Mortgage Tips for Newlyweds Buying a Home

Sharon Rumsey  0:00  

planning your wedding is a lot of fun and requires a lot of your attention. However, don't make the mistake of failing to think about your life after is one of your dreams owning your own home.

Michael Gaddie  0:11  

If purchasing a home is one of the route you two lovebirds are considering, then don't miss this episode.

Kristina Stubblefield  0:17  

We got to talk extensively with a mortgage loan officer about credit scores, loan programs available, getting pre approved and everything else you need to know before starting your home search. You got engaged. Congratulations, happy. Yes, joyful time. Of course. Now what timelines to do list and checklist 100%. Don't worry, you're in the right place. Welcome to the ring, the bling, and all the things. Hi, I'm Kristina Stubblefield, one of your host, along with my two good friends, Michael Gaddie. And Sharon Rumsey. We have over 50 years of wedding industry experience between us. We have seen it, heard it, done it and found a way around it. We are here to get you from down on one knee to down the aisle. Our podcast will cover everything from you saying yes to the I do's and all that happens in between. So buckle up and enjoy the journey. Now let's get started with this episode.

You know, we love hearing from our listeners. Thank you so much for tuning into our podcast. But also thank you for those who have taken time to subscribe and click the review button. We really appreciate it. This week we're spotlighting another review. This one's coming from Carrie, wedding prep can be fun. These three are more than hilarious. They're also experts at making wedding dreams come true. Seriously, skip the expensive books and magazines. This podcast is a fabulous guide to all things weddings. Thank you so much. We'd love to hear from you. You can visit our website, the ring, the bling, and all the things calm. Over on the right hand side, there's a share with us button and you can record a video message to us, you can tell us about your engagement. Tell us how your wedding planning is going. Or if you're already married. share with us some of your tips or what stood out on your wedding day, we may feature it on one of our upcoming episodes. So we know that you're ready to dive in. So let's get started with this episode. If you're one

Sharon Rumsey  2:49  

of our normal listeners, you know that we are all about wedding planning, we will talk all things wedding planning, and we will talk it all day long. But the reality is that there is life after wedding planning, there is real life stuff that couples need to address and be educated about. And we're super excited about our guest today. But she's someone pretty special to Christina. So I am going to let her introduce this person.

Kristina Stubblefield  3:15  

That's right, Sharon, okay, you all are in for a real treat. Because my mama has come to be a guest on this episode. Now in all honesty, my mom has been doing mortgages and home financing. I'm not going to tell you for how many years because she'll kick me under this table. She'd been doing it a long time. And she knows all the ins and outs and everything to bring you some good advice. Whether you're looking to purchase your first home or if you already own your home. And maybe you want need to refinance or you're going to do it as a couple. She's here to tell us all about it. Okay, mom, take it away. You got to tell them who you are. All right, go for it. All right. Hi.

Pam Kimmel  3:55  

Pam Kimmel, been a loan officer for over 40 years. I work for new Washington State Bank. And it is a very fun job that I enjoy greatly in helping people be able to buy their first home or buy an upgraded home or buying a home. Maybe they want to take and fix up and make it their own.

Kristina Stubblefield  4:19  

In like you said how many years you've been doing it I didn't realize it was 40 years.

Sharon Rumsey  4:25  

That means she knows her stuff.

Kristina Stubblefield  4:26  

I told you she was gonna be a guest. Now you should be nervous, Sharon because she knows everything there is to know. In all honesty, though, I used to do mortgages just for a few years, not even beginning close to that many years. But one of the things that I really enjoyed about the process is people are not at all familiar with terminology. They don't understand the process because most of the time people don't take time to explain it to them to know their options because there's options out there and that's one of the things my Mom's customers, they're not a number, they're not a file folder to her. They're just like a great friend, she wants to do right by them, whether whatever that means getting them the home that they're trying to get into getting them to the payment, they're trying to get to whatever that is. And that to me, a lot of people don't do that, especially today. So we're going to cover a lot of topics. And we've got lots of questions. But let's first start with one of the biggest questions, I think in people's minds, they don't realize how many different programs or loan types there are out there. So you want to start there.

Pam Kimmel  5:37  

So talking about our loan types, everyone seems to be very familiar with what's called conventional mortgages. That's your standard 1015 2025 30 year term. A lot of people hear the word conventional, and back a long time ago, the conventional loans, everybody always had to have 20%. So some of the people that's been around for a while, still think, Oh my gosh, it's 20% down, it's not, you can have as little as 3% down for a conventional loan, then you got 5%. And then you just keep going. That's one of the loan types. Then you go into your government type of loans, which is VA for veterans, USDA, and FHA. So USDA is all set up by if you see a home listed for sale, and it's going to say USDA financing or 100% financing, that home is in the census track for USDA. And then there is also a cap on how much money they can make. So that is very specific for USDA qualifications, then you have the FHA oil, let me back up USDA is 100% financing, FHA is three and a half percent down. And VA loans are 100% financing. So the only one that has that census track and where that property's located is USDA, on the 3%, down conventional loan that I mentioned earlier, that has an income cap as well. And REITs are great right now, although we've seen a little tick, but we're spoiled with where REITs are compared to where they were back in the 80s. That's for sure.

Kristina Stubblefield  7:34  

So for people that are listening, some of the things that you just mentioned, do they need to know when they're buying a house, which program they're going to fall into?

Pam Kimmel  7:46  

That seems to be one of the things is, sometimes they're afraid to say, I don't know where to start. And I like to go overboard by talking to them getting their information, asking the questions, not just say, here, go online and fill out the application. I'll get back to you. Well, yeah, you saw an application and I can do it verbally, or we can do it online, however, but getting the right questions by asking how much are you looking to spend? Maybe like you would say that there's looking for a certain payment, may they've been paying rent, and that that works well for them. And then you get that credit pulled in that credit, which requires a credit score, then tells me which programs I need to that they're qualified for. And that's how I start. Okay, hold

Sharon Rumsey  8:36  

on.

Kristina Stubblefield  8:36  

We've got several questions here. Mike, I think you're gonna go first.

Michael Gaddie  8:41  

Okay, so a bride and groom, they just got married, and you talking about their their credit score? Does it go on both of them combined? Or is it just the male part or the female part?

Pam Kimmel  8:53  

That's a great question. A lot of people don't realize there are three major credit reporting agencies, which is Experian, Equifax, and TransUnion. A lot of people say why aren't they all the same? So we pull what's called tri merge credit report, because being try merges three. And when you have a joint applicants, we're going to pull try merge, which I should get a total of six scores. Then you take the middle score, reach bar work, and then whoever has the lowest middle score is where we place and start the grid for where the rate falls.

Kristina Stubblefield  9:33  

Very good explanation, because Mike, that's a good point. each person's Credit Bureau is their own, and they have to look at both the both borrowers that's a really good question. So

Sharon Rumsey  9:44  

if one partner has a really high credit score, and the other partner may be has a much lower score. It's that lower score.

Pam Kimmel  9:54  

Yes. Wow. I

Sharon Rumsey  9:55  

never knew that. And what I

Pam Kimmel  9:56  

do in some instances like this is If the higher credit score person can carry the loan by themselves, we can leave the CO borrower, which doesn't mean mangoes first a woman Second, you can flip it. So I'm gonna say borrower co borrower, I'll say, hey, you want to drop, we drop the CO borrower here, leave them on the deed, purchase contract. And then we get a better rate for them, because we're only using the higher score.

Kristina Stubblefield  10:32  

Does that make sense what she's saying,

Michael Gaddie  10:34  

guys, but let me ask you this, if I say myself, I'm 19 years old, me and my bride get married, she has no credit score at all. So is her name still gonna be able to be put on now

Pam Kimmel  10:50  

the loan for mortgages, you have to have a credit score. And right now all across the board, when COVID hit, everything went to a minimum score 620. So she would have to have a 620 score.

Michael Gaddie  11:06  

So basically, they would not be eligible to even get a home,

Pam Kimmel  11:10  

he would be she wouldn't be able to be. So on the loan.

Kristina Stubblefield  11:14  

One One thing that she mentioned, I don't think maybe our listeners might understand is she made the comment that the first borrower could carry it. And what she meant by that was, the loan could be in just borrower one's name. However, both husband and wife are both the couple themselves could be on the deed. So they both own the home, but the loan responsibility would just be the one borrower. So it's not. It's not as if you don't own your home together. Right. Sharon, you had a question? Right?

Sharon Rumsey  11:48  

I do. So, Pam, as you know, Mike, my boys are grown now. But I remember them being in college, and they would talk to me about opening credit cards. And I always said absolutely not, you don't want a credit card, I don't want you to use a credit card. I didn't want them to have any debt. And I thought I was giving good advice. But as I hear you speak, I'm wondering if I did them a disservice. Because what do you recommend young people do to build their credit score, but still be safe with with with gaining debt.

Pam Kimmel  12:22  

So there are some secured credit cards out there, for people that don't have a score. So what you want to do in talking about safe is like they get $1,000 secured credit card. Now the key, and a lot of this information gets told wrong. So I'm going to implement this very big here. The key is you have $1,000 secured credit card, do not go over a $500 balance, you keep it at 50%. Why is because once you go over 50% of what that line amount is, it hurts your score. So you're trying to build it. So go get gas, go get groceries, the other thing that happens is, they'll say, Okay, get a credit card, and then pay it off each month, wrong. paying it off, you're not establishing that you're responsible to make a monthly payment, consider on time consistent. If you charge it and you pay it right back off, that's not going to build that score.

Kristina Stubblefield  13:36  

And even sometimes, if you don't hit it correct on your billing statement, it doesn't even show. If you made a purchase in the next week, you pay it off. It doesn't even go through a billing write cycle to show us on your

Pam Kimmel  13:48  

credit report and then 30 days cycle

Michael Gaddie  13:50  

That's very interesting.

Pam Kimmel  13:52  

I always thought if you have to charge something, you pay it off that month like you you don't want to keep your interest from occurring, which that makes sense. what she's saying is that at that point, you don't say it. But you've got to let that roll. So I'll have ones that go out. And I'll just say, okay, don't go over that limit, keep paying the minimum, or maybe pay 100 then once it starts getting lower, charge some more on it and keep it right in there so that you can watch that to help build that score. Now, does that happen in two months? No. It's probably going to take four to six months for that to kick in.

Kristina Stubblefield  14:34  

So one of the things Sharon, I want to make sure we make clear, okay, is we are talking about a credit card in order to increase your credit score. Now if you're using a credit card for points possibly and you don't want to incur interest, like my mom said, then of course you want to pay it off before it cycles through for

Sharon Rumsey  14:57  

39 people that are trying to establish I think this is great information. I mean, I sure wish I would have met you back when I was, you know, 1019 or 20 instead of 52. But this can also ever

Kristina Stubblefield  15:10  

knew that this can also apply to people out there that are already married, that may have lower credit scores for whatever reason, you their life happens. Yeah, life happens. But there are tools you can use. But a lot of times people say go get a credit card, they don't finish the sentence, don't don't you go over the 50% mark, because there's no clue about that.

Pam Kimmel  15:32  

And a lot of credit cards are hard to get if you don't have a score. So, you know, our bank, new Washington State Bank has a secured loan, that they'll do the same way, give you $5,000. And then they take that loan that you're getting for 5000, put it into a CD, and you make payments on it. And once you get that paid back, then they hand you back that 1000 that 5000. But that builds and reports immediately to

Kristina Stubblefield  16:05  

so for people that are listening, because not all of our listeners are local to us which we're southern Indiana across from Louisville, Kentucky, new Washington State Bank is a local bank here with several branches. But for those out there that are across the US, this would be a question you would ask your credit unions, banks, things like that, because most of them will have some type of program or have someone there to help answer those questions for you. I should

Sharon Rumsey  16:32  

we have a lot of parents that listen to us, you know, have kids that are I say kids, because they're my kids age, but of people that are getting married? So if you have a say a college age child, does it help build their credit? If maybe, I don't know they need a car and you cosign for that car with them? Does that report to my credit, or would it report to my child's credit?

Pam Kimmel  16:55  

Both so that it does show his cosign? Yes, yes.

Michael Gaddie  17:00  

So talking about parents say that I give my son $20,000 to put down on a house? How does that? How does that factor in when it comes to him getting a loan?

Pam Kimmel  17:15  

Having more of a down payment than like the 3% or no downpayment?

Michael Gaddie  17:20  

I mean, does he have to have record that he had $20,000 in the bank? Or I gave him $20,000?

Kristina Stubblefield  17:27  

Yes. Good question, Mike. Really good question, big, big paper trail

Pam Kimmel  17:31  

of when there's going to be gift funds involved, which there is what's called a gift letter that has to be signed by the donor and the applicant, and then that donor.

Michael Gaddie  17:46  

So does that mean that I'm sat giving him a letter that he does not have to pay that back to me? Yes.

Kristina Stubblefield  17:53  

So let's walk our listeners through that. So Mike just gave an example of a father of a couple gives $20,000 towards purchasing a home. So what does he do with that money? Does he what he hears $20,000 cash? No. Okay, that's what we want to get out there. Right, tell

Pam Kimmel  18:12  

them what they need to do. So if a family members going to give their child or say a grandchild money to buy a house, they do need to write it in a check form. And they would deposit that into their account, the child or the grandchild, and then this gift letter would be signed. And then you'd have the paper trail, the check that was written from the donor. The other piece of that puzzle on the paper trail is the donor has to supply a 30 day print out of their bank account to show that, that 20,000 been in their account for over 30 days.

Kristina Stubblefield  18:57  

Okay, so I'm gonna play the other side of this fence

Sharon Rumsey  18:59  

that's very involved. That is,

Kristina Stubblefield  19:02  

well, in a lot of times, I think this comes up for people where somebody just, you know, let me ask that. Let me ask the question this way. Old School ways. Older people may not have kept as much money in their bank or savings. Some people kept that at home. And I think some of that goes on now. You know, so if a parent, grandparent or whoever that is, is going to give money and it's cash cache, what what has to go on because it has to be in an account, right?

Pam Kimmel  19:38  

So the donor then would need to put that money in the bank and then wait the 30 days before the gift is done. In order for all that two, work as far as the 30 day print out, doing the gift letter and all that

Sharon Rumsey  19:54  

I always thought if you had the money, you had the money I never knew they wanted to know where it came from.

Pam Kimmel  19:59  

And At Guardian because of the money laundering and everything that went on there, it's regulated what our underwriting guidelines are.

Kristina Stubblefield  20:08  

And the reason I wanted her to bring this up, and I'm glad you asked that question was, guess when a lot of times this comes to light, my mom will know better. But can you imagine going out and finding a house? And then you're going to do this alone? And all of a sudden, Well, okay, where's I'm putting $20,000? Where, where that's come? Oh, well, last week, my grandpa gave me $20,000.

Michael Gaddie  20:29  

Well, you know, what, just I was just thinking about this. What if they got $10,000? for wedding gifts?

Pam Kimmel  20:36  

Well, I've had different Yes, I've had that come up. In course, if you get into that, and you show that you just got married, and you deposit probably gonna be checks from all these people. And it's probably gonna say wedding gift or something, we can usually get that to surpass through the underwriters.

Kristina Stubblefield  20:58  

Are there some of these links, you know, how people could do a honey fund, or there's even like, we're going to be buying a home, you know, help us furnish it, where they would have a printed report to show this money came in there. That's really good. That's

Michael Gaddie  21:12  

Yeah, like, I just didn't realize that they would go to that extreme to track that and go back and see if those checks were made out for wedding gifts.

Pam Kimmel  21:22  

Well, when you buy a home, you have to supply 60 days, two months bank statements, those bank statements are read very well, by underwriters.

Michael Gaddie  21:34  

I mean, I haven't bought a home in 30 years. So

Kristina Stubblefield  21:36  

and Okay, you bring up a good point, let's go back to the basics. If someone's going to apply for a loan, what do that what information do they need to compile? Because you need a complete view of their jobs, the money they bring in their debt, things like that? So what are all things people need to compile? When they're going to apply for a loan? Okay, well, I

Pam Kimmel  22:01  

may touch on the 60 day bank statement. Okay, good. Because right now, a couple of my clients, I have been advising them about, where's your money coming from? What do you have, do not put any cash deposits in, and they're like, why? And my one customers, like, my husband has a side job he does on the side. And they, you know, they might pay in cash, well, leave alone, don't be throwing that in there. Because trying to explain that and you're wanting to use that money, you're we're going to go down a road, I don't want to go down and try to have to prove this

Sharon Rumsey  22:40  

actually, I'm going to be really selfish here and ask a question for myself go to his happens. I get, you know, owning my own business, a lot, especially younger people, now they want to pay through PayPal or Venmo, or something like that, and it's legit money that that I earn. But how do I? How would you justify those kind of like, for people that are self employed? How do they,

Unknown Speaker  23:06  

she's opening up a whole nother can of worms

Pam Kimmel  23:08  

as well, you know, with all those type of payment plans. Now, that's something we haven't seen a lot of, but being self employed, what they do, they do require bank statements as well, when you're going back two years tax returns, and then you're going to do a profit and loss. But they're going to see that the money you're claiming that you make, and the money that's coming into that account, those type accounts are going to be acceptable.

Kristina Stubblefield  23:39  

Okay, it gets a little trickier with self employed people, just from my knowledge, because you can get into people that have, and this is a little off topic, but you can get in or people have earned partnerships with businesses with people, you're a whole nother can of worms, but I share on this a really good point because there's a lot of people out there that are starting their own business much younger, that are entrepreneurs that, you know, for Take, for example, a lot of virtual assistants. And, you know, knowing this stuff, if you're self employed, and you know that you're going to be buying a car or a home or something where you're going to have to show your income what should they do? Well,

Pam Kimmel  24:23  

if you're going to go down the road of being self employed, or you already self employed,

Kristina Stubblefield  24:28  

you're you're self employed. But you know, when the next few years we're going to buy a home.

Pam Kimmel  24:34  

We have to have normally it's a two years full two years tax returns. So if they come and say, Hey, I started this last year, went self employed, I can help them on my side of the mortgage. Well,

Michael Gaddie  24:52  

that's that's good information right there because I feel like in this generation that is coming up. They're more gearing towards You know, being self employed, employed,

Kristina Stubblefield  25:02  

or they don't understand about, I'm going to buy a home next year, but I'm gonna, I'm gonna start my business and quit my job next month without even thinking to ask any questions ahead of time, all this could keep me from qualifying, I may have to end up waiting another year or two. That's why I wanted to ask her about that.

Pam Kimmel  25:19  

Now, if we go to what's called raelian, not your standard conventional loans. New Washington bank has their own portfolio loans. And self employed portfolio means it stays in house with them. And their underwriting guidelines are a little more different. And they can look at somebody that's possibly doesn't have two years tax returns and is self employed, and got 20% down.

Kristina Stubblefield  25:49  

It's a more one on one basis. And I think the point that we're all headed towards here is planning ahead a little bit and asking the questions before you get your heart set on a house or whatever that may be. You need to know what what's at stake?

Michael Gaddie  26:06  

Tell me I'm going to be the stupid one here to ask the question, because I'm sure there are people that will want to know this. But what's the definition of conventional loans compared to all the other loans that you lifted?

Pam Kimmel  26:18  

conventional is just your standard mortgage out there that goes through what they call Fannie Mae or Freddie Mac. And it's not a government loan.

Kristina Stubblefield  26:29  

Okay, what do Are they any and Freddie Mac?

Pam Kimmel  26:32  

Fannie Mae, and Fannie Mae and Freddie Mac is who backs the conventional loans? On the conventional side,

Kristina Stubblefield  26:40  

and buybacks honestly, for our listeners, what does that mean? They're the ones that are

Pam Kimmel  26:45  

that's who puts the your underwriting guidelines and everything in place for those types of loans are

Kristina Stubblefield  26:51  

kind of like your regulators. Yes.

Pam Kimmel  26:53  

And that's where the underwriting guidelines and all come from.

Kristina Stubblefield  26:56  

I saw Sharon's face over here, for those of you that are listening, you know, we put a video of the recording up on our YouTube channel and Sharon over here, she kind of set back and her eyes got Bay.

Pam Kimmel  27:09  

Yeah, I don't know, as you're in this world, you're like, Who's Fannie Mae and Freddie Mac?

Sharon Rumsey  27:14  

Yeah, it sounds like a 50. Song.

Kristina Stubblefield  27:17  

So okay, so let's circle back around to you've got a couple out there. They work regular jobs, meaning their w two employees, if they're going to apply for a mortgage, just so they can start the wheels turning in their mind, what do they need to be prepared to show or to bring as far as documentation goes?

Pam Kimmel  27:37  

So let's just talk about kind of going down that application, part of it is the application requires to know where you've lived for the past two years. And then where you've worked for the past two years. So if you've been on your job for two years, and you've lived in the same place for two years, fairly simple. I have some people that have had 10 jobs in past two years, I have to know start and ending dates, address phone number to all those jobs cover in the past two years. And

Michael Gaddie  28:12  

that's probably a big negative, though, correct? No,

Pam Kimmel  28:14  

it's not now. Well, I

Michael Gaddie  28:16  

mean, you wouldn't look at someone that's had a job for two years at the same place compared to somebody that has had used jobs. And

Sharon Rumsey  28:23  

to me, it sounds like it's a negative to like their job hopping, they're not gonna stay anywhere. Yeah,

Pam Kimmel  28:28  

no, because in the one instance, I think he had 10 or 11 jobs that I got closed couple years ago. But he was in the medical field. And he transferred close to where his kids were, was there for a while, got something a little better got something a little better than moved where my kids are. And as long as you don't have a gap of employment for more than 30 days, that's not a problem as long as they had income coming in. And it used to be they didn't want to see you really get out of the field you were in. But that's kind of slacked. That's not as long as you're employed. And you can show it, and then when COVID hit last year, and you had so many people that were off, you're thinking oh my gosh, yeah, but as long as we got the verification to show they were off for COVID. And had that verified, it was fine. That's a good.

Kristina Stubblefield  29:27  

That's a good Good point. I didn't even think about that.

Pam Kimmel  29:30  

Okay, so we're at your job, his job history, and then knowing what your gross income is, which a lot of people go Okay, which is that number. It's always what your amount is before taxes come out.

Kristina Stubblefield  29:42  

And then as as a couple, yeah, you mentioned borrowers on it. It's your gross income. Yeah. Well, you

Pam Kimmel  29:48  

break it down individually. And then you have Okay, where you have your check counts where you have your savings accounts. Sometimes I will ask if they have like an IRA One case anything like that, sometimes we need it, sometimes we don't. And then once we pull credit, I can see the liability. So I don't really have to go in and ask every one of their debts

Kristina Stubblefield  30:12  

I will ever sorry for those who don't know what liabilities are just said debts, but some people aren't going to know what that is. Sure.

Pam Kimmel  30:21  

So on the mortgage on the loan applications gonna say liabilities, liabilities is credit cards, car loans, mortgage payments, it's what debt monthly debt you have.

Sharon Rumsey  30:32  

So Fannie and Freddie want to know who you owe?

Pam Kimmel  30:34  

Yep, gotcha.

Kristina Stubblefield  30:35  

Yep. And we're gonna get to that chair, you can tell how long she's been doing this, you might not realize or your might not realize what she's doing. She's visually going down through the application, but she's seen it so many times. Correct?

Pam Kimmel  30:48  

Yes. So go ahead. Yeah. One good point is, they might have just paid car loan off. Okay, and I'm getting ready, pull credit. And I Oh, I just paid it off last week, it's not gonna show. So I'll make note of that. And then I'll say, okay, soon as you get a letter that showing it's paid, or something like that, hold on to it, send it to me. So we can because when I submit it, I'm going to show that liability paid off. If I don't have to account for it in the ratio for their income, I don't want to. And then we'd go through when I pull up those liabilities. And then I put it all together. And I ask what do you look into buy? Some more say, I don't know, tell me how much I can buy. So then

Sharon Rumsey  31:37  

what I would say

Pam Kimmel  31:39  

you work backwards. And then they might qualify for one amount through FHA. And they might qualify for a lesser amount through conventional. And there's a reason why I can go into that. But each program, they're not going to qualify for the same loan amount.

Sharon Rumsey  31:56  

So I heard you just say ratio. And just so I make sure I understand the ratio between what they have coming in as far as their income and what they owe each month,

Kristina Stubblefield  32:08  

correct? Yes, old debt to income ratio. She just shortened it.

Pam Kimmel  32:13  

Yes, yes. And a lot of people will say, Okay, well, my cable bill, my cell phone, my utilities, we don't count those. So it is just liabilities that debts. And if you have Child Support coming in or going out, that's something we've got to know.

Kristina Stubblefield  32:34  

The one thing too is a lot of people don't realize they think that they could qualify for a house in my house payments going to be $900. Well, the other thing that you have to take in consideration is the taxes and insurance is built in there as well.

Pam Kimmel  32:49  

Yes, if they don't, if you're doing a conventional loan, and you do 20% down, you don't have to have the taxes and insurance and the payment. But I have to know those amounts, for two reasons, one still has to be added to the payment to say what their true housing expenses for the month. Second of all, when you're doing a purchase, one year, homeowners insurance needs to be collected at closing and paid upfront, or we collected at closing and it's paid up for a year. So those are two items might be in might not most of the loans, all of them are escrowed with the taxes and insurance. But if you're doing a purchase with 20% down, or if you're doing a refinance on the conventional side, and you're in that category of under 80%, then you don't have to escrow those taxes and insurance. But then when you're over the 20%, and depending on which program, you might have what's called mortgage insurance or PMI. And back in the day, that was just oh my gosh, the worst thing in the world, you don't want PMI? I remember that when I got my house. Yeah. And now it's a common thing. Conventional does have where it eventually falls off. USDA does not fall off, and FHA doesn't fall off.

Kristina Stubblefield  34:14  

Can you explain a little bit what mortgage insurance is? Okay,

Michael Gaddie  34:19  

and what is PMI?

Pam Kimmel  34:21  

private mortgage insurance, or PMI? Or they'll call an MRP? Or as loan officers just say, Emma, so it's a mortgage insurance. So another language? Yes. Yeah. So the reason those are on the loans is it's not an insurance for the borrower. It's an insurance for the lender, should the customer default.

Kristina Stubblefield  34:46  

And default means not pay their mortgage, right?

Pam Kimmel  34:50  

Go very delinquent and all that. Yes. And then that would kick in. So one of the things FHA says Several years ago, had where it was falling off. Now they changed it, it went back and it never falls off. So VA is the only product that doesn't have mortgage insurance and does 100% financing. They depending on your veteran, if he is disabled, and his Certificate of it's called a co he for VA shows that he's exempt from the funding fee, then he doesn't even have the funding fee. It's just straight up. Wow. It's a nice program

Sharon Rumsey  35:37  

well deserved.

Kristina Stubblefield  35:38  

So let me ask you a question on va. If he or she is a veteran, should they always go va? Is that always the best option? For a person that's a veteran?

Pam Kimmel  35:51  

I would say a good percentage of it. Yes. But then again, if you have a veteran that's putting 20% down, say maybe he's selling his existing home and going in, he's got 20% down, and he's not exempt from that fee. Va offers 0% down for naught percent financing, a funding fee is applied, if the veteran is not exempt, depending on if it's 0%, down 5% down or 10%. Down on what that calculation is, if you've had a prior VA loan, then that VA funding fee is calculated different as well. Now it's funny instant they don't bring it. But in the case that you're asking, would that be the best option? Well, if he's got 20%, down, and that 3.3, could be pretty costly to add on, I might price out the conventional loan, just to see now the rate for the VA should be much lower. But I would price it both ways just to check it.

Kristina Stubblefield  37:06  

So the reason that I asked this question, just sharing a mic. So you all know is sometimes when you go to speak to someone about their mortgage, they don't know you, they're just gonna do what they can do get you approved. And that's that. But if you have just a little bit of education, just a little tips to you know, where to ask some questions is that the lowest your payment can be? Do I have to go VA, it could end up like you said that money adding up, it could end up saving you money, you don't have to become an expert in the mortgage field. But if you just know a few of these tips, it could end up saving you money.

Pam Kimmel  37:44  

And another thing to add to that talking about a veteran and VA and and where these debt to income ratios lie. There's a lot of FHA loans out there, FHA allows for a higher debt ratio, higher debt ratio allows for you to possibly maybe buy a little more expensive home, or maybe you've just got some debt, maybe your car loan that $700 a month can be paid off in two years, but you really want this house. And you can't get qualified because your ratios too high on the conventional side or VA, because they do have a little bit tighter ratio. So I have a lot of people I have to put it on FHA to make it work for them for what they want.

Michael Gaddie  38:34  

Well, I know you're covering a lot of information. But let's go back to the beginning for just a minute because your brain is just a rolling like a wheel.

Kristina Stubblefield  38:41  

If you're still at the beginning, we're

Michael Gaddie  38:43  

just going back to the beginning just for a second. Because if if me and my wife brand new to the you know, being married, where do we even begin to start? Do we start with you at the bank? Or do we hire a lender or realtor? What I know what we do first right now?

Pam Kimmel  39:04  

Well, in the market that we're in currently in, I'd say for last couple years, the realtors would really like you to be pre approved before you contact them. And that's a good thing because one they're going to know you're going to know about your where your maxes and where to tell that realtor you're looking, they're gonna know that they really got someone that's taken a minute to get pre approved and in their busy time right now is crazy. To be able to take time and show people homes so that they know where I have a really

Sharon Rumsey  39:43  

good friend who's a realtor and she we were just talking the other day and she said her agency that she works for has quit taking quit doing showings for people that are not pre approved.

Kristina Stubblefield  39:54  

I was just getting ready because

Sharon Rumsey  39:56  

of the waste of time. They don't have time to show you five houses and then you can't get a mortgage anyway.

Kristina Stubblefield  40:02  

And you can't just say, Oh, yeah, I'm pre approved. Don't you've had to send

Pam Kimmel  40:06  

Oh, yeah, we have to do a letter. They want to see a letter. Now there's a few agents, if they would call me and say, Hey, so and so said, You got pre approved, but they don't have the letter. If I would say, Yes, they are. They take my word on it. But I don't blame them. I mean, that's a lot of driving gas and everything. I

Sharon Rumsey  40:24  

think right now, with the rates being what they are, I think houses, realtors are so busy, because rates are so good that everybody's wanting to buy their house while these rates are so low. So she was saying they just don't have time,

Michael Gaddie  40:38  

right? So I just pick a bank and go to them, and hopefully they'll help me out. I mean, I'm really playing stupid here, you know, and say, What do I do first? So you can

Pam Kimmel  40:48  

call me?

Kristina Stubblefield  40:49  

So for our listeners? Very good Mets. Exactly. For our listeners, who can, where can they be located for you to work with them?

Pam Kimmel  40:58  

anywhere? Um, I'm licensed to do anywhere

Kristina Stubblefield  41:02  

in the United States. Yes. Okay. So you may not know, but we're also in other countries, believe it or not? Oh, so

Pam Kimmel  41:10  

I don't know about outside Do you know,

Kristina Stubblefield  41:13  

I'm really trying to clarify, because we do have people that listen that aren't in the US. Thank you all for tuning in. We appreciate it. However, you can go to a local bank or financial institution, and talk to them about your country's specific guidelines to get the right direction. because really what we're talking about is us base. I mean, a lot of our listeners are in the US, but just for those who might not be, depending on where you're located, the guidelines might be a little

Sharon Rumsey  41:43  

different, it's changed so much, because I remember, you know, I've lived in my house for 33 years, I've had the same house. And, you know, I remember getting the realtor and the realtor showed us houses. And then we went and we applied for the mortgage, the realtor told us where to go. So I'm kind of like Mike, I wouldn't have had a clue where to go, if I to get the mortgage first.

Michael Gaddie  42:06  

That's a different way of thinking. And when Pam and I bought our house, we actually built our home. So we did go to a local bank to get a construction loan. So that seemed like it was a little easier. But if we were going to house to house to look at different places I wouldn't know to go to the bank first or go to the

Kristina Stubblefield  42:24  

My mom's gonna kill me now, because you just brought up a great point with the housing market the way it is, people aren't able to find something that they want. And they are turning to bought to building a home. So for those listeners out there, if they've never owned a home before, can they go into a new construction as their first home?

Pam Kimmel  42:47  

They have the credit score? Yes, our bank does construction loans,

Sharon Rumsey  42:53  

are constructions, construction loans, do they require more qualified buyer,

Pam Kimmel  42:59  

the score is a little higher for the construction loans. You're looking at a 20% investment. So let's just say you've had this lot You didn't know if you're going to build or what you were going to do. And you've had it for a couple years and you're like, Hey, I think I want to build on it. Well, if you've paid for the lot, or we have a small balance on it, the equity, a lot of what it's worth now could be used towards that 20% for your construction loan,

Kristina Stubblefield  43:32  

our listeners are going to have to get out a pen and piece of paper. All you need to do is call Pam Kimmo Washington State Bank. And honestly, I know this can be overwhelming. But I really think this is good information. And honestly, for anyone parents of the couple the couple themselves. It doesn't matter a lot of this applies. So one of the things that you mentioned, is their credit report. And I think it would be good to highlight a credit report, you make a payment today. Next week. It's not showing on your credit report for the most time for the most part. It's 30 days right for him to cycle through. Yes. Yeah. Because you mentioned about if you just paid off a car, it could take 30 days or more to show up that it's paid off. Yeah. Okay. I just want to clarify that

Pam Kimmel  44:23  

and just update you a little more on that is the cycle for the credit agencies, those three that I mentioned to TransUnion, Experian and Equifax. They run a tape so to speak, like once a month and report it all out. Okay. So you might have paid that car off the day before they sent that tape out. So then is going to be another 30 days before reports. Now, as a lender, we do have where we can request verification that it is paid off. And some insists even though we have the letter that says it's been paid off, underwriting will still make us get that request. Sometimes.

Sharon Rumsey  45:09  

That's another I think, big plus for pre approval. Because what if you don't have pre approval you find a house you love. And the way today's market is, there's probably five other people that are going to try to buy that house as well. If you have to wait on something like that it could cost you getting the house you want, while you wait for that, right.

Kristina Stubblefield  45:31  

It's so such a good reason for your mortgage person, your loan officer to have a clear picture of what you have going on. So they can give you credible information on how to maneuver you need 20 more 1000 to be able to buy this house, what could be paid off? What's your what money do you have? There's so many different ways. And I think people don't realize you go to somebody you get one answer, you know, and I want to bring out some my mom, this is one of my favorite things. What about you've applied for a mortgage? What's one of the first things you tell people that you've applied for the mortgage? You've ran their credit? What do you tell them? I hope your answers the same as mine.

Pam Kimmel  46:20  

What you mean what

Kristina Stubblefield  46:21  

do not don't? What don't you want them to go to

Pam Kimmel  46:25  

take what I've given them and go shop at you mean?

Kristina Stubblefield  46:29  

No, go out and buy a car, oh, well, or this is

Sharon Rumsey  46:34  

this add additional debt?

Kristina Stubblefield  46:36  

And you would not believe or they'll go to a furniture store and take out a $5,000

Sharon Rumsey  46:43  

loan. I mean, they're getting a

Kristina Stubblefield  46:44  

new house they've been that has happened this that has happened. So cost them there. Honestly, they don't know. And this has come up. And that's where it's happened is the smallest thing can keep you because it changes their application. If you go so long. If I'm right, you can correct me if I'm not, you may have to pull a new credit bureau before the loan closes. You know what you're saying?

Pam Kimmel  47:07  

I do not do that before the lawn closes right if you're serious on looking. And I'll give a couple examples that I had a couple years ago, I had a client moving to this area. And she was just transferring with her job. And right before we close the credit report expired, because credit reports are good for 120 days. And it was going to expire before we went to closing. So we had to pull a new credit report. She had went car shopping, and the dealerships shopped her 21 times for like each different dealership

Sharon Rumsey  47:49  

ran a credit report.

Kristina Stubblefield  47:51  

Yeah, so as I say shopping, people won't get that but they pulled a credit 21 times and guess what that does to your score you want to tell him

Pam Kimmel  47:58  

almost cost her her home. Indeed, costs are on the right, because it dropped her in another tear bucket. So if you are going to go shop for car, don't give your social out to every dealership that you stop, because the lot of colleges didn't know she didn't. And

Kristina Stubblefield  48:21  

and you know, she might have went to just a couple dealerships but they shopped her on multiple lenders. Yeah. Or sent her and when I bought my

Sharon Rumsey  48:27  

car, I remember I have it's probably not nearly as fancy as what she used to. But I have Credit Karma on my phone. And I kept getting these notifications that someone was running my credit. And I'm like I've set right here at the Volkswagen dealership. I didn't go anywhere. That's what I had put it all, you know,

Pam Kimmel  48:46  

four or five different deals.

Sharon Rumsey  48:48  

I totally I wasn't buying a house, but I totally know what you're talking. Yeah.

Pam Kimmel  48:52  

And people don't realize that. I mean, just kept going, Dean. Yeah, I didn't realize that. And

Kristina Stubblefield  48:57  

what I was bringing up was about another payment. So if you added a $500 a month payment, your your debt to income ratio is now because I'm saying debt ratio, your debt to income ratio may have went right out the window as far as you getting approved. And you're in the final stages of that.

Sharon Rumsey  49:15  

So once you've once you've gotten that loan application done, you kind of just need to keep life status quo for quite some time until you're approved. You know, Pam, that leads me to another question. I so my one of my favorite shows in the whole world is fixer upper. Joanna Gaines is like my spirit animal. I love her so much. But what about that couple that maybe can't afford, you know, the super, super nice house right now. So they do buy one that that needs some improvements that has some, you know, things that it needs. How do they go about that?

Pam Kimmel  49:51  

Well, one of the programs that I've done quite a bit is called the FHA 203 k It's a renovation loan. So it's all done at one time when they buy the house. And so they buy it, we start on it, they get bids on all the construction that they want done, they pick a contractor, they cannot do any of the work themselves. But it can be rolled in with the purchase price. And you're thinking, well, how can that be that you're going to get that kind of money, and we're only paying this, but the appraisal is based on the subject to of all the work that's going to be done. So they can get the loan, get the money, qualify for all that with con,

Sharon Rumsey  50:38  

I would have never gotten known that was

Kristina Stubblefield  50:41  

an option. And I'm gonna do just a little bit of clarification here on the appraisal. So an appraiser comes out appraises your home. But it's subject to means he's going to copy of the contract to see what all is going to be done. And then he's going to value the home based on those improvements being done. That's what subject to his wording. Okay.

Pam Kimmel  51:03  

Yes.

Kristina Stubblefield  51:05  

Yeah. Wow.

Michael Gaddie  51:06  

So along with that, if you say they've been in the house five years, and then they started to, you know, run improvements and prove it and put new siding on it or whatever it rumination. Yeah, so is that a little different than what you're including with the permanent the

Pam Kimmel  51:25  

same loan could be used. And we could do a refinance, and do a room addition, or some people need roofs, they want to pool, they want a new deck, they want to build a garage that can be used for that. And then on a refinance. So talking about refinancing,

Michael Gaddie  51:43  

tell me a little bit about that. I mean, I don't even know enough about that myself, either to refinance. I

Sharon Rumsey  51:51  

know a lot of people are doing it right now. Yeah.

Kristina Stubblefield  51:53  

Well, some people don't realize that they can save money by refinancing. They just know, they went out and got a loan for their home, they making their payments, don't even know it's an option.

Pam Kimmel  52:04  

True. Very good question. Mike. There used to be the old rule, if you can drop your rate by 1% and don't refinance. And that's not true. Yes, it is nice to be able to drop your rate. But what happens if you have 20 years left? And the rate that you can get? Isn't? Quite, it's a little lower. But you can drop it down to 1515 years? Yeah, 15 year term. So now, my rate didn't drop. But I'm able to knock five years off. And when I take and multiply that out, because they'll say, Oh, is it really worth it? It's a huge, huge difference. We used to do refinances.

It's huge. Some people, they're still out there on four and a half, five 6%. I even had one the other day was at seven. And it's just amazing how much they're going to save. And you know, there's no age discrimination. So if you're on a fixed income, and you're thinking, Oh, I can't I can't get a loan like that. It doesn't matter if you're 80 years old, and you command apply for a 30 year mortgage.

Unknown Speaker  53:27  

Interesting.

Sharon Rumsey  53:29  

And if you cannot those years off, you're going to pay less, right? Because the interest you would have paid those say additional five years is now not going to be paid. Right.

Michael Gaddie  53:38  

So what is the Finance? Right now?

Kristina Stubblefield  53:41  

The right the right

Pam Kimmel  53:42  

rates are determined in several categories. One is your credit score, because there's different tiers for that. Another one is depending on your term, so a 30 year term versus a 15. The 15 lower. Another is the loan size of like, you'd think if you're getting a $50,000 loan versus 100, the rate would be lower on 50. It's not, the more you borrow, the better the rate. So for someone to go, Hey, I got this, what's my rate? purchases are discounted at a lower rate than a refi. So their credit score, if they're putting 20% down or only 15% down, all these different tiers play into that on what are rates going to be it can you tell us a little bit of a starting rate and

Sharon Rumsey  54:37  

other way things right now?

Pam Kimmel  54:39  

Um, I would say right now on a refinance on a 30 year, if your scores over 740 I'd say you're around 3% which is an awesome rate.

Kristina Stubblefield  54:54  

Okay, so let me give a little bit of a disclaimer here at the time we're recording this it we're at March So just so everybody knows, and also go ahead and say, rates can change.

Pam Kimmel  55:05  

Yes, we had three changes last Thursday, they went up or down, they went up. And then Friday, they started coming back down on a lot of people talk to me, him, we'll do a pre approval, and we'll talk about the right. I had one guy just say, oh, when I'm pre approved, I'm not locked in. I said, No, because you have to have a property address to lock in so that you're putting all this in? And I said, No, I can't just lock you in on a pre approval. So another thing that happens is when we the realtors are in a frenzy right now, in course, when those rights start tearing up at any time, and people are pre approved At this rate, and then rates just went up. And you know, they're out there shopping, and trying to keep up with it. Oh my gosh, did it just go up enough that it kicked them out?

Sharon Rumsey  55:57  

They can't afford the payment? Yeah, yeah. Oh

Michael Gaddie  55:59  

my god. Yeah.

Pam Kimmel  55:59  

So it gets really, really crazy think

Sharon Rumsey  56:03  

I'm gonna

Kristina Stubblefield  56:04  

stay where I am. Well, but the other thing too is when you talk about refinance it, can they do home improvements, then when they refinance,

Pam Kimmel  56:13  

there's two refinances, maybe you want to just take your balance and put it get on lower term, and do that and save money. Or maybe you want to do home improvements, and you want to get cash out. If you do cash out, there's a little bump on the rate to get cash out. But you can get cash out, everything's based on the equity in your home. Yeah, always updated percent of your home, except VA will go up to 90 a belief of the value of the home of the value of the home. And then you pay off the mortgage that you existing have and then minus closing cost. And then you get the balance left.

Kristina Stubblefield  56:49  

So that could be to build a garage, a deck, put a pony fan you want.

Pam Kimmel  56:53  

You don't have to specify if you just get cash out you can you just say you have a lot of people right before when this COVID was hitting. They were doing cash out refinance refinances, because they didn't know something was going to happen that everything tightened down, you get to it, and they were doing cash out refinance, I may be given you a call.

Michael Gaddie  57:14  

I mean, we're really talking about read outside of our house and stuff.

Unknown Speaker  57:19  

Are you at your original What you got?

Michael Gaddie  57:21  

No, no, we've refinanced once over the last 30 years. But I mean, I still think we're at six or 7%

Sharon Rumsey  57:28  

I'm sitting here thinking I was really stupid

Kristina Stubblefield  57:30  

because I'm you might not want him to call you though cuz he's self employed.

Sharon Rumsey  57:37  

When I bought my I'm thinking how stupid I was, because when I bought my house, it was it. 6% and I just paid it for 20 years, I paid 6%. I didn't know

Kristina Stubblefield  57:46  

you're also talking about the timeframe, though to 6%. When you're talking back then

Michael Gaddie  57:51  

was right, it's

Sharon Rumsey  57:53  

only been paid off two years. So I really longed

Pam Kimmel  57:56  

to do probably refinance, don't tell before two years ago, but I mean, you didn't know so didn't

Kristina Stubblefield  58:01  

know. And now you're using that life lesson. And you're gonna go tell everybody have you refinance? What's your right,

Sharon Rumsey  58:08  

I'm calling both my boys on the way home

Kristina Stubblefield  58:11  

now, okay, Yes, I understand. But we didn't want to throw a bunch of information out there to confuse people, but just help you understand. There's different scenarios, there's not just one way of doing it. And if you're going to buy a home or refinance, or whatever the case is talking to somebody before you get your heart set on doing something, whatever that is,

Sharon Rumsey  58:35  

I wish this was the kind of stuff they offered in school when you took a business class, you mean everyday lifestyle, everyday life stuff,

Pam Kimmel  58:42  

we need so much more that right people need

Sharon Rumsey  58:45  

to know this kind

Pam Kimmel  58:45  

of stop class finance class bookkeeping, checkbook, you know, scenario not check

Michael Gaddie  58:53  

that the generation now doesn't even know what a checkbook is.

Pam Kimmel  58:57  

Yeah. Yeah, it is. This

Sharon Rumsey  58:59  

has been so much good information. Thank you so much.

Kristina Stubblefield  59:02  

Okay. So for people that want to contact you or want to reach out with questions, where do you suggest they do that? Okay.

Pam Kimmel  59:11  

So you can reach me, my office number is 812-256-5462 or my email address is the initial P. Kimmel at New wash bank.com.

Kristina Stubblefield  59:29  

Okay, for those of you that are listening, we will always put a links for Pam's contact information in the show notes so you can get to it easier, as well as any information that he she has that she wants us to share with you all. So, thank you all so much for tuning in. I know you have got more questions, but this was awesome.

Michael Gaddie  59:53  

I am It was amazing.

Kristina Stubblefield  59:54  

We may have to do a part two we're going about lately, you know, it really is Okay, for those that are listening, we would love to hear your feedback, visit our website, the ring, the bling and all the things.com and you can either hit the contact button, or you can press the microphone and send us a voice message. As always, we'd love for you to connect with us on our social media. You can find us there and catch the video on our YouTube channel. Until next time, he planning those weddings.

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