New products: 'Mortgages for Dummies'

 

Distracted by multiple offers, skyrocketing home prices and the task of finding a home, it's not surprising you can't focus on financing the deal.

 

"Mortgages for Dummies," (IDG Books, $16.99) was written for you.

 

Authors Ray Brown and Eric Tyson have already scored with IDG's "Home Buying for Dummies" and "House Selling for Dummies" ($16.99 each). The latest is peppered with wisecracks and IDG's trademarks: a magnifying glass advising you to investigate an issue, a bull's-eye for tips and bombs that warn.

 

The core is the "Ten Mortgage No-Nos."

• Don't let lenders tell you what you can afford. They'll likely be willing to lend you more than you can handle comfortably.
• Get mortgage preapproval, a written guarantee you'll be lent a specific amount, before you house-shop.
• Avoid loans with prepayment penalties.
• Don't grab a fixed-rate mortgage without thinking. If you aren't going to live in a home very long, an adjustable rate loan could be cheaper.
• Avoid 125 percent home equity loans.
• Steer clear of mortgage brokers who insist on balloon notes or negative amortization adjustable mortgages. They are after a higher commission.
• Shun adjustable-rate mortgages with negative amortization. These carry balances that get larger each month.
• Don't refinance by the 2 percent rule. The outdated rule advises you not to refinance unless the interest rate is at least 2 percentage points less than the old rate. Instead, base your refinance rate on the amount of time you plan to stay put after you refinance.
• Don't assume that all reverse mortgages are the same or bad. They vary; do your homework.
• Avoid mortgage life insurance. Get regular life insurance.