Secrets to a Smooth Mortgage Process: Expert Tips Revealed

Transcription

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Pete: Today, I have a very special guest with us here. And I want to introduce everyone to Amy Cockburn. Amy has been working with me for nine years, since February 1st 2015.

Amy: Yeah.

Pete: Not only have you been working with me, but I've known you since you were a very little child. And you also know me because you are my sister.

Amy: Correct.

Pete: And I am your brother.

Amy: Yeah.

Pete: And I'm very, very, very lucky to have you here working with me and with us.

Amy: Thank you.

Pete: Yeah.

Amy: Likewise.

Pete: For sure. Yeah.

Amy: Yeah.

Pete: So I wanted you to talk about it because you are very, very good at what you do. Extremely good. And do you want to explain what you do, or can I explain what? I'll explain what you do, and then you can elaborate on that.

Amy: Yep.

Pete: So what, Amy? Amy, you're an originator.

Amy: Yep.

Pete: And what that means, she's also a loan officer.

Amy: Yeah.

Pete: But you also handle a lot of the paperwork, the disclosures, and the attention to detail required for a borrower to get to that endpoint.

Amy: Yeah.

Pete: And so your brain is wired in that way, and to where you can really pay attention to all of the paperwork and help that client along.

Amy: Yeah.

Pete: And so that's been primarily your role is to watch the documents to help the borrowers get from when they go into contract to when they close. Did I get that right?

Amy: Yeah, to the closing table. Yeah.

Pete: Yeah.

Amy: Yeah.

Pete: Anything else you want to say there?

Amy: No, not really. People might know as far as language. You like it to be called like my position as a loan partner, right?

Pete: Yeah.

Amy: But a lot of people might understand that position as a transaction coordinator. So they go hand in hand. Most people understand what a transaction coordinator would be like.

Pete: Yeah. Transaction coordinator. You're coordinating and managing that loan to its end.

Amy: Yeah, yeah.

Pete: Ensure the customer has a good experience.

Amy: Correct.

Pete: And so I wanted to have you on because you're really good at making sure the customer has a good experience.

Amy: Yes.

Pete: So we wanted to talk about, and I wanted to have you talk about what makes that buyer have a good experience. What is that borrower's role in having a good experience on their mortgage? Not every borrower can experience us working for them on their loan. And so whoever's watching this may pick up some pointers on what they can do to ensure a good mortgage experience.

Amy: Yeah, absolutely.

Pete: Yeah. So, the first thing I wanted to cover is that you've worked for me for nine years, February 1st. You've been with me and started as a front desk person.

Amy: Yeah.

Pete: And then you've been in this role for, how many years have you been?

Amy: I started as a front desk, and then you moved me into a pre-approval stage.

Pete: That's right. Yeah.

Amy: Before even a contract, I was chasing documentation before you found a house. From there, I moved into the loan partner transaction coordinator role. So I would say it's been at least, I don't know, seven of those eight years.

Pete: Yeah. Yeah.

Amy: Yeah.

Pete: Awesome. You have a ton of experience in what you do, but also what is required from the borrower.

Amy: Correct.

Pete: So this is the juice that I want to get to. The meat of this episode is defining exactly what the borrower can do to have a good experience with their loan officer. So we wrote a couple things down that we can talk about. The first one is a lot of borrowers; not everyone's the same, so every one is unique, and you know.

Amy: I would go so far as to say every client, every borrower, every.

Pete: Family.

Amy: Family is different. There's something different in every transaction.

Pete: Yeah. Yeah.

Amy: I would go so far as to say that. Yeah.

Pete: Yeah. So, in the beginning, let's say you have a customer who's never bought a home. We help a lot of first-time homebuyers.

Amy: Yes.

Pete: What would be some pointers you would give that first-time home buyer on starting the process before they even get pre-approved, or what would be your recommendations for that?

Amy: As a first-time homebuyer, I know a lot of times they get in touch with a real estate agent first, which most, we say this all the time, "Most buyers fall in love with the home before they fall in love with a loan." Right?

Pete: Right.

Amy: The first step will always be meeting with a loan officer or calling a loan officer and having that initial conversation. Because I'm getting your basic information, many customers ask me, "Well, do you need to pull my credit right away? Do you need to do all this?" And the answer to that is not necessarily. In that initial conversation, I want to know what your goals are. And so, just thinking about your goals before you have that conversation, "When do you want to buy? How soon?" Things like that are super important to have in mind before that conversation.

Pete: I love that because you're right, a lot of families, a lot of borrowers, they have no idea where it starts, what to do, a lot of them think, "Oh, the first thing I do is go and apply," and that's not really. We don't.

Amy: Yeah.

Pete: That's not the goal. The goal is to find out what this customer is wanting.

Amy: Yeah.

Pete: Right?

Amy: Yep. Whether you are looking to purchase right now, three months, six months, or a year, it is super important to sit down with a loan officer to know the next steps. Once you know if you want to purchase in a year and then you sit down with me or me, it doesn't matter; we'll be able to provide you with those steps.

Pete: Yeah. And I think many customers, like me, don't realize the payment. This is a big question, like, "Hey Pete, what's my payment?"

Amy: Yes. Payment's huge. Yeah.

Pete: So, like, they might have this house that they love, like what you're saying, they fall in love with the house, and then the payment comes second in mind of the payment. But what you're saying, what I heard you say is, you should know your payment first.

Amy: Yes.

Pete: Before you are looking at the property.

Amy: Yeah. Know what your comfort range is. Yeah.

Pete: You don't have to pull credit to know your payment.

Amy: No.

Pete: They can just call us, right? Give you a call and go over exactly, "Hey, what's my payment at this range?" or, "What's my payment at that range?"

Amy: Yeah.

Pete: Yeah. So what I heard you say is, for sure, talking, figuring out the plan for them, and talking to the loan officer first before the realtor.

Amy: Yes.

Pete: Got it.

Amy: Yeah. Yep.

Pete: And what happens next? Or what, what, what.

Amy: Once we take that call from you, we are just going through basic information, so having an idea of, we ask about your address history, it's huge.

Pete: Wow, that's a big one.

Amy: Right. Some people have stayed at their address for over two years, but we must get a full two-year address history. So if you've moved, some people I've seen up to ten times, we need all those addresses. And by we, I don't mean us, Von Mortgage. It's a rule we must follow to get your full address history.

Pete: Got it. And who makes that rule?

Amy: FHA, Fannie Mae, Freddie Mac, makes that rule.

Pete: Got it. So what I heard you say is that the customer and family will see how much they can qualify for. They have. Part of what they have to provide is a two-year work history.

Amy: Address history.

Pete: Sorry, address history, yes.

Amy: Yeah.

Pete: Two-year address history.

Amy: Yeah.

Pete: Sometimes the customer has been moving, and that's okay too, right?

Amy: Yeah. Oh yeah. You can move as many times as you want. As far as history goes, we have to be able to document and show where we've lived. Yeah.

Pete: Part of what I also. I'm sure, and I know you do too, but I'll explain to the customer that there are three basic things. Well, I'm going to say two basic things. We need to show stability.

Amy: Yeah.

Pete: So that's in the past.

Amy: Yeah.

Pete: And then we also need to show ability. Going forward in the future.

Amy: Yep.

Pete: You need to show stability. So, the old CEO that I worked for for nine years told me this or taught me this.

Amy: Right.

Pete: Stability and ability. So, the address where someone lives shows some sort of stability.

Amy: Yes.

Pete: They could still move and live in different places. It doesn't mean they're not stable.

Amy: Correct.

Pete: But it does help us start to paint a picture.

Amy: Yes.

Pete: So do you want to talk about the picture of the big bird's view of that?

Amy: As far as addressing history or.

Pete: Or just the big picture, a bird's-eye view of a customer, of a family wanting to get a mortgage, what's the big picture?

Amy: The big picture is regarding information I'm getting from them. Is that what you're asking?

Pete: Yeah.

Amy: Yeah. Big picture. So, we start with address history. And then we move into work history. I would say work history is number one in terms of the rules we have to follow, as per Fannie Mae and Freddie Mac. You mentioned a two-year work history earlier. Very, very important. There are many rules around how long you've been on your job and how many jobs you've had in two years. What your pay looks like, whether you're hourly or salary or, roofers, they get a piece rate, things like that. So knowing your income and how you are paid is very important.

Pete: What can a customer provide or give their loan officer information to help that process?

Amy: Yeah. So I always tell my customer a pay stub, your most recent pay stub, at least, and your W-2 from the prior year. Now, that's just basic. There is more information that we require. But as far as getting the ball rolling, having a pay stub and a W-2 from last year.

Pete: Got it.

Amy: Yeah.

Pete: Yeah. And you're right; that is the most important. One of the most important is the job and the work history because that's where the income comes in.

Amy: Correct.

Pete: To give our audience a backstory of why that is so important, they will lend this money out for a long time.

Amy: Yes. Well, and you've taught me this, it's like each transaction you have, it's almost like thinking about it as if it was your funds that you were lending someone. And would you lend someone money if?

Pete: For that long of a period.

Amy: For that long period and that much with this story, job history, and pay?

Pete: Yeah. I was also taught that by somebody else as well.

Amy: Yeah.

Pete: When you're a customer and you're applying for a mortgage, I don't want to scare people away.

Amy: Yeah.

Pete: But this call is really to help with that process, make sure that that customer is honest with her and knows their work history. There have been many customers over the last two years; they come, and we ask, are asking, and might not remember. And that's okay.

Amy: Yeah. Yeah.

Pete: This is an important detail we need to get for that pre-approval process.

Amy: Yeah. Yeah. I was talking to a client yesterday, and she said that she had talked to multiple different lenders and that she just didn't know what was allowed and not allowed with her job history. And she said no one had ever told her one way or the other. And I just really helped educate her on how long she needed to be on her job and things like that. And she appreciated that. So that's also a part of it; you don't know what you don't know as a buyer.

Pete: Totally.

Amy: I always tell clients you don't know, especially a first-time homebuyer. You don't do this every day like we do. And we're the ones that are supposed to supply you with the tools to take the steps to get there.

Pete: And many customers or families that come in might be scared.

Amy: Yeah.

Pete: And they might not want to potentially disclose things that they may potentially think it's a bad thing if they disclose it.

Amy: Yeah.

Pete: And do you want to talk about that at all or as far as what are your thoughts on that of a customer coming in, they have something that's, maybe they had this job that they quit, or maybe they had this job and, or maybe they had this job gap.

Amy: Yeah. We've had clients, yeah, that when we're getting that information from you over the phone, and we're looking at your history, and you tell me, "Oh, I've been on my job three years." Then we go to do the verification with your pay stubs and W-2s, and for whatever reason, the income doesn't align with how long you've been working at your job. And so, come to find out from the employer that you had taken six months off, maybe you got hurt on the job, or something happened. Those are just the things that we need to know.

Pete: So what I heard you say was, is that just be, just tell us because we'll help you.

Amy: Yes.

Pete: Like we're on that customer's side.

Amy: Yeah. Yeah.

Pete: We want to get them the loan.

Amy: Yeah.

Pete: And I think many customers don't understand that piece.

Amy: Yeah.

Pete: We are on their side, wanting to help them, but we also.

Amy: We're all on the same team.

Pete: Yeah. But we also know the rules.

Amy: Right.

Pete: We know the rules well, and so the more honest that customer, from what I'm hearing you say is, the more honest that customer can be about everything with what it, as it relates to the application, the better we'll be able to help them.

Amy: Yes.

Pete: And the better experience they'll be able to have.

Amy: Yes.

Pete: I've had multiple times in my career where that's happened, and we don't find this information out until further into the process.

Amy: Yeah.

Pete: And it's okay because we get it fixed 99% of the time.

Amy: Right.

Pete: We figured it out, and we're able to get it fixed. I had a customer who was moving from Southern California. They're moving up to Redding, and when that happens in that situation, you know this.

Amy: Yeah.

Pete: But when they're moving, we must have their job. We have to figure out, okay, if they are going to keep their job down there or if they will have a job up here. Or will they be able to work remotely because it's an eight-hour drive down to Southern California, and they're buying it as a primary residence? And so part of my job is to make sure that if they're buying as a primary, will they be able to have the income still?

Amy: Right.

Pete: Otherwise, if they're moving here as a primary, they're working down there in Southern California, and they might not be able to afford this home if I give them a loan, if we give them a loan. And so this is something that we have to make sure, well, this particular customer was not exactly aware that, they didn't realize they were not going to keep their job, or, sorry, they were keeping their job down there. One of them was keeping their job down there, and one was moving up here and getting a job up here. We ended up figuring it out, but I hadn't. I didn't have this information, andm I wasn't told. I was originally told that they would keep their jobs and it would be okay for them to work remotely up here.

Amy: Yeah. Yeah.

Pete: Anyways, long story short, we figured it out, we got it done for them, but it did cause a little bit of a delay. Not necessarily. And it wasn't like us that was upset about it, but just for that customer's experience.

Amy: Right. Right.

Pete: On their end.

Amy: Yeah.

Pete: We want to make sure that they have the least amount of stress possible.

Amy: Correct.

Pete: Right?

Amy: Yep. Yeah, and talking about primary residence, I think it would be cool. What's the definition of a primary residence?

Pete: Oh, great question. So there are three ways you can buy a home. A lot of customers don't know this, but a primary residence, the definition is that you live in the house just 51% of the time.

Amy: Yeah.

Pete: So you could have another place, and when we say a home, it doesn't mean that you own a home. You could rent a place and buy a place as a primary. You just have to buy it. You just have to live there 51% of the time, according to Fannie Mae, Freddie Mac, and Ginnie Mae, 51% of the time, and then you could live in the rental the other %49 of the time.

Amy: Yeah.

Pete: Yeah. There are three ways you can buy a house: you can buy a primary residence, you can buy a second home, or you can buy an investment property. If you buy a primary residence and you're going to live in the house, you have to live there 51% of the time. If you buy a second home, this is a second home, and you cannot use rental income to help you qualify for that home.

Amy: Yeah.

Pete: Now you could be renting, and that's your primary residence, and you could buy a second home. It's not a second home. It's a second residence.

Amy: Yeah.

Pete: Right?

Amy: Yeah. Then the third one is an investment property.

Pete: Yeah.

Amy: And you can buy an. Now, when you buy an investment property, you can use the rental income to help you qualify.

Pete: Yes. Yeah.

Amy: Yeah, yeah.

Pete: Now, there are differences in how much down payment there is.

Amy: Right. Right.

Pete: But, yeah, that. Many people don't understand the three different ways to buy a home.

Amy: A home. Yeah. Yep.

Pete: Yeah. So what else would you say that will help buyer's clients have a really good experience? What other topics would you say? I know we talked a little bit about documentation. Then we talked a little about loan options. This is a big topic.

Amy: Yeah.

Pete: Knowing their loan options.

Amy: Yeah.

Pete: You want to talk about that?

Amy: Yeah. So, one of the things that we do when we meet with clients is go over a mortgage cost analysis. Regarding a mortgage cost analysis, we give you multiple options and pathways to become a homeowner in different loans. So, for the customer, we want to make sure that you understand those options but also know that it's okay if you choose one option and then we get a week, two weeks into escrow, and you change your mind, and you want to change. You absolutely can make that change. However, communication on that change is crucial to ensure we're providing you with a good experience.

Pete: Yeah.

Amy: And the least amount of stress possible.

Pete: So what I heard you say was that A, the customers should know that they always have options.

Amy: Yes.

Pete: They always have. They can. It's not one loan that you can get qualified for.

Amy: Yeah.

Pete: There are multiple different ways you can structure a loan. Multiple different loans that you can get. Each one has its benefits. Each one has its drawbacks. And our job is to present those options and then help you make a choice.

Amy: Yeah.

Pete: But what you're saying is that they pick an option, and then they just communicate to us that they may want to switch to this option.

Amy: Yep. Yeah. Yeah. Or change things like you could put more down payment down or less down payment or. Those are the things that are communicating with not only your loan officer, but the team, as far as making.

Pete: The team of that loan officer.

Amy: Correct. Yeah. Yeah.

Pete: The processor, the transaction coordinator.

Amy: Yeah. Exactly.

Pete: Yeah. Yeah. Just communicating.

Amy: Communication.

Pete: Yeah. Yeah. A lot of people think when they go into a contract that, they're stuck with that option.

Amy: Yeah.

Pete: But they. I do tell customers that they can switch.

Amy: Yes. Yeah.

Pete: I need to do a better job in telling them to communicate that to us.

Amy: Yeah. Yes.

Pete: When they do want to make that switch.

Amy: Yeah.

Pete: Yeah.

Amy: Yeah. A big thing too, just in regards to that too, is a part of what we have to do when you go into contract, and this is just getting started on the process. So, we send initial disclosures. So I get a lot of questions, "Well, what are the initial disclosures?" So, the disclosure piece of it.

Pete: This is good. This is good. Yeah.

Amy: Basically, everything we have to disclose to the customer upfront as far as the loan terms, and then all federal disclosures, things that tell you about the loan and different things that the state and Fed require.

Pete: Yeah.

Amy: Yeah. So.

Pete: This is a big. This is a good topic. I'm glad we brought up disclosures. Go ahead.

Amy: Yeah. So a big question that I get is, when you sign those initial disclosures, they're called initial for a reason. So, by signing those disclosures, it doesn't mean you're locked into anything, and it doesn't mean any of the information on there can't be changed. So I always explain, let. That's. It's at that point that you're reviewing those disclosures. Yes, please review your initial disclosures. Some customers don't. Make sure that any information on those disclosures, because it's. The application's on there, with all of the information we get from you upfront, making sure all of that is correct because it's at that point to let us know any changes that need to be made, and we can 100% make those changes.

Pete: Got it.

Amy: That doesn't mean you can't sign those initial disclosures. It just means that we're able to make the correct changes after those disclosures are signed, so by the time you go to the closing table, everything is correct.

Pete: Yeah.

Amy: Yeah.

Pete: So what I. There are a few things that I heard you say.

Amy: Yeah.

Pete: The first one is, that I heard you say is, on the disclosures, it doesn't mean that they just signed their life away.

Amy: Correct.

Pete: Now, in other words, they're not obligated.

Amy: Correct.

Pete: So when someone signs their disclosures, are they obligated to finish that loan?

Amy: No.

Pete: Do they get penalized if they back out of the loan?

Amy: There are things that. No, I would say, but yes, at the same time. Part of what's in the disclosure package is an intent to proceed. So an intent to proceed is needed in order for an appraisal to be completed. Right?

Pete: Yep.

Amy: And so if the appraisal gets done and you want to cancel after the appraisal is completed, this is where you still have to and are obligated to pay that appraiser.

Pete: Yeah. And I know some offices or some loan officers, they'll actually have the customer pay for the appraisal.

Amy: Correct.

Pete: Before we actually.

Amy: Before.

Pete: Before the order.

Amy: Yeah.

Pete: We have a different process. We actually don't make you pay for the appraisal, we actually pay it when we close.

Amy: Yeah.

Pete: Because the appraiser will get paid when it's closed. But what you're saying is that if they proceed and we do order the appraisal, of course we have to pay the appraiser.

Amy: Yeah.

Pete: But they're not locked into any kind of contract or anything.

Amy: No.

Pete: They could still back out of the loan.

Amy: Correct.

Pete: And even if they did get the appraisal, they could still back out of the loan, they could decide not to buy the property.

Amy: Correct.

Pete: They could decide to switch loan terms, they could decide to pay cash for the house.

Amy: Yeah.

Pete: They could do all of the above.

Amy: Yeah. Yep.

Pete: So those. Then why the initial disclosures? What are they really signing?

Amy: They're acknowledging, I would say, that they're understanding the terms that the loan officer went over and are acknowledging the loan that they're applying for.

Pete: Yeah.

Amy: Yeah.

Pete: Yeah. That's good. This was a huge change that the feds did on compliance. Compliance because a lot of people back before 2008, when there were all these crazy loans that were being done, people were going. Getting to the closing table and they had no idea, it was like playing telephone, like you start telling someone something and it goes all the way around and by the time it gets back, it's like a completely different thing that they're getting at their closing table.

Amy: Yeah.

Pete: So what the initial disclosures are is that communicating, "Hey, this is what we're starting with."

Amy: Yeah.

Pete: And then those disclosures can't change. In other words, it's more for us because we are obligated to make sure that we disclose upfront what's being charged.

Amy: Yep.

Pete: And that we can charge more than what that disclosure is. Unless it's something that can change, but our costs and the title costs, can't change because we're disclosing it by the time it gets to closing. In other words, we can't arbitrarily increase.

Amy: Correct.

Pete: The cost.

Amy: Yeah.

Pete: For the final, this is what the disclosures are.

Amy: Yeah.

Pete: Did I say that right?

Amy: Yeah. And that's where we get into the compliance aspect of it. Because once you have an actual application and a triggered application, we also.

Pete: What does that mean, trigger?

Amy: Trigger.

Pete: What does trigger mean?

Amy: There are five pieces of information that trigger an application. You're going to test me on this?

Pete: Yeah.

Amy: This is a part of our.

Pete: And five or six, I think it's six, go ahead.

Amy: I think it's five. Is it six?

Pete: And five, okay. Maybe it's. Let's hear it.

Amy: So name, right?

Pete: Yeah. Name.

Amy: Yeah. Social security. You have to have a property address. Appraised value? Or is it an estimated value?

Pete: I think, an address.

Amy: I did say address.

Pete: You say, you said address? Okay. We might get back to you on the five pieces of information. We'll put it on the screen here.

Amy: Yeah.

Pete: So the five pieces of information, it's address, social security number, name.

Amy: Yeah.

Pete: That's three.

Amy: I believe it's the estimated value of the home.

Pete: The value. Yeah, the value of the home, I think you're right. The value.

Amy: Yeah. Yeah.

Pete: And what's the fifth one? Income. We need income.

Amy: Or is it credit?

Pete: Credit, yeah, credit. Yeah, it is credit, yeah.

Amy: Credit. Yeah.

Pete: Yeah. So there's like so many. I think the income is six figures.

Amy: Okay.

Pete: Yeah. To know the income.

Amy: Yeah.

Pete: Right? Once there are those six pieces. Okay. So that. Once you have that six pieces of information, you are obligated as a lender.

Amy: Correct.

Pete: To do what?

Amy: To disclose to the client within three days the terms of that loan.

Pete: Got it.

Amy: Yeah.

Pete: So those terms don't mean they're obligated to.

Amy: Correct.

Pete: It just means that more basically protecting the customer, saying, "Hey, these are. This is what we're charging."

Amy: Yeah.

Pete: And then those costs cannot change by the time it gets to this.

Amy: Correct.

Pete: Is that right?

Amy: Yeah.

Pete: Yeah.

Amy: Certain costs, not all of them.

Pete: Yeah.

Amy: But yeah.

Pete: Yeah. If the insurance cost goes up.

Amy: Correct.

Pete: If their homeowner's insurance, hey, this is where the homeowner's insurance started, but then we've got some more quotes and maybe it got better or maybe it got worse potentially.

Amy: Yeah. So the customer has the. Has every opportunity to shop for their own homeowner's insurance. So anything that you can shop for per the estimate can change because they have an opportunity to shop for it. Yeah.

Pete: See this is a great topic because the disclosures are a piece. It's a. I understand where the customer's coming from because they see all these documents, and it's like a hundred pages of things that they have to sign. And it's like page after page of all this stuff. And who knows? They have to like to read everything, to see, and this is where a lot of trust can come in. Right?

Amy: Yeah.

Pete: So you want to talk about trust, like that customer trusting the loan officer and making sure there is a lot of trust there.

Amy: Yeah. Obviously, trust in any relationship is crucial, not just in the mortgage world, relationship world too. But, trusting, I would say I. It's not me, I definitely. Like if I could give a loan for free, I probably would, but wouldn't at the same time. Like I want to be able to provide and help customers purchase a home first. That's the first thing I would say. As far as we understand the disclosures, if you're reviewing those disclosures, the most crucial piece to review is the loan estimate. And that's where I say that they need to trust us.

Pete: Where does that? Yes, go ahead.

Amy: But we also need to trust them.

Pete: Correct.

Amy: As far as they need to do their due diligence in reviewing the documentation.

Pete: Correct.

Amy: As well.

Pete: That's a great point because there is. There could be some things that need to be communicated to us. Like, "Hey, I noticed that you didn't put this property that I own."

Amy: Yes.

Pete: "I told you that we own this property, but I didn't see the property that we own in Maine," or in Texas or something like that.

Amy: Yeah.

Pete: Making sure all the assets and liabilities are on the applications is important.

Amy: Correct. Correct. Yeah.

Pete: Yeah.

Amy: And that's part of the disclosures that you sign that, "Hey, to my knowledge, there's not any other loan or liabilities that aren't listed on this application."

Pete: Yeah. And do they get penalized if they signed it and that somehow there is another property?

Amy: No. If they. No, they don't get penalized. If you forgot, there's so much that goes into it that it won't. Yeah.

Pete: Yes. And that's what I say too. However, customers should know that if they don't put something on the application, there's a 99.9% chance that we do find it.

Amy: Yes.

Pete: Correct?

Amy: Correct.

Pete: So there's reports and there's things that Fannie Mae, Freddie Mac have in place to be able to know if you own a property or not.

Amy: Correct.

Pete: Know if your name is on another loan or not.

Amy: Yeah. Yeah.

Pete: That may be not showing up on a credit report.

Amy: Yeah.

Pete: Part of the documentation is we see the bank statements.

Amy: Correct.

Pete: And so we can see expenses coming out of the bank statement.

Amy: Yes.

Pete: So for example, if you have an IRS expense.

Amy: Yeah, yep.

Pete: That doesn't show up on credit.

Amy: Yep.

Pete: It doesn't show up on anything else, but it shows that you're making payments to the IRS.

Amy: Yeah.

Pete: For sure that would be something that the underwriter will ask, "Hey, what is this IRS expense that you have?"

Amy: Yeah. And that's like part of the questions that we ask at an, in that initial conversation. One of the declaration questions we do ask is, do you?

Pete: It's part of the application.

Amy: Yeah. Do you owe any taxes or anything like that?

Pete: Yeah. Yeah.

Amy: A lot of people, I don't think that they connect that question with, "Oh yeah, actually I'm paying the IRS X amount of dollars."

Pete: And it's okay if they forget.

Amy: Yeah.

Pete: That's not a big deal. The goal here is to make sure that they have a good experience.

Amy: Correct.

Pete: We want them to have a really good experience. And we're going to do everything we can. But also the customer should also play their part.

Amy: Correct. Yeah.

Pete: Is what you're saying.

Amy: The trust on both sides. Yeah.

Pete: Yeah.

Amy: Yeah.

Pete: Yeah. No, that was a super good topic. Okay. What else do we get here? Understanding the numbers. So we did talk a little bit about that.

Amy: Yep.

Pete: One thing I do want to say about that is, the mortgage in and of itself is a very. Can be very complicated. In other words, there's interest rates, there's APRs, and it's a 30-year term. There's so much jargon there. And there's so many different closing costs, and loan amounts and all, there's so many things to look at. This is where the trust comes in. What I was going to say is if there's at any point you don't understand anything, no question is a bad question.

Amy: Yeah. Agreed. Yep.

Pete: Because that question could lead to that customer having a better experience.

Amy: Yeah. Yeah.

Pete: I've had customers where like, I just was talking to a customer about a reverse mortgage. I don't know what that customer's thinking, and they don't know what they don't know, but I don't know what they are thinking or have questions on. So like I told him, it's like, "Hey, the reverse mortgage is not for everybody, but it does serve its purpose and potentially it might work well for you." And I told him, "The number one thing is it's very expensive. Reverse mortgages are very expensive."

Amy: Very expensive.

Pete: Right?

Amy: Yeah.

Pete: And so I told him what the cost was, and I didn't realize he equated that cost to actually him having to pay out of his pocket.

Amy: Oh.

Pete: And so I didn't know that.

Amy: Yeah.

Pete: And, so he was like telling me he didn't want to do the loan and we were going over other details. And finally half an hour into the conversation, he goes, "So those closing costs that. When do you expect payment on that?" And I said, "Oh, no, that comes out of the loan. That's in the loan documents." And so that was an example of just making sure that you fully understand.

Amy: Understand, yeah.

Pete: And not have any assumptions.

Amy: That's good.

Pete: I don't know those assumptions.

Amy: Yeah.

Pete: And sometimes it's hard for me to say every little detail because there are a lot of details of the mortgage.

Amy: Yeah. That's good.

Pete: And once he knew that he didn't have to pay, he's like, he's all in on the reverse mortgage, he's like, "Oh yeah, let's go. We're ready to go. Let's do this."

Amy: Another really good topic is credit.

Pete: Yes.

Amy: Credit is huge.

Pete: Yes. Let's talk about that.

Amy: It's an everyday situation. I will use that word.

Pete: This is where every customer's different.

Amy: Yes. Every customer is different with credit. And a big thing. So we can get into the questions I get a lot of times when I'm talking to first-time homebuyers. Do you need a credit score when you buy a home?

Pete: Yeah. You do.

Amy: You do.

Pete: Yes.

Amy: Yes.

Pete: Yeah.

Amy: Yeah.

Amy: They'll see online that they don't, but they truly do. I've never heard of someone getting a loan, Fannie Mae, or Freddie Mac.

Pete: Correct.

Amy: Ginnie Mae without a credit score.

Pete: Credit score.

Amy: Yes. So, and to those clients, I always say, yes, we definitely need you to get a credit score. That is step number one. And a big thing with that, too is it's almost better that you don't have a credit score or any credit cards or auto loans or things like that than it is if you're on the other side to where you have dug yourself a hole and have lower credit scores.

Pete: Yeah.

Amy: It's easier to get a credit score and start off on the right foot as opposed to digging yourself out of the hole.

Pete: Let's talk about this because I feel like this is a super important topic.

Amy: Yeah.

Pete: The reason why is because a lot of people might have good credit, 640. I think that's a decent credit.

Amy: Yeah.

Pete: But they think it's horrible, so they'll never apply for a mortgage.

Amy: Yeah.

Pete: Some people think that they should do certain things to their credit before they apply.

Amy: Yeah.

Pete: And because they might think, "Oh, I need to do this, this, and this before I talk to the mortgage person, because I want to, A, get a better deal, and they're going to give me a higher rate or something like that."

Amy: Right. Yeah.

Pete: So it's the exact opposite of what they should do. Because the loan officer's going to help them.

Amy: Yeah.

Pete: The loan officer will tell them, "Hey, before we give you the loan, pay this credit card up, or pay it down by this much. We'll maximize that score."

Amy: Yeah.

Pete: Do you want to talk about that a little bit?

Amy: Yeah. More so, I have like stories in the minds of clients who either haven't worked or it has worked. I have a client for whom I gave the instructions, so a lot of times with the credit scores, if you have revolving credit, meaning a credit card with a limit that you can borrow up to that limit.

Pete: What's the difference between revolving and closed?

Amy: A revolving credit card instead of an installment loan?

Pete: Okay.

Amy: It's better to have revolving than installment.

Pete: What does revolving mean though?

Amy: Revolving means you have a limit on that credit card.

Pete: Okay.

Amy: And you can utilize that limit.

Pete: Up and down.

Amy: Up and down.

Pete: I see.

Amy: You can utilize it and pay it off.

Pete: Versus like a car loan where you pay it off and it goes down, you are unavailable.

Amy: Correct.

Pete: Okay, sorry, go ahead.

Amy: So as far as the credit bureaus are concerned, they look at installment debt.

Pete: Which is like a car loan.

Amy: Correct.

Pete: Okay.

Amy: As your debt. So paying that won't necessarily help your credit. By getting an auto loan, it won't necessarily help your credit. A revolving credit card will help your credit. And the longer you have that revolving credit card and keeping the balance under 30% will help your credit.

Pete: Help your credit.

Amy: Yes.

Pete: So what I just heard you say, Amy, is that some people think, "Oh, I should get this card because it's going to help my credit?"

Amy: Correct.

Pete: Credit. So because it's one loan, and that they have to pay it back, and if they don't pay it back, they get penalized, it doesn't really help the credit score.

Amy: Correct.

Pete: Now, over time, it could help by having 12, 24 months, but that's far.

Amy: Yeah.

Pete: Far down the road.

Amy: Correct.

Pete: But a credit card, from what you're saying, is they open that credit card, they have an available credit, that helps their credit.

Amy: Yeah.

Pete: Faster than a car loan.

Amy: Yeah, because the credit bureaus can see how you manage your money. Yeah, they see if you're utilizing it, if you're maxing it out, which you never want to max out a credit card, right?

Pete: Right.

Amy: And you want to keep your balance under 30% or pay off every month.

Pete: Got it.

Amy: But you also want to utilize it.

Pete: Yeah.

Amy: Right? You don't.

Pete: You want to use it. Yeah.

Amy: Yeah. You don't want just to have it.

Pete: We could create a whole ten topics podcast for 10 hours and talk about credit.

Amy: Yeah.

Pete: There's so much to learn, guys, on credit. This is why having trust in your loan officer and the loan officer team comes in handy because the loan officer is going to really know credit.

Amy: Yeah.

Pete: Especially if they've been around and seen many loans. I have not necessarily been in the business for a long time, but I see a lot of loans.

Amy: Yes.

Pete: Because that's where the experience comes in, and we can understand credit and help that customer.

Amy: Yeah.

Pete: Would you say that?

Amy: Oh yeah.

Pete: Yeah.

Amy: Yeah.

Pete: Yeah. There was one more thing I was going to say. Oh yeah. So, like the credit card thing, many people don't want to have credit cards.

Amy: Yeah.

Pete: They think that credit cards are bad.

Amy: Correct.

Pete: And they don't want to have credit cards, so they don't have any, but they might have this car loan. Well, someone. That I always explain, I. This is the last thing I want to talk about with credit. I explain it like this, like what you were saying in the beginning: if you give your money to somebody, do you want to give your money to someone who has a credit card but has a zero balance and can borrow up to a thousand dollars but it's a zero balance? Or would you rather loan someone who doesn't have any credit cards and cannot get on credit? That answer is that I'd rather lend to the person who has available credit on their credit card that they're not utilizing or not using. This is why I tell everyone not to close their credit cards.

Amy: Yes. That's huge.

Pete: Keep their credit cards open.

Amy: Yes.

Pete: Never close a credit card ever.

Amy: Yes.

Pete: That can hurt your credit.

Amy: Correct.

Pete: The more available credit there is, the better your score can be.

Amy: Yep.

Pete: Yeah.

Amy: Yeah. That's huge. And that's what my client is. I told him to pay down two credit cards, which he did. But he had gotten an account closed, and didn't tell me that he was planning on doing that, nor did I tell him not to do that.

Pete: Do not do that. Yeah.

Amy: But I didn't know that that was.

Pete: So you're saying he closed the account and hurt his credit.

Amy: Yeah.

Pete: And you didn't know he would do that.

Amy: Correct.

Pete: Nor did you say not to do that.

Amy: Correct.

Pete: Because there's.

Amy: So many things.

Pete: "Hey, don't jump off the cliff. You may die."

Amy: Yes.

Pete: Right?

Amy: Correct.

Pete: I didn't think about saying that.

Amy: Yeah.

Pete: But that's what.

Amy: Yeah.

Pete: Not that that's. Yeah, that's a little bit sarcastic, but you're saying there's so many things, so communicate.

Amy: Correct. Yeah.

Pete: "Hey, I'm going to do this." If you do anything with your credit, say something.

Amy: Yeah.

Pete: Say, "Hey, is it okay if I close this?"

Amy: Yep.

Pete: Or, "Hey, is it okay if I pay this balance?"

Amy: Yeah.

Pete: Or, "Hey, is it okay if I buy this T-shirt with this credit card?" All right.

Amy: Yeah. Yeah. That, in itself, gets us into, if we're talking about being in escrow, right? Things not to do when you're in escrow.

Pete: That'll be on our next episode, so stay tuned to episode two of me and Amy talking about what is good.

Amy: What not to do?

Pete: Yeah, what not to do, and good borrowers.

Amy: Yeah.

Pete: So Amy, we've been talking for a long time. It feels like it's only been a couple of minutes. And you're super, super knowledgeable about this whole process. So thank you very much. Any last words or advice you would say for a first-time home buyer?

Amy: Yeah. Number one, talk to a loan officer first. Number two, prompt. Be prompt.

Pete: Prompt. Yes.

Amy: When you're, anytime we ask for anything documentation-wise, any of it, and the sooner you can get it to us, the better experience for not only you but for us as well.

Pete: Yeah.

Amy: Yeah.

Pete: Yeah. And there's always a reason for that when requesting the documentation.

Amy: Always.

Pete: And it's not necessarily us saying, "Hey, this is what we need." We're just following the rules. Right?

Amy: Yeah. I don't want to have to request 15 things from you.

Pete: Yeah.

Amy: But I have to follow the rules and provide you with those rules and what we need to fulfill them. Yeah.

Pete: Yeah. So you're saying to have a really good experience, be prompt.

Amy: Yes.

Pete: Provide the documentation.

Amy: Yes.

Pete: Don't ask questions, just give it. No, I'm just kidding. You can ask questions.

Amy: You can. Yeah.

Pete: Yeah.

Amy: Yeah, yeah.

Pete: We'll explain it to you.

Amy: Yeah.

Pete: Documentation, be prompt, and talk to a loan officer first.

Amy: Yes.

Pete: Before talking to the realtor.

Amy: Yeah.

Pete: Love it.

Amy: Yeah.

Pete: Thank you, Amy.

Amy: Yep.

Pete: Super awesome to have you on.

Amy: Thanks, Pete.