Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan

by David Reed

Overview

How much house can you afford (or not afford)? Is every mortgage loan the same, or are there specifics to look for that meet your individual needs? How can you increase your chances of getting those almost unbelievable rates you see banks advertising? Is there any end to the paperwork? Questions like these make the mortgage process seem so complex and intimidating, yet they must be worked through in order to achieve the American Dream of home ownership. Because 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 your next home.Thankfully, Mortgages 101 eliminates the confusion and stress with clear-cut answers to all your questions. In this one-stop reference, find everything you need to know from a wide range of mortgage topics. Updated to reflect all the housing market’s latest changes, you will find the latest information on:• Application procedures• Online lenders• New loan and government programs• Qualifying requirements• Zero-down options• Guidelines for self-employed borrowers• And much more!From negotiating the best deal to saving on closing costs, Mortgages 101 supplies the answers and assistance for everything you need until the day you walk through your new front door!

Product Details

ISBN-13:	9780814438749
Publisher:	AMACOM
Publication date:	02/08/2018
Edition description:	Third Edition
Pages:	320
Sales rank:	704,384
Product dimensions:	5.90(w) x 8.90(h) x 1.00(d)
Age Range:	18 Years

About the Author

DAVID REED has two decades of experience in the mortgage industry as a Senior Loan Officer and Underwriter. He is a regular contributor to Realty Times and the author of several popular books on real estate.

Read an Excerpt

1.7 WHAT IS THE PREAPPROVAL PROCESS?

The "pre" stuff verifies two critical elements in credit approval: your ability and willingness to repay a mortgage. Ability and willingness go hand in hand. While you can make enough money to be able to afford to pay back a loan, if you don't have the willingness to do so, then it won't work. And, of course, there are certainly a lot of people out there who may have the willingness to pay someone back, but they just don't have enough money to do so.

By verifying income and the available assets to close on a house, and then reviewing the credit report, these two initial hurdles are overcome. It's no big deal, but documenting your prequalification really is your very first step. Let's examine the process a little more in detail.

TELL ME MORE

First, here's what doesn't happen: Loan applications aren't sent to some loan committee for review. Loan committees went out with leisure suits. Once upon a time, yes, that's how it happened. Potential borrowers would apply for a mortgage and extol their financial virtues; a loan committee, usually meeting once per week, would later discuss the positives and negatives of the applications. A host of old men in black suits, smoking cigars and saying things like "harrumph," would eventually approve or disapprove the loan request.

Today, your loan application is approved or not approved at the very beginning of the process—before it ever gets to an underwriter (the person who physically approves your loan). This process is now fully automated and everything is approved first, before anything is ever verified. It's different from the old days. It used to be document and verify absolutely everything before any approval whatsoever. You could go three to four weeks without really knowing if you were approved. Today, your loan is approved first, then verified later.

Decades ago, the first thing you did was to gather all your documentation—bank statements, tax returns, and paycheck stubs— whatever you could think of. Then you trotted down to your local mortgage company, bank, or savings and loan and met with a loan officer. You completed the loan application with the loan officer, who then detailed the types of documentation needed. Your credit report was also pulled and reviewed. Your debt ratios were calculated to make certain you weren't borrowing more than you—in the lender's eyes—could handle.

If there were any credit problems—say, a late payment on a car last year—the loan officer would ask for an "explanation letter." The credit report would show whether the problem was a pattern or an isolated instance. The explanation letter was a secondary requirement that had to be in the file. Many times the letter simply said, "I forget why it was late," and it would still be okay. The explanation didn't have to convince anyone or be necessarily plausible; it just had to be there.

You'd also have to address any other discrepancies, such as length of time at your current job or a gap of employment. Didn't work because you broke your leg? Provide some medical bills to prove it. Sudden deposits of money in the account? Prove where you got the funds. You needed to show that you didn't borrow the money from somewhere else and make sure it wasn't affecting your debt ratios or perhaps hiding a prior lien on the property.

And that was just from your standpoint. At the same time, an appraisal of the home you were considering buying would be ordered, along with some initial title work. Then a bevy of folks would start mailing stuff to you, explaining this and declaring that, and using words you've never heard before. Then about three weeks later, after all of the required documentation had been gathered, and only then, your complete application would be sent to a loan underwriter for approval. By then it'd been nearly a month and the mortgage company still hadn't looked at your complete application.

Your loan today is electronically submitted to an automated underwriting system. The loan application is electronically submitted to the system, which quickly, as in just a few seconds, issues a response. The response will show whether the loan is eligible for an approval and what items must be provided in order to ensure the final loan is compliant with the guidelines set forth for the loan being applied for.

This process simply means: Verify first, approve last.

Excerpted from MORTGAGES 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Third Edition by David Reed. Copyright © 2018 David Reed. Published by AMACOM Books, a division of American Management Association, New York, NY. Used with permission.

All rights reserved. http://www.amacombooks.org.

Table of Contents

Preface xix

SECTION I: MORTGAGE FUNDAMENTALS 1

CHAPTER 1: Introduction to Mortgages 3

CHAPTER 2: How to Know How Much Home to Buy 33

CHAPTER 3: Getting Your Finances Together 43

CHAPTER 4: Down Payments and How They Impact Your Mortgage 61

CHAPTER 5: Getting Your Credit Together 81

CHAPTER 6: Credit Scores: What They Are, How They Work, and How to Improve Them 103

SECTION II: THE RIGHT MORTGAGE 117

CHAPTER 7: Finding Your Home Loan 119

CHAPTER 8: Loans for Good to Great Credit 151

CHAPTER 9: Refinancing and Home Equity Loans 161

CHAPTER 10: Construction and Home Improvement Loans 181

SECTION III: THE RIGHT LENDER AND RATE 197

CHAPTER 11: Finding the Best Lender 199

CHAPTER 12: Finding the Best Loan Officer 213

CHAPTER 13: Finding the Best Interest Rate 225

CHAPTER 14: Closing Costs and How to Save on Them 245

CHAPTER 15: Using the Internet the Right Way 257

APPENDIX

Monthly Payment Schedules 271

Glossary 275

Index 293

What People are Saying About This

From the Publisher

"When you read anything by David Reed, you get the feeling you are talking with a lifelong friend. His folksy, familiar style makes learning about loans fun and you won't forget his advice. If you do, you'll regret it." — Blanche Evans, Publisher/Editor of Realty Times and Agent News

"David Reed has the ability to explain some of the most complex issues in everyday language. This veteran gives it to you straight and gives you the upper hand when looking for a home mortgage. The chapter on finding the best rate is worth the price of admission alone." — Barry Habib, CEO, Mortgage Market Guide

"Easy to understand, this book puts all the information in one place. The best book on home mortgages I've ever read." — Michael Finney, Award winning San Francisco consumer reporter for ABC TV & Radio. Columnist, San Francisco Examiner

Publishers Weekly: "An easy-to-digest look at the world of mortgages. Reed writes in a straightforward, conversational tone and offers appropriate cautions.serves up useful advice that is rarely discussed. The q&a format makes this a worthwhile addition to the real estate shelves."

Mortgage Originator: "With consumer-friendly language and an easygoing tone, Reed answers over 250 common, yet critical borrower questions. Originators can use this book chapter by chapter, or as a whole, to help educate consumers on the entire mortgage process.Give this book to any potential customerófirst-time buyers, move-ups, and experienced homeowners alike and they will come back to you more informed and confident in their mortgage proceedings.you and your customers will benefit greatly from this informative book."

RealtyTimes.com: "Written in Q&A, the advice in Mortgages 101 is unvarnished and to the point. Reed takes a dry subject and makes literally years of hard-gained knowledge digestible and usable in a thumbable loan manual."

Editorial Reviews

On my scale of one to 10, this outstanding home-mortgage book rates an off-the-chart 12.
—Inman News

Robert J. Bruss

Reed, an experienced loan officer and columnist for Realty Times, offers an easy-to-digest look at the world of mortgages. With definitions of the various types of loans, explanations of credit scores and a discussion of how the Internet has changed the real estate business, the book is a handy reference for anyone involved in real estate transactions-though best for beginners who want a map to navigate their way through the complexities of mortgages. The book explains basic issues such as the difference between renting and buying, which individuals at a bank actually approve loans and how to figure out debt ratio. More complex topics, like construction loans and getting online approvals, are also included. Reed writes in a straightforward, conversational tone and offers appropriate cautions such as not to reveal confidential information online. While much of this information is available elsewhere, Reed serves up useful advice that is rarely discussed. For example, there is a "rescission" period for refinanced mortgages that gives people a three-day grace period to get out of the mortgage agreement with no penalties; he also discusses various types of appraisals. While there are books that cover this information in more depth, the q&a format makes this a worthwhile addition to the real estate shelves. Copyright 2004 Reed Business Information.

Publishers Weekly

It's hard to believe that someone could come up with 250 questions to ask about mortgages, so give seasoned loan officer Reed some credit. He starts with the basics, like renting vs. buying, and continues through the closing process. His concise answers are often followed by "tell me more" sections. Reed spends a lot of time going through the specifics on various types of forms, which would seem helpful for those in the midst of the process. He also offers insights into what's going on behind the scenes. For instance, he explains how loan officers might drag their feet on locking in your rate as they look for market gains for themselves. For those wanting to "shop" online, an entire chapter is devoted to the Internet and mortgages. Refinancing and home equity loans get coverage, too. The monthly payment schedules and glossary make trusty reference tools. Though a number of books cover mortgages for consumers, this helpful how-to is distinguished by its "Socratic" style; many web-savvy readers will benefit from the familiar FAQ format. A welcome addition to public library business collections.-Carol J. Elsen, Univ. of Wisconsin Libs., Whitewater Copyright 2004 Reed Business Information.

Library Journal

..".takes the guesswork out of getting a mortgages...If you don't become an expert on mortgages after reading this book, don't blame us." - The Post-Standard

."..takes the guesswork out of getting a mortgages...If you don't become an expert on mortgages after reading this book, don't blame us." - The Post-Standard

"An indispensable guide to answer any question imaginable when you're buying a home or other property. If you own your own business, have had credit trouble or just want to learn more about the amazing array of current real estate mortgage products, "Mortgages 101" can help." --"BookPage"

"Reed, an experienced loan officer and columnist for RealtyTimes, offers an easy-to-digest look at the world of mortgages....Reed writes in a straightforward, conversational tone and offers appropriate cautions, such as not to reveal confidential information online. While much of this information is available elsewhere, Reed serves up useful advice that is rarely discussed....While there are books that cover this information in more depth, the q&a format makes this a worthwhile addition to the real estate shelves." --"Publishers Weekly"

"This new book provides important information from an experienced mortgage broker whose home-finance articles I have enjoyed for many years. Reed shares his insider home loan secrets, offering sage advice along the way on how to overcome frequent home-mortgage problems....On my scale of one to 10, this outstanding home-mortgage book rates an off-the-chart 12." --Robert Bruss, nationally syndicated real estate columnist

"With consumer-friendly language and an easygoing tone, Reed answers over 250 common, yet critical borrower questions. Originators can use this book chapter by chapter, or as a whole, to help educate consumers on the entire mortgage process....Give this book to any potential customer--first-time buyers, move-ups, and experienced homeowners alike--and they will come back to you more informed and confident in their mortgage proceedings....you and your customers will benefit greatly from this informative book." --Mortgage Originator

"Written in Q&A, the advice in Mortgages 101 is unvarnished and to the point. Reed takes a dry subject and makes literally years of hard-gained knowledge digestible and usable in a thumbable loan manual."

--RealtyTimes.com

"His lucid explanations translate confusing mortgage industry jargon into plain English for the nonfinancial reader....no-nonsense tone." --"Financial Planning"

"Reed follows the question-and-answer format and covers just about every issue that can come up, from how much to put down to the various types of mortgages available. Perhaps the best thing Mr. Reed does is explain, simply, how banks determine your creditworthiness." --"The New York Times "

"Though a number of books cover mortgages for consumers, this helpful how-to is distinguished by its 'Socratic' style; many web-savvy readers will benefits from the familiar FAQ format. A welcome addition to public library business collections." --"Library Journal"

“An indispensable guide to answer any question imaginable when you're buying a home or other property. If you own your own business, have had credit trouble or just want to learn more about the amazing array of current real estate mortgage products, "Mortgages 101" can help.” --"BookPage"

“Reed, an experienced loan officer and columnist for RealtyTimes, offers an easy-to-digest look at the world of mortgages....Reed writes in a straightforward, conversational tone and offers appropriate cautions, such as not to reveal confidential information online. While much of this information is available elsewhere, Reed serves up useful advice that is rarely discussed....While there are books that cover this information in more depth, the q&a format makes this a worthwhile addition to the real estate shelves.” --"Publishers Weekly"

“This new book provides important information from an experienced mortgage broker whose home-finance articles I have enjoyed for many years. Reed shares his insider home loan secrets, offering sage advice along the way on how to overcome frequent home-mortgage problems....On my scale of one to 10, this outstanding home-mortgage book rates an off-the-chart 12.” --Robert Bruss, nationally syndicated real estate columnist

“With consumer-friendly language and an easygoing tone, Reed answers over 250 common, yet critical borrower questions. Originators can use this book chapter by chapter, or as a whole, to help educate consumers on the entire mortgage process….Give this book to any potential customer—first-time buyers, move-ups, and experienced homeowners alike—and they will come back to you more informed and confident in their mortgage proceedings….you and your customers will benefit greatly from this informative book.” --Mortgage Originator

“Written in Q&A, the advice in Mortgages 101 is unvarnished and to the point. Reed takes a dry subject and makes literally years of hard-gained knowledge digestible and usable in a thumbable loan manual.”

--RealtyTimes.com

“…takes the guesswork out of getting a mortgages…If you don’t become an expert on mortgages after reading this book, don’t blame us.” – The Post-Standard

“Reed follows the question-and-answer format and covers just about every issue that can come up, from how much to put down to the various types of mortgages available. Perhaps the best thing Mr. Reed does is explain, simply, how banks determine your creditworthiness." --"The New York Times "

“Though a number of books cover mortgages for consumers, this helpful how-to is distinguished by its ‘Socratic’ style; many web-savvy readers will benefits from the familiar FAQ format. A welcome addition to public library business collections.” --"Library Journal"

"His lucid explanations translate confusing mortgage industry jargon into plain English for the nonfinancial reader....no-nonsense tone.” --"Financial Planning"

.,."an easy-to-digest look at the world of mortgages....Reed writes in a straightforward, conversational tone and offers appropriate cautions....serves up useful advice that is rarely discussed....the q&a format makes this a worthwhile addition to the real estate shelves."

--Publishers Weekly

.,."an indispensable guide."

-BookPage

"On my scale of one to 10, this outstanding home-mortgage book rates an off-the-chart 12."

--Robert Bruss, nationally syndicated real estate columnist

"With consumer-friendly language and an easygoing tone, Reed answers over 250 common, yet critical borrower questions. Originators can use this book chapter by chapter, or as a whole, to help educate consumers on the entire mortgage process....Give this book to any potential customer--first-time buyers, move-ups, and experienced homeowners alike--and they will come back to you more informed and confident in their mortgage proceedings....you and your customers will benefit greatly from this informative book."

--Mortgage Originator

"Written in Q&A, the advice in Mortgages 101 is unvarnished and to the point. Reed takes a dry subject and makes literally years of hard-gained knowledge digestible and usable in a thumbable loan manual."

--RealtyTimes.com

"On my scale of one to ten, this outstanding home-mortgage book rates an off-the-chart twelve." -- Robert J. Bruss "Real Estate Columnist"

From the Publisher