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of Congress Control Number: 2017942339

      ISBN 978-1-119-38779-4 (pbk); ISBN 978-1-119-38780-0 (ebk); ISBN 978-1-119-38781-7 (ebk)

      Introduction

      Welcome to Mortgage Management For Dummies! If you own or want to own real estate, you need to understand mortgages. Whether you need a loan to buy your first home, want to refinance an existing mortgage, seek to finance investment properties, or are interested in tapping some of the value you’ve built up in your home over the years, you’ve found the right book.

      Unfortunately for most of us, the mortgage field is jammed with jargon and fraught with fiscal pitfalls. Choose the wrong mortgage and you could end up squandering money better saved for important financial goals, such as covering higher education tuition for your adorable little gremlins, buying that second home you’ve always wanted, or simply having more resources for your retirement. In the worst cases, you could end up losing your home to foreclosure and end up in personal bankruptcy. Just look at what happened in the late 2000s when the real estate market declined in many parts of the country. Folks who overextended themselves with risky mortgages ended up in foreclosure.

      For typical homeowners, the monthly mortgage payment is either their largest or, after income taxes, second largest expense. When you’re shopping for a mortgage, you could easily waste many hours and suffer financial losses by not getting the best loan that you can based on your specific needs and financial situation.

      Because so much is at stake, we want to help you make the best decisions possible. That’s where we come in.

      How This Book is Different

      How is this book different and better than competing mortgage books, you ask? Let us count the ways. Our book is

      ❯❯ Objective: Our goal is to make you as knowledgeable as possible before you commit to a particular mortgage. Most mortgage books are written by mortgage brokers or lenders who loathe to share the secrets of the mortgage business. Typically, they’re more interested in promoting their own business by convincing you to use a particular mortgage broker or lender. We’re not here to promote any specific brokers or lenders – we wrote this book to help you. Consider us your independent advisors.

      ❯❯ Holistic: When you obtain a mortgage, that decision affects your ability to save money and accomplish other important financial goals. We help you understand how best to fit your mortgage into the rest of your personal-finance puzzle. We also offer tips on strategies to pay off your mortgage debt efficiently or use it creatively to build overall wealth. Other mortgage books don’t help you consider these bigger-picture issues of personal finance before you buy.

      ❯❯ Jargon-free: One of the hallmarks of books intended to confuse and impress the reader, rather than to convey practical information and advice, is the use of all sorts of insider terms that make things sound more mysterious and complicated than they really are. We, on the other hand, pride ourselves on simplifying the complex. Between the two of us, we have more than seven decades of practical experience explaining things to real people just like you. Eric has worked as a financial counselor, teacher, and syndicated columnist. For over 15 years, Robert hosted a real estate radio program; he was the live, on-air real estate expert for NBC-TV, and he has written several real estate books. Our combined experience can put you firmly in control of the mortgage-decision-making process.

      ❯❯ User-friendly: You can read our book piecemeal to address your specific questions and immediate concerns. But if you want a crash course on the world of mortgages, read it cover to cover. In addition to being organized to help you quickly find the information you’re seeking, each portion of the book stands on its own.

      Foolish Assumptions

      Yes, we know that making assumptions is foolish, but we just can’t help ourselves. We assume that you, dear reader, fit into one of these categories:

      ❯❯ You’re preparing to purchase your first home.

      ❯❯ You want to refinance your current mortgage.

      ❯❯ You desire to explore real estate as an investment.

      ❯❯ You’re interested in tapping into the equity you’ve built up in your home.

      ❯❯ You want to find realistic, legitimate ways to pay off or significantly reduce your mortgage early.

      Icons Used in This Book

      Sprinkled throughout this book are cute little icons to help reinforce and draw attention to key points or to flag stuff that you can skip over.

      

This icon flags key strategies that can improve your mortgage decisions and, in some cases, save you thousands of dollars. Think of these little light bulbs as highlighting words of wisdom that we would whisper in your ear if we were close enough to do so.

      

This icon designates something important we don’t want you to forget when you’re researching, applying for, and finalizing your mortgage.

      

Numerous pitfalls await prospective mortgage borrowers. This symbol denotes mistakes committed by those who have come before you. Heed these warnings and save yourself a lot of heartache.

      

This icon marks stuff that you don’t really have to know but that may come in handy at cocktail parties thrown by people in the mortgage industry.

      Beyond the Book

      In addition to the material in the print or e-book you’re reading right now, this product also comes with a free access-anywhere Cheat Sheet that can help you think about the best and most cost-effective ways to select, use, and manage mortgages. To get this Cheat Sheet, simply go to www.dummies.com and search for “Mortgage Management For Dummies Cheat Sheet” in the Search box.

      Where to Go from Here

      If you’re not quite sure where to start, flip to the table of contents or index and find a subject that piques your interest. Feel free to dive in wherever you find chapters that apply to your circumstances. If you’re more conventional, start at the beginning and trust us to guide you safely through the mortgage maze. By the time you finish the book, you’ll be a mortgage master.

      Part 1

      Getting Started with Mortgages

      IN THIS PART …

      Determine how much mortgage debt you can really afford.

      Find out how to qualify for a mortgage and why getting preapproved is a smart move.

      Discover the importance of your credit score, the secrets your credit report holds, and how to get both in top-notch shape.

Chapter 1

      Determining Your Borrowing Power

      IN THIS CHAPTER

      ❯❯ Understanding how much mortgage debt you can truly afford

      ❯❯ Estimating your likely homeownership expenses

      ❯❯ Considering your other financial goals

      If you’re like most folks, the single biggest purchase you’ll make during your lifetime will be when you buy a home. And, to make that purchase, you’ll likely have to borrow money by using a loan called a mortgage. The cumulative payments on that mortgage will far exceed the sticker price on your home due to the interest you’ll pay.

      Most people thinking of purchasing a home focus solely on the price of the home. If you’re in the enviable position of being able to pay all cash, then the price is really all you need to consider in determining whether you can afford a given home. But the vast

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