"Declining Markets" Cause Calculators to Malfunction.
Historically, home values have always been on the rise. You can look up such statistics easily by doing some basic research over the Internet. One of the big assumptions used in rent versus buy calculators is the value of home appreciation. Each calculator asks you to enter the expected price increase. But what if there is no increase? What if there's an expected decrease in value? These calculators work only when there is price appreciation; they don't work when there's home price deflation as a result of declining market values.
Home values can go up and down over time, but when property values are decreasing over an extended period of time, there is no mechanism for a rent versus buy calculation. Home values appreciated rapidly in the early 2000s, so all those calculators were telling people to buy. But home values also plummeted over an extended period in the late 2000s. There isn't even a way to input "negative" appreciation in most of these calculators, so they're practically worthless when values are declining.
Knowing and Using the Following Terms Will Improve Your Chances of Not Being Taken Advantage Of.
There is an exhaustive glossary at the back of this book, but there are certain key terms that you need to know and understand before you get involved in the mortgage process. These key terms are essential for two reasons:
1. Making certain that you're clear on what's happening during the critical points in your loan process
2. Letting those in the mortgage business know that you're an educated consumer, so they shouldn't even try to mess with you
Using a few well-placed mortgage terms will help set the table when it comes to finding a good lender who will listen to you and not fill your mailbox with marketing pitches.
First and foremost, you're not making a loan application. Instead, you're completing the 1003 (pronounced "ten-oh-three"). The 1003 is the official form number that Fannie Mae has assigned to the five-page loan application, and that's what everyone in the industry calls it.
You'll hear loan officers and loan processors talk to you about a loan application, but behind closed doors, they call it the 1003. Every day. So from this point forward, don't talk to a loan officer about completing a loan application; ask him to send you a 1003 to fill out.
When you talk the lingo, you're giving notice that you've done your homework and are wary of their little tricks.
Know the differences between loan prequalification, preapproval, approved with conditions, clear to close, and funded.