FHASecure is the program started last August to allow sub-prime borrowers to switch to low, fixed-rate mortgages after they fell behind on payments because their adjustable rate mortgages reset.

Only about 1.5% of the 200,000 refinances through FSASecure are reported to be for those who were about to lose their homes. The rest were homeowners who met the criteria for the program who simply wanted to lower their payments. You can’t fault the homeowners for taking advantage of the program. New requirements in July will change who is eligible.

The new rules, are as follows:

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As someone who is debt free in all other aspects of my life, it’s probably not surprising that I prepay my mortgage. By prepaying, I mean paying more than the required payment each month. This will allow me to pay off my mortgage in about a third of the time. I’ll save a ton on interest and it seems like good financial sense, but there are some opposing views to consider. The fact that opinions vary so widely on the subject is a good indication that the right answer is highly dependent on your personal situation. Statements like “prepay 10% extra each month and you’ll be in a great position” are of no real value to anyone. There are simply too many other factors:

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A little competition between potential mortgage lenders can help to get you the best deal. Going into the process, it’s good to know the prevailing rates for the type of loan you are looking for. I get that information from the “today’s feature rates” section at Capitol Federal. Those rates may not be what you’ll get depending on your credit rating and location, but give you a ballpark estimate of what you can expect. If lenders come back radically different than what you see there, that indicates that something is wrong. It could be you (bad credit,etc) or them.

The next step is to apply with multiple lenders. You want to balance the work of applying with the benefit of having multiple offers. I usually get two quotes, but more may be even better. Having multiple quotes allows you to bargain back and forth with each company. I’ve found it useful to deal with a specific person (preferably a manager) at the lenders rather than with a generic customer service rep who may not be able to make a deal happen.

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I’ve mentioned it in the past, but confusion over the tax deduction for mortgage interest warrants it being repeated: the deduction is not a reason to have a big mortgage. Too many people get talked into buying more house than they can afford because they get sold on the idea that a big mortgage means a big deduction from the interest you pay. While it’s true that the more you pay in interest, the larger your deduction will be, that deduction is simply returning a portion of your money to you. You would be much better off not paying the interest in the first place.

The amounts vary with your tax bracket, but let’s assume that you are in the 28% bracket. That would mean that for every dollar you spend in mortgage interest, you’d reduce your taxable income by a dollar, which would save you 28 cents in taxes. If you were in the 25% bracket, you’d save 25 cents per dollar spent, etc. Spending a dollar to save 28 cents means that you are losing money. Having a larger mortgage and paying more in interest means that you are losing more money.

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I came across a great article about purchasing a home in a buyer’s market. It can be found on the Irvine Housing Blog (link below). While the article, and the blog, deal with real estate in Irvine, CA, the information is practical as a general resource as well. Even those buyers in markets that didn’t balloon as drastically as southern California can no doubt learn some valuable tips from the humorous and informative post. While not all buyers will go to quite the extremes suggested, you can pick and choose the methods that will work best for your situation and market. Read the post here.

I keenly remember the excitement that surrounded my first read of a book that has become a financal classic: Rich Dad, Poor Dad by Robert T. Kiyosaki. It wasn’t just the philosophical difference in how assets are traditionally defined (things you own with perceived value) versus the author’s new definition (things that put money into your pocket each month.) No, the real excitement came from the practical application that accompanied that definition: investing in rental property.

For all of the benefits that come along with finding a rental property with positive cash flow, the downsides (even if only perceived to be so) hold people back from such an investment. Even though the author provided many solutions (such as hiring a property manager) to the typical complaints of those opposed to rental property (such as “I don’t want to fix toilets”) there were still some things that were holding me back too. I liked the idea of investing in something that paid me back regularly, but the overhead and management of a rental property business dissuaded me from the investment.

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With the current crisis in the mortgage industry, the likelihood of getting a mortgage with little or no money down is considerably less. Usually coming up with 10% down is sufficient to get a loan. The major drawback of putting down less than 20% is that you almost always have to pay PMI.

The method I used to avoid paying PMI on my first house was something called an 80/10/10 mortgage. The idea is that once you put 10% down on your house, you automatically have 10% equity in your home. That most likely qualifies you for a Home Equity Line of Credit for at least 10% of the value of your home. Taking out that credit effectively allows you to double your downpayment and avoid PMI.

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