Ep. 6_First Time Home Buyers Interview Brittany Shoemaker, Loan Officer at Trinity Oaks Mortgage
Looking for the top things you need to know before buying your first home? On this episode of the Welcome Home Podcast, first time homebuyers get all of their questions answered by Brittany Shoemaker, a loan officer with Trinity Oaks Mortgage.
Brittany Shoemaker: [00:00:01] Another thing that I wanted to point out on credit scores, because I get asked this question all the time - people have Credit Karma's and Credit Sesames, and that's how they monitor their credit. It is very important to know whenever we pull your credit, we're not pulling it from Credit Sesame or Credit Karma, we're actually pulling it from the three bureaus.
Chelsi: [00:00:19] That was the voice of Brittany Shoemaker, loan officer with Trinity Oaks Mortgage. She's answering questions from first time home buyers about credit scores, and it may not really be what you think. So we dive into that and answer many more questions on this episode of Welcome Home.
Intro: [00:00:36] Welcome home, a podcast brought to you by John Houston Custom Homes, join hosts Chelsea Frasier and Whitney Pryor as they walk you through the exciting adventure of your home buying and building journey.
Whitney: [00:00:50] Hello, listeners. Thank you for joining us on this episode of the Welcome Home podcast. I have Chelsea, our co-host here with me. Chelsea, why don't you tell us who is at the kitchen table today?
Chelsi: [00:01:02] We have got Britney Shoemaker. She's a loan officer with Trinity Oaks Mortgage, and she's going to be interviewed today by first time home buyers Hannah and Joshua Lippert. They've got all the questions that we all had when we were purchasing our home for the first time. Where do I start? What does this mean? What is PMI? How do I qualify, etc.. So welcome to the show, Brittany, and welcome Hannah and Joshua.
Chelsi: [00:01:33] Thank you all for coming. We're going to let you ask the questions. Whitney and I may step in to ask our own and get clarification on a few things, but we'll just let you kick it off.
Hannah Lippert: [00:01:43] Awesome, so my husband and I are first time home buyers. We have gone through the process and really enjoyed it. But obviously we have a lot of questions and I feel like a lot of people have these questions. So I'm really excited to get some answers today from you because I feel like you're going to be able to really help us out. So I think the first question that Josh and I both have is the big question of how much mortgage can I really afford? How do I figure that out?
Brittany Shoemaker: [00:02:16] Okay. Well, that is a great question. I'm going to answer that by saying that that's kind of a comfort level thing. You guys have to be comfortable with what you guys spend. But also, we have to look at it from a guidelines point of view and a debt to income point of view. So really, it'll be a hard question to answer without having pulled your credit. Taken a look at your income tax returns W 2s. Once I have that information and I'm able to look at your credit report and look at your liabilities. That's whenever I'll be able to determine how much you guys can afford. And then it's up to you guys to determine what you're comfortable spending.
Hannah Lippert: [00:02:55] That makes sense, because even though we might qualify or be pre-approved for a certain amount, it wouldn't be necessarily smart to go all the way up to that amount, right?
Brittany Shoemaker: [00:03:04] Yep, that's exactly right.
Whitney: [00:03:07] Brittany, is there a general guideline of how much your mortgage should be, percentage wise, of all of your other income or debts or things like that?
Brittany Shoemaker: [00:03:18] So, again, I really think that's another question that can be answered with someone's comfort level, because some people are comfortable going up to 50 percent of their income. Others don't want to go above 20 percent. So it's really comes down to what someone is comfortable with in everybody's comfort levels just so different.
Joshua Lippert: [00:03:36] So for Hannah and I, what do we really need - what specific documents - should we bring to the table to prepare for or get a loan?
Brittany Shoemaker: [00:03:45] Yeah, so another really good question. There's two terms that we really talk about in the mortgage industry. One is qualifying. The other one is the actual loan approval. When you qualify, which is basically what we do on the first step, you guys tell me what you make and I'll pull your credit, and as long as there's nothing funky, like if you have self-employed income - that's something that would be a little bit different, because we'd want to go ahead and verify your income by tax returns - then we can do stated income, stated assets that will qualify you. And next steps once you contract, then we'll gather all of those documents and then we will verify all of the information that you told to me. That will be sent to an underwriter and they will review it and approve it.
Whitney: [00:04:32] So when first time homeowners are first searching for a home and they really like a home, they want to put an offer in. That's when you do the pre-qualification where you're just going off of stated income and credit reports. Then, whenever they actually put in that offer is when you're doing the pre-approval, which is we go off of actual documents and verify all of that information, is that right?
Brittany Shoemaker: [00:05:00] Yes, that is correct. Unless someone else has that situation where they're self-employed or even sometimes I have customers who they want to go ahead and go through with the approval process before they go into a contract, which I completely understand because it's such a nerve wracking process sometimes. Sometimes it's better for people to get approved first. It makes them feel a lot better and a lot more secure before they put an offer in. But we're fine doing it either way.
Joshua Lippert: [00:05:24] Yeah, that's actually really helpful to know because I'm the type of person who loves to plan ahead. So when Hannah and I talk about purchasing a home, I always want to know the logistics side of it. Like what do we really need to present to them to be able to qualify for a loan? So that's really helpful.
Hannah Lippert: [00:05:47] So let's say we get pre-approved for the loan. We find the home. We love it. We put in an offer. They accept the offer. What's next with you guys?
Brittany Shoemaker: [00:05:58] So what we will do at that point, once I get a copy of your contract, which will either be sent to me if you guys are building a house or getting a new construction home, it wil be sent to me typically from the sales agent. If you're working with a realtor and you're going with a pre-existing home, then your realtor is going to send me your contract. Once I get a copy of your contract, that's whenever we start the real loan approval process. I'll send you out all of your initial loan paperwork. And at that point, I'll request all of the documents - tax returns, W-2, bank statements, pay stubs, if I don't already have them. And that's something that if you guys want to give me up front, I'm totally cool with that. And then at that point, it gets submitted over to processing and they will review everything that I've already reviewed. At that point, I feel pretty secure that you guys are going to be approved. It usually doesn't go that far if there is a problem. Once processing reviews it, then it goes to underwriting for approval.
Chelsi: [00:06:53] Brittany, what is that typical length of time look like?
[00:06:56] So we typically are able to close loans three to four weeks once we get the contract, sometimes sooner. If we need to rush it, we will. If you don't want to rush it, I mean, it's really up to you guys. But three to four weeks is typical.
Hannah Lippert: [00:07:10] Something I think we both have a lot of questions on is the closing. Will I have to pay closing fees? How should I prepare for those?
Brittany Shoemaker: [00:07:21] So your closing costs and your down payment will be determined by your loan amount and your sales price. The closing costs are always going to vary. They're not ever the exact same. Everybody's loan situation is completely different, so closing costs are going to be completely different. Rule of thumb is that you want to prepare for about ten thousand in closing costs. Most of the time, it's not that much, though. But to be on the safe side, I always tell people, prepare for ten thousand. It's probably going to be less than that.
Joshua Lippert: [00:07:55] I did want to ask a question that is geared towards that too, as well. So I've heard and I've talked with my parents that when they purchased their previous homes, they had to pay 20 percent as a down payment. Is there a way we could possibly qualify for paying less than 20 percent? How does that really work?
Brittany Shoemaker: [00:08:14] Yeah, absolutely. So you do not have to put 20 percent down as first time home buyers. You guys actually have the option of putting as little as three percent down. And that is a really good option for first time homebuyers. It is going to be dependent upon your credit. So as long as you have great credit, three percent down is a great option. Interest rates are still really good for them. Now you will have mortgage insurance. So if you put less than 20 percent down, that is the role. You will have mortgage insurance and your Mortgage Insurance is going to be determined by two things - your credit and your down payment. So the more you put down, the less your mortgage insurance is going to be. The good thing with mortgage insurance is that you have the option, depending on how much you put down, to have two to three options on how you want to pay it. You can pay it monthly. You can pay it upfront. And sometimes you can even finance it into your loan.
Joshua Lippert: [00:09:04] So when it comes to mortgage insurance, if we were going to go with paying three percent for a down payment, do we have to pay the mortgage insurance until the home is paid off or is there a period of time when it cuts off?
[00:09:20] When you put three percent down, yes, you do have to pay the mortgage insurance for a certain amount of time, and it's going to depend on on how much you put down again. So if you do three percent down, you're probably going to be looking at at least 10 years that you would be paying the mortgage insurance. Now, there is another rule that if you have 20 percent equity in your home, you can request to have the mortgage insurance taken out of your payment. At that point, you do have to prove the equity with an appraisal and then you have to contact a mortgage insurance company and have them remove it.
Whitney: [00:09:54] I was a recent first time homebuyer myself, and coming from a rental background, I think that first time homebuyers typically want to know what does that monthly payment going to look like? Because that's what they're used to. So can you kind of go into explaining what all is in a mortgage payment monthly and kind of break down what all you'll be paying? Because it's not just principal and interest. There's more to it, right?
Brittany Shoemaker: [00:10:22] That's correct, you will have your taxes and your insurance to pay as well as mortgage insurance if you put less than 20 percent down. If you put 20 percent or more down, you actually have the option to take your taxes and insurance out of your payment at that point. You would actually need to just handle them yourself so you'd pay it every year when they were due.
[00:10:43] That makes a lot of sense. I think something that we run into is that we'll look at homes on Realtor.com And Zillow and, you know, they give you that little estimate calculator and it's like, "oh, this home's only going to be about 900 dollars a month." And it seems perfect, but then really, when you add all of the costs like homeowner's insurance, and property taxes, and HOA fees, it's so much more than that
Joshua Lippert: [00:11:07] As Hannah and I have been looking online at different homes, I see this little tab that says HOA fees. Can you go into detail on what HOA fees are? Because some homes say that you have to pay HOA fees and then with other homes, it's not even listed on there.
Brittany Shoemaker: [00:11:29] Yeah, so an HOA is a homeowner's association. A homeowner's association is actually separate of who owns your home or if someone's building your home. They don't typically handle the HOA's. It's actually independent. Whenever you make your HOA payments, you actually make it to a separate entity and they bill you separately. So it's not included in your payment, it's just a separate payment. Homeowners associations include things like lawn maintenance, or I don't know, what color you can stain your fence. So some neighborhoods have homeowners associations and others do not. But also, there's some really positive things about HOA's. Some neighborhoods have pools and parks, so if you have a family, stuff like that, then you know, your HOA's are taking care of those pools and parks and you're not having to worry about them.
Hannah Lippert: [00:12:19] Right, so your monthly payment might be more, but you're getting a lot of benefits in paying those HOA fees and being in a great neighborhood like that.
Hannah Lippert: [00:12:28] I think one of the last questions we have is how do I know which loan is right for us? I know there's different loans - FHA and Conventional. Can you explain the difference with those?
Brittany Shoemaker: [00:12:38] The different loan types are going to be really dependent upon credit scores. If you're a veteran, how much money you want to put down. So I'll go into a little bit about each of the loan products in that way. FHA and VA are both government loans. Most people hear government and they're like, "well, what's wrong with it?" There's nothing wrong with the an FHA loan. They're actually very popular loans and they're actually very great loans. So VA loans are strictly for veterans. You have to either be married to a veteran or be a veteran to get that type of loan. Now an FHA loan is great for people with lower credit scores and it also has a very low down payment requirement. The mortgage interest rates are fixed, and they are not based on your credit so it provides a very low payment for people with lower credit scores.
Brittany Shoemaker: [00:13:36] Conventional is going to be a more traditional loan type. You still, as a first time homebuyer, have the option to put three percent down. If you are not a first time homebuyer, the minimum downpayment requirement is five percent. Again, we talked about the mortgage insurance that goes on those if you put less than 20 percent down. But really, all three loan products are great. There's not a bad loan product. It just really depends on on what that person is looking for.
Whitney: [00:14:04] I'd like to pause for a moment and talk to you a little bit more about our preferred lender, Trinity Oaks Mortgage. I know you've heard from Britney and Daniel and the rest of the team at Trinity Oaks Mortgage here on our podcast, and I've even used them on my personal home loan this year. From the moment the application begins, Trinity Oaks is committed to serving their customers through all stages of the home buying process. They strive for building lifelong relationships that lasts well beyond the funding of your dream home. To learn more, follow them on Facebook or Instagram. You can call them at 866-429-5010 or visit their website at trinityoaksmortgage.com. They are an equal housing lender and their NMLS Number is 1443326. And now back to our conversation with the folks at Trinity Oaks Mortgage.
Hannah Lippert: [00:15:02] There's a lot of talk about credit scores when it comes to picking the right loan. I'd like to think that we have a really good credit score, but how does our credit score really affect our loan?
Brittany Shoemaker: [00:15:13] I'm really glad that you brought that up. There is a lot about credit that we could talk about. Credit scores are so important in which type of loan you qualify for because it just depends on what your credit is and what type of loan that you qualify for, but the good thing with FHA loans is that you can go all the way down to a 620 credit score and you're still going to get a fairly good interest rate. For conventional, we can go down to a 640, but at that point, when you get into the 640's, you're going to have a little bit higher of an interest rate. But depending on how much money you put down, if you put 20 percent down, you might have a little a little higher interest rate, but you're going to still have a lower payment than if you were to do an FHA loan. Another thing that I wanted to point out on credit scores, because I get asked this question all the time, is people have Credit Karma's, Credit Sesame's, and that's how they monitor their credit, but it is very important to know whenever we pull your credit, we're not pulling it from Credit Sesame or Credit Karma. We're actually pulling it from the three bureaus, and there's eight different ways for your credit to be graded. So there's FICO one through FICO eight, and those are all different grading modules for your credit. Mortgage industry uses a FICO five. There's actually websites that you can go on and look up your mortgage credit report, but as far as the Credit Sesame's and Credit Karmas, they're great for monitoring your credit, but not necessarily for looking at your credit scores.
Joshua Lippert: [00:16:40] So Hannah graduated two years ago, and we have begun paying off her school loans, and I actually just graduated a month ago, and I won't have to start paying those until about five or six months after graduation. My question is, how is us paying off our school loans going to affect being approved for a loan for our home?
Brittany Shoemaker: [00:17:02] So that's another really good question that we actually get asked quite often with people who have student loans. Just because you're not paying on them currently, you will in the future. Because you have the debt, we have to count that in your debt to income. So what we do is take one percent of your balance, and that's the payment that we use for our debt to income calculations. If you're already paying on your student loans, which is typically going to be lower than that one percent that we use for students that are in deferment, we can actually take the payment directly off of your credit report. A lot of people ask me, "So even though I'm not paying on it, you still have to count it against me?" We do, because we know eventually you're going to have to pay that student loan back.
Joshua Lippert: [00:17:50] So let's say we go for like a 30 year loan. And in a couple years from now, like three to five years, We have our school loans paid off. Should we refinance or should we keep it on the same path that we're going right now? What would you recommend for us to do in that situation?
[00:18:27] So your liabilities, your payments that you make on your cars, your student loans, stuff like that, they actually really don't have anything to do with your interest rate. So right now, rates are so low and they're so good, they might not ever be this low again. We don't know. Nobody does. But five years from now, the only reason you would want to refinance is if you had equity in your home. You could refinance the PMI, the mortgage insurance out of your loan if you have 20 percent equity. But other than that, unless you just want to shorten your term or if rates are better than they are now, that would really be the only reason that you'd refinance your liabilities and your monthly payments really don't have anything to do with your interest rate.
[00:19:15] We've been kind of going back and forth between either buying a home that's already been pre-owned or possibly even building. So when it comes to getting a loan for building a home, I know you have to purchase the property. And then also pay for the home itself. Are there two separate loans? Are they going to be put together? What does that really look like?
Brittany Shoemaker: [00:19:35] So there's two different answers. It really just depends on where you're looking to build. Some builders already own the land, and if the builder already owns the land, you don't have to do two loans. Basically you just go in, you'll put a deposit down with the Builder, and they will build the home. Whenever your home is finished, you'll close on the home. It's a one time close. Now, let's say you have a piece of property that you love and you want to buy it and then you want to build on it. That is something a little bit different. You have to get a land loan for those, and then you'll close on the land loan. Once you are financing that, then you'll actually go in and do a whole separate transaction with the builder. Once that transaction is complete, then you will have to do another close on the home and the land. So you basically are at that point that we call a refinance, so you're refinancing both properties into one.
Whitney: [00:20:37] So really, when you're looking at buying from a builder, you want to do your research and your due diligence to make sure that that builder is carrying that construction loan for you. So all you have to worry about is mortgage and getting qualified for the mortgage. It takes a lot of headache and stress out of the buying process when all you have to do is worry about qualifying for one loan.
Chelsi: [00:20:59] Well, those were all really great questions and answers, and I feel like we really tackled some of those first time homebuyer questions. I'm sure there's a lot more questions that we could tackle in another podcast or if you want to reach out to Brittany, she's going to provide her contact information at the end of the episode so you can reach out to Trinity Oaks Mortgage directly. I just wanted to thank you, Hannah, Joshua, Brittany, for coming on this show and demystifying the first time home buying process.
Hannah Lippert: [00:21:25] Yes, I think we both can say we feel a lot more prepared now, and we know clearly kind of the direction we want to go with our home. So thanks for answering these questions for us.
Brittany Shoemaker: [00:21:50] Yeah, absolutely. My name is Brittany Shoemaker. My NMLS number is 1035668 and I can be reached at 469-552-5607. Trinity Oaks Mortgage is an equal housing opportunity lender and their website is trinityoaksmortgage.com.
Whitney: [00:22:11] Well, that wraps up our show. Thank you so much for joining us today. Be sure to click the description for episode notes to get the contact information for Trinity Oaks Mortgage and Brittany directly, as well as our information. You can follow us on Facebook, Instagram, Twitter or LinkedIn. You can visit us at jhoustonhomes.com and if you have questions about the mortgage process that you would like answered on our show, call us at 866-646-6008 or Email us at firstname.lastname@example.org. Welcome home!