warren - homebuyers beware (2009)

ptg From the Library of Lee Bogdanoff ptg Homebuyers Beware From the Library of Lee Bogdanoff Download at WoweBook.Com ptg This page intentionally left blank From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Homebuyers Beware Who’s Ripping You Off Now?—What You Must Know About the New Rules of Mortgage and Credit Carolyn Warren From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Vice President, Publisher: Tim Moore Associate Publisher and Director of Marketing: Amy Neidlinger Executive Editor: Jim Boyd Editorial Assistant: Myesha Graham Development Editor: Russ Hall Operations Manager: Gina Kanouse Senior Marketing Manager: Julie Phifer Publicity Manager: Laura Czaja Assistant Marketing Manager: Megan Colvin Cover Designer: Chuti Prasertsith Managing Editor: Kristy Hart Project Editor: Betsy Harris Copy Editor: Karen Annett Proofreader: Water Crest Publishing Indexer: Lisa Stumpf Senior Compositor: Gloria Schurick Manufacturing Buyer: Dan Uhrig © 2010 by Carolyn Warren Published by Pearson Education, Inc. Publishing as FT Press Upper Saddle River, New Jersey 07458 This book is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services or advice by publishing this book. Each individual situation is unique. Thus, if legal or financial advice or other expert assistance is required in a specific situation, the services of a competent professional should be sought to ensure that the situation has been evalu- ated carefully and appropriately. The author and the publisher disclaim any liability, loss, or risk resulting directly or indirectly, from the use or application of any of the contents of this book. FT Press offers excellent discounts on this book when ordered in quantity for bulk purchases or special sales. For more information, please contact U.S. Corporate and Government Sales, 1-800-382-3419, corpsales@pearsontechgroup.com. For sales outside the U.S., please contact International Sales at international@pearson.com. Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America First Printing October 2009 ISBN-10: 0-13-702016-3 ISBN-13: 978-0-13-702016-4 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson Education Singapore, Pte. Ltd. Pearson Education North Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educatión de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Cataloging-in-Publication Data Warren, Carolyn, 1950- Homebuyers beware : who’s ripping you off now?—what you must know about the new rules of mortgage and credit / Carolyn Warren. p. cm. ISBN 978-0-13-702016-4 (hbk. : alk. paper) 1. Mortgage loans—United States. 2. Credit ratings—United States. 3. House buying—United States. I. Title. HG2040.5.U5W357 2010 332.7’22—dc22 2009027598 From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Wendy L. Smith and Brian T. Smith, thank you for your enthusiastic support of my writing projects. From the Library of Lee Bogdanoff Download at WoweBook.Com ptg This page intentionally left blank From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Contents Introduction New Rip-Offs . . . . . . . . . . . . . . . . . . . . . . . . .1 My Credentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What’s Coming Up . . . . . . . . . . . . . . . . . . . . . . . . . 6 Easy Reference Guide: Terms to Know . . . . . . . . . 7 Chapter 1 Getting the World’s Cheapest Loan . . . . . .11 Save Time and Money by Learning from This True Story . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Make Your Experience Easier, Smoother, and Better . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Chapter 2 What’s New with Credit . . . . . . . . . . . . . . .19 Are You Getting Ripped Off By Your Own Credit Score?. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 How Lenders Rate Credit. . . . . . . . . . . . . . . . . . . 23 Beware of Bogus Credit Scores . . . . . . . . . . . . . . 24 10 Common Misconceptions About Credit Scoring . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 How Your Score Compares with Others’ . . . . . . . 27 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Chapter 3 Quick, Easy Ways to Raise Your Credit Score . . . . . . . . . . . . . . . . . . . . . . . .29 Nine Ways to Raise Your Score, Quick and Easy . . . . . . . . . . . . . . . . . . . . . . . . . . 30 If You Have No Credit History. . . . . . . . . . . . . . . 36 Get More Respect with an 800 Score. . . . . . . . . . 37 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 38 From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Chapter 4 Aggressive, Innovative Ways to Fix Credit . . . . . . . . . . . . . . . . . . . . . . . . . .39 Innovative Method #1: Use Charm to Get a Goodwill Agreement . . . . . . . . . . . . . . . . . 41 Innovative Method #2: Demand the Removal of Old Collections and Interest Charges . . . . . . 43 Aggressive Method #3: Insist They Stand by Their Original Agreement . . . . . . . . . . . . . . . 46 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Chapter 5 Five-Step Plan for People Working Toward Buying a Home . . . . . . . . . . . . . . .51 Five Fun, Easy Steps to Home Ownership . . . . . 51 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Chapter 6 How to Recover from a Foreclosure or Short Sale . . . . . . . . . . . . . . . . . . . . . . . . . .57 How Long After a Foreclosure or Short Sale Until You Can Buy Again? . . . . . . . . . . . . . . . . . 59 Getting an Exception for Extenuating Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 The Great American Comeback. . . . . . . . . . . . . . 60 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Chapter 7 Beware of Privacy Pirates! . . . . . . . . . . . . .63 How to Protect Yourself from ID Rip-Off Artists . . . . . . . . . . . . . . . . . . . . . . . . 64 Five Proactive Steps to Avoid Being a Victim of ID Theft. . . . . . . . . . . . . . . . . . . . . . . . 64 Five Steps You Must Take If Your ID Is Stolen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 What to Do If Your ID Is Lost . . . . . . . . . . . . . . . 68 You Can’t Be Too Careful . . . . . . . . . . . . . . . . . . . 68 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 68 viii HOMEBUYERS BEWARE From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Chapter 8 Don’t Buy a House Until You Read This . . . . . . . . . . . . . . . . . . . . . . . . . .69 Gain an Uncommon Advantage Over Your Competitors . . . . . . . . . . . . . . . . . . . . . . . . 70 Further Explanation About the Earnest Money Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Chapter 9 When Is the Best Time to Buy a Home? . .75 When Is It a Good Time to Buy? . . . . . . . . . . . . . 75 Will You Get a Cheaper Price by Waiting? . . . . . 78 The Folly of Procrastination . . . . . . . . . . . . . . . . . 78 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Chapter 10 The Loan Process in Ten Easy Steps . . . . .81 Carolyn’s Ten-Step Loan Process Checklist . . . . . 81 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Chapter 11 Choose the Right Loan for YOU . . . . . . . .87 How Much Down Payment Is Required? . . . . . . 87 Which Loan Program Is Best for You?. . . . . . . . . 88 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Chapter 12 Broker, Banker, or Direct Lender? . . . . . . .97 Find Your Mortgage Star . . . . . . . . . . . . . . . . . . . 98 What About Credit Unions? . . . . . . . . . . . . . . . . 100 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . 101 Chapter 13 How to Shop for a Loan Without Getting Tricked . . . . . . . . . . . . . . . . . . . .103 Bad Advice Disguised as a Helpful Tip . . . . . . . 103 How to Find a Mortgage Star. . . . . . . . . . . . . . . 106 How to Handle a “Forgotten” Fee . . . . . . . . . . . 108 Why You Need the Good Faith Estimate Before Making a Decision . . . . . . . . . . . . . . . . 109 Coming Up Next . . . . . . . . . . . . . . . . . . . . . . . . . 111 CONTENTS ix From the Library of Lee Bogdanoff Download at WoweBook.Com [...]... pick-of-the-month and earned reviews in publications ranging from The Boston Globe to the Orange County Register, The Seattle Times to the Arizona Republic and San Diego Union-Tribune She has appeared on many radio talk shows, including Bob Brinker’s national Money Talk and The Gil Rose Show in San Francisco Currently, she is working as a broker/banker and is the owner of two Web sites, www.AskCarolynWarren.com... before loan documents are drawn up for signing From the Library of Lee Bogdanoff Download at WoweBook.Com 8 HOMEBUYERS BEWARE Discount Fee Interest paid up front to buy down the interest rate charged on your loan Note, the money you are borrowing Also called points (see the next page) DTI, debt-to-income ratio All the debts listed on your credit report plus your proposed house payment in relation to your... first-time homebuyer’s loan (although, you don’t have to be a first-time homebuyer to use it) because the down payment is only 3.5 percent GFE, Good Faith Estimate A form that lists the terms and all the costs of your loan loan officer, loan consultant, mortgage consultant These and other titles are used interchangeably by employees of banks, brokers, direct lenders, and credit unions LTV, loan-to-value... Report 233 No Points 234 No-Cost Mortgage 235 Equity Acceleration Programs 236 Coming Up Next 239 From the Library of Lee Bogdanoff Download at WoweBook.Com CONTENTS xiii Chapter 28 Watch Out for the Ten-Million-Dollar Mortgage Man (and His Cohorts) 241 Debt Today, Gone Tomorrow ... big to control Bad Practice Taking a risky loan, paying too much, and glossing over the details of your contract Good Practice Understanding the terms of your loan and choosing low-risk financing Teaser rates, deceptive “pick-a-payment” loans that gobbled up home equity like a hungry hippo, giant prepayment penalties, loans for people with no verifiable income, and other insanities led to the mortgage... individuals in management First Franklin is no longer in business From the Library of Lee Bogdanoff Download at WoweBook.Com 6 HOMEBUYERS BEWARE Now I’m back in touch with Main Street America, helping good folks buy houses and refinance (For more information, see my Web site, www.AskCarolynWarren.com.) As a homebuyer’s advocate, I am telling you that it is possible to get a fantastic deal and save tens of thousands... why the new HVCC law has loan officers fuming Chapter 30 is a wrap-up, a personal message, and resource information Feel free to browse the chapter titles and subheads and skip around to the topics that interest you most When you’re finished reading, I’d love to hear from you You can send me an e-mail via my Web site at www.AskCarolynWarren.com Easy Reference Guide: Terms to Know If you come across... hard-working agents who are outstanding advocates for their clients (in alphabetical order by last name): Heath Coker, Cape Group Real Estate, www.CapeGroup.com Marc Cormier, ReMax Allegiance, www.Help34.com Sam DeBord, RE/MAX, www.SeattleHome.com Michael A Eaves, Long & Foster Real Estate, Inc., www.MikeEaves.infre.com From the Library of Lee Bogdanoff Download at WoweBook.Com xvi HOMEBUYERS BEWARE. .. WoweBook.Com About the Author Carolyn Warren has been a mortgage industry insider for more than twelve years She worked in both retail and wholesale lending for some of the largest national lenders including Full Spectrum Lending/Countrywide Home Loans, Ameriquest, Green Tree Financial/Conseco, and First Franklin wholesale lending Carolyn Warren is the author of the best-selling Mortgage RipOffs and Money... up every month These loans became popular right before the mortgage meltdown These loans are also called pick-a-payment loans because you get to choose whether or not to make the fully amortized payment each month From the Library of Lee Bogdanoff Download at WoweBook.Com INTRODUCTION: NEW RIP-OFFS 9 Origination Fee A fee paid up front to the lender Also called points If you opt not to pay this fee, . publisher. Printed in the United States of America First Printing October 2009 ISBN-10: 0-1 3-7 0201 6-3 ISBN-13: 97 8-0 -1 3-7 0201 6-4 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson. Cataloging-in-Publication Data Warren, Carolyn, 195 0- Homebuyers beware : who’s ripping you off now?—what you must know about the new rules of mortgage and credit / Carolyn Warren. p. cm. ISBN 97 8-0 -1 3-7 0201 6-4 . . . . . . . . . . . . . . . 239 xii HOMEBUYERS BEWARE From the Library of Lee Bogdanoff Download at WoweBook.Com ptg Chapter 28 Watch Out for the Ten-Million-Dollar Mortgage Man (and His Cohorts)