Free government money is not something to be looked upon lightly!

No down payment USDA loans not only save you the upfront costs of house ownership, but you also gain the tax benefits of a mortgage and begin to build wealth through equity.

The government, through the USDA, has dedicated itself to building up rural areas, and offering substantial benefits to the people who help them accomplish this. Normally the mortgage vs rent argument is a closer one, but with benefits like these, the decision becomes much more cut and dry.

A USDA loan also comes without the need for purchasing expensive mortgage insurance, which allows more money to be directed toward the house payment every month. They also come with no maximum limit. So if your credit is good, you may get a bigger house than you could with a traditional or FHA loan.

But what if your credit is bad? Should you still rent?

Even those with bad credit should seriously consider the benefits of a loan with the United States Department of Agriculture. There are special provisions made for borrowers with bad credit, and although borrowers' credit reports are still required, there is much more leeway to provide for those with less than perfect credit.

The interest rates in these special loans are also quite competitive, at any credit rating. Also, because the government is investing in the industrialization of rural areas, certain home repairs can be included in the the loan. If you help the government by purchasing a home that needs refurbishing, they will provide you with the funds to do that.

Interested home buyers in the Tri-Cities Washington area should contact me directly or call their nearest Rural Development Office and obtain a official list of approved lenders. Next, scout for properties that meet the standards of a rural property, usually in an area of less than 10,000 people and located in more rural areas. There are many properties which fit these criteria in the West Pasco area.

To learn more about eligibility for the USDA program, please call or email me for the most up to date program guidelines.

Here is the official clarification on the tax liabilities from the shortsale of a primary residence.

** Note that 2nd homes and investment properties are not exempt

 

http://www.irs.gov/irs/article/0,,id=179073,00.htm

Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form

Updated with FAQs at bottom - Feb. 28, 2008 IR-2008-17, Feb. 12, 2008   WASHINGTON - Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service. Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site. "The new law contains important provisions for struggling homeowners," said Acting IRS Commissioner Linda Stiff. "We urge people with mortgage problems to take full advantage of the valuable tax relief available." The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds. The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b). The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.  Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details. Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure. The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).

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As of the time of this post, the new Housing Bill has only passed the senate and has not been signed into law. 

Many of you have seen blips about it in the media, some of you have probably even taken the time to read some of the 20 page summaries that explain how this is really about bailing out the Banks on Wall Street, and not helping the Homeowner on Main Street.  Anyone who has read into this knows that there is indeed a lot of fine print. ( Owners pledging future appreciation on their home to be paid to FHA in some circumstances )

Just received a call from a homeowner telling me that the government just forgave all prepayment penalties and loan balances over 90% of his home's value, etc. etc. etc. and wanted to know when he can receive a new FHA loan.  For anyone in trouble with their home or mortgage, I certainly sympathize.

What this homeowner, and I'm sure so many others missed is the most basic tenet of this Bill.

....That banks only have to allow this if it costs them less to forgive the balance and refinance the loan to a new FHA loan than it does to foreclose...

..... That homeowners without jobs or facing medical problems that keep them from making income are really not going to receive anything out of this...

.... waiving your right to borrow against the home in the future... not that anyone may be lending anyways, but still...

I could go on, and on.

 

For anyone in trouble with their home or mortgage, I certainly sympathize.  As a mortgage planner, as well as an owner of multiple homes, I've also personally seen my share of challenges in this marketplace.  I'm not against helping homeowners in need, I am a bit ambivalent about this new bill, though.

My Question is this, what similar experiences are you seeing that are being caused by selective coverage

 in the media?   What's your take on this new Housing Bill?  Helping Homeowners or Bailing out Banks?

 

 

 

 

 

Endless myths and misconceptions about the factors affecting credit scores are as abundant and varied as the scores themselves. This post will help you to separate fact from fiction.  

Most loan officers, (and probably a lot of sharp agents out there,too!) already know the answers to these questions.

Here's a simple way to test your credit knowledge on some of the most common credit myths by answering the questions below:   

Q: True or false; Closing accounts helps your credit score.

A: False. While it's true that having too many lines of credit open can be damaging to a credit score, once a line of credit is established, closing it can actually lower scores. Credit scores compare the difference between available credit and the credit that's being used. Shutting down accounts lowers total available credit, making the credit balance appear larger than it actually is, and hurting scores in the process. Scores also track credit history, so shutting older accounts can make credit history look younger than it actually is, thus hurting scores. A better solution is to pay down credit card debt.  

Q: True or false; You don't actually have to use credit to get a good credit score.  

A: False. Credit scoring formulas (like FICO) are designed to judge how well a consumer pays bills on time over time. If credit is never established, or the credit that is available isn't used occasionally, it's more difficult for the formula to make a fair assessment. Sadly, failure to maintain a credit history could result in higher premiums when the time comes to secure a large loan.   Many conventional first and second mortgage products require a minimum number of active credit accounts, and also often require that those accounts be opened and maintained for a minimum of 12 months or more.

Q: True or false; Checking on your own FICO score can hurt your credit.  

A: False. Ordering a copy of your own credit report or credit score doesn't hurt.  Applying for new credit, however, can lower an individual's score. To minimize the damage from credit inquiries when shopping for a mortgage, make sure that multiple inquiries are made over a short span of time. The FICO scoring model treats multiple inquiries in a 45-day period as just one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed.  

Q: True or false; A FICO score is the same score at all three major credit bureaus.  

A: Technically, this is a "trick" question, because Experian, TransUnion, and Equifax all actually use the same formula developed by Fair Isaac Corporation, but they each give the scores a different name and they don't all share the same raw data when determining scores. One bureau may list certain accounts over others and these variances across the three bureaus result in three different credit scores. Due to these subtle differences, it's always smart to pull and examine credit scoring from all three bureaus before applying for a big loan. Many lenders use the middle score from the three bureaus when making their decisions, so fixing errors in all three reports before shopping for a mortgage loan is wise.

 

New Bill Would Repeal Home Mortgage Exception During Bankruptcy

http://www.housingwire.com/2007/09/21/new-bill-would-repeal-home-mortgage-exception-during-bankruptcy/

 

Great Article By Paul Jackson:  Check out www.housingwire.com for this and other housing industry information

A new bill introduced today by Reps. Brad Miller (D-NC) and Linda Sánchez (D-CA) seeks to repeal the home mortgage exception in the current U.S. Bankruptcy code:

... the Miller-Sánchez bill will treat home mortgages the same as mortgages on investment properties and family farms. The bill repeals a provision that prohibits a bankruptcy court from modifying a home mortgage, but allows a bankruptcy court to modify any other secured debt, including mortgages on other properties.

Called the Emergency Home Ownership and Mortgage Equity Protection Act (H.R. 3608), the bill would make it possible for a bankruptcy court to restructure a home mortgage - meaning a bankruptcy judge could change interest rates or alter principal amounts as part of a Chapter 13 restructuring plan.

If you work in the mortgage industry, this bill should give you strong pause. From an investor's perspective, most structured securities are generally designed to account for prepayment and default risks - and not an additional restructuring risk due to borrower bankruptcy. (And I think we all know how well many of these securities have accounted for the expected impact of the first two risk factors.)

But it doesn't really stop there. If I'm understanding the bill correctly, I believe it would eliminate the "relief from stay" from a lender's/servicer's legal toolkit during property repossession and disposition. The result would seem to inevitably be an increase in the timelines surrounding default management and REO disposition, introducing a new cost source that would place further pressure on an investor or insurer's ability to recoup some of their losses.

Making it more difficult for lenders to take back homes when a default takes place - whether or not a forced modification is approved during bankruptcy - also hurts consumers, not just those making the loans. Consumers will either be charged higher rates to compensate for the higher risk of loss given default, and many lenders themselves will become less likely to lend to consumers whose credit profiles mark them as a relatively greater default risk. (That would be subprime.)

In case you missed it: if enacted, this bill will likely have the unintended effect of hurting the very group it is purported to help. Given the lack of options already facing many subprime borrowers today, I just don't know how much I can get behind a bill that seems likely to further thin out the herd of available options even further.

 

 

This helpful email was a forward from Mortgage Mastery. 

Ok, this is going to be a long one, but please don't get glassy eyed :).   This is important and will affect your closings (for the good)!

IMPORTANT FHA NEWS!

The Senate Banking Committee passed by a vote of 21-1 the FHA modernization legislation this week.  Senator Dole was the only "no" vote largely in principle over the way FHA is implementing risk-based pricing (administratively without Congressional authorization).  The near unanimous vote virtually guarantees full Senate passage of the bill.  It will then go to conference to reconcile differences with the House bill that was passed yesterday.   Please understand that NONE of these items below have been finalized........  This is only what is on the table.  

The speed with which the bill moved through the Committee demonstrates the political significance of the FHA program in today's marketplace.  Accordingly, we expect the next steps to move equally fast and it is now likely that there will be an FHA bill ready for the President's signature in less than 30 days. 

 

The key provisions of the Senate bill are:

FHA "floor" - increases from 48% to 65% of the GSE limit (i.e. from $200,160 to $271,050)
The House bill contains the same language virtually ensuring its inclusion in the final bill.  The new "floor" will likely be effective upon signature by the President.   

FHA "ceiling" may increase to $417,000
The House bill raised the FHA limit to around $730,000 in high cost areas-  (note that we are in a low cost area, so our max should probably be $271,050 or it could go to $417,000 (which is also Fannie/Fannie's conforming limit).  At a minimum therefore, the increase to $417,000 (in some areas) is a certainty assuming the bill passes.  An increase above $417,000 will likely depend on market events.      

This provision will likely not be effective immediately.  FHA will need to analyze local markets to determine whether an increase is justified.  We do believe that FHA will move to increase limits ASAP.   

Lower and more flexible downpayment
The Senate passed the compromise provision that  will require 1.5% borrower cash investment (vs the 3% now).  There will be a cap of 100% loan-to value ratio.  However, the upfront MIP will  be required to be included in the 100% LTV effectively capping the loan amount at 98.5% assuming an upfront MIP of 1.5%.  At first glance, our thoughts on this provision are:

The House bill still contains the zero downpayment provision.  In this market environment, we believe it will be difficult to include the  no downpayment proposal in any legislation.  We believe the Senate provision will be the more likely scenario. However, lowering of the cash investment requirement is possible but unlikely.   

No mention of risk-based pricing
There was no mention of risk-based pricing in the bill and  no increase in the annual premium.  In light of HUD's preemptive administrative action earlier this week to implement risk based pricing on January 1, 2008, it will be curious to see how this issue unfolds in the coming weeks and months.  In the limited discussion this morning, risk based pricing  was the one issue in which both Republicans and Chairman Dodd expressed concern at FHA's actions and want FHA to explain what they are planning to do with this change. 

Condominium improvements
The bill will facilitate the acceptance of Fannie Mae and Freddie Mac approved condominium projects.

HECM (Reverse Mortgages)
There were several HECM improvements.  They are: 1) raising mortgage amount to $417,000, 2) eliminating the cap on volume, 3) permitting use of HECMs for purchase transactions and cooperatives (right now only Fannie-not FHA- allows purchases using a Reverse Mortgage)  and 4) lowering of the origination fee to 1.5% vs 2%

There were also several amendments accepted unanimously.  They were: 1) much stiffer penalties to fraud (the draft called for 35 years in prison and $5 million in fines), 2) pre-purchase counseling demonstration, 3) expanding counseling to borrowers in trouble and 4) study on reverse mortgages.  

What is next and when will the bill be enacted?

As we indicated, Senate was/is/will be the key to the enactment of the FHA legislation.  Now that the Senate Banking Committee has moved affirmatively in a very bipartisan way, we are increasingly optimistic about the prospects for an FHA bill.  We would expect the process to be completed and signed by the President in the next 30 days or so barring some unforeseen circumstance.   

That being said, there is still the Conference of House and Senate Committee leaders  to reconcile differences in the two bills and there are several thorny issues.  Probably the most controversial are two House proposals.  They are: 1) creation of a housing trust from a portion of the FHA profits and 2) raising the FHA limits in high cost areas above $417,000.  

Because of the nature of Senate rules (i.e. minority has considerable power), we would expect most controversial provisions to be resolved along the lines of the Senate bill although changes are possible.  However, House Financial Services Chairman Frank is deeply committed to the housing trust found.  Republicans are vehemently opposed to it.  I cannot imagine that a disagreement over this provision will hold up a bill but we'll have to see.  The other is mortgage limits in high cost areas.  As we noted, the House proposes to raise them to as high  as $730,000.  While the Senate Republicans will oppose such a provision, events in the mortgage industry could result in some type of compromise.   

We will, of course, follow this process through the remaining steps that hopefully will end at a bill signing ceremony by the President. 

So, what does this mean for you?

•·With the increase of the FHA limits, we will be able to put more buyers in FHA mortgages (remember that FHA is not credit score driven, only credit history driven- unlike Freddie and Fannie products).  

•·        If the buyer investment $$ decreases, that will allow the buyer to be less out of pocket than before.

•·        More lenders will start "practicing" on your buyers without any experience at all of FHA.    Don't let non-FHA experienced loan officers practice on your clients-   We ARE the FHA experts.... Let our knowledge work for you.

 

We will keep you informed of what changes are actually put in place and when it happens!  

FHA REMINDERS

Seller can contribute up to 6% of the Sales Price.

No Termite Inspection Required. 

No Non-Allowables required for the seller.

Buyer can currently be in a Chapter 13 Bankruptcy.

It is an assumable loan (important when rates go to 8% and they are at 6%).

Buyer can have Federal Tax Liens and not have to pay them off!

FHA is now using the standard Fannie Mae appraisal form- No more VC sheets

 

 

From   http://www.fha.gov/press/2007-08-31release.cfm

BUSH ADMINISTRATION TO HELP NEARLY ONE-QUARTER OF A MILLION HOMEOWNERS REFINANCE, KEEP THEIR HOMES
FHA to implement new "FHASecure" refinancing product

 

WASHINGTON - President George W. Bush today announced that HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.

In addition, FHA will implement risk-based premiums that match the borrower's credit profile with the insurance premium they pay-i.e., riskier borrowers pay more. This common-sense, risk-based pricing structure will begin on January 1, 2008.

"Many hard-working American families who were able to make their mortgage payments under the initial teaser terms of the exotic loan are now struggling to make ends meet because their rates have doubled or tripled," said HUD Secretary Alphonso Jackson. "FHASecure will bring stability to the housing market and give eligible families who were in good financial standing before their loans reset a chance to keep their homes."

The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was originally designed to play, bringing stability to the real estate market by helping break today's cycle of foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage market.

FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions has tripled since the start of 2006. FHA's transactions are projected to surpass 100,000 loans by the end of the fiscal year. To date, these figures do not include refinances for delinquent borrowers.

The FHASecure initiativewill operate under the same safe guidelines as the FHA's existing mortgage insurance program without affecting FHA's financial health. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA's insurance fund at no cost to the taxpayer.

The risk-based insurance premium structure will further expand FHA's reach to additional underserved borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.

FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2009;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.

"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with teaser rates," said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and ultimately prevent risk to the taxpayer."

FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.

Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. The 109th Congress introduced the Expanding American Homeownership Act in June 2006 which would enable FHA to be a safe option for more underserved low- and moderate-income and minority families so they can achieve the American Dream of homeownership. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.

For more information about FHASecure and other FHA products, please call 1-800-CALL-FHA or visit http://www.fha.gov/ or http://www.hud.gov/. For a list of your local homeownership center or a HUD-approved housing counseling center, go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

The Federal Housing Administration recently passed legislation approving a new program known as the "FHASecure" loan. This program is designed to refinance consumers who have fallen behind on Subprime ARM loans due to recent adjustments in the rate. The "Fhasecure" loan will help consumers with negative equity, or who cannot meet the payments when their ARM loan adjusts.  Expect to see the program available later this year.

At a glance, the FHASecure loan program will finance borrowers up to a 97.75% Loan to value. Up to 6 months past due mortgage payments may be included in the loan amount if the borrower qualifies.

A new appraisal is ordered for the property for an FHASecure loan program. The new appraisal for the Fhasecure loan must be performed by an FHA approved appraiser, and must adhere to FHA guidelines.

The main benefit of the FHASecure loan program is getting consumers out of adjustable rate loan programs they cannot afford, and to help them before their mortgage payments increase too much for their budgets.

The FHASecure loan will be offered as a fixed rate program.

The primary reason that the FHAsecure loan program was created not to bailout for mortgage lending institutions, but rather as a tool to help consumers caught in a jam. 

in 2008 than 2 trillion dollars of mortgages are due to reset, according to some economists.

Under the new program guidelines, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.

For more information about this program, contact David Mordue at davidm@lfgloan.com, or 425.953.4009

 

 

NEW YORK (Fortune) -- Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it.
The subprime-mortgage-market meltdown is a classic example of the way small fry get devoured, but the whales of Wall Street get rescued. Here's the deal: People with crummy credit who took out mortgages are being allowed to fail in record numbers. The mortgage companies that made those loans are being allowed to fail.
The Street itself? It's bailout city. Even before the Fed made a symbolic half-point cut in the discount rate, it and other central banks from Switzerland to Singapore were trying to rescue the Street by injecting hundreds of billions of dollars into the financial markets and announcing they will put up more, if needed.
Hello? If you believe in markets - which I do - this rescue is especially galling, because Wall Street enabled this mess in the first place. How so? By happily sucking up hundreds of billions of dollars' worth of suspect mortgages from marginal U.S. borrowers-and begging mortgage makers to create more of them. The Street sliced and diced this financial toxic waste into a variety of esoteric securities, making a nice markup when it sold them and generating a continuing stream of profits when it made markets in them.
Somehow analysts at credit-rating agencies, looking at computerized scenarios rather than at the real world, decided that the bulk of the securities backed by these trashy loans could be rated triple-A.
It's really amazing: Most of the loans to substandard creditors borrowing 100% of the purchase price of homes they couldn't afford were rated the same as GE and the federal government. That makes no sense. But the money rolled in, and Wall Street-by which I mean the world's biggest and most important financial institutions-didn't care about the real world or ask any questions. It was too busy making money, and cashing bonus checks generated by subprime-mortgage profits.
But the world's central banks aren't letting the big guys fail. Think of it as the Escape of the Enablers. The reason this is happening, of course, is the same reason that the Fed orchestrated a bailout of the infamous Long-Term Capital Management hedge fund a decade ago-and about 20 years ago didn't close some of the nation's biggest banks, even though they were effectively insolvent because unrealized losses had wiped out their capital.
It's the "too big to fail" syndrome. In a world in which big players make incredibly large and complex deals with one another - that's what derivatives are - regulators don't dare let a big or important institution fail for fear that the collapse of one would lead to "cascading failures," and other institutions wouldn't be able to collect what the collapsed institution owed them.
The Fed's job, you see, isn't to protect you and me and our retirement portfolios, or even many of the nation's largest companies and biggest employers. The Fed's job is to protect the financial system. That's why it's trying to rescue the gigantic subprime enablers while letting borrowers and mortgage companies go under.
Your collapse or mine wouldn't bother Fed chairman Ben Bernanke or the world's other central bankers. But if, say, a big German institution loaded to the eyeballs with subprime securities croaked, Bernanke and his fellow central bankers would care a lot.
Sure, we know that Ben and the boys will always bail out the biggies. And none of us - I think, anyway - wants the world's financial system to implode. But I'd feel a lot better if the Street had to pay a serious price to its rescuers--say, having to fork over a big equity stake and pay a loan-shark interest rate. That way taxpayers, who are picking up the tab for the rescue, would get paid bigtime for taking on bigtime risk.
After all, that's the Wall Street way.

Came accross this article today when I was reading Market Watch.  How to get a mortgage today

By Gail Liberman and Alan Lavine

You still may qualify for a mortgage, regardless of a shaky credit market. But you need to know the ropes because many lenders have tightened standards. So what should you do if you're buying a home today or you need to refinance? Understand that some types of lenders are more apt to loan you money in today's markets than others. Plus, certain types of mortgages may be easier to get than others. Above all, don't be discouraged. Even if your credit is too far gone, or your home appraisal falls short of what you owe, government efforts are under way to make money available to bail out cash-strapped borrowers. The best way to qualify for a mortgage with decent terms may be to shop savings institutions, smaller commercial banks and credit unions. The key is to find a "portfolio lender." Portfolio lenders both originate and hold onto the loan. They don't sell to investors. By contrast, mortgage brokers generally offer mortgages from a variety of lenders. Mortgage brokers typically don't finance a loan with their own money. They're intermediaries: The more people involved in a deal, the more chances that the chain could break or something could fall through the cracks. Also, be sure to consider a mortgage broker's fee, which could take the form of a higher rate or points. One point equals one percent of the loan amount. Mortgage bankers, on the other hand, front their own money for your mortgage, but often sell loans to investors. It's investors who are demanding higher interest rates due to their higher perceived risk. Historically, "portfolio lenders" largely have been savings institutions. But more recently, lines between these businesses have blurred. Some lenders may shift from one line of business to another as needs change. Credit unions Right now, for example, "credit unions have $170 billion of first mortgage loans on their books," says Bill Hampel, chief economist for Credit Union National Association. "Lately, they've been selling about one-third of their production, which means they hold onto two-thirds. So they're primarily portfolio lenders." Yes, Hampel says, you can get a jumbo loan, which is mortgage of more than $417,000, from a credit union. Can't get what you want from a large credit union? You could stand a better chance with a smaller one, he suggests. To join a credit union, you generally must fit into a specific "field of membership," and open a "share" or savings account. Find a credit union you can join at . Click on "Consumer information." Large savings institutions Large savings institutions making mortgages include IndyMac Bank, Pasadena, Calif., and Astoria Savings, New York. But IndyMac officials acknowledge that the days of no-down payments may be over -- at least for now. Also, except for loans it can sell to government-sponsored secondary market players, IndyMac no longer offers subprime loans, or those for less creditworthy borrowers. It has eliminated second mortgages except for some home-equity lines of credit. High-quality borrowers, however, still may qualify for mortgage loans with a 10% down payment. Hampel suggests that if you can't get attractive terms on a 30-year fixed-rate mortgage, you might find a 5/1 or 7/1 adjustable-rate mortgage. With those mortgages, the interest rate is fixed for five years or seven years. Then, the rate becomes subject to change annually. Borrowers usually only stay in a home for seven years anyway. Five steps to a mortgage Before applying for a home loan, consider taking these steps: Pay down credit balances. That will make you look less risky and might help your credit score, suggests Tom Quinn, vice president of scoring for Fair Isaac Corp., Minneapolis. If you have good credit, it may be possible to raise your credit score by asking existing creditors to raise your credit limits. But ask the lender not to pull your credit report to do it. Credit-report inquiries or deteriorating credit can lower credit scores. Get a copy of your credit report from each of the three major credit bureaus. Fix errors and get as much adverse information removed as possible. You're entitled to one free credit report annually from each credit bureau at . Check licenses of lenders you're considering. This may not be easy because state licensing requirements vary by state and lender. Banks and thrifts can be checked out at by clicking on "Institution Directory." Shop several lenders. Don't assume if you get one quote of an unusually high interest rate, all will be high. Negotiate lower rates and seek removal of unnecessary fees. Consider that interest rates and terms may change daily. Also, a low interest rate could mean more upfront points or added fees. Get all pricing information in writing before obtaining a written commitment for your loan. Get a commitment letter directly from the lender who's financing the mortgage, which may be different from the loan originator.