster 200 Does your mortgage have a prepayment penalty? 201 How liquid are your assets? 201 Have you funded retirement savings accounts? 201 How aggressive an investor are you? 202 What are your refinancing options? 203 Considering psychological and nonfinancial issues 203 Developing Your Payoff Plan 204 Chapter 13: Reverse Mortgages for Retirement Income 205 Grasping the Reverse Mortgage Basics 205 Considering common objections 207 Who can get a reverse mortgage? 208 How much money can you get and when? 209 When do you pay the money back? 210 What do you owe? 211 How is the loan repaid? 212 What''s the out-of-pocket cost of getting a reverse mortgage? 212 What are the other reverse mortgage costs? 213 What''s the total annual rate? 214 How do reverse mortgages affect your government-sponsored benefits? 215 Shopping for a Reverse Mortgage 215 Making major choices 216 Counseling 217 Deciding Whether You Want a Reverse Mortgage 217 Part 5: The Part of Tens 219 Chapter 14: Ten-Plus "Must-Knows" About Foreclosure 221 Deal with Reality 222 Review Your Spending and Debts 223 Beware of Foreclosure Scams 223 Consider Tapping Other Assets 223 Make Use of Objective Counseling 224 Negotiate with Your Lender 224 Understand Short Sales 225 Seek Legal and Tax Advice 225 Understand Bankruptcy 226 Consider the Future Impact to Your Credit Report 226 Understand the Realities of Investing in Foreclosed Property 228 Chapter 15: Ten Mortgage No-Nos 229 Don''t Let Lenders Tell You What You Can Afford 229 Never Confuse Loan Prequalification with Preapproval 230 Avoid Loans with Prepayment Penalties 231 Don''t Reflexively Grab a Fixed-Rate Mortgage 231 Steer Clear of Toxic 100 Percent Home Equity Loans 232 Watch Out for Mortgage Brokers with Hidden Agendas 233 Shun Negative Amortization Mortgages 234 Don''t Let the 2 Percent Rule Bully You When Refinancing 234 Don''t Assume That All Reverse Mortgages Are the Same or Bad 235 Avoid Mortgage Life Insurance 235 Part 6: Appendixes 237 Appendix A: Loan Amortization Table 239 Appendix B: Remaining Balance Tables 245 Appendix C: Glossary 271 Index 281.