How First Time Home Buyers Can Spot Scams

Buying your first home is an exciting process, and it’s easy to get caught up in the exciting parts and lose track of the details. Unfortunately, if you aren’t paying attention, it becomes easy for unscrupulous people to take advantage of you. Here are some of the top scams that first time home buyers fall for, and the ways you can spot and avoid them.

Moving Scams

After spending a large chunk on your first home, you may be tempted to use a cut-rate moving service to save some money. But using a mover you’ve never heard of before can lead to trouble. Moving scams are popular all across the country, and can result in you losing some or all of your possessions. Before you hire a mover, look out for the following red flags:

They won’t provide a written estimate. Companies who do this may charge you a lot more than you expected when they deliver your items.
They don’t have proper insurance. If there is an accident or theft and the mover doesn’t have insurance to cover your belongings, you can end up having to pay out of pocket to replace it all. Ask to see valid proof of the mover’s insurance coverage.

Listing Scams

In many popular real estate markets, listing scams are an easy way for con artists to make money. These people look for listings for a home for sale or rent, re-post the details to another website with their contact information, take application fees from people who are interested and disappear. To avoid getting caught in a listing scam, make sure you see the credentials and business information of the realtor who shows you a home.

Loan and Mortgage Scams

When you take out a loan or mortgage to buy a home, the lender who helps you should be acting in your best interest. They are supposed to offer you advice on home financing, how much you can afford, and how to get the best possible interest rate. If your lender does any of the following, you might want to reconsider using them:

Encourage you to make false claims on your mortgage application, like making more money than you do or having assets you don’t.
Ask you to pay money up front to apply for a mortgage.
Offer you an interest rate on a loan before checking your credit.

Be wary of lenders that have recently popped up looking to offer you a cut-rate loan. There are many reputable lenders with established reputations to choose from, so avoid lenders that you can’t find much information or history on.

If you’re shopping for your first home, The Core Group can help. Contact us to get more information on homes for sale in the Central Florida area.

The Top Four Mistakes First Time Homebuyers Make (And How To Avoid Them)

As a first time buyer, you’re probably excited to start the process of looking for your new home. But before you get your comfortable shoes on and start looking at listings, there are a few things you should do first. Many first time buyers forget to do these steps and end up regretting it in the long run.

1. Waiting to get Approved

Getting pre-approved is a good way to help narrow down your home search for a few reasons. First, it helps you get an idea of how much you can spend. It is one thing to try and come up with a budget based on your own math, but the bank will have the final word on exactly how much you can spend, and it may be a different amount than you anticipated.

The second reason to get pre-qualified before you start looking for a home is to confirm that you have everything in place that you need to in order to buy a home. The lender will ask for proof of your employment and check your credit as part of the process. Any issues that may come up during this process are better to know about up front so you can attempt to resolve them before you enter the purchase process.

2. Limiting Yourself to One Area

Many first time buyers go into the process with a set idea of where they want to purchase a home. But the perfect home that hits all of their must haves might just be a short drive away. Staying open to seeing properties outside your desired area will help you have a better idea of how far your money will go. Oftentimes, purchasing just outside a trendy area will get you much more within the same budget, and a good real estate agent can steer you towards these homes as long as you are open to seeing them.

3. Only Seeing a Property Once Before Buying

Even if you fall in love with your dream home and are sure you are going to buy it, it still makes sense to visit the home more than once before you put an offer in. Visit on a different day of the week or different time of the day to see if traffic around the area is much worse at a given time, or if you see issues on the exterior of the home during the midday hour.

4. Going With The First Mortgage Lender You See

Shopping around to see the different rates that are offered to you is well worth the effort and time. Even if the rate you end up getting is only lower by a few percent, the savings you will have over the life of the loan can add up to hundreds or even thousands of dollars.

These common mistakes are easy to avoid making with a little planning and some work up front. As a first time buyer, you have to be willing to conduct some research and do a little legwork to ensure you get the best possible deal.

Common Mistakes in the Refinancing Decision

We have discussed basic #RefinancingDecision in other posts. If you are just starting on this topic read “Refinancing 101” first. The greatest issue with most refinancing decision is the failure to account for:

Time Value of Future Dollars

Time Value of Money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.

Additionally, future payments are worth less (if you hold to this thinking) than payments made today. For example, if you make monthly mortgage payments of $2,000 over a 30 year period, and can earn 8% on your money invested elsewhere, your last payment (360^th) would only be worth about $182.90 today.
Tax Benefits Lost by Refinancing

Interest paid on a mortgage is tax deductible. So, when making a refinancing decision, it only makes sense to account for the tax benefits lost by refinancing.

Suppose a homeowner currently pays taxes of $0.25 for every dollar of additional income, then each dollar of interest deducted reduces taxable income by a dollar thus reducing taxes by $0.25. For example:

6 percent interest that is deductible would cost only 4.5% ((1-.25) x 6)).
Alternative Options for Effectively Lowering Interest Rate

Many homeowners refinance for the purpose of getting their loan paid off faster. They may have a 30 year mortgage and want to take advantage of lower15 year mortgage rates. Consider the following:

Option 1: 30 year, 4.5% interest, $300k loan amount = $1,592.18 monthly payment

compared to

Option 2: 15 year, 3.25% interest, $300k loan amount = $2,108.01 monthly payment

If these were the 2 options available and you were already locked into a 30 year amortized loan (option1) you could simply make 15 year mortgage payments of $2,108.01 and pay off the 30 year amortized mortgage in under 17 years.

This is only one of many ways to effect your mortgage without refinancing. Take into account that this method of quicker repayment does not cost you the 2%-3% in closing costs that is normally required.

Summary

Sit down with someone that can help you determine the best path to reach your financial goals. The purpose of this post is to show you that simply knowing you will pay back the cost of refinancing in a certain number of years doesn’t necessarily paint the whole picture. Find someone you know and trust that can help you factor in all of the factors above so your decision to refinance is clear. It’s important that you make a point to understand #TheWhy in making your decision because ultimately you are the one that will be affected for many years to come.

#TheMoreYouKnow

Cost of obtaining a loan up 6% to $2,539 nationwide

Mortgage closing costs rose six percent over the past year and now average $2,539 on a $200,000 loan, according to Bankrate.com. Origination fees increased nine percent to $1,877 and third-party fees rose one percent to $662.

Florida ranks eighth nationally, according to Bankrate. On a $200,000 loan, the average origination fees charged by lenders is $1,982, and third-party fees and $666 for total closing costs of $2,648.

Bankrate.com offers a list of average fees for a Florida closing, though with a notation that they don’t add up to the overall average because “each lender charges some of the fees listed below, but not all of them.”

Origination fees charged by lenders in Florida

Origination points (not discount points): $732

Application: $343

Document preparation: $73

Broker, originator or lender: $1,275

Processing: $495

Tax service: $74

Underwriting: $200

Wire transfer: $25

Third-party fees in Florida

Appraisal: $405

Attorney, closing or settlement: $400

Credit report: $17

Flood certification: $9

Employment verification: $15

Inspections: $125

Postage/courier: $75

Survey: $365

“New mortgage regulations are the biggest reasons why closing costs went up over the past year,” says Holden Lewis, senior mortgage analyst at Bankrate.com. “The good news is that some lenders have not increased fees. To get the best deal, consumers should compare good faith estimates from at least three different lenders.”

Bankrate surveyed up to 10 lenders in all 50 states and Washington, D.C. in June 2014. Researchers obtained online good faith estimates for a $200,000 mortgage to buy a single-family home with a 20 percent downpayment. Costs include fees charged by lenders, as well as third-party fees for services such as appraisals. The survey excludes taxes, title fees, property insurance, association fees, interest and other prepaid items.

For a breakdown of closing costs by state, visit Bankrate.com’s website.

3 EASY challenges to overcome when buying a home

It is imperative that your agent knows how to handle the challenges that will arise. Wisdom in overcoming challenges comes through experience in today’s fast paced market. Many challenges exist throughout this process that you do not need to go through. An agent with a track record of success has learned to avoid many of the potholes that exist. It’s important that your agent has a strong understanding and experience with:

1. #Mortgage & Financing

Today’s mortgage world is filled with obstacles that can keep you from obtaining the house you select as “the one.” The best advice I can give is to ask your agent:

Which lender they would use if they were buying a home?

How many transactions have you closed with this person?

This mortgage professional who you have identified is an important piece of the puzzle because they are now responsible to you and to your agent who will continue sending them business long after you have closed (assuming they are successful with your closing). I still encourage shopping around, not for the purpose of finding someone you like better, but for making sure the loan you are obtaining is competitive. Let the lender know you are doing this and then give them every opportunity to earn your business if they are not the best in interest rate or fees (cost to acquire a loan).

Regardless of your lender, they will require a lot of you. It is extremely important to disclose all of your income, debts, and have your credit pulled before beginning the house hunt.

To summarize, a great agent will connect you with a great lender that will require a lot of you upfront to avoid challenges after finding the perfect home. The last thing you want to do is squander a contract on the perfect home for your family because you were trying to save $50 on a loan origination fee.

Crazier things happen every day!

2. Market Values

Seek proof of market values in the form of a Comparative Market Analysis known as #CMA. Your agent needs to help you understand the market values some you can negotiate from a place of justification. I always tell buyers, “I will submit any offer as long as it can be justified.” Some homes and communities are much harder to evaluate than others, so it’s important to have an open-minded discussion of market values with your trusted, hired resource…your Realtor.

Headache Relief: You will save yourself a lot of headaches if you can come to the realization that MARKET VALUE is more important than LIST PRICE. If a home is priced at priced at $50,000 below market value and you pay $25,000 more than the list price, this is a success. Inversely, if a home is listed $50,000 over market value and the seller won’t take less than $25,000 below the list price you need to move-on. Always keep

3. Negotiations

How your agent interacts with you in telling you positive news and the news you don’t want to hear is likely how they will converse with other agents in the negotiation. Ask specifically what their strategy is in presenting your offer. If you have an agent who was weak negotiating with you on parts of the purchase offer, don’t expect them to become a hero when negotiating with the seller for you and your family.

Also, understand that there are many sellers out there that are unwilling to listen to justified market values or are not in a position to sell except at a certain price (unrealistic). The best negotiator cannot create deals when there are no margins, so understand that going into it.

There are many other things that need to be negotiated other than price. A good offer should also protect you as the buyer in the form of contingencies (inspection, appraisal, financing, etc.) and portray clear timeline from the point of contract though closing. A good agent can also foresee certain issues that may arise and attempt to address them in the first version of the contract rather than having to engage in a second negotiation later. DO NOT assume you will be able to negotiate something after the first contract is agreed upon. Include your concerns in your first draft. Your due diligence (inspection) period is to uncover things you did not know about the property.

Lastly, it’s important to know that there are many small negotiations through the closing process such as property repairs and appraisal issues. So, it’s important to keep a positive relationship with the other side or they will be less likely to agree to any future requests.

Bonus Material

This may be the most important part of this post. Do not become jaded by a drawn out negotiation and allow that to affect your goal of obtaining the property. Understand that every seller and buyer are looking for the best end result as possible. Stay focused on the goal and understand there is give and take to every #negotiation, and you need to realistically determine what success is for you before starting any negotiation. Keep market value in mind, and protect yourself in a well presented offer preceded only by an agreed to negotiation strategy. Keep It Simple.

-JC

Mortgage Mistakes to Avoid

Mortgage Documents

This topic has become increasingly more relevant with the restrictions and intricacies of the mortgage world. There are lenders out there promising things that they have no control over. The average homebuyer is under the assumption that they way to find a good mortgage professional is by shopping around and comparing rates and fees. Although this may be a way to save money in the short term there are a lot of other factors that should be considered.

If you are looking for a mortgage professional for a loan origination or a refinance, please reach out to me and I will put you in touch with 2-3 professional that are great at what they do, they have been pre-screened and are trustworthy individuals.

Contact me here! Keep reading and enjoy.

Mistake #1 – Paying Your Mortgage Before Paying Off Higher-Interest Debt

Do you love the idea of owning your home free and clear? It’s a beautiful dream, isn’t it? But if you have other, higher-interest debt, you should hear what our experts have to say before you make paying down your mortgage a financial priority.

“Homeowners should pay their higher-interest rate debt first before they pay their house off,” says Sam Suliman, a mortgage expert with over 20 years experience in the business.

Alex Gonzalez, a mortgage loan originator with Vintage Mortgage Group, agrees.

“Your home is emotional – it’s your foundation – and people want to pay that off as quickly as possible. But credit cards typically have 18-25 percent interest rates,” Gonzales cautions. “Even if your home loan is at 5 percent, you should never put extra money into your mortgage until you’ve gotten rid of your credit card debt.”

Want another reason to get rid of credit card debt before paying down your mortgage? Here’s one: “The interest you pay on your credit card balance is not tax deductable like the interest you pay on your mortgage,” says Gonzales. “It’s wasted money.”

Mistake #2 – Getting a Loan for “Free”

In this life, you don’t often get something for nothing. So when someone offers you a “no cost” loan, you might get a little suspicious. That’s good instinct.

Why? According to Gonzalez, “no cost” loans typically come with a higher interest rate than normal loans. That’s because the bank pays the loan fee for you – knowing that the higher interest rate you’ll be paying on the “no cost” loan will more than make up for what they spent on the loan fee, he says.

Here’s an example to help illustrate the point a bitter: Let’s say you want to refinance your $200K mortgage, and you plan to stay in your home for 10 years or more. You could either get a “no cost” loan at a 4.25 percent interest rate, or you could pay $5K in closing costs for a standard loan with an interest rate of 3.25 percent.

	“No Cost” Loan	Standard Loan
Interest Rate:	4.25 percent	3.25 percent
Monthly Payment:	$983.88	$870.41
Total Interest Paid:	$154,196.72	$113,348.55

The difference between your monthly payments with a “no cost” loan and a loan where you pay $5K in closing costs is $113.47 a month. But since the loan cost you $5K, we need to figure out your “break even” point.

$5,000 divided by $113.47 a month comes out to 44 months, or just over three and a half years. So you’ll break even on the $5K after four years and you’ll start saving money by paying a lower interest rate for the remainder of the loan.

In fact, even after paying $5K for a lower rate loan, you’ll save $8,616 after 10 years.

Bottom line? “If you’re going to be in your home for longer than 10 years, the no cost loan is probably not the way to go,” says Gonzalez.

Mistake #3 – Getting a 15-Year Mortgage, But Having No Financial Security

There are huge benefits to getting a 15-year mortgage. First, you’ll be paying your loan off in half the time of a traditional 30-year mortgage. Second, you’ll pay less in interest over the life of the loan. However, due to the higher monthly payments that often come with a 15-year term, this option isn’t for everyone.

For example, let’s say you’ve got a $200K mortgage at 4 percent. If you have a 15-year mortgage, your monthly payment will be $1,479.38 and the total cost of the loan over 15 years will be $266,287.65. The same loan amortized over 30 years will only cost you $954.83 a month, but the total cost of the loan will be $343,739.01. So, while you’ll save approximately $77k in interest with a 15-year loan, your monthly payments will increase by more than $500.

[Thinking of refinancing? Request a lender that fits your situation.]

The big question you need to ask yourself is, “Can I afford the larger monthly payment?” If you’re not sure, don’t panic – here’s some great advice for you.

“I think the best way to do it is to get the 30-year loan and make the higher payments. This way you make sure you’re in control of your finances in the future,” says Suliman. “You could take the money and invest it in something like stocks. But this way, it doesn’t strain your budget.”

Of course, this all depends on your income and financial security. If you could afford a 15-year loan, you could save a lot of money in interest. However, if you take on a 15-year loan without a clear understanding of your future finances, you could be in trouble. So, talk to your lender about what the best option for you is.

Mistake #4 – Not Thoroughly Researching Lenders

Gonzalez suggests that his clients think about this scenario for a moment: If you had a briefcase with $300K in it, and you were choosing who to hand it over to, you’d probably do some pretty thorough research, right? That’s essentially what you’re doing when you get a mortgage – so make sure you’re handing it over to someone trustworthy.

“When someone says ‘do you want a 1.9 percent interest rate?’ your first thought might be ‘yes!’,” says Gonzalez. But don’t fall prey to a lender simply because they told you something you want to hear.

If you’re unsure if you can trust your loan officer, it’s okay to ask questions and challenge them, Gonzalez says.

“Real professionals don’t get their feelings hurt if you have questions for them. People want to guard their savings and investments – so if someone gets upset if you challenge them on an opinion, you need to find someone new.”

Some questions you may want to ask a lender, says the Federal Reserve Bank of Boston, include whether or not your interest rate will be fixed or variable, and if the lender offers an introductory rate, when it will expire, and what the new rate will be.

Story from Yahoo.

Is it time to “lock-in” your loan?

Is now the time to lock the interest rates on your mortgage? Here are a couple of things to consider:

1.The major concern is the growing possibility that the rating agencies are looking at downgrading our government’s bonds from AAA status. By lowering the credit rating of the bonds being presented to the market, the confidence of those who buy our bonds will be shaken. In order to overcome the risk of lower rated bonds, we will need to offer greater rates of returns on our bonds. THAT will result in a rise in mortgage rates because mortgages are what make up the bonds. This will affect virtually every conforming loan limit home buyer, whether they have conventional or government (FHA/VA) financing.

2. The pending lowering of the maximum loan amounts (slated for October 1^st) that can be sold to FannieMae, FreddieMac and GinnieMae (in high cost areas from $729,250 to $625,500 for single family homes) will create more “Jumbo Loans”. Jumbo loans have historically been .25% to .375% higher than conforming loans; however, industry insiders are hinting at a much bigger spread (.75% or more). Granted, this will not impact most home buyers, but it is worth noting.

Now, it is possible that neither item becomes effective. Let’s keep our fingers crossed. Yet, what is the benefit of NOT locking. Maybe rates could go down an eighth or a quarter of a percent. Is that worth the risk of a rate increase that would be quick and dramatick of a half of a percent or more?

The safe bet is to LOCK to protect yourself……It’s always better to be safe than sorry. Not locking could cause you to put your home buying on hold.

How Much Can I Afford?

How much mortgage money can I qualify to borrow?

This is typically the number one question mortgage professionals are asked by new clients.

Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.

In other words, what makes for a comfortable long-term mortgage payment?

The Quick Answer:

If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.

Sample Mortgage Scenario:

Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:

$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment

This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month.

“Ballparking” a Qualifying Loan Amount:

Simple step: We use a safe average of $7 per month in payment for every $1000 in purchase price so…

Step 1)  $900 a month divided by $7 = $128.50

Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.

Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.

Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.

Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.

Other items to consider in your monthly budget:

1. Confirm all debts are taken into account
2. Any private notes or family loans
3. Short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Keep a cushion for savings and financial planning

Top 10 Ways to Finance a Home Without All the Drama

By Tara-Nicholle Nelson, FrontDoor.com | Published: 4/14/2009

Many lenders these days are fixing their current borrowers’ soon-to-adjust ARMs to prevent homes from ending up in foreclosure.

#1: Fix your broken ARM.

When I hear talk of fixing an ARM, or adjustable rate mortgage, I envision a mortgage broker hammering away at a broken loan, then stepping aside for the reality-show style reveal — the ugly duckling ARM is now a swan of a fixed rate mortgage! While not every ARM is broken or requires fixing, if you have an interest-only or negative-amortization ARM, your payments could go up (even double!) when the loan adjusts. Wash the ARM drama right out of your hair with a simple action plan:

Who ya’ gonna call? Your lender! These days, lots of lenders are fixing their current borrowers’ soon-to-adjust ARMs just on general principle — it has begun to dawn on them that a skyrocketing payment makes it pretty likely your home will end up in foreclosure, which costs them money. Don’t hesitate to call just because you have little or no equity. Some lenders see that as a good reason to fix your loan voluntarily, because you probably won’t be able to refinance with another lender. If you’ve tried to call your lender before and got nowhere, try again. After April 2009, the stimulus plan will literally pay lenders who help on-time borrowers fix their loans and lower their monthly payments, so you might have a better chance then.

Refi-fo-fum. Don’t assume that refinancing your ARM into a fixed rate mortgage is impossible because you’re upside down and mortgage money is scarce. Though the headlines blast the bad news that 10 percent of homeowners are upside down, that means that 90 percent of homeowners do have some home equity. So long as you also have decent credit, you might find it easier to qualify for a refi than you think! Get in touch with your mortgage broker and have them refinance your ARM into a fixed-rate loan at today’s uber-low interest rates.

Your legal last resort. Upside down and your lender won’t help? If you are also late on your mortgage or your original deal violated predatory lending laws, you might be able to nudge your lender into modifying your ARM into a fixed-rate loan. Rather than tackle the task of distinguishing the loan modification consultant heroes from the zeros, hire a reputable attorney with a track record of success at negotiating mortgage mods.

#2: Take smart, simple steps when you are facing foreclosure.

Not everyone facing foreclosure took a liar’s loan or just decided to walk away — job loss, divorce and even medical problems can put a responsible homeowner in danger of losing their home. Tragically, the ostrich response tends to be very popular among homeowners facing foreclosure. Over half go through the six-month process without ever once speaking to their lender! If you have life issues or money issues that are causing issues with paying your mortgage, don’t ignore the problem. Take a deep breath, then take these steps:

Are you in or out? Your home is not disposable. Walking away just because it has depreciated is simply not cool. But, realistically, some folks simply don’t have the income to hold on to the home. Before you do anything else, figure out whether you can afford to keep it. Get a clear fix on what comes in and goes out every month and how much longer you expect your money problems to last. You’ll need that information when you talk with your mortgage company to sort things out, no matter what you decide.

Don’t check out — check in with your lender. When you are fighting foreclosure, your mantra should be, “call, answer, open:” call your lender incessantly, answer their calls and open their mail. Lots of lenders are offering to waive or lower payments for folks who are falling behind, but your offer might come in the mail. If you avoid the mail to keep bad news from bringing you down, you’ll also miss out on any good news or opportunities to get back on track. Other lenders will work with you to make your mortgage more affordable, but only if you reach out to them first.

If you’re sure you can get back on track with a little help from your lender, but they won’t play ball, consider hiring a loan modification attorney to run interference for you.

Damage control, stat. If your cash flow simply can’t stretch to cover the mortgage, even with some help from your mortgage company, switch into damage control mode, and take steps to get closure as painlessly as possible. List your home with a Realtor who has had success negotiating short sales. If it doesn’t sell within two or three months, talk to your lender about a deed-in-lieu of foreclosure, a process in which you deed your home back to the bank with minimal legal drama and fanfare. If your lender agrees that your personal economy is in a recession, they might even cut you a check to help you move!

#3: Find funds to boost your down payment.

Zero down.100 percent financing. These mortgage ad slogans from just a few years ago might as well be relics in some home finance museum, because the no-money-down ship has definitely sailed. But what do you do if you’re trying to bust in to the market with a busted bank account? Use this treasure map to find funds to fill out your down payment, without blowing your chances with the bank.

Get down (payment help from your) town. Many cities and states — the government entities themselves — offer Downpayment Assistance Programs (DAP) for first-time homebuyers or buyers within a certain income level. These programs can offer big chunks of money, as much as $75,000, to go toward your down payment, and often offer fabulous features like deferred payments (anywhere from 3 to 30 years) and way below market interest rates. Of course, they sometimes add their own restrictions to your transaction too, like requiring you to put a certain amount of your own money into the deal or requiring that the property you buy meet minimum condition guidelines.

Government DAPs are to be distinguished from seller-assisted DAP programs like AmeriDream and Nehemiah, which were outlawed by legislation in 2008, though they’re still fighting to get back in business. To find the DAP options in your area, Google your state’s and city’s official Web sites and click on ‘housing’ or ‘economic development,’ and check the Department of Housing and Urban Development’s roster of government DAPs at HUD.gov/local.

Now, that’s what I call a fringe benefit. If you are a public servant, you’re probably underpaid for the incredibly important work you do. But you’ve got a major perk: there are lots of down payment assistance programs dedicated to law enforcement officers, firefighters and teachers! They vary widely — some offering low-interest loans, with others actually fronting a chunk of money to help those who help the rest of us. To see what’s available, check with your HR department and your mortgage broker — they usually have the hookup.

Gift money — it’s all relative. You can buy with a little help from your family, not friends. If you’re using an FHA loan, you can receive as much or as little of a gift toward your down payment from a relative as they are willing to give. All you need is the money and a letter from your kin confirming that it was a gift, not a loan. Conventional loans have much trickier gift money guidelines. Definitely let your mortgage pro know ASAP when you think a gift might be in the works, so they can help set things up for success. Oh and definitely say an enormous ‘thank you’ to the giver!

#4: Know when it’s time to refi.

It seems to me that my mortgage broker buddies spend about 50 percent of their time brokering loans, and the other 50 percent of their time taking calls from their former clients asking, “Is this a good time to refinance?” Few things cause homeowners ongoing angst like the ever-open question of whether they should refinance their home loan. There are a huge number of things that can provoke thoughts of refi-ing:

Your BFF gets a mortgage at 5 percent. Does that mean you should refi?
You hear a radio announcement that rates are at a record low. Time to refi, right?
A postcard comes in the mail offering to refinance your mortgage at a full point less than your current rate. That’s gotta mean you should be refinancing your loan. Errm, doesn’t it?

Let’s stop the mortgage mystery. Here’s how to know if the time is nigh for you to refi.

Why refi? There are really only three major reasons to refinance your home loan. The most popular reason these days is to get a lower interest rate and reduce your monthly mortgage payments. It also makes sense to refinance an adjustable rate mortgage (ARM) into a mortgage with a longer period of fixed interest and payments. And, if you have any home equity, you can also refinance to borrow cash against that equity. But, borrower beware of borrowing too heavily against your home’s equity: many who lost their homes to foreclosure got in trouble by ceaselessly borrowing against their home equity for unworthy causes like cars and vacays.

Mortgage, may I? By definition, refinancing involves trading one loan for another, better loan. That means the new loan has to pay the old one off to make things work. For the loan swap to work, the collateral — your house — must be worth at least the amount of the new loan. The upshot? If you owe more on your current mortgage than your home is currently worth, it’s impossible to refinance into a new loan without writing a check to help pay off the old loan and pay the new loan’s closing costs.

Are falling values fouling up your refi plans? Under the stimulus plan, there’s a temporary exception to this equity issue. If you qualify, you can be slightly underwater and still trade loans for a lower rate. Check MakingHomeAffordable.com to see if you’re eligible.

Do the math. Refinancing costs money — usually between 1 percent and 2 percent of the new loan’s amount. So you don’t want to be doing it every five minutes, or every time rates drop a fraction of a percent. Worthwhile refis save you more on your monthly payments over the time you plan to hold the loan than they cost to execute. Ask your mortgage pro to help you do the math and project how low rates must go to trigger a refi that makes sense for you. Then, forever after, you won’t rush to call your mortgage broker every time you hear any old low-sounding interest rate quoted on the radio. You’ll have your own personal refi trigger rate!

#5: Debunk mortgage myths and know what it really takes to get a home loan.

Bad news travels fast, so when mortgage guidelines tightened up, word spread faster than rumors of an A-list baby bump sighting. Problem is, the rumor mill is just not the most reliable source of money advice. It’s just not as hard to qualify for a home loan as most would-be buyers believe. If you want to jump into this buyer-friendly market, here’s the straight dope on what it actually takes to get a loan.

What’s your number, baby? Contrary to popular belief, it does not take 20 percent down and a 850 FICO score to get a home loan. When the subprime, zero down, must-only-be-human-to-apply-type loans disappeared, the Federal Housing Administration (FHA) stepped up to make sure that normal folks would still be able to afford homes by vouching for low-down payment loans. An FHA loan — now the loan du jour — only requires a 3.5 percent down payment, and you can get one at most banks with a decent credit score: 620 or thereabouts. And these are really good loans — fixed for 30 years at low interest rates. No, they won’t let you go out and buy a Russell-and-Kimora-esque manse on a nurse’s salary, but you didn’t really need to do that anyway, now did you?

The downside — with an FHA loan, you’ll pay an extra Mortgage Insurance Premium to defray the risks of lending to you. It’s an extra 1 percent at closing compared to what you’d pay for private mortgage insurance on a conventional loan. So if you have at least 10 percent down and a strong credit score, look at whether a conventional loan would save you a chunk of change on mortgage insurance.

Supersized loans. If you need a home loan that’s above the FHA loan limit in your area — for 2009, between $417,000 and $729,700, depending on where you live — you’ll need a conventional (i.e., non-FHA) loan. That means you’ll also need about 10 percent down and good credit — a 720 FICO is a pretty common requirement to get good interest rates. If you have the 10 percent and you need a loan over the $417,000 conforming limit but under the FHA loan limit for your area, you should probably compare rates on FHA and conventional loans. FHA loan interest rates shoot up for “jumbo” loans. Check https://entp.hud.gov/idapp/html/hicostlook.cfm to see what FHA loan limits apply to your area.

Ratio-ning. There’s always the question of how much debt you can have and still get a home loan. But that’s not the right question: if you meet the credit, assets and other guidelines for a loan, you’ll qualify for that loan. But the loan amount for which you qualify hinges on your debt-to-income (DTI) ratio, an expression of how much of your income will be obligated to debt payments after you take on a certain mortgage payment. These days, you can get a loan with a total back-end maximum DTI ratio of 43 percent to 50 percent, depending on the bank, your other qualifications and the loan program.

Minus the mortgage gibberish: all the monthly bills that show up on your credit report plus your new mortgage can’t exceed 43 percent to 50 percent of your gross monthly income. Your mortgage pro can help you work backwards from various price points to figure out how much you can afford with your current debt and how much more purchasing power you’ll get if you pay off some bills or bulk up your down payment.

Too many would-be buyers wrongly assume they won’t qualify and think they have to let this incredible buyer’s market pass them by. Don’t let mortgage myths make you miss out!

#6: Protect yourself when you bypass the bank.

Seems like seller financing would be the best of all worlds, right? No bank qualifications you can’t meet, no underwriter who requests the same copy of the same paycheck stub you’ve already produced three times, no loan closing costs — what’s there not to like? Seller-financed deals hold the potential to be just that good, but nothing is perfect. Make sure that your homeownership experience doesn’t go haywire when your home’s seller finances the deal.

Use protection. Banks build lots of stuff into real estate transactions to protect their interest in the houses they make mortgages on, and those protections often work in favor of their borrowers’ interests too! If the seller is financing your purchase, it’s all too easy to forgo what may seem like bank-mandated formalities like a title search and title insurance. A title search ensures that the seller has the right to sell to you in the first place and makes sure you’re not buying a place that’s already in foreclosure.

Similar protections that can go overlooked when there’s no bank monitoring the deal are obtaining a robust homeowners’ insurance policy prior to close of escrow, reviewing legally mandated seller disclosures and even recording your title to the home in your county’s property records. These items shield you from disasters as serious as losing the property and are absolute musts. There’s also logistics involved. For example, your bank issues annual tax documents you can use to deduct your mortgage interest. Is the seller prepared to do that? Make sure you have a Realtor, attorney and/or escrow holder on board to line up these legal and logistical lifesavers.

Don’t go overboard. Some buyers are so relieved and grateful to get seller-financing that they overpay the seller, agreeing to an interest rate or purchase price that is out of whack compared to the fair market value. With a bank-financed deal, the appraiser is the fail-safe against paying more than the place is worth. In a seller-financed deal, it’s up to you and your Realtor to analyze recent comparable sales in the neighborhood and be sure they justify the price you pay. It’s fair to add a small premium or pay on the high end of the justified price range for the perk of seller-financing. The seller is making your life easier and agreeing to postpone receiving their money, and that’s worth something.

On interest rates, again, it’s fair to pay a smidge more than you would pay the bank for a similar loan, because there’s value to escaping loan origination fees and the underwriting obstacle course. But you may want to go ahead and get a mortgage broker’s good faith estimate for the bank-financing equivalent of the loan being offered by the seller. Make sure you’re not paying a huge premium for the privilege of writing your check to the seller.

Gratitude is normally a good thing. But in a seller-financed deal, too much gratitude can get in the way of good judgment and attention to detail, and there’s no bank underwriter with guidelines that will have your back. So hire a team of pros to make sure your interests are protected. And if it helps, keep in mind that the seller should be grateful for your willingness to do the deal too!

Find a trustworthy mortgage broker by asking your Realtor, friends and relatives for referrals.

#7: Pick the right mortgage pro for your situation.

As that popular rap song goes: “More money, more problems.” Doesn’t it seem like the more money is involved in an industry, the more scam artists and charlatans work in that field? That’s certainly true with the mortgage industry, but for every fraudulent financier, there are a dozen honest mortgage mavens who can hook you up with the funds you need to finance your home. Here are some simple steps you can take to make sure your mortgage specialist is both honest and the right pro for the job.

In referrals we trust. Finding a mortgage broker who is worthy of your trust is an important task, but it doesn’t have to be a difficult one. The best way? Ask your friends and relatives — someone you know must have a mortgage rep they swear by. And one of the best sources of mortgage referrals is a frequently overlooked one — your Realtor. Even if you bought your home years ago and are just wanting to refi, your Realtor stays in the know on which reputable local loan reps have access to the loan options you need.

In the mortgage realm, because there are so many different types of professionals, it’s sometimes tough to know what sort of referral you even need. There are mortgage brokers who shop a bunch of different lenders, mortgage representatives who are employed by (and thus only work with) a single lender, and all sorts of service providers in the business of modifying loans. Let your mortgage project determine the type of pro you seek out.

Straight from the lender’s mouth. If you’re trying to stimulate your household economy by taking advantage of the stimulus plan, go straight to your lender. If you qualify for one of the stimulus modification or refinancing options, they’ll make it happen. For a quick-and-dirty Cosmo-style quiz to see if you’re eligible, visit www.MakingHomeAffordable.gov. Even if you’re not looking for stimulus help, but you would like to explore your refinancing or loan modification options, you should always check in with your current mortgage holder and your personal bank or credit union to see if they can waive fees, get it done faster or offer you some other preference for being an existing customer. But be sure to compare their offer against your mortgage broker’s to make sure you’re getting the best deal. And remember, these mortgage reps work for the bank, not for you, so their goal is to sell you what their bank offers, which may or may not be the most appropriate loan for you.

Broker is better. In almost every scenario, it’s a good idea to get a mortgage quote from a reputable mortgage broker, even if you’re also going to get one direct from your lender. Brokers know how to work the system to get you the best deal, and they generally have access to tons of lenders, so they do the hard work of shopping for you. But make sure you use a broker you find by referral. They want to earn your repeat business, so they’ll do everything possible to get you the lowest rate and best terms on the right loan for you.

#8: Get a clue about cash to close.

There are few matters in real estate as mysterious as the concept of the cash a homebuyer needs to close escrow. Your down payment is only one of the chunks of change you need to have on hand to get the keys to your new home. Before you even get pre-approved, know how deeply you’ll have to dig to do the deal.

The importance of being earnest. When you first make an offer on a home, you’ll need to come up with an earnest money deposit — 1 percent of your offer price is about the norm. Funny name, but descriptive — this dough just tells the seller that you are serious or in earnest about buying their home. You’re communicating that they should take you seriously enough to pull their place off the market while you do your inspections, appraisal and loan underwriting.

Depending on your contract, you might need to increase your deposit when you remove your contingencies or your objection period expires — a 2 percent increase is not uncommon, though this varies widely depending on the contract, standard local practices and the property’s price point. The precise details of your earnest money deposits are negotiable with the seller.

The best part about earnest money deposits? If the deal goes as planned, the money goes into your escrow account, not to the seller. Then, when you close escrow it is credited toward your closing costs and down payment. The worst part? In many states, if you back out of the deal after removing contingencies or waiving objections, you forfeit that money to the seller.

Down by the buy. Be careful not to confuse your deposits with your down payment — your down payment is the difference between the purchase price and your mortgage amount. And it has nothing to do with the seller — this is all about your agreement with your lender, as your down payment has a major impact on whether you qualify, on your interest rate and on your monthly payment.

To your credit — closing cost credit, that is. Every business deal costs money to do, and buying your home is no exception. Your closing costs include line items like your loan origination fee, title insurance, escrow services and even taxes some areas charge every time a property changes hands — and they all have to get paid before you can close. More and more, sellers are agreeing to pay closing cost credits, literally funds that come out of the sale price and are credited to your account at closing to defray your expenses. Closing costs range anywhere from about 2 percent to 5 percent of the purchase price, with FHA loans incurring costs on the higher end of the range and high-priced properties coming in at the lower end.

The million dollar question is how these three elements of cash to close relate to one another. Here’s the pleasant surprise — you may not have to come up with deposit money, plus down payment money, plus closing cost money, especially if you negotiate a seller closing cost credit. At closing, the escrow holder draws up a balance sheet listing all the debits and credits to your account. The price you agreed to pay and your closing costs go on the debit side, but your earnest money deposit, the loan money from your lender and any closing cost credits the seller agreed to go on the credit side. Subtract, and you get the amount you need to bring in to get your keys.

So, for example, if you put down a 3 percent deposit, got a 3 percent closing cost credit, incurred 3 percent closing costs and want to make a 3.5 percent down payment — you’d only need to bring in a half of 1 percent to close. Without the closing cost credit from the seller, though, you’d need to bring in 3.5 percent at closing in order to seal the deal. With cash to close, it all comes out in the wash. Real estate mystery: solved!

Learn from the mistakes that caused the foreclosure crisis: Let your household spending plan and a reality-based projection of your income over time dictate how much you pay for your home.

#9: Foreclosure-proof your home, before you even buy it!

The finance fear factor involved in buying a home has grown particularly intense in the aftermath of the foreclosure crisis. Seeing constant news reports about the tragic consequences of bad real estate and mortgage decisions makes it tough for buyers not to wonder, “how can I avoid that?!” If you’re about to buy a home, and you’ve had this exact thought, you’re in luck — learn from their mistakes and position yourself to avoid foreclosure in just a few simple steps.

Think long term. Don’t buy a place planning to sell it in a year. Really, you should only buy if you’ll be comfortable owning the home for at least four or five years. As we’ve seen recently, one year you might be able to sell at top dollar in just a few days, and the next year it might take months to move the same house at a deep discount. If you plan from the outset to commit to the home for a few years, your home and loan choices will be less likely to force you into a financial crisis.

Intelligent (mortgage) design. Take charge of your mortgage choices and make sustainability your goal. Let your household spending plan and a reality-based projection of your income over time dictate how much you pay for your home. Tell your Realtor and mortgage broker how much you can spend on housing every month, rather than letting them tell you what you can afford. That may mean you end up buying a lower-priced home than you qualify for, a decision many owners who have now gone through foreclosure wish they had made back when they had the choice.

Sustainability should also be your guiding force when it comes to the type of mortgage you choose — with so many low-interest mortgages with fixed interest rates and payments available, it just doesn’t make sense to take on a loan where your payment will double in a year or two (or three, for that matter)! Actually, don’t make any mortgage move where your ability to hold onto your home relies on your ability to refinance your home in less than five years — that’s like betting your home on a short-term prediction of home values, and that’s not a good move.

Cultivate a cushion. Saving money hasn’t been a priority of American homeowners for some time now. When everyone’s home was wildly appreciating, there was always cash to be had from equity lines and loans. With no real savings, though, even a temporary job loss doomed homeowners to foreclosure. To insulate your home from foreclosure, start the savings habit and shoot to create an emergency cushion of six months’ mortgage payments and other living expenses.

Get a shredder. Homeowners who used their homes like ATM machines have been much more likely to end up in foreclosure. So, decide in advance to avoid frequent or excessive borrowing against the equity in your home. And arm yourself against the barrage of equity credit offers you’ll get as a homeowner. Be prepared to shred the junk mail that comes before you have a chance to start daydreaming about that Bahamas cruise you could take if you just got a small equity line.

Put a Plan B in place. Income glitches due to a death in the family or a job-stopping disability lead to almost as many foreclosures as mortgage problems. Make sure all wage-earners have life and disability insurance policies in place to keep one unfortunate event from turning into a double-whammy.

Mortgage — what used to be such a dry, even boring financial topic is now riddled with emotional landmines and drama potential.

Maybe, like lots of Americans, your home equity is upside down and you can’t refinance? Or you suspect your mortgage broker might be a con-artist? Perhaps your loan qualifications are great, but your spouse’s credit is, well, not so attractive.

Whether you’re trying to get a loan to buy a home or simply trying to keep the home you have, FrontDoor Insider Tara-Nicholle Nelson will help you defuse the potentially explosive drama of home financing with 10 surefire strategies.

#10. Know the ins and outs of your mortgage.

Eliminating mortgage anxiety from your life doesn’t require a Ph.D. in finance. The road to no more drama starts with taking a few steps to understanding the major features of your home loan. Most of us can remember a time, during escrow, when the details of our loan were our life’s primary obsession. A few years later, though, those days and that data are foggy memories. Don’t get caught by a surprise loan adjustment or miss out on potential refi savings because you don’t know what your loan is all about. Dig out those loan docs or give your lender a ring, and get in the know about every mortgage you have on your home.

Who’s who and what’s what. Every homeowner should know which bank or mortgage servicer is handling their loan at all times, and whether their loan is government-insured. This is especially key if you think you might need a loan modification to get your payments back on track, as your lender is the first place you’ll need to call. But before you do, you’ll want to know if your loan is an FHA, Fannie Mae, Freddie Mac or VA backed loan — something you’ll find in your loan documents. If so, your lender is required to make more loan mod options available to help you out if you get in a bind.

Your loan type — fixed or adjustable — is potentially the most essential piece of information you need to know about your mortgage. You should be able to tell that from your mortgage payment coupons. The idea is to know what you need to be planning for. Can you count on having the same payment forever or do you need to anticipate adjustments?

Ch-ch-ch-ch-changes. If you have an adjustable rate mortgage, or ARM, you’ve got lots more investigating to do. You need all the details of the planned adjustment, things like:

Is your loan an amortizing ARM, an interest-only ARM or a negatively amortizing, or Option ARM?
When is it set to adjust, and how often will it adjust thereafter?
What index does your loan adjust based on, and what sort of payment increase is projected, roughly, based on today’s rate for that index?
If you currently have an Option ARM, how much interest are you adding to your balance every month when you make the minimum payment?
ARMs all have a cap for how much the payment and interest can ever go up — what’s your loan’s adjustment cap?

Analyze whether you’ll be penalized. Though less common these days (fortunately), prepayment penalties must be factored into your mortgage planning, especially if you’re considering selling or you have an ARM you plan to ‘fix’ sometime soon. Check out when your prepayment penalty will expire, how the penalty is calculated and whether it’s hard (kicks in whether you sell or refinance) or soft (only incurred if you refinance).

If you get your mortgage payment and original loan documents in one place, you should find the answers to every question here. If push comes to shove and you can’t find — or can’t decipher! — your loan paperwork, ask your mortgage broker to sit down and help you figure things out. It’s a great segue to getting advice about whether it’s time for you to make any mortgage moves.