Title: "Mortgage Confidential: What You Need to Know That Your Lender Won’t Tell You (Second Edition)"
Author: David Reed
Publisher: AMACOM, 2011; 233 pages; $17.95
On a holiday trip to my Mom’s house, she pulled out a letter I’d written when I was about 5. It went something like this: "Dear tooth fairy: My tooth came out, but I lost it. Please give me some money anyway. Thank you, Tara."
As savvy as I consider myself to be now, it’s hard to recall a time when I believed in the tooth fairy. And I can only imagine the logical sequence that likely unfolded when reality dawned on me — not only is there no tooth fairy, but my Mom has just been collecting each tooth from under my pillow (is that sanitary?) and replacing it with a dollar from her purse? That must have been both illuminating and deeply anticlimactic, at the same time.
Readers of the second edition of David Reed’s "Mortgage Confidential: What You Need to Know That Your Lender Won’t Tell You" might be in for a similar education about the backstory behind mortgage money, where it comes from and how lenders make their money on it.
From the very first chapter, Reed makes clear his intention to debunk what you thought you knew about mortgages, and course-correct your home finance knowledge base to be both accurate and up to date, the latter of which is increasingly critical if you want to be an informed and successful mortgage consumer, due to the supersonic speed at which the mortgage market is evolving.
In fact, throughout, the book is smattered with sections headed: "Confidential," heralding some secret, empowering information Reed believes your lender, mortgage broker or the industry at large would rather you not know.
I’m not big on the "us vs. them" positioning of the book, due to my general inclination against fear-mongering and needless adversarial relations — especially in light of the many highly ethical mortgage pros I know personally who would rather lose a transaction entirely than impair their clients’ best interests.
With that said, I think we’ve all witnessed enough of the aftermath of the subprime mortgage meltdown and the resulting housing crisis to know that the interests of mortgage lenders and mortgage borrowers are often in opposition; so much so that it behooves today’s borrowers to equip themselves with the knowledge to make wise decisions on their own, without relying solely on external advice.
Reed starts out with a chapter on the birds and the bees of borrowing: "Where Mortgage Loans Really Come From," including a primer on how FHA, VA and USDA loans work. Next, he moves on to the "Mortgage Loan Process," covering the basic process and placing a focus on the six key insider phrases and terms consumers can use to signal their non-cluelessness to their mortgage broker, ostensibly minimizing the likelihood of being taken advantage of.
Next, Reed covers the "Risk Elements" that lenders will consider when evaluating your loan application and your creditworthiness, here providing a great deal of post-bubble updates on the newly intense scrutiny lenders are placing on things like mortgage insurance, down payments and the condition of the property the loan will be used to purchase.
One of the most important of these risk elements, "Credit," gets its own devoted chapter later in the book; in between, Reed briefs readers on closing costs and interest rates, and how to minimize them both.
Reed reviews "Loan Choices," helping readers understand and utilize the lessons of the subprime era to avoid negative amortization entirely, and make very smart decisions about the appropriate situations in which to use low-down-payment and adjustable-interest-rate mortgages.
Though "Mortgage Confidential" is a highly usable book, generally speaking, I believe homeowners considering refinancing at today’s uber-low rates (despite their recent uptick, rates are still very, very good) will find Reed’s coverage of "Refinancing" to be worth the price of admission, as he instructs them on how to understand and manage the fees and costs of refinancing better than most mortgage instructionals I’ve read (and that’s a lot).
Reed also offers rare insights into how to finance new construction, before providing a detailed glossary that readers can use to decode the jargon-riddled mortgage planning and application process.
The tooth fairy may not exist, but in "Mortgage Confidential," David Reed takes an admirable turn as America’s home financing fairy godfather, a role for which there is arguably more demand.