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
