Jack M. Guttentag The Mortgage Professor

Below are answers to some of the most common questions I am asked by readers.

Does mortgage insurance protect me if I'm disabled or lose my job?

No, mortgage insurance protects the lender against loss in the event that you default. You pay the premium, but the lender receives the protection.

The sole benefit to you is that, with mortgage insurance, lenders are willing to make loans with down payments smaller than 20 percent of the purchase price or appraised value. I should add that a few mortgage insurers have experimented with programs that provide the kind of protection to borrowers that you are asking about, but they have never caught on.

When your time horizon is very short, you want to minimize your upfront cost. The best way to do this is with a no-cost three-year or five-year adjustable-rate mortgage (ARM).

A no-cost loan is one with an interest rate high enough to command a rebate from the lender (negative points) that will cover your settlement costs. Avoid interest-only or option ARMs because these minimize your payments rather than your upfront cost.

You can't; there is no directory of predatory loan providers. Checking the Better Business Bureau or the state licensing agency is usually a waste of time, because very few misdeeds are reported and predators change their names and locations.

But this question is only posed by borrowers who have allowed themselves to be solicited, which is a big mistake. Select your loan provider, don't be selected. If you were a wild-mushroom fancier who lived in the woods, which are full of mushrooms, and a mushroom knocked on your door and said "eat me", you wouldn't, because it might be poisonous. What the mushroom fancier does is choose from among those he knows are safe, ignoring the rest. You should select a loan provider that way.

If I refinance two years after purchase, why do I need a new title insurance policy?

You don't, but the lender will probably require a policy that protects him against the risk that some liens might have been placed on your property during the two years since the policy was written. Title insurance policies are backward looking; they cover incidents prior to the date of the policy. Anything that happens after that date is not covered.

If only a few years have elapsed since the previous policy, however, you are entitled to a discount, because the insurer doesn't have to do a lot of work to bring the policy up to date. Be sure you ask for the discount; if you don't, you may not get it.

Am I in trouble because I borrowed as an occupant, then changed my mind and rented the property?

Lying on your application is a fraud, but everyone is entitled to change their mind. If you occupy the house for a while and then rent it, you are probably in the clear. If you never occupy it, appearances are against you, but if you make all your payments on time, nobody is going to care, and the chances are that nothing will happen. If you never occupy the property and become a chronic delinquent, a flag goes up opposite your name, an investigation could reveal your transgression, and an action might be taken against you.

The option to purchase a house under a lease-purchase contract is contingent on the buyer paying the agreed-upon rent every month. If the buyer doesn't pay, the seller doesn't have to sell. But the devil is in the details.

A contract that allows the seller to back out if the buyer is late only once, by a single day, is clearly unfair. The buyer should read the contract carefully to make sure that this provision is not unreasonably onerous.

Pay it, and then make your own calculation of what the escrow should be and submit a "Qualified Written Request" under the Real Estate Settlement Procedures Act to get your money back. 

The worst thing you can do is refuse to pay, because the lender will place your insufficient payment in a suspense account, which means you are delinquent and on your way to having your credit ruined.