Book Review & Giveaway: The New Rules for Mortgages

Hello everyone, I hope you are all having a magnificent week so far! Before I get started, I feel I need to clarify a few things about my views and beliefs concerning a mortgage. As most of you know, I am against debt, but I do realize that not all people are going to go out there and save, save, save, in order to pay 100% cash down. Some people, if not most, would even consider that to be impossible. I’ll save that discussion for another day, but I just want to point out that I understand that the average person will not even consider the sacrifice and commitment that it takes to pay for a house without getting a mortgage.

With that said, I started this blog to help people, and if I ignored the fact that most people (even those adamantly opposed to debt), will still consider a mortgage to be good debt, I’d be doing a great disservice to many of you. For those of you that do not hold my belief that all debt is bondage and unnecessary, and fully intend on getting a mortgage, I want to help you get the best mortgage you can. Owning a home is often considered the American Dream, but you should know what you are getting yourself into.

That’s why I agreed to do a quick review and giveaway, for a book written by Dale Robyn Siegel, called The New Rules for Mortgages. She is an attorney and licensed mortgage broker with more than 20 years of experience, which includes owning a mortgage brokerage company for more than 10 years. As most of you know, the rules have changed since the colossal free fall of the housing market in 2008. This book sets out to help you understand those changes in the midst of all the chaos.

It is intended to present “just the facts and the vocabulary you need to understand the subject matter.” It provides short explanations for the basics, without confusing you with unnecessary gibberish that you really don’t need. If you want the most current information available, no matter what state you live in, this book is for you. Best of all, it’s less than 200 pages!

I did not read the entire book, but I did pick a few chapters of interest so that I could go ahead and put this book in your hands. In chapter two, the author talks about income, obviously a big part of qualifying for a mortgage in the first place, hence the reason I chose it. Did you know that in 2008, average families were spending as much as 60% of their income on housing. (proof this book is much needed) That only leaves 40% for everything else! Not only should those numbers be flipped upside down, but realistically, you should responsibly try to spend around 25-35% as a reasonable percentage. Once you get over 40% you are entering dangerous territory, and it’s time to start taking drastic measures to either reduce that number by earning more, refinancing, or even selling!

“The More Toys You Have, the Smaller Your House”

Now this is my favorite part of the chapter 2, because we’re talking about behavior and how it affects your decisions, or as I like say, Behavior Versus Reality.

Here’s an excerpt that states something I think most Americans fall victim too—themselves and their bad habits!

“The problem is the the more money you spend on cars, time-shares (YIKES!), and credit cards (TRIPLE-YIKES!), the less you can spend on a house. The more payments you have on stuff you don’t need, the less you have left over for the house with the white picket fence. So think before you spend on stuff you can do without, or knock yourself down a few levels on that car!” Chapter 2: Income, Yeah You Need That! (my emphasis added)

Take away the car payments and the credit cards, and you’ve got yourself the possibility of owning a nice home with a white picket fence—and within your means.

Furthermore, the chapter covers all of the different income scenarios, what you can use, what you cannot, and why, to help you get a mortgage. Another subject of interest for me was in the same chapter, about co-signing and how it can harm your borrowing power. For obvious reasons, if you are going to be held responsible if someone else doesn’t pay (and statistics show you likely will), the risk to the bank increases because it is at least possible you will not be able to make your payments in the future. Anyone that reads EOD knows I think co-signing is one of the dumbest things a person can do financially. If you’ve never done it, DON’T START NOW, and if you have, I’m sorry. ๐Ÿ˜€

I was planning on covering another chapter, but I think I have said enough. You get the point. If you are going to get a mortgage then you are going to want the newest and most helpful information available, to assist you with the biggest financial decision you may ever make. As I always say, do your own research and understand what it is you are getting yourself into. Once your name is signed, you are obligated.

There are a number of things covered in this book that I would never recommend to anyone, but to be fair, they are written for informational purposes. If you only read about 15 year fixed-rate mortgages (my recommendation), and then hear something about an interest-only mortgage that will reduce your payments, from a shady mortgage brokers perspective, you will at least know what it is they are selling. We have an interest-only mortgage and my advice would be to RUN as fast as you can in the other direction!!! (not kidding) Once you’re in, it’s really hard to get out, and we’re experiencing that right now!

You may even find that owning a home is something you just can’t do right now. No worries though. Just make a responsible and well thought out plan so that you can do it in the near future.

The New Rules for Mortgages Giveaway

I am giving away two copies of this book! Be sure to enter!

All you need to do in order to enter for a chance to win is be a current subscriber to Enemy of Debt and leave a comment below. In your comment answer one of these two questions: (worth 5 entries)

  1. Have you ever had too much mortgage, or a bad mortgage loan you regretted getting? What did you learn from your experience?
  2. If you’ve never owned a home, why do you think it’s important to buy a house you can truly afford? (Don’t confuse afford with “I can afford the monthly payments”, because there’s more to affording a home than just the payments.)

Want to increase your chances of winning? These can be done at the bottom of this post. (Be sure to leave a comment letting me know about your extra entries.)

  1. Tweet this post. (make sure @enemyofdebt is in your tweet.) Worth 5 extra entries!
  2. Stumble this post. Worth 5 extra entries!
  3. Tip this post. Worth 5 extra entries!

Giveaway Deadline

All entries must be submitted by Saturday August 28th at midnight! I will be selecting the winners via random.org, and will update THIS POST to let you know who the winners are on Thursday.

Good Luck!! ๐Ÿ˜€

WINNERS!

Jenn and Melissa won a copy of this book! Congratulations for taking the time to leave a comment and participate! ๐Ÿ˜€

About Brad Chaffee

8 Responses to “Book Review & Giveaway: The New Rules for Mortgages”

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  1. I am currently going through a short sale and its been extremely hard!! Personally I don’t EVER EVER EVER plan to purchase a home again if its not 100% cash. Even if I decide to live in a half of a million dollar home it will be paid for!! Home ownership is a great thing when you can actually afford it. Afford doesn’t mean I skimped here and there to eek by, I mean you have enough money in the bank to keep you afloat for a long time.

    my 2.4 cents!

    • Brad Chaffee says:

      Divine and Debt Free – AMEN!!!

      We are going through the same thing Mikki! We have tried everything to avoid it but the banks have stopped every other possibility. The banks move super slow, and seem to have no clue as to what they are doing.

      Cash-only for us too. Getting this mortgage was the absolute worst financial decision we have ever made.

  2. Having many years experience in the mortgage business, I can say with confidence that you’re right on the money with staying within 25-35% for your house payment. (I’d go even further and say keep it at 20-25%!) Beyond that you’re beginning to approach being HOUSE POOR.

    A house is important, but it’s not so important that you otherwise live on the brink of bankruptcy for it. There are too many other aspects of life that are important as well. And spending excess money playing the mine’s-bigger-than-yours game is worse than a complete waste of good money.

    The other thing people miss when buying a house is the contingency factor, and it’s more critical now than ever. A 25% payment can quickly become a 50% payment if you lose your job and have to take one for less. (This is why I like 20-25% better!) Or what happens with a sudden increase in expenses, such as a child going to college, the need for a new car, or a spike in energy causing utility bills to go haywire. All are easily projectable situations, all can and should be provided for. The first best way to do this is by keeping your largest fixed expense–your house payment–as low as possible.

  3. Craig says:

    I can confirm that this is an awesome book with lots of good sense to take in if you are considering buying a home.

    Fact is, I liked it so much I used Dale Siegal as my mortgage broker!

  4. Ernest S. says:

    I am in a bad mortgage right now. I bought a townhouse in 2007, and paid more than I had planned. My wife and I make a decent income, but most of it gets allocated toward paying our mortgage.

    If we had to do it again, we would have rented for longer. I felt so rushed when buying a house, especially since it was such a competitive market. However, now I know that it was the wrong time to buy. Also, I used to hate the idea of renting, but now I see the value of waiting for the right opportunity (rather than feeling pressured to buy). It’s sad to think of what we could have done with the extra cash flow (e.g., traveling, building up our retirement funds, etc.).

  5. Penny says:

    We are now on our 3rd mortgage, but that needs to be explained. We had a plan to buy and pay off the land first and then build a nice house on that land. We stuck to this plan even when the bankers wanted us to stay in debt.

    First mortgage bought our land and a trailer to put on that land. In cash we put in well, septic, and a garage. Bank with all of hubby’s money in it wanted us to take out a construction loan which would amount to paying closing costs twice in less than a month. And since it would be a construction loan, we might as well put the well, septic, and garage on it and use that money somewhere else. We were told “Think of the vacation you could take with that money.” Lets just say we looked around found a credit union that was willing to work with our plan and then pulled all of hubby’s money out of that bank. Because all the money was coming out on one day, the credit union considered it a traditional mortgage.

    Paid that 30 year mortgage off in about 4 years. At which point we built our dream home. With building we knew we would need a construction loan this time around, but researched to find a different bank that would only require one closing fee for a construction loan. We were preapproved for way more than we were willing to spend – mostly becuase we already owned the land it was to go on. Long story short we ended up fighting with them for 2 months to close out the loan without using the full amount. This time we were asked “Are you sure you wouldn’t like to add an indoor pool with the extra money?” While we would love a pool, we couldn’t stomach the thought of paying for it over the course of our mortgage. (We knew after all, that we probably wouldn’t be able to pay this one off as fast as the last one.) When threatened with legal action, they closed the loan and refunded us the interest we had paid during the 2 months of fighting to get the loan closed.

    Never thought we would go through that hassle again, but when the mortgage rates dropped as they have, we couldn’t help but jump at the chance to lower what we would pay over the course of the loan. Looked around and found a credit union with the best rate. This was the easiest of the 3 mortgages because we weren’t doing any building this time around. We refinanced to raise our payment amount, but lower the number of years and interest rate on the loan. (The credit union staff was very supportive of this, but family and friends thought we were crazy.) Took 5 years off the mortgage before making the first payment on the new loan. We still pay more than the new minimum payment, so our budgeted amount hasn’t changed a bit.

    What we’ve been through over the mortgage has sealed the no banks for us motto. All of our accounts and our kids accounts are with credit unions and we haven’t paid a bank fee in more than 10 years.

  6. Melissa says:

    I am 35 and have never owned my own home. I have about 2,500 dollars more to pay in debt and then I plan to save 10,000 dollars before I even consider saving up to own a home. I wouldn’t want my home to own me when a plumber is needed or any other small or big thing may come up. I’m not going into debt just because something breaks. I shouldn’t have to miss a house payment if something breaks. The plan is to be able to fix whatever it is with cash and still be able to make the house payment “STRESS FREE”.

  7. Jenn says:

    My husband and I are 31 years old – and while we haven’t had too much mortgage debt or a bad mortgage experience – we certainly could have, as when we started looking we were told we could “afford” up to 700K worth of a mortgage! We went with a 300K mortgage (300K house with 10% down), at 5.6% (best rate at the time two years ago). My regret if I could call it that, is that we did a PMI buyout, which has me holding back from refinancing to 4.5%, as we’d have to either do another PMI buyout or have PMI added to our monthly payments. All in all we love our house and our payments are affordable, so I’m still happy.

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