Book Review: Mortgage Ripoffs and Money Savers

If you’re shopping for a house, one of the biggest favors you can do for yourself is to get educated about the complicated process of applying for a mortgage. A mortgage is probably the most expensive obligation you’ll ever have, and if you don’t know what you’re doing, it’s easy to get taken advantage of.

Despite attempts at regulation in the mortgage industry, there is still plenty of room for unscrupulous lenders to make massive profits at great expense to you — we’re talking tens of thousands of dollars. Some lenders take advantage intentionally, while others are just following the boss’s orders, but either way, you’ll need to be prepared to protect yourself. You’ll also need to learn how to get the best deal possible, because it’s unlikely to just be handed to you.

If you only have time to read one book about getting a mortgage, it should be Mortgage Rip-Offs and Money Savers by Carolyn Warren. Warren has ten years of experience in the industry working for a direct lender, a mortgage broker and a wholesale lender. During this time she was also a notary public who witnessed many loan signings. Horrified by what she saw during this portion of her career, she resigned and wrote this book, which exposes the mortgage industry’s secrets with the aim of helping consumers get the best possible loans.

Not your traditional expose, the book takes the reader through the mortgage application process like any good mortgage book would. The difference is that each chapter is filled with tips on pitfalls to avoid, and those tips come from an industry insider.

Also, since the book was published in 2007, most of the information is recent enough to still be relevant (a few 2008 changes in lending practices notwithstanding, such as the elimination of no-documentation loans).
Readers learn how their credit scores affect mortgage qualification, rates, and fees and how to choose the best loan for their situations. Then, Warren explains the most effective way to shop for the best mortgage — it’s much simpler than you’d think and only involves contacting three companies.

Perhaps the most useful aspect of the book is the many images of actual good faith estimates the author received as a mystery mortgage shopper. (A good faith estimate is the document that sets out the terms of the mortgage and closing costs: what the interest rate will be, whether there’s a prepayment penalty, how many points you’re paying, what fees are required to close, and so on.) Each good faith estimate is accompanied by explanations of what is wrong with it so that readers can learn how to read these statements and what to look out for.

The good faith estimate is negotiable, and Warren explains which numbers can be negotiated and by how much. This document is also a mystery to most people, so learning how to understand one before you’re in the position to sign your own is crucial if you don’t want to be taken for a ride.
To help readers understand what’s happening on the other side of the table, the author explains how lenders and brokers make their money, what’s a reasonable amount for them to make on a loan and the outrageous amounts of money that can be made off of your naïveté.

There is also a short section on refinancing — if you got duped the first time around, this section will help you get a better deal. There are at least as many pitfalls in refinancing a loan as there are in getting that initial mortgage that puts you into a house.

Finally, there is a section called Special Topics and Unique Situations that discusses things like first-time homebuyer programs and grants, buying a condo or multi-family home, what to do if you get turned down for a mortgage and what to do if your loan doesn’t close.

In addition to being packed with useful information, the book has a very detailed table of contents, which makes it easy to skip around to the sections that are pertinent to your situation and go back and review certain areas later.

If you don’t want to waste thousands or even tens of thousands of dollars on your mortgage, read this book. It’s well worth the mere $12 it costs on Amazon (and you may even be able to borrow it for free from the library).

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Learning the Fine Art of Couponing

I've never thought I had much use for grocery coupons. I didn't even get the weekly ads in the mail because I unsubscribed myself from all the major junk mail distributors. I never knew what was on sale at the store until I got there, and I never had a coupon for anything. The main ways I saved money on groceries were by shopping with a list and setting a monthly grocery budget. I also had a few other tricks that you can read about here and here.

Then I saw a woman who calls herself the Coupon Mom on Oprah last week. I really didn't think she would have anything to teach me. I thought I knew everything about saving money on groceries, and I thought that coupons were a waste of time since they are usually for brand-name items and I usually buy generic items that are cheaper than the brand name, even with a coupon. Well, I was wrong.

The Coupon Mom showed viewers how she took a $172 grocery bill and slashed it to $37 using her strategic shopping methods with a combination of the grocery store's club card discounts and a slew of coupons. Even when you set aside that club cards are a huge scam (in my opinion), the savings were still impressive.

For those of you who are lucky enough to not have to deal with club cards, here's my opinion of how they work. The grocery store significantly overprices everything in the entire store. To get a decent price on anything, you have to a) wait for it to go on sale, and b) have a club card. It's free, but you have to give them your name and address to sign up. You can't get the store's sale prices unless you have a club card.

In my opinion, the "sale" price you get with the club card is the fair price, but it is rarely a bargain. Case in point, last week I bought several pounds of ground beef. The tab was $13 regular price, or $6 with a club card. $6 I felt was a fair price, while $13 would have been highway robbery. That's why I prefer to shop at stores that have low everyday prices and no club cards (not Wal-Mart, at least not yet), but sometimes I need something I can't get at those places.

Anyway, the idea is that you don't just buy something when you have a coupon for it or when it's on sale. Instead, you wait until you can take advantage of both simultaneously, then you stock up on that item as much as possible. I made my first foray into this tactic today, and here's what I did.

1. Looked through the grocery ad I got in the mail. Wrote down the items I was interested in buying and their sale prices.
2. Went to the Coupon Mom website and followed her link to another site where you can print grocery coupons from home.
3. The only items that coincided were Cinnamon Toast Crunch cereal (on sale for $1.88) plus a coupon (55 cents off). So I printed two coupons, one for me and one for my boyfriend.
4. I didn't know this ahead of time, but the grocery store seems to double certain coupons up to $1.00, so we each used a coupon, each got an extra 45 cents off, and each got a box of cereal for 88 cents that normally costs $3 or $4. Now I have one box to eat over the next couple weeks, and one box for my emergency food stash.

I think the savings may start off slowly, but over time I will get better at getting lots of deals like this and slashing my household grocery bill. Currently it's about $300 for 2 people, which I think is already pretty good, but why should I pay more than I have to?

To learn more about this technique, I recommend visiting the same site I did, CouponMom.com. Read her free e-book to get started. Everything on the site is free.

Photo by qmnonic

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Frugal Tips for the Home Cook

As far as I'm concerned, throwing away food is like throwing away money. Since almost none of us can afford to do that right now, I'd like to share some tips I've been using lately as I'm cooking for myself more, eating out less, and trying hard to not throw anything away.
Grow your own herbs. Buying fresh herbs at the store when you need them is often expensive. Most of the stores in my area primarily sell fresh herbs in small plastic containers that cost $2.00 a pop. You can buy a packet of seeds that will grow an incredible amount of herbs for just $1 to $2, or you can buy a starter plant for $2 to $3. Either way, you'll get more bang for your buck than buying cut herbs at the store.
Make herbal ice cubes. Whether you buy fresh herbs at the store or grow them in your yard, you'll probably end up with more than you need at some point. Instead of letting them go to waste, save the ones you can use in soups, stews, and curries by chopping them up, putting them in an ice cube tray (fill each cube 3/4 full of herbs) then covering them with water and freezing. When you're ready to use them, just throw an herbal ice cube into your stew and let it melt. What's more, having a stash of extra herbs in your freezer might save you a trip to the store.
Reuse frying oil. I used to think that you could only use oil once and that was it, but when you use oil for deep frying, you can save it and reuse it again and again as long as it doesn't go rancid. I've used the same oil to fry toasted ravioli and tofu and then used it in a brownie recipe. Visit Go Ask Alice! to learn about the proper way to reuse frying oil.
Keep your fridge extra cold so items don’t spoil. I keep my fridge so cold that the things in the back occasionally get frozen by accident, and I'm sure it increases my energy bill, though I couldn't tell you by how much. However, I used to throw out a lot of food that I couldn't eat before it spoiled, and since I lowered the temperature of my fridge, I rarely find myself throwing out spoiled food. Recently, I was able to use a carton of half and half for a good month after the expiration date. If I'd had to throw it out on the use-by date, I would have wasted half the carton.
Use leftover wine to make sangria, mulled wine, or vinegar. If you find yourself dumping lots of half-used bottles of wine down the drain, try making sangria or mulled wine with it to extend its shelf life. You could also turn it into homemade vinegar (but you'll need to get some mother first).
Save extra brewed coffee in the fridge and drink it as iced coffee later. How many times have you brewed a large pot of coffee, only to end up pouring half of it out? Store it in an airtight container in your fridge instead and make iced coffee with it in the afternoon. Better yet, if you have a blender that's good at pulverizing ice, you can use this leftover coffee to make your own Starbucks-esque frozen coffee drinks and save yourself the $3 to $4 they normally cost.
Squeeze it. If you have a bunch of lemons, limes, or oranges that you suspect will dry out before you get around to using them, squeeze the juice out of them then store it in the fridge. You can also use the ice cube trick here and thaw the juice as you need it.
Freeze it. If I have some food that I can tell will go bad before I can eat it, I freeze it whenever possible. If I buy too many bananas, I freeze them and use them later in banana bread. If I make a huge pot of soup that I get sick of before I can eat it all, I'll freeze the rest. If that loaf of bread is languishing on my counter, it goes in the freezer. Bell peppers that are starting to go soft get chopped and frozen for use in pasta dishes. Once some items have been frozen, they won't be quite as good, but you can usually still find a way to use them. If the frozen bread isn't quite as fluffy as you'd like, try making grilled cheese with it instead of using it for PBJ.
Photo by WordRidden

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