Episode Transcript
[00:00:00] Speaker A: Hey, guys. Welcome back to Head in the Clouds, the podcast for real estate pros who are done with the burnout and ready to start working smarter, not harder. I'm your host, Heather, and today I am here with Tim Arrington. He is the owner and broker of Mortgage Corp. Hey, Tim.
[00:00:15] Speaker B: Hey, Heather. How are you doing?
[00:00:17] Speaker A: I'm doing good. How are you doing today?
[00:00:18] Speaker B: Doing great. It's a beautiful day.
[00:00:20] Speaker A: It is. It is a nice day. I'm glad it's not raining today. So today I kind of want to talk to you about the. Your side of things. It's something that every real estate agent has to deal with if they're working with buyers and sellers, and that is mortgages. So let's dive into the mortgage industry. And who better than better to guide us than Tim? I have known Tim for several years, and he has handled several of my clients. I definitely trust him. And he. You've come in several times and saved the day, Actually, when my clients had brought their own lender and their lender couldn't get the job done.
[00:00:50] Speaker B: Well, yeah, I love it when that happens. And we've done several transactions together, and I've always enjoyed working with you.
You and I are in the same way. We're all about communication and doing what's best for the buyers.
[00:01:01] Speaker A: Definitely, definitely. And that's, you know, kind of a common theme in my podcast is relationships. That's what everything pretty much boils down to is just the relationships you have with other agents, with lenders, your clients. It's a relationship business.
[00:01:14] Speaker B: Exactly.
[00:01:15] Speaker A: So, Tim, do you want to tell us a little bit about your background and how you got into the mortgage industry?
[00:01:20] Speaker B: Sure. Yes.
I've got a degree in industrial engineering, which is a far distance away from mortgages, but I did that for, like, the first 12 years of my career. I graduated with an industrial engineering degree from the University of Alabama after 9 11, so it was like 1991, I believe somebody said, hey, why don't you get in the mortgage industry? You can make some good money. And I said, I saw an ad in the paper and I responded to it. I thought I'd be doing it for maybe six months. And now I'm, I think, on my 26th year. So that was a little bit longer than six months.
[00:01:56] Speaker A: But who better than to talk about mortgages? You have a very long, successful career of working with agents, working with borrowers. How has the industry changed for you since when you first started to, like, yesterday.
[00:02:08] Speaker B: Yeah, well, that's a. That's a great question. It's night and day different. I mean when, when we first got in, I don't think people realized we were in a declining rate market for about 15 to 20 years. I mean from 19, probably early 90s, all the way till just 2023, it was really in a declining rate market. So it's a whole different sale. You got people calling you, you know, it's a, a buyer's market. Rates are going down in the last three or four years. We all know that, you know, rates have gone up. It's a lot harder to attract buyers. It's a lot harder to convince people to do a cash.
So I think that's the biggest change. Going from a declining rate market to an inclining and just how you have to change as a loan officer and then also as a real estate agent to attract business.
[00:02:57] Speaker A: What in all of that is your favorite part? And then what is your not so favorite part?
[00:03:03] Speaker B: Another good question. So my favorite part of the job, and it sounds a little corny, but it truly is helping people, helping buyers achieve the goal of homeownership, Especially first time home buyers, you know, they, they don't understand the complexity of buying a home, especially on the lending side and also on the real estate side. But there's just a lot of rules and regulations and what is approvable and what can, you know, what we can use for documents. So helping people navigate the process to get to the closing table is what I enjoy. I like to kind of take control and say, you know, if you work with me, I'm going to tell you what's going to, you know, what documents you're going to need help you get to the closing table. So the whole process is seamless and at the end of the day they're like, wow, this wasn't near as bad as I thought. So I enjoy that part. Helping, helping new people buy homes.
[00:03:54] Speaker A: Is there a common misconception for people who are like first time homeowners or want to be first time homeowners that think that they can't get a loan in reality they can?
[00:04:04] Speaker B: Yeah, I mean there's some old misconceptions that are still out there. You know, like I need 20% down. That's always a misconception. But as you know, I mean, we can go as low as 0% down or we can do 3% down or 3 and a half percent down. So the days of 20% down are really rare. You very rarely have a buyer now just because it's so tough to save money that has 20% down. There's some variation and that's where I like to come into. And not just be a numbers guy, but actually explain the process to them, explain what it takes, how it works. You know, you've heard this a million times, but it, it's the biggest decision, a financial decision a lot of people make in their lifetime or one of them. And I really believe in informing them to the nth degree to have all the information. I, I'm old school in that aspect. I will prepare an itemized fee worksheet as many times as they want. If somebody says, hey, I want to go look at this house, want to go look at this house, I'll run numbers. A lot of my competitors don't want to do that because they don't want their numbers out there that can be shopped. It doesn't bother me because they're going to. I want them to know that I'm giving them a good deal first of all, but also I want them to have the ability to shop around so they have all their questions answered.
[00:05:16] Speaker A: You know, that's.
[00:05:17] Speaker B: Go ahead. I'm sorry.
[00:05:18] Speaker A: I was going to say, that's one of the great things I personally love about working with you is that relationship where when I'm out showing a house, I can text you, I can call you, I can say, hey, I. We need numbers for, you know, this subdivision and we give you the taxes, we give you the hoa. And you can like on the spot give us numbers if we're working. And I'm not going to say like a branch name, but if we're working with like a big bank, you have to dial 1-800- and then you get whoever answers the queue on the phone, they're not going to do that for you. You're not going to have that type of rapport with that person. Especially if it's like Saturday at 7 o' clock at night.
[00:05:52] Speaker B: Think that separates really the broker. And that's one of the things, I mean, there's three different, I think, avenues someone can go about getting a loan. Probably more than three, but three main ones. There's banks, right? You know, maybe have your deposit account with a big bank and they also have somebody over on the side that says, hey, they'll help you with mortgages. Then they're really there. It's kind of more of a 9 to 5 type position. I'm sure not all bankers are, but that's the general perception. And then you have retail lenders. So retail lenders are. They're selling their company's program and products only. And then the third which is really raising, rising in popularity is the broker. And that's what I am. I've been all three. I've been with banks, I've been with retail lenders and now I'm with a broker. I think broker gives the best overall experience, the best pricing, the best everything to the consumer.
[00:06:42] Speaker A: What would you say to home buyers that are like, well I want to use the bank that has my student loans. What would you say to them?
[00:06:50] Speaker B: I'd say, yeah, I mean by all means get an estimate from them and then get an estimate from me and I'll be glad to go over it with you line item by line item and I can educate you on it there. There was a misconception at one time that if you work with a broker, you lost control of the system and it took them longer to close or you lost control of the file. But that's not the case about five years ago when some of the bigger broker players like Rocket and UWM invested ton of money into technology.
Now brokers are accessing quicker close times and we have direct access to all the underwriters too. So I would say, you know, I.
[00:07:25] Speaker C: Would get, if I was about to.
[00:07:26] Speaker B: Buy a house and I was a first time owner, even if I wasn't a first time home buyer, I would get two or three quotes. I think that's enough. I wouldn't get much more than three. And I would truly compare apples and apples because there's a lot of games that loan officers can play to make their numbers look little or less. But then that's not reality.
[00:07:42] Speaker C: When you get to the closing table.
[00:07:43] Speaker B: For example, some loan officers may say, okay, we're only going to use three months of escrows. But they know that your escrows are going to be much more. Your taxes and insurance, your prepaids, they know that because they know when you're closing in the year. So it's a little stuff. Or they may say the fees are going to be this, but then when you get the loan estimate they're more. So I try to go over, over everything in a lot of detail.
[00:08:07] Speaker A: When you have clients coming to you and I know you could like, and you have done like whole seminars on the different types of loans. But how would you explain to a buyer coming to you the different type of loans that there are? And I know kind of like in a nutshell because there's a lot to it, but what if I'm, if I'm the buyer and I Want to buy a house? What options do I have?
[00:08:26] Speaker B: Great. Another great question. So my first thing, if somebody says, hey, I want to get pre approved for loan and I take the pre approval process very seriously. And as a real estate agent, you really should deal with lenders that do the same, that take the pre approval process. If somebody's just saying, I don't need any credit, I don't need any income, I'll just give you a pre approval. You know, it's a little suspect that you don't know how good that pre approval is. Just kind of in a nutshell that may help some of your listeners. What I normally do is say, hey, do you have an idea of what your credit is? Okay, do you have any? We're going to look at all three bureaus and take the middle of those three. But now because of the cost of credit and because we don't, we don't want to start off pulling a hard pull. I just pull a mortgage soft pull that'll give me two bureaus and it doesn't even show up as an inquiry. And then I can get them some itemized numbers and a pretty good fee sheet to give them the idea of where we're at. And then if they go under contract or get serious, then we'll pull the hard pull. So the first thing I ask potential buyers, hey, do you have an idea.
[00:09:26] Speaker C: Of what your score is?
[00:09:27] Speaker B: And if somebody says like say it's less than 660, they think it's in the fives or in the low 600s, then I would almost naturally assume they're going to do an FHA loan. Either an FHA loan or if they're a veteran of VA or they're in a certain area of a USDA loan, probably a govy loan. Right. If they say, hey, I think I'm in the 700s, then we'll look at all options. We'll look at conventional and fha. Okay.
And see which one's best for them. But really I tell people, and I don't want to take over the questions here, but three buckets real quick, three things. So credit score, I need at least a 580 to get you an approval. Okay. Or at least run it through the system. Number one is credit score bucket. Number two in the most important is your debt to income ratio. So you take your total consumer debt, whatever shows up on your credit report, credit cards, student loans, car payments, any kind of consumer debt, plus your new housing payment proposed. So I'll just give them, if they say we're looking in the 400 price point range. I'll have a general idea of what the monthly P and I would be. I'll estimate insurance, estimate taxes. So I'll get their, their total debt, that new housing payment plus the consumer debt divided by their income. Okay. And that if it's W2, it's straightforward, it's what your W2 is. If it's self employed, this is where everybody gets tied up. A two year average of line 31 on your schedule Cs, you take all that in consideration, you come up with the ratio. But a great rule of thumb, if somebody's an agent and you really don't want to be an agent, you want to be a loan officer and get in too much detail because you're trying to sell the house. But if you can somehow get around ballpark if you know what their income is. So if they say they make 60,000 a year, you kind of know it's about 5,000amonth. Just off the top of your head, you know, half of that, which in this case would be 2500, is a total amount of debt they can have out. So if somebody says I have two houses and three cars and I'm trying to buy 500, but I make 60,000 a year, you probably know the ratios are not going to work. First thing is credit, second thing is debt to income and then third is where the money's coming from. Is it you're getting gift funds, are you getting DPA funds or you're borrowing that money or you know, there's different things. So we got to document that. So we document your credit score, we document your income, your debt to income and then we document and source where the money to buy the house is coming from. And that's it. That's it. A nutshell right there.
[00:11:53] Speaker A: Well, no, thank you for explaining that to us. So that actually led us into a couple of questions. My first question would be, so somebody comes to you and they find out their debt to income ratio is too high. So is all hope lost forever or is there something that, you know, you can do to help them eventually become a homeowner or get on the path to homeownership.
[00:12:10] Speaker B: Yeah, you're on the right. I mean you're thinking like a loan officer. So if their DTI is too high, people don't know this. Like I could go off and say they have money. Say they have money either through gift funds or they just have cash saved up, we can pay off debt to help them qualify for the new purchase. So if we make it to be paid off to be paid, it's just going to increase their cash to close. So say there's a credit card and there's check $20,000 and that 20,000 is 800amonth, right? Right now I'm having to count that $800 a month but if they had the extra cash I would just include that to be paid off as a debt. And now I don't have to count that 800 against their ratios. So one thing you can do is see where they are with income with available cash and pay off debt to help qualify. Another thing you do is if they're thinking hey I'll just go and buy myself right, but their DTI doesn't work then is there anybody else we can add to the loan? Can we add a spouse or we can add a parent. We can even add a non owner occupant. They don't even have to be living in that home. We just count the new debt, the new credit score and use them on the loan to help us qualify.
[00:13:18] Speaker A: So that, that's awesome Tim. That's really good for our listeners to know. So even if you know they think oh that's bad news, I don't qualify, all hope isn't lost. They're still, still things and ways to kind of, you know, maneuver the situation.
[00:13:32] Speaker B: Debt debt to income is overcomeable. Not high enough credit. Say I'm in the four. That's not a road stop either. It just may delay the process. We'll have to do some credit repair. We'll have to try to get our credit cards 50% of the available balance and we'll have to see if there's anything in dispute. We'll have to go and get that. If it's credit is the reason we're not getting an approved eligible. It may take a little bit of time but it can still be done. There's really nothing that can stop you from buying a house. If your, your mindset is you want to do it and it's a priority, you work with a good loan officer, we can help navigate the process.
[00:14:08] Speaker A: And that's awesome. And so that's the key is just to make sure you're working with somebody who's looking out for your best interest and is there to guide you along the way like Timid Mortgage Corp. A commercial there.
[00:14:18] Speaker C: I like that.
[00:14:19] Speaker A: How has the industry either kept up or not kept up with the new ways of making money. Now with the age of like TikTok and going live, people are making large Amounts of cash and they'll go from like having nothing to having enough money to buy a house. But they don't really have a form of showing earned income other than like live streaming something. So how does that play in effect to buying a house?
[00:14:44] Speaker B: Yeah, they, I don't know that they've done a great job there. I think they're a little bit behind. I think there's going to be have to be some, some more changes made. Fannie, Freddie the agencies, they move a little slow and you're right, I think what's that term, they call it gig economy. So there's so many people out as Lyft drivers or Uber drivers or just you know, different ways of making money that may not be your normal punch o' clock and get a pay stub.
So I actually think the agencies will need to come out. If you go non QM to bank statement loans, do DSCR loans do some of these other loan program or investors, they seem to be a little bit better in that aspect. But here's a good thing for your listeners to know too really. There's three avenues. There's agency, right, that's going to be Fannie, Freddie, fha, USDA and va. I mean that's your agency loan. They're going to be the hardest to get right, but they're going to give you the best rates, the best times, the best rates. They're a little bit more restrictive but they're also covering their risk by making sure that they have a good loan that's going to perform and not default. Then the next group of loans is you'll hear non QM or Alta used to be the old subprime loans. These are anything that doesn't use traditional W2 pay stubs, tax returns to qualify your income. These are like bank statement loans, DSCR loans, interest only loans, jumbo loans, all that's considered non qm. That's going to be your next move after agency and it's going to be a little bit higher rates and it's going to be higher rates, usually a longer term. So these are private held investors that are giving you the money and they're kind of almost portfolio in it or holding the paper and selling. Some cases they sell to agencies but usually they're holding that paper. So they make their own guidelines but they're in the business to make money too. They're not, they don't want loans that are going to defer fault. Now a lot of people think hey well what do you care if I don't make my payment, you have my house, you can just sell that. Well, first of all, banks aren't into business to sell homes. They don't want to do that. They're not set up for that. They want you to make your monthly payment and then the 3rd Avenue. So 1st Avenue would be any of your agency loans. Then you have the non QM investors and then you hear the term hard money. Hard money is more like you, you don't have any income and really you're hard to document.
So we're going to charge you 10 or 11% and we're going to make the term much shorter. So there's really a home for the all three, anybody. But as you move down the line there are higher rates. So what I try to do is can you qualify for the best rates? If you can't qualify for the best rates, can we look at non qm? Can't do non qm, then we're going to have to look at hard money. So that's kind of good thing to know. I think a lot of people get confused on the agents about the different loan types. Thought I'd throw that out there.
[00:17:36] Speaker A: No, that's good. That's really good information and I hope everybody's taking notes because it's really good information to have. Especially with the way everything is changing from the way people are making money to the way they're, you know, spending money. When people who aren't making money traditionally and then they're Uber drivers or you know, they are streaming or something like that and then you have tips involved. Where do they start? Understand along the lines of like claiming the money that they're making, should they claim everything, should they not claim everything? The tips like how does that work for them when they're trying to buy a house?
[00:18:08] Speaker B: Well, when you're trying to buy a house, your best to claim everything. I mean you really want to be able to document it whether it's some way of documented. If you get W2s, especially the year you're going to buy go out, you're about to buy a house, you want to have the foresight even a couple years in advance. Maybe I put more on my tax returns and I write off a little bit less so my net income is higher. Because that's what we're going to use to qualify you on your amount. Right. I know as a self employed owner, I'm self employed that you want, you're encouraged to write off a lot. But the year you're trying to buy a house, if you're going to be on the loan. You might want to rethink that a little bit.
[00:18:46] Speaker C: So.
[00:18:46] Speaker B: But that's it. I mean, if you're W2, we're looking at pay stubs. If you're highly commissioned and you get a lot of tips or you're 100% commission or you're self employed or you have a K1 or whatever, then we're looking at using tax returns. And that's where it gets to be a little bit of an issue. That's where most people don't get. They don't get, I made $100,000, but you told Uncle Sam it cost you from your expenses $60,000. So I can only use 40K, you know, or say approximately, you know, almost 4,000amonth to help you qualify. And the worst part is not just one year, it's a two year average on most cases.
[00:19:28] Speaker A: Would you say that if you're wanting, you know, to buy a house in the next couple of years, it would be a good idea just to talk to a lender now, even if, you know, you're, you know, you're not quite ready, but that way you can kind of get your ducks in a row and get things organized.
[00:19:41] Speaker B: Definitely, definitely. It's, I mean, and I love that you would say that because that's kind of the way I view myself. I'm not just a order taker or here's the rates. I want to help, I want to consult people. I think I'm almost a financial mortgage consultant that can help you get in position to buy a home. So I think that might be one of my biggest. It's not really a pet peeve, but people don't understand. I'll get calls, Heather, once a day almost. And they're like, okay, well what's the rates today? And I think we've had this conversation. I'm like, well, what, what do you want the rates to be? They can be anything you want them to be. If you're willing to buy points and buy the rates down. I can make the points 2%. I can make them anything you want it to be.
I mean, you, Tony and yourself, you guys get it. Y' all, y' all get it. You're great to work with. But a lot of agents like, they don't get that are really mostly first time home buyers or buyers that they don't get the whole process of what we use to qualify somebody.
[00:20:34] Speaker A: So I have to think everybody gets hung up on the rate. Everybody's always like, oh, the interest rate, the interest rate And I never understood why. To me, it was always the price of the house. Because you can't change the price of the house after you buy the. After you buy the house. And for some reason, people are more concerned with the interest rate than the price of the house.
[00:20:51] Speaker B: You know what's crazy about that, too, Heather, is I never understood that, because the difference. Say you're buying a $400,000 home, right? And you were like, I got to get the best rate. Or my rates are.
You say you're at 7, right? Which is on a conventional loan, you're probably about seven and a quarter today, maybe a little bit higher. The difference between 7 and, say, 6.875 on a $400,000 loan, maybe 50 or $60 a month. It's not that much. It's not enough to be like. I mean, I'm. I'm bigger about it. If that's your big thing. Try to negotiate seller concessions and buy the rate down. Just get a lower rate to start with.
[00:21:26] Speaker A: So I guess, would that be one thing that you wish more agents knew?
[00:21:29] Speaker B: What I wish more agents. I think the biggest thing I think I wish about agents is they think somehow we're associated with the appraisal. I have nothing to do with appraisal. We order it from an appraisal company. An appraiser has a lot of training. They have to go through three years.
[00:21:44] Speaker C: Of apprenticeship before they even become an appraiser.
[00:21:47] Speaker B: Most of the ones have been in the business. But a lot of times I'll get upset, hey, this house didn't appraise. You don't know what you're doing. This house didn't appraise. I'm like, all I did was order the appraisal. I don't set the value. So I think that's a misconception, is that somehow the lender has something to do with the appraisal. It doesn't. We're just ordering it. And if it comes back at what the appraiser thinks versus what the listing agent thinks, maybe the listing agent is wrong. Maybe the listing agent put it at that price because they wanted a higher amount. So I don't know. I always have a struggle with that because I really think I represent. I have a lot of bosses, and the buyer, the buyer's agent, the listing agent. I have a lot of people I have to answer to. I mean, they're just going off of comps and other stuff to come up with a value. But that's a little bit of a pet peeve about real Estate agents, especially listing agents that get all upset if it doesn't appraise.
[00:22:38] Speaker A: I didn't realize that they blamed you when something didn't get an appraise.
[00:22:42] Speaker B: I blame the lender a lot on a lot of things, but that, yes, that's one of them. Like I knew we should have went with our lender. My values always come in. I'm like, well, I have nothing to do with their appraiser. So yeah, I get blamed for that a fair amount. But I'm okay, I'm thick skinned.
[00:22:57] Speaker A: So there are a lot of factors in play, but I guess nobody wants to be at fault. So it's got to be somebody's fault and not theirs.
[00:23:02] Speaker B: Well, plus I think it moves. You know, maybe agents are still thinking three months ago or two months ago and now new data came in that the appraisers using and that does affect the value. I mean it, it can move quickly. You know, a neighborhood, if one or two go lower, especially on the same street or nearby, that can affect the value pretty, pretty quickly.
[00:23:23] Speaker A: Okay, Tim, so let's talk about down payment assistance and the pros and the cons for home buyers.
[00:23:30] Speaker C: Okay. Dpa, you'll hear that term down payment assistance is really hot right now. It's tough to save money to buy a house. So there is some true 100% loan programs. Like if you're a veteran, it's probably the best loan out there. Any kind of VA loan. If you're a veteran, utilize your VA benefits to purchase a house. I will say even on that there's some requirements and it only goes for 100% of the loan, you still have your closing costs. So if you can get a VA loan, 100% down payment or 100% loan and then work with somebody who's good at it like you guys are to get the seller to pay some concessions because you can get up to 4% on a VA loan. Seller concessions, that is the best loan going. 100% loan, very low rates and then get the seller to pay for some of the closing costs. Cost. That's number one. There is a ton of down payment assistance loans out there. The bigger loan programs like Georgia Dream, there's a lot of initiative and county initiatives. There's one in Columbus, Georgia that's real good. There used to be a Gwinnett initiative. There's tons of them and I don't by no means know them all. Problem with those is like they fund them for a year and everybody will be hot and heavy over this program and then they'll go away, right, because they run out of money and then they're not, they have to wait or maybe it was only meant to be a year. It's supposed to, you know, it's some extra surplus money that a government agency has in most cases that issues out. Okay. But there's also banks now getting into the space and other investors that are issuing down payment assistance. Okay, so is it a, is it good for the VARs? In my opinion, no. Now I should, I don't want to be a straight hard. No, it's not going to give you the best rate. I don't care what people say. So if you can qualify for three and a half percent, say you're doing an FHA loan, your scores are if somehow you can get your family to give you gift funds for that three and a half percent, you get the seller to contribute to your closing cost. The best rate you can get is just a normal FHA loan. Outside of va, it's just a normal, you get somebody to help you with the three and a half percent. Even if it's like okay, say I'm buying a three hundred thousand dollar home and three and a half percent, well like seven five hundred dollars right. Down payment, you can get the, you know, say I have two grand, you get somebody else to help you with the other. Okay, so that is going to give you the lowest rate. Okay. But there say that's not possible. You don't have any family, they don't have any money. You want the house. There is some DPA loans that are better than others. There's, there's some loan investors that you know will do it as a true double down payment assistance. You got to be careful. Every one of these down payment assistants are a little bit different. Some of them are a grant, some of them are repayable, some are non repayable. You got it. You know, some of them don't just come off unless you've made your payment for four or five years. So all these different empowers and some of these big banks have their own ones, pros and cons. And they just have to know that investor. So you have to work with your loan officer and say hey, I don't have the three and a half. I can't get it. I can't get it. I need to go this down payment. Well, I'm going to tell you right now, your rates will be higher. They will be slightly higher. And then you just go through and look at the different ones and make sure that the criteria that, that Investor has for later down payment assistance meets this buyer and you tell them the pros and cons and say, hey, here it is. You know, you could have got a rate if you can come up to three and a half, your rate is 6.25. If you want to go this down payment assistance, because you're not putting any skin in the game. You're borrowing 100%, your rate may be seven and a half and you're they're going to charge you a point to get it or point and a half. So really, if they're charging you a point and a half and they're only giving you three and a half, you really only picked up a point and a half. So for a point and a half, you're getting a point more in interest rate. No, in that case, I'm like, you sure? Let's retract every way you can get more money. Do you have a, do you have a 401k? Do you have even a little 401k that you can take out money now? You can take it out as a loan. So you don't even have to count that in your debt to income calculation that 401k used to. You have to, but not anymore.
Now that they considered a loan, they don't even count that because it's your money. You're just getting a loan to yourself.
I'm probably a little bit different. A lot of people get on here and spout how great DPA is because they know that gets the phones ringing. I'm like, hey, that's not my first go to. My first go to is, can you come up with the money? If you can't, then yeah, we'll look at dpa.
[00:28:00] Speaker A: Do you think that a lot of the advertising for Down Payment Assistant is a little bit of clickbait like you were saying, just to get the phone ringing. And then it turns out the people don't actually qualify and they can't get the funding.
[00:28:10] Speaker C: I think so, yeah. No, I don't want to be like somebody calling me and saying, well, you don't know more program. Our program is this. So I don't, I don't know all the programs. So there, there could be some good examples and I will help everybody search. But I start off with, here's your best loan program on a, on an agency or whatever. And then we'll go to dpa. But you know what also people don't understand is the down payment is just one aspect. You still have to get the FHA loan. So it's does nothing to do with credit qualifying you for a loan and it does nothing to do with your debt to income. You're still qualifying with a regular, traditional or FHA loan. Then you're getting help with the dpa. That's all about where the money is. That's that third bucket where your money's coming from. So a lot of people also think first time home buyers, hey, I've got a, you know, I'm just gonna be a little silly here, but I got a 400 credit, I'll just use DPA and that'll take care of everything. That just not how it works. You still gotta qualify for the first loan, the 96.5 and then we will help you. If you have no other avenues to get the money, I'll help you investigate other down payment programs that can help you come up with that.
[00:29:21] Speaker A: It's funny you're saying that. I know one thing that I hear from clients a lot was like I would send them the link, like your mortgage application and they would be like, why do they need all this information? Why do I have to fill out these forms? Why do I have to give them all of my history and you know, all of my, my taxes, my W2 is, my employment information. And I'm like, dude, they're going to be giving you hundreds of thousands of dollars. You have to show that you have the money to pay this back. Do you run into that a lot? You know, not wanting to turn in.
[00:29:50] Speaker C: Try to be considerate because they're, you know, I just say, listen, if you're about to give somebody 400,000, are you going to make sure that they're, they're going to repay you back? Are there, are there a good risk? It all comes down to risk. So banks are saying, I have this amount of money, millions of men's dollars, I'm going to loan it to this guy. Am I going to get a return on that investment?
Is that person a good risk? Are they, am I going to loan this money? And in three weeks or three weeks, three months, three years, whatever, they're going to default. And then we're just holding this loan that we've already given out money on. We're going to have to sell it less rates could be higher now. So they're all about analyzing risk. And unfortunately the system could use some revamping. It's they always. But the way they've decided to evaluate that individual risk is credit score, debt to income and where's your money coming from? Is it your own Funds or is it dpa? That's another thing people don't understand is if you go down payment assistance, I have to put that in the system as down payment assistant. Run it through automated approval engine to determine whether you can get the loan. That is a riskier file. If you have no skin in the game versus if it's your, you know, if it's your own funds you're pulling from your savings, you're pulling from your 401k, it's not as risky. But if I have zero, then really, where is your commitment to make sure that you pay your mortgage payment before you go buy new clothes or new tennis shoes? Because they want to make sure you're a good risk. It's all about calculating and analyzing risk.
[00:31:19] Speaker A: Like you said earlier, the banks don't want to take the house away. They're not in the business of, you.
[00:31:24] Speaker C: Know, they lose money when they default. They have to go seating. That's not what they're in business for. They're not real estate agents. They don't want your house.
[00:31:31] Speaker A: And speaking of like buying new shoes, buying new things, when you're in the process of buying a house, I know this is something I always very clear with buyers. When you're in the process, you're, you know, getting everything worked out so that you can be at that closing table. Why shouldn't people go buy furniture on financing for that house? Why shouldn't they buy a car? Why shouldn't they sign a student loan for their niece or something like that? Why do they need to not do anything on their credit during the process?
[00:31:59] Speaker C: Yeah, I get calls in the middle of a loan process and they're like, hey, I'm about to go on vacation, is that okay? And I'm like, you know, I don't know, how much is the vacation going to cost you and whatnot? It all goes back to debt to income. Until you actually sign the papers, they're making sure you didn't lose your debt to income. So if I'm, if I pull credit and credit's good for 90 days and it's this amount of debt on there, right? So that's your debt. We're going to divide that by your income and we know you're good. But if you go buy a new car and all of a sudden you have another $800 payment, I got a cap and the new debt. So that's why people are like, hey, don't go be buying a lot of stuff and opening up new lines of credit because they're Going to check it. Seven days prior to closing, we do another credit, basically softball. We look and make sure no new lines were opened because if there was, we've got to get documentation what the balance is because it's going to increase your debt to income ratio. It's all about dti. Debt to income is the most important, really qualifying factor. Credit score is what it is. But there's so many moving parts with your debt to income ratio. That's what really, I think banks use as the biggest tool to determine whether buyer A is a good buyer, whether we should give them this money or not.
[00:33:11] Speaker A: So plan that vacation around the closing to be after the closing, the furniture after the closing.
[00:33:17] Speaker C: Right.
[00:33:18] Speaker A: So tell little Susie she can't go to college yet.
[00:33:20] Speaker C: Yeah, don't lose your job. And if you do lose your job, people, that's another thing. We've had people that were ready to close. I think one of Tony's we had ready to close alone. Right. And they do a verification of employment seven days prior to closing too. Anywhere from zero to seven days. And we've called them or, you know, processors have called and they no longer work there, no longer worker. So then we call them, hey, man, we just tried to do a voe on you. What, what happened? Oh, yeah, I left that job. I got another one. I'm like, why didn't you tell me? So, you know, we're all at the closing table. We're getting ready to go to the closing table. Oh, I just, I thought it would mess things up. It's always better just to come up, tell your loan officer what's going on, because we can, we can move on the, on the fly pretty quickly. We can then go say you got a new job, get me a new pay stub, get me new everything. Let me get that back in front of underwriting. And nine times out of 10 works. Now, if I qualified you making, you know, 120,000 a year and you're only making 60,000, then we have to rerun the debt to income and it may not work.
[00:34:22] Speaker A: Can you kind of elaborate and break down for us the rules and regulations when it comes to the years you have to have in a certain job and the related industry and how that works? And I know we've run into that a couple times too, where somebody put their job and then got a totally different field.
[00:34:37] Speaker C: So the main thing is if you're two going to W2, it's pretty straightforward if you're in the same line of work, right. So if you were, you know, an accountant working for an accounting firm. You went to another accounting work for another accounting firm and we got an offer letter or we got a new pay stub that makes pretty good as long as there's no large gap. Right. But if you were a school teacher, right. And then you went to become a fire person that was highly commissioned or you were, you know something that. Well, that. That's can be problematic because you haven't enough time in your new job in your new field. Especially if you're highly commissioned to determine what your true income is going to be if it's W2 to W2 and even if it's not the same field. But we can say you were an office manager here or you're an admin person here or an HR person and you're an HR person here. We will make it work. But it's when you change the whole field what you're doing. And really if you go from W2 to either highly bonus highly definitely if you go to self employed. Self employed people do that. That's the worst thing you can do. Go to a good W2 job, say I'm going to go become my own boss and be self employed and then try to go get the loan.
You would better be sick with W2 until after you buy the house. Yeah, that's a thing that happens a lot. People don't get the difference between. I've got to look at two years of W2.
[00:36:03] Speaker A: So two years W2.
[00:36:05] Speaker C: I'm sorry, two years of tax returns, tax return. I only need to look at on W2. I just need to look at the pay stubs.
[00:36:11] Speaker A: Okay, so there's a pay stub but. But preferably same field, same type of stuff.
[00:36:16] Speaker C: Don't do crazy job changes and even maybe have a reason why I left. Even like I got a better job or something like that. So that's not a deal breaker. Going from W2 to self employed usually is a deal breaker because you don't have two years set up in that. In that new job or new business. A lot of people don't get to. They think 1099 is the same as W2. 1099 is self employed. You are 1099. You're a contractor that works primarily for this one company or one person and they give you a 1099. But you're still self employed. You pay your own taxes. That's another thing a lot of people think 1099 is what I made 100,000. You. They gave you 100,000. Then you had to tell Uncle Sam, you wrote off 50. So that, that kind of comes back to that.
[00:37:01] Speaker A: That's kind of what we were talking about earlier about making sure that if you are self employed, if you, you're claiming everything and you're not just right.
[00:37:08] Speaker C: Everything off, make that another thing that's is offer letters. They've kind of cracked down on that. They were getting really, agencies were getting pretty laxed on it, but they've been a crackdown of the Reese, you it needs to spell it out. You need to be a salary employee. You know, like I would get, hey, I just started this new job. They didn't qualify before. They said they make say $3,000 a month. Right. And then they go get a job. Right. And they say here's my offer letter. And the offer letter is $7,000, almost like a 100% increase or more and but I'm going to be hourly and the offer letter doesn't spell out the terms and condition and it's contingent on this that that's not going to fly anymore with agencies. They're going to want you to show a clear I'm a salaried employee. Here's the offer letter spells out every term. There's no contingencies. And then that may work. But some of the offer letters in the past that help people get qualified are being looked at a little bit more partially now.
[00:38:04] Speaker A: Gotcha, gotcha. Can you break down for us on an FHA loan just kind of like roughly credit score and then down payment and the requirements for those.
[00:38:14] Speaker C: And I, I know it's a lot of FHA loans. I mean I'm a big fan of FHA loans. You know, I think they perform just as well as conventional. They get a bad rap. They get a bad rap with agents. That's a no. I should have went back and said that on my pet beef is that VA and fha, a lot of agents kind of turn their nose at those because they think they're being scrutinized on the appraisal. But I think they need to kind of change that attitude a little bit and allow. Because they're missing out on a segment of people that could purchase a home. But yeah. So anything from 580 or greater will work with an FHA. Okay. Should work. That doesn't mean you're going to prove eligible. But less than 580, I can't even run it through the system. So from a credit standpoint, on an FHA loan I need at least a 5, 580, you know, debt to income. That's a good thing. With FHA you can go up to 55%, 56% maybe, but usually the max is about 55% DTI. Right. So it allows for a higher debt to income ratio. That's a good thing. Another good thing is on student loans, they're only going to count. That's another thing people don't get on student loans. On fha, regardless if it's in deferment, I'm going to look at the balance and use a half of a percent of that balance to count against your debt load. Whereas on Fannie they're going to use a percent 1%. So a little bit more forgiving on FHA with student loans, 580 credit, probably in that 55 max range on ratios, it's a possibility if you had enough reserves, it could maybe bump it up a little bit higher. Yeah. And you just, if you have those, I can run it and then see where we're at. It may be that 55 is too much, they don't like it or they, we may need additional reserves. Reserves help a lot. So if you're having trouble getting a loan and I would educate or talk to your loan officer and say, hey, why don't you see If I put $10,000 in reserves that I have that can I get an approved eligible. And sometimes they don't even ask for those reserves. Just adding it into the application will help you get approved.
[00:40:14] Speaker B: Eligible.
[00:40:15] Speaker C: FHA likes reserves on low credit scores, high ratios. That's pretty much it. And then where the money's coming from, where that three and a half, we go back to that. You know, I've got a document, I'm going to get 60 day hours. Another thing, 60 days of bank statements. All right, so I'm gonna get 60 days of bank statement. I have to source any large deposit. I think we're at 99, if that makes a difference. Does it, Are we good?
[00:40:36] Speaker A: It says yeah.
[00:40:37] Speaker C: And then the, the I'm gonna ask for 60 days of bank statement. So if there's a large, you know, deposit that you can't source, say you won gambling or you somebody just gave you cash. Right. And you can't source it and you can what they call. And I got to be careful here because I'm online. But you can season that. I'm only going to ask for 60 days. But if you put that money in 90 days ago and then send me 60 days of bank statements, I would not see that. So the, when you're starting to buy a home, always be on the foresight. Okay, this year I'm going to buy a home here. What do I need to do to get myself in position?
So there's a lot of little nuances that I have learned over 25 years that I love to share with people.
So, yeah, I mean, work with a good loan officer. There's a lot of them out there. There's a lot of not good ones too.
[00:41:29] Speaker A: Just like real estate agents and professionals in every industry, there's good ones and there's bad ones. And you got to be careful who you work with, who you pick to associate with in your day to day life. Where do you see the market headed?
[00:41:41] Speaker C: So with rates, here's what I see. If you, if, you know, if you've been following some of the economic and indicators and economic news, we've moved over from the first time and I think last four years we've kind of switched from a seller's market to a buyer's market. There's a first time that the inventory basically there's more homes on the market. They've been in the last five years. So the inventory is coming back online. Right. The only thing we need to do now is get confidence in the economy and that we're not going to create inflation and get the rates down. I would love to see the rates on a conventional loan, you know, maybe mid sixes and in the fha, low sixes, high fives. If we can get that sweet spot with the inventory coming back online and then the rates in that low sixes, mid sixes, that would be a sweet spot. I think everyone would start jumping and saying, okay, this is, this is where we're going to get. Problem is we've had no inventory and then no rates. Now we're getting a little bit of inventory, but high rates. So if we can work, those two things can work together. I think we're in a spot to see huge boom for real estate agents and for loan officers. I do think in certain pockets of the country already look what's happening in Florida. We're having a housing bubble. I think in that in 2008 when we had our big last crisis, it's the same thing. Florida was kind of a flagship for what was eventually going to happen across the country.
[00:43:06] Speaker B: Country.
[00:43:06] Speaker C: But right now price points are really dropping in Florida. So I hope that's just an isolated area. Hope it doesn't transcend to the rest of the country. I don't know that it will. I just think people are still a little uncertain about the indicators with the economy and the tariffs and how that all is going to impact the mortgage backed securities. But everything I read and see right now, it's moving in the right direction. We got some good news today. Rates improved a little bit. But I will say this, you don't have the luxury anymore to wait. Hey, rates are now at, you know, they, they came down a quarter or they came down half a point. I'll wait till they come down a point because you could be waiting a while. You see a little bit of movement, you need to jump on it because it could go the other way too. No one knows with 100% certainty. I, I'm bullish. I think that the market's going to rebound. Whether we're going to rebound where we have this huge cash refinance boom, I'm not sure. But for the people that are on the sideline to purchase, I think we are going to have a little bit of better time. Maybe rocky up and down the next three. But starting in the fall and then the beginning of 2026, I think the factors are going to come together where it's going to be positive. I'm pro right now. I'm upbeat.
[00:44:18] Speaker A: I do know from the real estate side of things, and I know you can never really, you can't predict the market. You never know what's going to happen. But from what I've seen in the past is when the rates do come down, the prices go up. And I was there when it was. I remember one time Tony and I went to a showing and we were working with a client who wasn't even using a loan. He was cat like cash and we offered 70,000 over asking price in cash and didn't get the house.
[00:44:43] Speaker C: That's what certain pockets are always going to be that way. But that's because there's no inventory. I mean, if you think about it, what was it? You know, Covid, there was three years, we didn't build one home. We didn't have any lumber. We didn't, I mean, we basically put building on and we were already low in inventory. The new home starts real low. But in the last three years we've been getting back up. So that whole philosophy about, oh, you know, if rates get lower, price points are going to go up. That works when there's no inventory. But when you have supply and demand and you can't charge that higher rate, somebody will just go to another house. Then, then you have the perfect mix between lower rates and inventory. They can't play that game where I'm just going to Go up on price points.
[00:45:23] Speaker A: Can you explain refinancing for people who don't know what, what that is?
[00:45:28] Speaker C: Yeah. So refinancing is just paying off the existing mortgage to either get a lower rate or get your equity out of the house. So what most people don't know about refinances is we're going to get a new appraisal. Okay. And we're the max if you want to get equity out of your house. People think they can get 100% equity out of their house. Now the rule is the map, the motion get is 80% of the new appraised value.
So if you bought the house for, I'm just using some numbers here. 300,000 five years ago and now you think it's 600,000.
Right. Well then we're going to take 80% of that 600,000. Right. So what is that 40, 600 times a.80 times 0.80? 480,000, right. So the most you can get is that 480. 480,000. 80% of the new appraised value. So say you got four hundred and eighty, you've been in the home for about a year or so and your balance is now say 275.
So in that scenario you have $205,000 in equity. You can pull out for whatever reason you want. So now we have a new loan for 480. We paid off the existing loan. And the difference is the cash you can pull out and get is in the form of money, cash in hand. But say you don't want equity, you just want to lower your rate. So then we take a look at the same process. We look at the appraised value minus your balance, okay. And then that is your new loan amount, whatever you need it to be. And then we just do a rate and term. Rates on a rate and term are going to be lower than they are in a cash out refi problem right now is unless you there's a ton of equity, everybody has equity in their home right now.
And there also is a ton of debt. Credit card debt is at an all time high. So people are so tough or that they don't learn. Like I got a 3% rate, why would I mess with my 3% rate? Well they're not, they're really being a little short sighted because then they say, well yeah, but you're also got 60,000 of debt at 20% that you're paying. It would be much smarter to grab some of that debt even if it's 6% and pay it off and pay off all that credit card debt, then it's going to be a lower monthly payment and help you get out. People are struggling themselves with all this debt because they want to hold on to the 3% rate. That's why HELOCs are so popular right now. It's because people are keeping their 3% rate. But go get in a line of credit. Line of credits are good to a degree. I wouldn't put a lot on the line of credit because it's just like a credit card, it's month to month. So if the index changes or the market changes for the worst then that month you're commitment on the ELOC is going to go lay up.
[00:48:03] Speaker A: So somebody who isn't even wanting to necessarily buy another house, they're just kind of wanting to change their overall financial position. They can call you and talk to you about doing a refinance to see learned the business.
[00:48:16] Speaker C: Yeah, I was, I was one of the first lenders on LendingTree network back 20 years ago and that's when rates were going down every day. But yeah, I do it. I love refi, I do a lot of refi and there's so much you can do with reference refi. We can say why don't we pay off these four debts and then you can save a little bit of money, put it aside, do some repairs. So it's like a puzzle too. You just look at your whole financial picture, figure out what debts you want to pay off, how much equity is in the home, the closing costs on a refinance are going to be less than they are on a purchase. You're not going to have like owner's title that's just reissued. You're not going to have some of the other closing costs associated with a purchase and that's rolled into the loan. So if you owed, you know, say you're going to do a line up for 400 and you want your loan amount to include your closing costs. We just put all that in there. So you, it's not like you have to have any money to come to closing with. You're just pulling equity out.
[00:49:08] Speaker A: Is there anybody that you would say that they shouldn't do a refinance?
[00:49:14] Speaker C: Yeah, I mean if you're, it depends on your situation. Every situation is different. If you're, if you're at a 3% or 4% and you know you don't really need the money, you don't have to pay off debt, you don't have a lot of debt, then you should just keep your rate. There's no reason to go from a four to six and a half unless there's some benefit to you, a net tangible benefit. And most of those loan programs won't allow you to do that. There has to be a net tangible. You have to be paying off debt, you have to be reducing your rate. There has to be some reason most investors, per Fannie guidelines, are not going to allow you.
[00:49:46] Speaker A: And so whether it's refinancing or getting your home loan, what areas do you service, Tim? Is it just Georgia? Do you work in other states?
[00:49:53] Speaker C: Thank you for doing that. I thought we were still just trying to learn about. You're helping me out trying to get business, aren't you sweet. No, we're in right now in Florida, Georgia, Alabama and Pennsylvania. And I tell that I've been saying this for about a year, so I got to either do it or quit saying it. But soon to be Texas. So yeah, I'm trying to get in as many states as possible.
[00:50:11] Speaker A: That would be awesome. So anybody in any of those states can contact you through your website and.
[00:50:16] Speaker C: Put in an application www.mortgagecorp.com or call Tim Arrington maybe. Can I give my phone number?
[00:50:22] Speaker A: Yep, go ahead, give your phone number. And I'm also going to attach the link to the podcast and in the notes so that if they want to apply they can just go on your website. But yes, give us your phone number, please.
[00:50:31] Speaker C: Yeah, so My number is 770-856-6397 and the name of the company is Mortgage Corp. Just go to my website or you can call me directly. I can answer any questions you may have. If you have any buyers that have questions. I'm big on trying to help people. Very big on reviews. If you go to Google and look at Mortgage Corp, you can look at our reviews. You can see the type of business we do. I try to shoot straight with people and we really take a lot of pride in our customer service and trying to deliver the best we can.
[00:51:03] Speaker A: You guys really do. And I can speak from experience. I have lots of clients who have been very happy with Mortgage Corp. You, Amanda, we love you guys. We just barely scratched the surface, but we got a lot, lot of good gems today. But I would love to have you back and really dive deeper into certain areas because I feel like we could just talk forever. There's so much to cover when it comes to mortgages. I really like to go over the start to finish process of the whole loan when we have time to do that. I want to thank you today for being on here. And again, just encourage everybody to reach out to Tim. If you have any financial needs, you can either click the link or shoot Tim a text or a phone call. Any last parting words, Tim, you have for everybody?
[00:51:45] Speaker C: Well, I just, I appreciate you having me as a guest. I mean, I think I'm a big fan of yours. So you do a great job. And we do, we kind of work similar where we communicate. Well, I would say this just if you're thinking about needing a good loan officer and a good mortgage company in any of those states, please give me a call. I was an in house lender for a realtor company for many years. So I kind of get what agents need or want. I mean, the main thing is they want to communicate. They want good news and they want bad news. At the same time, they just want to make sure that they're in the loop. And I appreciate that and I try to deliver those services.
But thank you for having me.
[00:52:22] Speaker A: Thank you for being here, Tim. And again, this is Heather with Head in the Clouds and we will see you guys on the next one. Don't forget to go like subscribe and follow. Bye guys.
