Nov. 14, 2009
BOOK REVIEW: 'Homebuyers Beware': You Can Take Carolyn Warren's Advice to the Bank -- Or Your Mortgage Broker
It's the One Real Estate Advice Book You MUST Read
Reviewed By David M. Kinchen
Huntingtonnews.net Book Critic
One of my all-time favorite TV series is "Hill Street Blues." Each week at the roll call, actor Michael Conrad, playing Sgt. Phil Esterhaus, sent his cops out to the mean streets with his signature caution: "Let's be careful out there."
That advice is equally applicable to prospective home buyers and is liberally furnished with humor and panache in Carolyn Warren's "Homebuyers Beware: Who's Ripping You Off Now? -- What You Must Know About the New Rules of Mortgage and Credit" (FT Press, an imprint of Pearson, Upper Saddle River, NJ, 288 pages, $19.99).
Warren has worked in the loan industry in a variety of capacities -- both retail and wholesale -- so she writes about something she knows about from the inside. She cautions readers -- and prospective homebuyers -- that scams and ripoffs have not disappeared with the subprime mortgage meltdown. In fact, deceptive lending practices and heavily advertised marketing schemes have produced a new crop of pitfalls for buyers.
Furthermore, she doesn't like the new three-page Good Faith Estimate (GFE) form that will replace the current one-page version on Jan. 1, 2010. And she thinks even less of the Home Value Code of Conduct (HVVC), implemented on May 1, 2009, which she says destroys long-term relationships with qualified appraisers. Starting on page 160, Warren analyzes the new GFE form slated to go into effect in a few weeks. Some things she likes, but she calls the new form too "convoluted."
With all the changes in the real estate industry, the worst mistake someone could do is to rely on an old real estate advice book. And an "old" book could be one published in 2008. The entire world of mortgages and credit has turned upside down. Everything people think they know has changed and relying on a book published before 2009 could be a very expensive mistake. In "Homebuyers Beware," Warren reveals the new realities and shows how to take advantage of them, whether you're buying your first home, refinancing, struggling with imperfect credit, or planning to invest in real estate.
Warren reveals secrets home buyers can't afford to miss, and exposes the newest scammers taking advantage of today's desperate consumers. Unlike older guides, this book fully reflects today's radically new and different mortgage requirements, as well as the latest federal legislation, including the Housing Bill of October 2008 and the brand-new FACT credit reporting rules. Discover:
Toward the end of the book, Warren writes about another deceptive practice, maybe even a scam: Internet mortgage sites, exemplified by a company that asserts "When Banks Compete, You Win." Whoa Nellie! Warren says. Lending Tree and other "lead generation service" sites generate leads which they sell to "bottom feeder" mortgage brokers, she says. This is beginning to sound like David Mamet's play -- and later movie -- about unscrupulous real estate salesmen, "Glengarry Glen Ross"! Her advice: if you're looking for a loan, stay away from the internet, except to access her sites, www.MortgageHelper.com and www.askcarolynwarren.com.
I checked out her sites and found them enlightening. In almost 40 years of covering real estate -- I started in the fall of 1970 at the old Milwaukee Sentinel, now the Milwaukee Journal-Sentinel, and after six more years there, worked for the Los Angeles Times from 1976 to 1990 -- I've read dozens of books advising prospective homeowners, but this is one of the few that has information that real homebuyers can use.
I particularly liked Warren's advice in Chapter 20 about not relying on the agent on the For Sale sign, who represents the seller. Instead, she says, hire your own buyer's agent; the seller's agent -- on the sign -- is legally required to get the highest possible price and all the best terms for the seller.
Warren says: "You need your own agent representation, an experienced professional who is looking out for your best interests. A buyer's agent is free to you, and he or she will save you money, time, and stress."
Warren took a poll of agents from coast to coast and they agreed with her on hiring a buyer's agent, saying that a listing agent won't give you a lower price or better terms because he or she is "getting both sides of the deal." Remember, the listing agent represents THE SELLER. You wouldn't expect the lawyer in the opposite site of a lawsuit to represent you, so why should you expect a seller's agent to work for your best interests? A buyer's agent is free to you, because he or she splits the commission with the seller's agent.
Does this apply when you're dealing with a for sale by owner property, a FSBO? Even more so, she writes. FSBOs often have unrealistic expectations about what their property is worth, and a buyer's agent will help bring them down to earth. Or not...sometimes it's best not to deal with an unrealistic FSBO at all.
Here are some more pitfalls for the unwary buyer:
* Mortgage insurance companies refusing to insure loans approved by the lender. Warren says it does you no good to get an approval with a bank or mortgage company if the private mortgage insurance company refuses to insure the loan. Her advice, work with a savvy loan officer -- she calls them "Mortgage Stars" -- who can save your financing if you get thrown a curve ball in the middle of a deal. If the mortgage insurance company plays hardball, one choice is to switch to an FHA loan, she says.
* Title companies and escrow companies -- the latter are big on the West Coast and in many mountain states --have jumped on the junk fee bandwagon. Warren's advice: Don't rely on the seller's agent to pick the title and escrow company. Of course, for much of the country, closings are handled by attorneys. My advice: rely on your buyer's agent's advice when you're picking a real estate attorney. Having lived in both an escrow state -- California -- and a non-escrow state -- West Virginia -- and buying real estate in both states, I have experience in this matter. Chapter 14 of her book covers fees, including tons of new junk fees that Warren detests.
* There are no "special deals" -- loans "nobody else has" or "loans they don't want you to know about." All loans are designed to make money for the lender. If it sounds like it's too good to be true, you should realize instantly that it's a scam.
* Your default loan should be a 30-year fixed rate, or even a 15-year fixed rate mortgage, if you qualify. You'll save a lot of money in interest with the latter. Warren suggests -- and I'm even more adamant about it -- that adjustable rate loans are ticking time bombs.
On her www.askCarolynWarren.com site, I found a list of five common mistakes. These are covered in the book, but here they are as they appear on the site:
1. Compare the APR (Annual Percentage Rate)
Comparing the APR on loan offers is a BAD idea. The APR is a mix of interest rate and certain fees intended by federal regulations to help you compare offers, but it is a joke. Why? Big banks and mortgage companies have different ways of calculating the annual percentage rate. They purposely leave out some of the fees so they look like they're the cheapest when they're not.
Instead, ignore the APR and follow my directions for comparing Good Faith Estimates. Don't bother to fill out an application, either on the Internet or over the phone, before you get a Good Faith Estimate. Why? Because you shouldn't give out your Social Security number for credit checks before you've made a final decision as to who you're going to work with, and at this point, you're not ready to make that commitment.
2. Shop extensively.
Shopping dozens, or even ten lenders, is a fat waste of your time, and it won't lead you to your best deal. You'll spent hours on the phone over several days and end up with a meaningless pile of notes and Good Faith Estimates. Because you aren't comparing rates on the same day, and rates change daily, your analysis is worthless. You'll feel like you've done a thorough job, based on how exhausted you are, but in reality, you'll be no further ahead in making a wise decision than before you started.
Instead, use my Short List method; that way, you'll know exactly what you're doing and get a dirt cheap loan in minimal time. With my insider's plan, you make just three short phone call, ask one smart question, and get your best loan--pronto!
3. Ask ten questions.
If you read an article that gives you a list of ten things to ask while you're shopping around, you know you're getting advice from someone who really has no clue about what goes on inside the lenders' sales offices. When you call with a long list of questions to ask right off the bat, you communicate to the loan officer that you have no idea what you're doing, but you desperately want to get a good deal. The smooth-talking loan sharks love it, because it gives lots of time to use their charm and influence you with a big earful of nonsense.
Then either you'll stop shopping long before you complete number two above, "shop extensively," or you'll end up swimming in confusion and make a decision based on who impressed you with the best verbiage--which is often the same person who has the most expensive loan.
Instead, when you're calling around, use my insider's script, and then you'll nail down a great loan quickly, without stress.
4. Be wary of mortgage brokers.
The warning, so-called, says mortgage brokers aren't obligated to look out for your best interests. But neither are direct lenders or bankers. The truth is, all loan officers can offer you a good deal or a pricey deal. The ethical loan officers will advise you wisely and offer you fair pricing, and the greedy ones work to pad their own profits. Both ethical and greedy loan officers work at all three venues: brokerages, direct lenders, and banks.
5. Talk to past clients.
Every smooth-talking, over-priced loan shark has a bevy of past clients who will be happy to offer you a glowing recommendation. So don't waste your time with that. Obviously, a loan officer is going to give you only the names of happy people, not the ones who subsequently went into foreclosure.
* * *
About the Author: Carolyn Warren was a mortgage industry insider for ten years, and worked in retail and wholesale lending for some of the nation's largest lenders, including Full Spectrum/Countrywide Home Loans, Long Beach Mortgage/Ameriquest, First Franklin, and Green Tree Financial/Conseco. She was a mortgage broker at Alpine Mortgage Services, Inc. for seven years. This is her second book; her first was "Mortgage Rip-Offs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Refinance. She lives in the Seattle area.
Publisher's web site: www.ftpress.com
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BOOK REVIEW: 'Homebuyers Beware': You Can Take Carolyn Warren's Advice to the Bank -- Or Your Mortgage Broker
It's the One Real Estate Advice Book You MUST Read
Reviewed By David M. Kinchen
Huntingtonnews.net Book Critic
One of my all-time favorite TV series is "Hill Street Blues." Each week at the roll call, actor Michael Conrad, playing Sgt. Phil Esterhaus, sent his cops out to the mean streets with his signature caution: "Let's be careful out there."
That advice is equally applicable to prospective home buyers and is liberally furnished with humor and panache in Carolyn Warren's "Homebuyers Beware: Who's Ripping You Off Now? -- What You Must Know About the New Rules of Mortgage and Credit" (FT Press, an imprint of Pearson, Upper Saddle River, NJ, 288 pages, $19.99).
Warren has worked in the loan industry in a variety of capacities -- both retail and wholesale -- so she writes about something she knows about from the inside. She cautions readers -- and prospective homebuyers -- that scams and ripoffs have not disappeared with the subprime mortgage meltdown. In fact, deceptive lending practices and heavily advertised marketing schemes have produced a new crop of pitfalls for buyers.
Furthermore, she doesn't like the new three-page Good Faith Estimate (GFE) form that will replace the current one-page version on Jan. 1, 2010. And she thinks even less of the Home Value Code of Conduct (HVVC), implemented on May 1, 2009, which she says destroys long-term relationships with qualified appraisers. Starting on page 160, Warren analyzes the new GFE form slated to go into effect in a few weeks. Some things she likes, but she calls the new form too "convoluted."
With all the changes in the real estate industry, the worst mistake someone could do is to rely on an old real estate advice book. And an "old" book could be one published in 2008. The entire world of mortgages and credit has turned upside down. Everything people think they know has changed and relying on a book published before 2009 could be a very expensive mistake. In "Homebuyers Beware," Warren reveals the new realities and shows how to take advantage of them, whether you're buying your first home, refinancing, struggling with imperfect credit, or planning to invest in real estate.
Warren reveals secrets home buyers can't afford to miss, and exposes the newest scammers taking advantage of today's desperate consumers. Unlike older guides, this book fully reflects today's radically new and different mortgage requirements, as well as the latest federal legislation, including the Housing Bill of October 2008 and the brand-new FACT credit reporting rules. Discover:
- Fast, effective ways to raise your credit score and lower your mortgage costs
- How to get a wholesale interest rate
- How to apply for new insured government loans, even if you've had a bankruptcy or foreclosure
- How to avoid new loans that look good on paper, but are just as horrible as yesterday's subprime mortgages
- Who's ripping you off now: high-tech "smoke and mirrors" that can trick you into overpaying
- When to buy, when to wait, when to lock in, when to float
- Negotiation tactics that can reduce your costs for years to come
Toward the end of the book, Warren writes about another deceptive practice, maybe even a scam: Internet mortgage sites, exemplified by a company that asserts "When Banks Compete, You Win." Whoa Nellie! Warren says. Lending Tree and other "lead generation service" sites generate leads which they sell to "bottom feeder" mortgage brokers, she says. This is beginning to sound like David Mamet's play -- and later movie -- about unscrupulous real estate salesmen, "Glengarry Glen Ross"! Her advice: if you're looking for a loan, stay away from the internet, except to access her sites, www.MortgageHelper.com and www.askcarolynwarren.com.
I checked out her sites and found them enlightening. In almost 40 years of covering real estate -- I started in the fall of 1970 at the old Milwaukee Sentinel, now the Milwaukee Journal-Sentinel, and after six more years there, worked for the Los Angeles Times from 1976 to 1990 -- I've read dozens of books advising prospective homeowners, but this is one of the few that has information that real homebuyers can use.
I particularly liked Warren's advice in Chapter 20 about not relying on the agent on the For Sale sign, who represents the seller. Instead, she says, hire your own buyer's agent; the seller's agent -- on the sign -- is legally required to get the highest possible price and all the best terms for the seller.
Warren says: "You need your own agent representation, an experienced professional who is looking out for your best interests. A buyer's agent is free to you, and he or she will save you money, time, and stress."
Warren took a poll of agents from coast to coast and they agreed with her on hiring a buyer's agent, saying that a listing agent won't give you a lower price or better terms because he or she is "getting both sides of the deal." Remember, the listing agent represents THE SELLER. You wouldn't expect the lawyer in the opposite site of a lawsuit to represent you, so why should you expect a seller's agent to work for your best interests? A buyer's agent is free to you, because he or she splits the commission with the seller's agent.
Does this apply when you're dealing with a for sale by owner property, a FSBO? Even more so, she writes. FSBOs often have unrealistic expectations about what their property is worth, and a buyer's agent will help bring them down to earth. Or not...sometimes it's best not to deal with an unrealistic FSBO at all.
Here are some more pitfalls for the unwary buyer:
* Mortgage insurance companies refusing to insure loans approved by the lender. Warren says it does you no good to get an approval with a bank or mortgage company if the private mortgage insurance company refuses to insure the loan. Her advice, work with a savvy loan officer -- she calls them "Mortgage Stars" -- who can save your financing if you get thrown a curve ball in the middle of a deal. If the mortgage insurance company plays hardball, one choice is to switch to an FHA loan, she says.
* Title companies and escrow companies -- the latter are big on the West Coast and in many mountain states --have jumped on the junk fee bandwagon. Warren's advice: Don't rely on the seller's agent to pick the title and escrow company. Of course, for much of the country, closings are handled by attorneys. My advice: rely on your buyer's agent's advice when you're picking a real estate attorney. Having lived in both an escrow state -- California -- and a non-escrow state -- West Virginia -- and buying real estate in both states, I have experience in this matter. Chapter 14 of her book covers fees, including tons of new junk fees that Warren detests.
* There are no "special deals" -- loans "nobody else has" or "loans they don't want you to know about." All loans are designed to make money for the lender. If it sounds like it's too good to be true, you should realize instantly that it's a scam.
* Your default loan should be a 30-year fixed rate, or even a 15-year fixed rate mortgage, if you qualify. You'll save a lot of money in interest with the latter. Warren suggests -- and I'm even more adamant about it -- that adjustable rate loans are ticking time bombs.
On her www.askCarolynWarren.com site, I found a list of five common mistakes. These are covered in the book, but here they are as they appear on the site:
1. Compare the APR (Annual Percentage Rate)
Comparing the APR on loan offers is a BAD idea. The APR is a mix of interest rate and certain fees intended by federal regulations to help you compare offers, but it is a joke. Why? Big banks and mortgage companies have different ways of calculating the annual percentage rate. They purposely leave out some of the fees so they look like they're the cheapest when they're not.
Instead, ignore the APR and follow my directions for comparing Good Faith Estimates. Don't bother to fill out an application, either on the Internet or over the phone, before you get a Good Faith Estimate. Why? Because you shouldn't give out your Social Security number for credit checks before you've made a final decision as to who you're going to work with, and at this point, you're not ready to make that commitment.
2. Shop extensively.
Shopping dozens, or even ten lenders, is a fat waste of your time, and it won't lead you to your best deal. You'll spent hours on the phone over several days and end up with a meaningless pile of notes and Good Faith Estimates. Because you aren't comparing rates on the same day, and rates change daily, your analysis is worthless. You'll feel like you've done a thorough job, based on how exhausted you are, but in reality, you'll be no further ahead in making a wise decision than before you started.
Instead, use my Short List method; that way, you'll know exactly what you're doing and get a dirt cheap loan in minimal time. With my insider's plan, you make just three short phone call, ask one smart question, and get your best loan--pronto!
3. Ask ten questions.
If you read an article that gives you a list of ten things to ask while you're shopping around, you know you're getting advice from someone who really has no clue about what goes on inside the lenders' sales offices. When you call with a long list of questions to ask right off the bat, you communicate to the loan officer that you have no idea what you're doing, but you desperately want to get a good deal. The smooth-talking loan sharks love it, because it gives lots of time to use their charm and influence you with a big earful of nonsense.
Then either you'll stop shopping long before you complete number two above, "shop extensively," or you'll end up swimming in confusion and make a decision based on who impressed you with the best verbiage--which is often the same person who has the most expensive loan.
Instead, when you're calling around, use my insider's script, and then you'll nail down a great loan quickly, without stress.
4. Be wary of mortgage brokers.
The warning, so-called, says mortgage brokers aren't obligated to look out for your best interests. But neither are direct lenders or bankers. The truth is, all loan officers can offer you a good deal or a pricey deal. The ethical loan officers will advise you wisely and offer you fair pricing, and the greedy ones work to pad their own profits. Both ethical and greedy loan officers work at all three venues: brokerages, direct lenders, and banks.
5. Talk to past clients.
Every smooth-talking, over-priced loan shark has a bevy of past clients who will be happy to offer you a glowing recommendation. So don't waste your time with that. Obviously, a loan officer is going to give you only the names of happy people, not the ones who subsequently went into foreclosure.
* * *
About the Author: Carolyn Warren was a mortgage industry insider for ten years, and worked in retail and wholesale lending for some of the nation's largest lenders, including Full Spectrum/Countrywide Home Loans, Long Beach Mortgage/Ameriquest, First Franklin, and Green Tree Financial/Conseco. She was a mortgage broker at Alpine Mortgage Services, Inc. for seven years. This is her second book; her first was "Mortgage Rip-Offs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Refinance. She lives in the Seattle area.
Publisher's web site: www.ftpress.com
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