Watch Out for BAD Mortgage Advice & False Information

Heads up! There are books and blogs with false information and bad advice about getting a mortgage or home loan. Here are three examples:

1) The book Home Buying Kit for Dummies tells you that if you close your loan on a Monday, you will  have to pay interest starting on Friday, thus wasting your money on three extra days of interest. After giving you this bogus tip, the authors brag that they’ve just saved you the price of the book. But, IT IS FALSE! If you close on a Monday, your interest payments start on that Monday. You are never charged earlier than the exact and actual day of your closing.

How could such a book print incorrect information? Looking at the authors’ biographical information, neither one has ever worked as a loan officer, loan processor, escrow closing agent, real estate attorney, or loan funder. So it appears that they are writing about an industry in which they’ve never worked. The fact that one of them worked in finance does not make him a credible authority on mortgages, just as someone who has “worked in sports” is not necessarily make him an expert in karate, and someone who has worked as “a cook” is not necessarily an expert in French pastry.

2) A high-ranking website offers a free 38-page e-book, How to Buy a House, A Guide for First Time Buyers. Again, false information is given. The author states that it’s a good strategy to include your closing costs in with the loan. BUT THAT IS NOT ALLOWED! With a purchase loan, the closing costs cannot be rolled into the loan; only in a refinance is that option available. So although the e-book is free, is it worth taking the time to read a guide that contains inaccurate information? The website says he is an “award winning writer,” which does not qualify him to dish out home buying or mortgage advice.

3) An Amazon book reviewer posted that Yield Spread Premius (YSP) is now illegal. THAT IS NOT TRUE! A lender has two options for collecting YSP (money for charging a higher interest rate than par rate). First, they can keep it for their own profit if they do not also have an origination fee. Second, they can credit it to you to help pay for your closing costs.

The Take-Away

Be aware of the credentials of the person offering mortgage information and advice. Just because something is printed in a book or published on the Internet, it does not guarantee you that it is factual. Speaking for those of us who have spent careers working in multiple areas of the mortgage industry, there is no substitute for experience in the field.

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