Bankers, brokers, and swindlers aren’t the only ones to blame for the subprime mortgage mess. Homeowners who purchased houses they couldn’t afford in the snatch-and-grab real estate rush of the late ’90s and early 2000s also played a key role.
But all is not lost. Despite tighter lending standards, it’s still possible to get a home loan, according to The Real Deal: How to Get a Mortgage During & After the Subprime Crisis.
In this smartly written, back-to-basics manual, author Kirk Charles tackles all of your homeownership and personal finance questions—from calculating your debt-to-income ratio to tips on increasing your credit score in a week.
“It’s the American dream to own a home, but you have to be financially disciplined,” says Charles, a loan officer and financial coach based in West Orange, New Jersey. “A lot of people don’t understand the true cost of owning a home. It’s important to know what mortgage interest is and how it works. It’s important to know what private mortgage insurance (PMI) is and how it affects what you’re going to pay every month. I see myself as an educator, as someone who can explain complex terms in a way people can understand.”
With more than 100 questions and answers, many accompanied by real-life scenarios, The Real Deal is a must-have for people trying to make sense of the home-buying process.
Charles recommends, for example, that first-time homeowners and folks shopping for mortgages consider a loan insured by the Federal Housing Administration (FHA).
“They offer very good interest rates and require a small down payment,” says Charles, noting that loans had taken a back seat more “creative” finance options, such as no-verification, no-money-down loans which were easier to obtain. And with chapters on how to avoid foreclosure and bankruptcy, the book is also a resource for borrowers who have fallen behind in their payments or are stuck in crippling loan agreements.
“With loan modification, you may be able to lower your interest rate, extend your term, or reduce your principal,” Charles says. “Foreclosures cost a lot of time, energy, and money. No bank wants to go through that. It’s better for the bank to have someone in a home, making the payment that they can. That way, everyone is happy. The bank is making money, and you still have a house.”
With its comprehensive information and straightforward style, The Real Deal is particularly relevant considering the mortgage meltdown of the last year and a half. Charles leaves no stone unturned in his quest to educate potential borrowers.
“You have to know what you can afford and what you can’t afford,” he concludes. “I advise homeowners to be realistic and learn as much as they can. Once people become educated, this process isn’t that difficult to navigate.”