August 22, 2022 • 37 mins
In this episode Jeff and Gina discuss using your pre-approval letter. We review the information contained in a pre-approval letter, how to shop with your pre-approval and the importance of the information
Jeff Cunningham is a Realtor (license # 301547) with United Realty Group (Broker license C34827) serving the Triad NC area.
Jeff can be reached at
Email - jeff.cunninghamrealtor@gmail.com,
website, jeffcunningham.mysalecore.com,
Facebook,- https://www.facebook.com/jeffcunninghambroker/
Gina Milloway is the Mortgage Loan originator NMLS #1676070 & CEO of Triad Mortgage LLC, NMLS # 2385260,
Gina can be reached at,
Email: gmilloway@traidmortgagellc.com
Web: https://www.ginamillowayloans.com/
Facebook - https://www.facebook.com/mortgageswithgina/
Office -336-290-1891
NMLS Consumer Access: https://nmlsconsumeraccess.org/
Privacy Policy: https://www.ginamillowayloans.com/privacy-policy
Triad Mortgage is an equal housing lender
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello, and welcome to let's.
Get moving with Jeff and Gina.
I am Gina.
Millway your local mortgageadvisor.
And Hey, I'm Jeff Cunningham.
I am your local real estateagent here in Greensboro.
Uh, try outta North Carolina.
Welcome.
All right.
Welcome to the show.
So today we're gonna kind of doa follow up on a show that we
did two episodes back, and thatwas your getting preapproved,
(00:22):
getting your preapproval letter,which is a really important
part.
In the process, but it's not thefinal step in the process before
we go shopping.
So we wanna kind of break thatdown, what it looks like, you
know, what information's on thatpreapproval letter and why it's
important, um, you know, to yourrealtor, uh, to know what's
going on with your preapprovalletter, right?
(00:44):
Oh, absolutely.
Absolutely.
Um, you know, we we'd like tokeep, uh, keep the preapproval
letters, um, andpre-qualification letters as,
uh, really our parameters and,and what it is that we are, we
are shopping for.
Um, you know, again, what, forwhat we can afford, um, as well
as.
You know, uh, just beingcomfortable and staying focused
(01:04):
on, you know, just that numbermm-hmm mm-hmm yeah.
And there's there's so,absolutely.
So, excuse me.
So there's a lot of things that,that go on, you know, before you
go out and start looking at ahouse, I think people really
need to.
Be ready to do that emotionally,physically, monetarily, wherever
that's at.
So, and there's different thingsthat can play into that.
(01:27):
So for instance, let's say thatmaybe someone needs to save up.
you know, another two or$3,000for down payment and closing
costs, then they should waituntil they know that they're
gonna have that money to beforethey even start looking.
Um, there are other things thatneed to happen too.
Sometimes somebody may beselling a home that they
currently live in, and that ispart of their preapproval
(01:50):
process.
The preapproval was based onthem selling that home in order
to buy the new one.
In fact, you actually maybe hadan instance where you.
Went out ahead of where youshould have been and started
looking at home.
mm-hmm absolutely absolutelywell put.
Um, but yes.
(02:11):
Um, so we did exactly that, um,have an individual or have a
family that, uh, is looking fora new, uh, new home, um, in the
same area.
Um, but we are looking for, uh,a specified school district
mm-hmm um, uh, that they hadchosen, um, and they were unsure
whether or not.
Um, homes would be available.
(02:31):
Um, even though, you know,you've got Google, you've got
Zillow, you've got realtor.com ahundred different ways to look
at proper.
You know, this family had justmoved a couple of times in the
last couple of years.
And, um, again was looking to goahead and get into a different
school system, a differentpriority if you wanna call it
that.
So, you know, we, we, we I'llsay, um, had suffered a little
(02:54):
tunnel vision where I, as arealtor would love to make sure
that again, we have all of theparameters.
What it is that you can buy, howmuch you can afford.
Are you mentally ready for this?
It is an emotional process.
Is the home ready to be listedthat needs to be sold and is the
home ready to be listed, whichis in this situation, um, you
(03:17):
know, a criteria for them beingable to buy the next.
Um, so.
Again, because this is anemotional process.
You know, we looked at the firsthome, um, on this beautiful
Saturday morning, trying to beatthe heat here in North Carolina.
Mm-hmm and it was gorgeous.
Mm-hmm Now this was, this homewas at the top of the pre, the
(03:39):
preapproval, right?
This was at the top of thepushing it a little bit.
Maybe even at the top.
Yeah.
Absolutely.
Um, we here in, in the triad inGreensboro, North Carolina, um,
we are still trucking rightalong, uh, in the seller's
market.
Mm-hmm um, so our sellers arecertainly putting the home on
the market and expecting listprice, if not more mm-hmm Um,
(04:00):
which again seems to be thetrend, right?
We're we're not dipping downbelow that at this moment.
Um, we'll talk more aboutinterest rates and so forth
going forward.
Um, but you know, again, What wehave, what we do when we bring
in the scenario there of notbeing prepared or sticking to
the script of your preapprovaland prequalification letters,
(04:22):
um, it could lead to someserious frustration.
Mm-hmm Yep.
So we went into this big,beautiful home being at the top
of the, the price list and it'sgorgeous, right?
Like this is the best home everfall in love with.
Yeah.
And then of course, in thismarket, there's also a little
bit of a, a frenzy around peoplebuying.
Sure.
Because appointments are back toback.
So there's people in there whenyou get there, people waiting.
(04:44):
Absolutely.
So it's, it's exciting.
It's like, okay, we, this is thehome.
We love this home, but, but theproblem.
Their home is not on the marketyet.
Um, and, and, and, and quitesimply, it just turns out to be
that.
So the conversation, you know,led on later on in the day after
(05:04):
we got through looking at theother homes, you know, what is
it that we can do to get anoffer in on the first home that
we saw today?
Now based on the preapprovalletters and as a good realtor,
you know, again, we wanna makesure that we, as a team are
focused on what it is, again,the parameters, yes.
What we can afford, what we see,what it is that you want.
(05:26):
What's on your list, schoolsystem, you know, two stories,
whatever it might be.
And then we need to have thatdiscussion as to what the next
steps are.
Right, exactly.
And, uh, where we, where we had,or at least where, uh, the
buyers were looking to get.
Cart in front of the horse.
It was, you know, well, let's goahead and get the offer in, and
then we'll worry about sellingthe house.
(05:47):
Mm-hmm well, we can't do that,that, uh, you know, again, our
responsibilities, uh, for, uh,for realtors is to the buyer,
uh, and or our seller, um, whichis a fiduciary responsibility
and a situation like that, wherethe contingency is not being met
right.
Based on our preapprovalletters.
(06:08):
Um, could seriously put.
Due diligence money or theirinitial down payment at yes.
Cuz all this has to be spelledout in the contract when you're
putting in an offer because thesellers have the right to know
certain things about the buyer'sreadiness to buy what what's
involved in that contract.
Absolutely.
So it's not just that it's not acourtesy thing.
(06:28):
It's a contract thing.
Like you, you need to be ready.
It sure is it sure is.
And that's where we need to beable to specify, um, in the
contracts, you know, what it is.
And here in North Carolina,that's exactly what they're
looking for.
Um, you have a contingency offerthat you're putting in.
Fantastic.
They ask, are you under agency?
(06:48):
Do you have a real estate, uh, areal estate agent working with
you?
Um, are you under contract and,you know, do you have a closing
date even, even scheduled againthat's for the sellers to see,
um, you know, as they're, asthey're being, uh, uh, presented
the offer um, Which as a buyer'sagent, we wanna make sure that
we have the best offer that wecan present to the seller,
(07:11):
right.
Uh, again, which puts the buyersin the best position that they
can be.
Right.
Because if, I mean, like in thissituation, if the home is not
listed or is not ready to belisted, maybe there, there are
some repairs that need to bedone, you know, before it's
ready to go on the market.
Um, Contractors are behindthere's, you know, a shortage of
getting people out it's takingforever.
So it could delay, you know,even, even two or three week
(07:32):
delay could put a massive delay,you know, in the buying of the
new home and potentially put yououtside of your contract and not
have any, um, real grip on beingable to keep the house.
If you go outside that contract,cuz the sellers don't have to
extend it.
So absolutely.
Absolutely.
And, and, and, and, and thatcan, you know, again, as
(07:53):
mentioned before, Not only leadto frustration, um, again, lead
to miscommunication,misunderstandings.
Um, but at the same time itcould lead to, again, uh, you
know, uh, a surrendering of yourdue diligence.
Right?
Absolutely.
Um, and you know, and today'smarket here in North Carolina,
you know, we're putting upanywhere from 2% to, I've seen
(08:17):
50%, you know, on homes that areexceeding$400,000.
And to put that money downwithout having, again, a clear
expectation of what it is theprocess is moving forward.
Um, you know, again, can, can,can have some catastrophic, uh,
results.
Absolutely.
Um, and, and, and that'ssomething that, again, previous
(08:38):
episode, we're talking abouthaving a, a, a, a relationship
established with your team, uh,your realtor mm-hmm, on your
lender.
Um, you know, again, making surethat the buyers, um, whoever's
in the family, whoever's in thebuying process, you know, again
are streamlined everybody onwhat it is that they're looking
for and what it is that they canafford.
(08:58):
Everybody knows where they are,what they can do and what they
can't do.
Absolutely.
I think it's really importantfor them to know that for
several reasons, one, thismarket is really fast paced, so
you don't have a whole lot oftime to ponder on a home as you
would, you know, maybe preCOVID.
And then, you know, the otherside of that is.
(09:19):
Purchasing a home for, for mostpeople is an emotional process.
This is where you're gonna raiseyour family.
Mm-hmm This is where you'regonna spend, you know, the next
five to however many years orso.
There's an emotional involvementin this and you go out and you
look at.
The house and the top of theprice point, you're probably
gonna like it more than you haveother ones.
(09:39):
And you're, you know, you mayeven fall in love with it and
they're like, this is the house,but if you're not ready to put
that down and you gotta watchsomebody else win the offer on
that house and it, it could betaxing on you on, on everybody
involved.
So being ready to do that,especially in this market, if
you're going out and looking athouses, you need to.
(09:59):
Ready to put that offer inwhether that's, you know, all
the money that you need.
Um, job situation is undercontrol house.
If you need to sell your currenthouse, all that stuff is really
packed away.
Ready to go.
Mm Yes.
Yes.
And, and, and it really is, youknow, and, and again, you know,
(10:21):
in this one instance, you know,again, great family, um, again,
very well qualified.
Um, but you know, it's so, soimportant that we follow the
steps in the process.
Um, because again, it, it, it,it can lead to, again, an
emotional upset, uh, or, youknow, again, worst comes, you
know, worst case scenario, youknow, again, we, we put some
money down that we're not gonnabe able to.
(10:42):
Right.
Absolutely.
And, and that's our job.
It's to protect you guys and,and keep you from losing your
money and help direct you.
We're not trying to, you know,reign on your parade and keep
you from buying that beautifulhome.
But it, this, we are dealingwith contracts and we are
dealing with potentially verylarge sums of money that you
don't wanna lose.
You know, some people save upfor years and years and years to
try to buy their first home.
(11:03):
The last thing you wanna do islose that because you weren't,
you weren't prepared or you wentinto it the wrong way.
So, you know, and understandingthe preapproval letter.
Let's go over a few things thatare on the preapproval letter
and, and what they mean and whatpeople need to look out for.
So the pre preapproval letter,when we're doing those, what's,
what's on it.
(11:23):
What's important.
So there are a few things thateveryone's going to be looking
at and preapproval letters will,will vary.
And we talked about thedifferent types of preapproval
letters a couple episodes ago,but there are a few main things.
The agents, um, whether it's theseller or the buyer's agent is
going to look at one, the amountthat's on the preapproval
(11:46):
letter, that's important becauseyou need to know what you're
qualified for those aren'trandom numbers.
They're, they're on there forone of many reasons, and it
really depends on the loanofficer and the buyer on, on
what those numbers mean.
So when we're looking at thetotal amount, when I do a
preapproval letter, I could baseit on a few different.
(12:07):
If someone tells me that theywant their payment at$1,500 a
month, max, then I will do apreapproval based on that
number.
So that's not necessarily their,their max.
It's not what they technicallycan afford, but it's what
they've told me they want.
And so that's where I stop.
Yes.
(12:28):
Now I have some bars who likewanna know the max that I can.
And so I will give them the maxfor those.
So it's not always that final.
Number's not always a max, butit's based on the discussion
that we've had.
We can always have a differentdiscussion, but it's based on
the original discussion thatwe've had.
So either your payment amount oreither a loan amount or the
(12:49):
information that you've given menow, the other thing that is
really, really important is theloan type.
There are many different loantypes and those loan types
require different types ofcontracts.
So your conventional loan isprobably, well, your cash is
probably the easiest, but yourconventional offer letters,
(13:12):
probably the moststraightforward.
And then you have your FHA, yourVA, your U S D a, and all those
have different addendums that goto the contract.
And you have to actually,there's a space on the contract,
right?
Where you.
What type of loan is this?
So mm-hmm, it's really, reallyimportant.
You can't put in a FHA offer andget it signed under FHA and then
(13:36):
go, go conventional withoutgoing back and redoing your
contract.
Mm-hmm yeah, absolutely correct.
So where that's important frommy side is going to be one, the
appraisal.
again, there are differentappraisal types and FHA
appraisal is a little differentthan a conventional appraisal.
A VA is a little different thana conventional, you know, VA has
(13:59):
certain stipulations, uh, herein North Carolina, not all
states, but here in NorthCarolina, where the sellers pay
for the termite inspection.
So that's important to know.
We need to know that going intoit.
Um, the sellers need to know,Hey, you're going to be
obligated for a termiteinspection or, you know, wood
destroying pest instruction.
Mm-hmm um, inspection.
So it is really, reallyimportant that we have all that
(14:19):
worked out beforehand before youput the offer in, and the offer
is accepted because once it'saccepted those set the terms of
the loan and the process, unlessyou go back and renegotiate
mm-hmm and once you renegotiate,I mean, You know, you may or may
not give the same terms that youwant.
So there's always that, youknow, right.
Uh, that out there that youknow, that the sellers may
(14:43):
change their mind.
So you may have to stick withthe original one.
So it's important to have thatup front.
Absolutely.
So, so since we're on that, uh,side of the, uh, process and,
and, and setting up theexpectations, uh, again, um, can
you tell us why, um, theappraisal number is so
(15:06):
important?
Again, I, I, I know we have somefolks out here, especially in
our market today where we aremm-hmm, typically over list
price, uh, overing price.
Um, and, and again, our loansfor those that are borrowing,
uh, are looking at, um, again,mm-hmm, the appraisal that comes
back.
And what is the importance of,so the importance of the
(15:28):
appraisal, the appraisalobviously gives us the value of
the home and the current marketbased on comps, um, homes that
are pre previously sold.
So when the appraisal comesback, there are several reasons
why it's important, but the,the, the biggest one is going to
be the value.
The loan is based off of thevalue on the appraisal or the
(15:51):
purchase price.
Whichever is lower.
So if the appraisal comes inlower, the loan is based off of
that.
For instance, if, if you offered400,000 on a home and it comes
back at three 80, your loan andall of your numbers are based on
the three 80, the bank will notlend on the higher contract
(16:12):
price, even though that's whatyou offered, you have to make up
that difference out of.
On top of price.
Yes.
That's very, very on top of yourother cost.
That's not all figured in it'san additional amount.
So if the appraisal's 20,000 lowmm-hmm that you have 20,000 over
and above what you were expectedto bring, if you want to follow
(16:32):
through with that.
So correct.
And then we can get intonegotiating, stuff like that,
but the other things that areimportant on the appraisal, and
again, it goes with the loantype too, because legit
different loan types.
A slightly different, um, qu uh,not qualifications, but like
standards.
So there may be repairs that areneeded based on the loan.
(16:52):
So that's really, reallyimportant too, that we know that
ahead of time.
You, you know, you, you can'tconvert a, I mean you can, but
it really costs the same toconvert a conventional appraisal
to an FHA appraisal.
It they're just not the samething.
FHA requires different pictures.
then a conventional, which isweird.
You think they'd all, it's ahouse.
You take a picture.
No.
(17:13):
Yeah, there are differences.
So it it's important upfrontthat we know everything going
forward, um, for that reason.
So that's important.
And your realtors.
Yes.
And your realtors should knowsomewhat, uh, what the
differences are based on thoseparameters.
Um, as, as, as we have run into,in the past, we've had an
(17:33):
individual, or I've run into anindividual who is, you know,
qualified, you know, again,conventional mm-hmm which is
typically the higher, uh, moredifficult to qualify for, but in
the situation, FHA was actuallygonna be a little bit more, um,
suitable for, for their.
And the difference being, youknow, again, with an FHA, as you
(17:55):
were saying, the repairs may benecessary for the loan to
actually be processed throughwhich gives expense or lend
expense back over to the seller.
Um, so the strongest offer maynot be, um, The, the, uh, FHA VA
or any of the government backloans.
(18:15):
Um, it certainly would be, uh,more attractive to the seller,
uh, on the conventional side ofthings.
but having the buyer understandthat, you know, they could be
looking at some expense ormm-hmm, requesting the seller,
uh, to go through some of thisexpense again, to get them into
that home and in today's market,that that might not be the right
(18:38):
thing to do.
Um, certainly comes down tonegotiate.
Absolutely.
Yeah, absolutely.
And so, You know, some of thethings there, there are things
that can change the preapprovalletter.
Um, you know, the number that'son there, like I mentioned
earlier may or may not be themax.
It may not be sat in stone, butit's an estimate.
And the reason why it's anestimate is because I don't know
(18:59):
what house you're gonna buy yet.
I don't, I don't know exactlywhat tax area you're gonna be
in, or if they're HOAs, HOAs ishonestly one of the biggest
little boogers on doing apre-approval letter.
Some HOAs are completelyoutrageous.
and if, yeah, that has not beenput into the equation, let's say
(19:21):
maybe it's, um, you know, maybeit's the first time home buyer
who's really pushing, you know,a young couple, maybe pushing
their max and we haven't takeninto account.
An HOA and they go look at thiscute little townhouse.
It's a great price.
They like the townhouse becauseit's, you know, it's in their
price range and it's still nice.
A lot of times you can get atownhouse for a little more
money than you can a singlefamily in some cases, but it has
(19:44):
a pool and it has a park for thekids and it has a community and
they love it.
And they go in a contract andthey didn't check ahead of time.
And the HOA is$350 a month.
Right.
That's a lot of money.
Yeah.
That's a lot of money and it'sa, it's not a percentage.
It's a hard dollar figure thattakes away from your budget
(20:06):
right now.
You may or may not be able toafford that, but there's no
getting around that.
It's it's if, if that puts youover.
it's, it's just that the deal,the deal is dead.
Unless you gotta come up withanother solution.
You've gotta either pay offdebt.
You've gotta get a co-borrower.
I mean, there's some massivescrambling that happens at that
point.
So you really wanna be careful.
(20:28):
Yeah.
With HOAs, you wanna be carefulwith taxes.
We have a lot of very differenttax areas here in this area.
You know, we have mm-hmm um,Davison county, which is great
on taxes.
I mean, they're completelydifferent than Gilford county
Gilford county, who just loves.
I mean, we just, we went up thisyear on our taxes, so.
(20:49):
You need to know yep.
The area that you're buying itand what those expenses are
going to be, because that willchange the amount of that
preapproval letter, the amountthat you can afford.
And that's where it comes inhaving a great agent like Jeff,
who knows those areas and knowswhat to look out for.
And that's something I'lltypically communicate to the bar
and the agent like, look, we're,we're maxed out at this.
(21:10):
We're pushing it.
Like.
Be careful on your taxes, becareful on HOAs.
Be careful on that stuff becauseI can't control that stuff.
And I don't know what it isuntil you find the house,
correct?
Correct.
So that's, you know, again, we,we don't wanna always keep a, a
hard line in the sand where therealtor is.
(21:33):
the fine answer, but the realtorneeds to understand what it is
that again, we're qualified forand what these additional
expenses could be.
So, so when a realtor comes downand says, you know, Hey, what
are you qualified for?
And you give a number, which isgreat.
And I will typically ask ifwe're looking for a home with a,
with an HOA, you know, are youaware that your HOA will mm-hmm
(21:59):
count towards.
DTI your debt to income ratio,which will have an effect on how
much you can borrow.
Um, and I, I know Eugene as, asa great real, uh, sorry, as, as
a great broker will ask thosequestions or at least point that
out to somebody who is lookingat, at that specific type of
home.
Um, but you know, even in a, asingle family home, we have a
(22:22):
number of neighborhoods.
That do have larger HOAs, uh,and, and folks just don't
understand, you know, why do Ihave to.
Just stay at number$250 a month,right.
For a home on a golf course.
And you know, across town,you're looking at something
else, right.
That might have a$15 HOA or notat all, which you know, again
(22:46):
is, is not gonna have asignificant impact.
No, not, not typically, but yourhigher ones will.
I mean, and I've seen, seen themanywhere from, you know, one, a
hundred bucks a month.
Uh, Up to, I mean, there's somereally expensive ones and some
areas here, they can go prettyhigh mm-hmm so sure, sure.
They're right.
I just wanna be really carefulwith it.
(23:06):
Now.
I try not to max people out whenI'm giving a preapproval letter,
or if I know that they're close,I'm having a really hard
conversation with them.
Like, look.
When you find a house that youlike, send me the link, let me,
let me look at the house.
Let me look at the taxes.
Let me make sure that we'regonna be okay here.
And yes, that creates a littleextra work on my side, but I
would much rather do that andhelp them get into the house
(23:26):
that they love.
But also did not be a trainwreck because their taxes were
$400 more a month than theythought they would be.
Or they were double.
I mean, we there's literally, Ithink almost some doubling in
some between some of ourcounties and the taxes.
It's, it's insane.
Um, and that makes a hugedifference on your monthly pay.
Yeah.
It makes a huge difference onyour monthly payment.
Mm-hmm yeah.
(23:47):
You really need to be, need tobe aware of your taxes, um, your
HOAs and the other thing that Ireally wanna throw in there,
that's on, you know, I don'tthink that this is even on the
preapproval letter and maybe itshould be.
Is what type of house thatyou've looked at.
And again, this comes back tothe HOA.
(24:08):
Townhouses are gonna have those,some single families have those.
They're typically not as highdepending on the area that you
buy in.
But the other thing ismanufactured homes, manufactured
homes can change thepreapproval.
So for me being a broker, I havea lot more flexibility than some
(24:29):
people do, but manufac.
Homes for a lot of lenders, alot of banks have a lot of
overlays.
What our overlay is, is kindalike an extra rule.
So like FHA tells us whatthey'll do this, this and this
for a manufactured home.
Well, the bank down the road orthe lender might say, well, we
don't really.
(24:50):
like manufactured homes.
They're a little riskier of a,of an investment.
So it's not something we reallywanna do.
So they might put somethingthat's called an overlay or an
additional rule on thatmanufactured home saying we
won't accept anyone under a six80 credit score with a
manufactured home, or we won'tdo single wise mm-hmm which is,
it is hard to find financing ona single wide.
(25:12):
Um, or we will only do 20% down.
I mean, there's a lot of.
Rules.
And usually it has to come inwith, uh, the credit score.
Typically there's overlays oncredit scores and sometimes with
the DTI as well.
Sure.
So you really wanna be carefulwith that?
Um, myself.
I being a broker, being able towork with many different
lenders.
I don't tend to have as manyoverlays of manufactured homes.
(25:34):
I can do a lot of round withthem, but you need to understand
that it is a different propertystructure and there are
different things involved onyour pre-approval.
So you wanna make sure if you'relooking at a manufactured home
that you take into account, whatthat might mean for your
preapproval.
mm-hmm Yeah, absolutely.
Absolutely.
(25:54):
And, and, and that's somethingthat, again, you mm-hmm as a
good broker would explain to.
You know, a client mm-hmm whomay or may not be looking for
some land mm-hmm you know, outthere in the rural areas here,
uh, on the outskirts of Gilfordcounty, um, even into Rockingham
and Davidson, what you'retalking about.
Um, and, and for those folks toactually understand that,
(26:15):
because that certainly could be,uh, mm-hmm yeah, a detractors.
Um, you know, they just mightnot be able to afford, or like
you said, get, get the lendingthat they need.
Yeah.
And we're seeing a lot of peoplego to alternative housing with
the inventory shortages or the,the tightening of the inventory.
You know, a lot of people arelooking at those manufactured
homes, mm-hmm or modular homesnow, modular homes, a little
(26:37):
different because they'reactually in the lending rule
consider the same as a singlefamily.
So those are, those are anydifferent, but when we're
looking at a manufacture hall,mm-hmm.
That is a different product andit has different guidelines to
it.
So we just need to make surethat we've, we've looked at
that.
I'm not saying there's anythingwrong with it or that you can't
do it.
We just need to check that box,run it as a manufactured home
and make sure that we're good togo on that and that you
(26:58):
understand what's involved.
Mm-hmm and you know, one otherthing that can change the amount
mm-hmm we're certainly dealingwith this now is the rate.
So.
Typically rates don't change asfast as they've been changing
the past two years, past two anda half years have been really
interesting for rates.
And right now we're recordingthis in the middle of, um,
(27:19):
actually the end of July.
And so we have some interestingthings happening with rates.
Um, rates have kind ofskyrocketed this year.
We went from being in, you know,the low threes to being in the
mid sixties in some cases.
So, um, If you are in anenvironment where you're
(27:40):
shopping and the rates are kindof in a volatile situation, like
we are now, your lenders shouldbe checking in with you and, and
making sure that if the ratetakes a jump, that you're still
preapproved because the, and thethree month timeframe between
March mm-hmm and June we had ahorrible increase in raise.
(28:01):
I mean, we went.
Two and a half, three points.
It was insane.
So every time we had a big jump,I'd go through and make sure
that all of my borrowers wereokay with the amounts I had
given them where the rates werefor that time.
So you really wanna make surethat you're staying current on
the rates and that, um,preapproval amount reflects that
(28:22):
cause that can greatly affectit.
I mean, if you were preapprovedat three and a half and now the
rate's five and a half.
You may need to change somethings.
You may, you may not bepreapproved for that found
anymore.
That's a big difference.
And, um, so yeah, absolutely.
Yeah.
Well, you know, initially whenwe kicked off the, the show,
yes.
We're talking about frustration.
We're talking about trying toeliminate that or, you know,
(28:44):
again, keep our goal and ourfocus mm-hmm, you know, really
just right in front of us.
And, and, and again, if we, youknow, went ahead, Like you said,
you know, three weeks ago or amonth ago, mm-hmm you know, we
were approved for a certainnumber at a 4% interest rate.
Yeah.
You, you just can't afford that.
No, you won't.
It won't payment.
(29:04):
A 5% interest rate.
And, and it's super importantagain, uh, for buyers mm-hmm to
check in with, with, with thefolks and say, Hey, you know,
I'm gonna go take a look at acouple of houses this weekend.
You know, mm-hmm, how's my ratelooking how's my monthly payment
gonna be looking if I'm lookingat a, you know,$350,000 house in
Summerfield.
(29:25):
again, you know, your, yourbackground, what you do, just
like you said, you know, you,you, you do all the factors, you
do the formula.
And if it says, you know, theycan't afford four 50, they're
back down in the$400 range or$4,000 range.
Um, and again, that's, that'shaving a clear, at least a set
expectation.
Um, and, and if that doesn'tmatch what it is that they are
(29:47):
looking for, if it's a specificneighborhood, if it's a specific
school system, then this justmight not be the right time.
Buy in that area.
Um, and, and your realtor, youknow, should be able to turn and
say, you know, Hey, this is,this is gonna be a different
scenario altogether as far.
Searching for a home, you know,again, because we've changed our
(30:09):
parameters somewhat for our maxlevel.
And you know, that, that, thatcertainly could impact again,
you know, the ability and theinventory, right?
Absolutely.
You that's out there.
Absolutely.
You know, it's funny talkingabout rates.
We've had some, you know,interesting stuff going on this
week.
Um, we'll do a littleinteresting is good.
(30:30):
Yeah.
Interesting.
I mean, nobody's going on rightnow?
I'll tell you.
It's a show.
It's that S S word in a showright now?
Um, it, it is just so out ofwhack, we had the, the fed, the
fed minutes came out onWednesday and this past
Wednesday, and we were expectingthem to, to hike the, the rates,
(30:52):
uh, 0.7, five, and they did,they increased it.
And he also, Jerome Powell saidthat, um, At the next meeting,
they intend to fight inflationas hard as they can.
So they're raising rates to tryto, to fight inflation.
And we, we kind of expected itto have a, a different impact on
rates than it did.
We expected the rates to take,uh, to worsen and they actually
(31:15):
improved quite a bit prettysignificantly after that
meeting.
So.
There are so many things thatare going into rates right now
that it's really hard to predictwhat they're going to do.
We have, um, inflation, we havesupply change shortages.
We have, um, global recessionshappening, uh, just listening to
news.
Like every, you know, there areplaces that are worse off than
we are, um, with gas prices,with food shortages, supply
(31:37):
change shortages.
So, you know the war on Ukraine,we still have that going on.
Mm-hmm so there are a lot ofthings that are pressing the
mortgage bonds in ways that.
Wouldn't normally press them.
So the reactions are really hardto judge right now, but we did
get a, an improvement.
So rates are, uh, rates arelooking pretty good right now
(31:58):
compared to where they were inthe end of June, about a month
ago.
So we've had quite a bit ofimprovement since then.
So, and you know, one thing Iwanna touch base on is when the,
when the feds come out and say,they're gonna raise rates 0.7,
five.
That doesn't mean they don't setthe interest rates.
That they're setting, sorry, mycomputer notifications, they're
(32:20):
setting the rate at which we buymoney from them that we borrow
money from them.
So yes, that will reflect intothe rate, but there are a lot of
other things that go into that.
The, you know, the margin atwhich the lenders are making the
profits.
Um, there are a lot of thingsthat go that go into that rate.
(32:43):
So the feds don't.
Mortgage rates.
They set the rate at which bankscan buy money from them.
So, um, so sometimes it has somedifferent, you know, different
effects.
so well, like, like you said,it's, it has been, uh, an
interesting couple of weeks,again, with, with, with a couple
(33:04):
of months, I should say with,with the interest rates, you
know, bumping up and down andyou know, the market is just
reacting, right.
It really is.
Yeah.
And a lot of things too, youkeep in mind is.
The mortgage.
So when you lock a right in andyou get a mortgage, there are a
lot of things that happen on thebackside.
And one of those is, you know,the loan goes to an investor to
be sold and they're, um, youknow, they're usually sold in
(33:27):
lump lump groups of mortgagesand not just one sale at a time.
So, um, mm-hmm so you have to,as a, as a lender, somebody
who's, who's selling loans, youhave to.
project the future a little bit.
You have to like, you almosthave to have a crystal ball.
Like, what are we gonna do?
So a lot of right, becauseyou're not selling, right.
(33:48):
You're not selling that loantoday.
You're selling that loan 90 daysfrom when it closes, maybe.
So you've gotta kind of gaugewhat the market's gonna do.
So a lot of these rate hikes arealready built in to the rates
where we are.
They they've already been builtin.
Sure.
You know, and that could havebeen part of the reason why we
didn't see as much of, you know,the change that we did.
(34:11):
So, yeah.
But it is an ever changingmarket.
Right, right.
Well, you know, and again, it'syeah.
I mean, you know, yes, we'vebeen at this for a few years
now.
Um, and, and just the fact that,uh, again, we're seeing some
mm-hmm aspects of the economythat just again are not
traditional.
Um, and, and, and, and I thinkthe market is, is reacting to
(34:35):
yeah, absolutely.
Nontraditional aspects.
Um, and, and again, you know, Ithink the best way that, uh,
again, to keep frustration at aminimum, um, to keep the home
buying experience at a maximum,um, as far as, you know,
enjoyment, uh, less taxing onemotion, um, and, uh,
(34:57):
absolutely, you know, just thebest experience it can be, uh,
again, is, is, is to keep, youknow, constant contact and.
Um, mm-hmm communication withagain, your realtor.
Um, you're a broker, uh, foryour lending.
And, um, and again, keeping aneye out there as far as the
inventory and what's available,um, through whatever you know
(35:20):
means you do see, uh, best fityou.
Um, again, whether it berealtor.com Zillow, um, if your
agent gets you set up on, uh, onyour own property search, um,
you know, it's very, veryimportant.
I think that if you are in themarket, Uh, that these are parts
of the formula that, uh, youknow, we need to take a look at.
(35:41):
Absolutely.
So it's not on a daily basis,you know, it's all about on a
weekly basis.
Again, like you said, thecommunication staying in contact
and knowing where you're at andthat you're ready to go.
When you go out and go shopping,don't go out and fall in love
with that house.
And you can't, you're not readybecause you can't do it.
right, right.
You can't do it.
Just so just say yourself.
I mean, almost in this.
(36:02):
Don't even, I was almost to saylike, you don't even start your
search until you you're ready.
Like get, get ready because youalways do it.
You find a house that's coming.
Absolutely.
And you're like, man, I love thehouse.
It's perfect.
Mm-hmm oh, I still, you know,I've only got money down
payment, same job, or I've gottaget, you know, repairs done on
my house or my, my lease on myapartment is not up for six more
(36:24):
months.
I don't have the money to buy itout.
So.
Be ready.
Be ready?
Yeah.
Be ready.
That's the moral today story.
Be ready to go.
Be ready.
Be ready.
So moral.
All right.
Well we just past 30 minutemark.
So I think that's, uh, that's a,that's a pretty good show and
lots of good information inthere.
If you guys need us, we're gonnahave contact information in the
links below.
(36:45):
Feel free to reach out to us.
Ask us more questions.
Uh, currently serving, um, youknow, North Carolina for myself,
Jeff is serving North Carolina.
if you're outside of our state,we can certainly have a
conversation and point you inthe right direction to somebody
who can help you in your state.
Hello, and welcome to let's.
Get moving with Jeff and Gina.
I am Gina.
Millway your local mortgageadvisor.
And Hey, I'm Jeff Cunningham.
I am your local real estateagent here in Greensboro.
Uh, try outta North Carolina.
Welcome.
All right.
Welcome to the show.
So today we're gonna kind of doa follow up on a show that we
did two episodes back, and thatwas your getting preapproved,
(00:22):
getting your preapproval letter,which is a really important
part.
In the process, but it's not thefinal step in the process before
we go shopping.
So we wanna kind of break thatdown, what it looks like, you
know, what information's on thatpreapproval letter and why it's
important, um, you know, to yourrealtor, uh, to know what's
going on with your preapprovalletter, right?
(00:44):
Oh, absolutely.
Absolutely.
Um, you know, we we'd like tokeep, uh, keep the preapproval
letters, um, andpre-qualification letters as,
uh, really our parameters and,and what it is that we are, we
are shopping for.
Um, you know, again, what, forwhat we can afford, um, as well
as.
You know, uh, just beingcomfortable and staying focused
(01:04):
on, you know, just that numbermm-hmm mm-hmm yeah.
And there's there's so,absolutely.
So, excuse me.
So there's a lot of things that,that go on, you know, before you
go out and start looking at ahouse, I think people really
need to.
Be ready to do that emotionally,physically, monetarily, wherever
that's at.
So, and there's different thingsthat can play into that.
(01:27):
So for instance, let's say thatmaybe someone needs to save up.
you know, another two or$3,000for down payment and closing
costs, then they should waituntil they know that they're
gonna have that money to beforethey even start looking.
Um, there are other things thatneed to happen too.
Sometimes somebody may beselling a home that they
currently live in, and that ispart of their preapproval
(01:50):
process.
The preapproval was based onthem selling that home in order
to buy the new one.
In fact, you actually maybe hadan instance where you.
Went out ahead of where youshould have been and started
looking at home.
mm-hmm absolutely absolutelywell put.
Um, but yes.
(02:11):
Um, so we did exactly that, um,have an individual or have a
family that, uh, is looking fora new, uh, new home, um, in the
same area.
Um, but we are looking for, uh,a specified school district
mm-hmm um, uh, that they hadchosen, um, and they were unsure
whether or not.
Um, homes would be available.
(02:31):
Um, even though, you know,you've got Google, you've got
Zillow, you've got realtor.com ahundred different ways to look
at proper.
You know, this family had justmoved a couple of times in the
last couple of years.
And, um, again was looking to goahead and get into a different
school system, a differentpriority if you wanna call it
that.
So, you know, we, we, we I'llsay, um, had suffered a little
(02:54):
tunnel vision where I, as arealtor would love to make sure
that again, we have all of theparameters.
What it is that you can buy, howmuch you can afford.
Are you mentally ready for this?
It is an emotional process.
Is the home ready to be listedthat needs to be sold and is the
home ready to be listed, whichis in this situation, um, you
(03:17):
know, a criteria for them beingable to buy the next.
Um, so.
Again, because this is anemotional process.
You know, we looked at the firsthome, um, on this beautiful
Saturday morning, trying to beatthe heat here in North Carolina.
Mm-hmm and it was gorgeous.
Mm-hmm Now this was, this homewas at the top of the pre, the
(03:39):
preapproval, right?
This was at the top of thepushing it a little bit.
Maybe even at the top.
Yeah.
Absolutely.
Um, we here in, in the triad inGreensboro, North Carolina, um,
we are still trucking rightalong, uh, in the seller's
market.
Mm-hmm um, so our sellers arecertainly putting the home on
the market and expecting listprice, if not more mm-hmm Um,
(04:00):
which again seems to be thetrend, right?
We're we're not dipping downbelow that at this moment.
Um, we'll talk more aboutinterest rates and so forth
going forward.
Um, but you know, again, What wehave, what we do when we bring
in the scenario there of notbeing prepared or sticking to
the script of your preapprovaland prequalification letters,
(04:22):
um, it could lead to someserious frustration.
Mm-hmm Yep.
So we went into this big,beautiful home being at the top
of the, the price list and it'sgorgeous, right?
Like this is the best home everfall in love with.
Yeah.
And then of course, in thismarket, there's also a little
bit of a, a frenzy around peoplebuying.
Sure.
Because appointments are back toback.
So there's people in there whenyou get there, people waiting.
(04:44):
Absolutely.
So it's, it's exciting.
It's like, okay, we, this is thehome.
We love this home, but, but theproblem.
Their home is not on the marketyet.
Um, and, and, and, and quitesimply, it just turns out to be
that.
So the conversation, you know,led on later on in the day after
(05:04):
we got through looking at theother homes, you know, what is
it that we can do to get anoffer in on the first home that
we saw today?
Now based on the preapprovalletters and as a good realtor,
you know, again, we wanna makesure that we, as a team are
focused on what it is, again,the parameters, yes.
What we can afford, what we see,what it is that you want.
(05:26):
What's on your list, schoolsystem, you know, two stories,
whatever it might be.
And then we need to have thatdiscussion as to what the next
steps are.
Right, exactly.
And, uh, where we, where we had,or at least where, uh, the
buyers were looking to get.
Cart in front of the horse.
It was, you know, well, let's goahead and get the offer in, and
then we'll worry about sellingthe house.
(05:47):
Mm-hmm well, we can't do that,that, uh, you know, again, our
responsibilities, uh, for, uh,for realtors is to the buyer,
uh, and or our seller, um, whichis a fiduciary responsibility
and a situation like that, wherethe contingency is not being met
right.
Based on our preapprovalletters.
(06:08):
Um, could seriously put.
Due diligence money or theirinitial down payment at yes.
Cuz all this has to be spelledout in the contract when you're
putting in an offer because thesellers have the right to know
certain things about the buyer'sreadiness to buy what what's
involved in that contract.
Absolutely.
So it's not just that it's not acourtesy thing.
(06:28):
It's a contract thing.
Like you, you need to be ready.
It sure is it sure is.
And that's where we need to beable to specify, um, in the
contracts, you know, what it is.
And here in North Carolina,that's exactly what they're
looking for.
Um, you have a contingency offerthat you're putting in.
Fantastic.
They ask, are you under agency?
(06:48):
Do you have a real estate, uh, areal estate agent working with
you?
Um, are you under contract and,you know, do you have a closing
date even, even scheduled againthat's for the sellers to see,
um, you know, as they're, asthey're being, uh, uh, presented
the offer um, Which as a buyer'sagent, we wanna make sure that
we have the best offer that wecan present to the seller,
(07:11):
right.
Uh, again, which puts the buyersin the best position that they
can be.
Right.
Because if, I mean, like in thissituation, if the home is not
listed or is not ready to belisted, maybe there, there are
some repairs that need to bedone, you know, before it's
ready to go on the market.
Um, Contractors are behindthere's, you know, a shortage of
getting people out it's takingforever.
So it could delay, you know,even, even two or three week
(07:32):
delay could put a massive delay,you know, in the buying of the
new home and potentially put yououtside of your contract and not
have any, um, real grip on beingable to keep the house.
If you go outside that contract,cuz the sellers don't have to
extend it.
So absolutely.
Absolutely.
And, and, and, and, and thatcan, you know, again, as
(07:53):
mentioned before, Not only leadto frustration, um, again, lead
to miscommunication,misunderstandings.
Um, but at the same time itcould lead to, again, uh, you
know, uh, a surrendering of yourdue diligence.
Right?
Absolutely.
Um, and you know, and today'smarket here in North Carolina,
you know, we're putting upanywhere from 2% to, I've seen
(08:17):
50%, you know, on homes that areexceeding$400,000.
And to put that money downwithout having, again, a clear
expectation of what it is theprocess is moving forward.
Um, you know, again, can, can,can have some catastrophic, uh,
results.
Absolutely.
Um, and, and, and that'ssomething that, again, previous
(08:38):
episode, we're talking abouthaving a, a, a, a relationship
established with your team, uh,your realtor mm-hmm, on your
lender.
Um, you know, again, making surethat the buyers, um, whoever's
in the family, whoever's in thebuying process, you know, again
are streamlined everybody onwhat it is that they're looking
for and what it is that they canafford.
(08:58):
Everybody knows where they are,what they can do and what they
can't do.
Absolutely.
I think it's really importantfor them to know that for
several reasons, one, thismarket is really fast paced, so
you don't have a whole lot oftime to ponder on a home as you
would, you know, maybe preCOVID.
And then, you know, the otherside of that is.
(09:19):
Purchasing a home for, for mostpeople is an emotional process.
This is where you're gonna raiseyour family.
Mm-hmm This is where you'regonna spend, you know, the next
five to however many years orso.
There's an emotional involvementin this and you go out and you
look at.
The house and the top of theprice point, you're probably
gonna like it more than you haveother ones.
(09:39):
And you're, you know, you mayeven fall in love with it and
they're like, this is the house,but if you're not ready to put
that down and you gotta watchsomebody else win the offer on
that house and it, it could betaxing on you on, on everybody
involved.
So being ready to do that,especially in this market, if
you're going out and looking athouses, you need to.
(09:59):
Ready to put that offer inwhether that's, you know, all
the money that you need.
Um, job situation is undercontrol house.
If you need to sell your currenthouse, all that stuff is really
packed away.
Ready to go.
Mm Yes.
Yes.
And, and, and it really is, youknow, and, and again, you know,
(10:21):
in this one instance, you know,again, great family, um, again,
very well qualified.
Um, but you know, it's so, soimportant that we follow the
steps in the process.
Um, because again, it, it, it,it can lead to, again, an
emotional upset, uh, or, youknow, again, worst comes, you
know, worst case scenario, youknow, again, we, we put some
money down that we're not gonnabe able to.
(10:42):
Right.
Absolutely.
And, and that's our job.
It's to protect you guys and,and keep you from losing your
money and help direct you.
We're not trying to, you know,reign on your parade and keep
you from buying that beautifulhome.
But it, this, we are dealingwith contracts and we are
dealing with potentially verylarge sums of money that you
don't wanna lose.
You know, some people save upfor years and years and years to
try to buy their first home.
(11:03):
The last thing you wanna do islose that because you weren't,
you weren't prepared or you wentinto it the wrong way.
So, you know, and understandingthe preapproval letter.
Let's go over a few things thatare on the preapproval letter
and, and what they mean and whatpeople need to look out for.
So the pre preapproval letter,when we're doing those, what's,
what's on it.
(11:23):
What's important.
So there are a few things thateveryone's going to be looking
at and preapproval letters will,will vary.
And we talked about thedifferent types of preapproval
letters a couple episodes ago,but there are a few main things.
The agents, um, whether it's theseller or the buyer's agent is
going to look at one, the amountthat's on the preapproval
(11:46):
letter, that's important becauseyou need to know what you're
qualified for those aren'trandom numbers.
They're, they're on there forone of many reasons, and it
really depends on the loanofficer and the buyer on, on
what those numbers mean.
So when we're looking at thetotal amount, when I do a
preapproval letter, I could baseit on a few different.
(12:07):
If someone tells me that theywant their payment at$1,500 a
month, max, then I will do apreapproval based on that
number.
So that's not necessarily their,their max.
It's not what they technicallycan afford, but it's what
they've told me they want.
And so that's where I stop.
Yes.
(12:28):
Now I have some bars who likewanna know the max that I can.
And so I will give them the maxfor those.
So it's not always that final.
Number's not always a max, butit's based on the discussion
that we've had.
We can always have a differentdiscussion, but it's based on
the original discussion thatwe've had.
So either your payment amount oreither a loan amount or the
(12:49):
information that you've given menow, the other thing that is
really, really important is theloan type.
There are many different loantypes and those loan types
require different types ofcontracts.
So your conventional loan isprobably, well, your cash is
probably the easiest, but yourconventional offer letters,
(13:12):
probably the moststraightforward.
And then you have your FHA, yourVA, your U S D a, and all those
have different addendums that goto the contract.
And you have to actually,there's a space on the contract,
right?
Where you.
What type of loan is this?
So mm-hmm, it's really, reallyimportant.
You can't put in a FHA offer andget it signed under FHA and then
(13:36):
go, go conventional withoutgoing back and redoing your
contract.
Mm-hmm yeah, absolutely correct.
So where that's important frommy side is going to be one, the
appraisal.
again, there are differentappraisal types and FHA
appraisal is a little differentthan a conventional appraisal.
A VA is a little different thana conventional, you know, VA has
(13:59):
certain stipulations, uh, herein North Carolina, not all
states, but here in NorthCarolina, where the sellers pay
for the termite inspection.
So that's important to know.
We need to know that going intoit.
Um, the sellers need to know,Hey, you're going to be
obligated for a termiteinspection or, you know, wood
destroying pest instruction.
Mm-hmm um, inspection.
So it is really, reallyimportant that we have all that
(14:19):
worked out beforehand before youput the offer in, and the offer
is accepted because once it'saccepted those set the terms of
the loan and the process, unlessyou go back and renegotiate
mm-hmm and once you renegotiate,I mean, You know, you may or may
not give the same terms that youwant.
So there's always that, youknow, right.
Uh, that out there that youknow, that the sellers may
(14:43):
change their mind.
So you may have to stick withthe original one.
So it's important to have thatup front.
Absolutely.
So, so since we're on that, uh,side of the, uh, process and,
and, and setting up theexpectations, uh, again, um, can
you tell us why, um, theappraisal number is so
(15:06):
important?
Again, I, I, I know we have somefolks out here, especially in
our market today where we aremm-hmm, typically over list
price, uh, overing price.
Um, and, and again, our loansfor those that are borrowing,
uh, are looking at, um, again,mm-hmm, the appraisal that comes
back.
And what is the importance of,so the importance of the
(15:28):
appraisal, the appraisalobviously gives us the value of
the home and the current marketbased on comps, um, homes that
are pre previously sold.
So when the appraisal comesback, there are several reasons
why it's important, but the,the, the biggest one is going to
be the value.
The loan is based off of thevalue on the appraisal or the
(15:51):
purchase price.
Whichever is lower.
So if the appraisal comes inlower, the loan is based off of
that.
For instance, if, if you offered400,000 on a home and it comes
back at three 80, your loan andall of your numbers are based on
the three 80, the bank will notlend on the higher contract
(16:12):
price, even though that's whatyou offered, you have to make up
that difference out of.
On top of price.
Yes.
That's very, very on top of yourother cost.
That's not all figured in it'san additional amount.
So if the appraisal's 20,000 lowmm-hmm that you have 20,000 over
and above what you were expectedto bring, if you want to follow
(16:32):
through with that.
So correct.
And then we can get intonegotiating, stuff like that,
but the other things that areimportant on the appraisal, and
again, it goes with the loantype too, because legit
different loan types.
A slightly different, um, qu uh,not qualifications, but like
standards.
So there may be repairs that areneeded based on the loan.
(16:52):
So that's really, reallyimportant too, that we know that
ahead of time.
You, you know, you, you can'tconvert a, I mean you can, but
it really costs the same toconvert a conventional appraisal
to an FHA appraisal.
It they're just not the samething.
FHA requires different pictures.
then a conventional, which isweird.
You think they'd all, it's ahouse.
You take a picture.
No.
(17:13):
Yeah, there are differences.
So it it's important upfrontthat we know everything going
forward, um, for that reason.
So that's important.
And your realtors.
Yes.
And your realtors should knowsomewhat, uh, what the
differences are based on thoseparameters.
Um, as, as, as we have run into,in the past, we've had an
(17:33):
individual, or I've run into anindividual who is, you know,
qualified, you know, again,conventional mm-hmm which is
typically the higher, uh, moredifficult to qualify for, but in
the situation, FHA was actuallygonna be a little bit more, um,
suitable for, for their.
And the difference being, youknow, again, with an FHA, as you
(17:55):
were saying, the repairs may benecessary for the loan to
actually be processed throughwhich gives expense or lend
expense back over to the seller.
Um, so the strongest offer maynot be, um, The, the, uh, FHA VA
or any of the government backloans.
(18:15):
Um, it certainly would be, uh,more attractive to the seller,
uh, on the conventional side ofthings.
but having the buyer understandthat, you know, they could be
looking at some expense ormm-hmm, requesting the seller,
uh, to go through some of thisexpense again, to get them into
that home and in today's market,that that might not be the right
(18:38):
thing to do.
Um, certainly comes down tonegotiate.
Absolutely.
Yeah, absolutely.
And so, You know, some of thethings there, there are things
that can change the preapprovalletter.
Um, you know, the number that'son there, like I mentioned
earlier may or may not be themax.
It may not be sat in stone, butit's an estimate.
And the reason why it's anestimate is because I don't know
(18:59):
what house you're gonna buy yet.
I don't, I don't know exactlywhat tax area you're gonna be
in, or if they're HOAs, HOAs ishonestly one of the biggest
little boogers on doing apre-approval letter.
Some HOAs are completelyoutrageous.
and if, yeah, that has not beenput into the equation, let's say
(19:21):
maybe it's, um, you know, maybeit's the first time home buyer
who's really pushing, you know,a young couple, maybe pushing
their max and we haven't takeninto account.
An HOA and they go look at thiscute little townhouse.
It's a great price.
They like the townhouse becauseit's, you know, it's in their
price range and it's still nice.
A lot of times you can get atownhouse for a little more
money than you can a singlefamily in some cases, but it has
(19:44):
a pool and it has a park for thekids and it has a community and
they love it.
And they go in a contract andthey didn't check ahead of time.
And the HOA is$350 a month.
Right.
That's a lot of money.
Yeah.
That's a lot of money and it'sa, it's not a percentage.
It's a hard dollar figure thattakes away from your budget
(20:06):
right now.
You may or may not be able toafford that, but there's no
getting around that.
It's it's if, if that puts youover.
it's, it's just that the deal,the deal is dead.
Unless you gotta come up withanother solution.
You've gotta either pay offdebt.
You've gotta get a co-borrower.
I mean, there's some massivescrambling that happens at that
point.
So you really wanna be careful.
(20:28):
Yeah.
With HOAs, you wanna be carefulwith taxes.
We have a lot of very differenttax areas here in this area.
You know, we have mm-hmm um,Davison county, which is great
on taxes.
I mean, they're completelydifferent than Gilford county
Gilford county, who just loves.
I mean, we just, we went up thisyear on our taxes, so.
(20:49):
You need to know yep.
The area that you're buying itand what those expenses are
going to be, because that willchange the amount of that
preapproval letter, the amountthat you can afford.
And that's where it comes inhaving a great agent like Jeff,
who knows those areas and knowswhat to look out for.
And that's something I'lltypically communicate to the bar
and the agent like, look, we're,we're maxed out at this.
(21:10):
We're pushing it.
Like.
Be careful on your taxes, becareful on HOAs.
Be careful on that stuff becauseI can't control that stuff.
And I don't know what it isuntil you find the house,
correct?
Correct.
So that's, you know, again, we,we don't wanna always keep a, a
hard line in the sand where therealtor is.
(21:33):
the fine answer, but the realtorneeds to understand what it is
that again, we're qualified forand what these additional
expenses could be.
So, so when a realtor comes downand says, you know, Hey, what
are you qualified for?
And you give a number, which isgreat.
And I will typically ask ifwe're looking for a home with a,
with an HOA, you know, are youaware that your HOA will mm-hmm
(21:59):
count towards.
DTI your debt to income ratio,which will have an effect on how
much you can borrow.
Um, and I, I know Eugene as, asa great real, uh, sorry, as, as
a great broker will ask thosequestions or at least point that
out to somebody who is lookingat, at that specific type of
home.
Um, but you know, even in a, asingle family home, we have a
(22:22):
number of neighborhoods.
That do have larger HOAs, uh,and, and folks just don't
understand, you know, why do Ihave to.
Just stay at number$250 a month,right.
For a home on a golf course.
And you know, across town,you're looking at something
else, right.
That might have a$15 HOA or notat all, which you know, again
(22:46):
is, is not gonna have asignificant impact.
No, not, not typically, but yourhigher ones will.
I mean, and I've seen, seen themanywhere from, you know, one, a
hundred bucks a month.
Uh, Up to, I mean, there's somereally expensive ones and some
areas here, they can go prettyhigh mm-hmm so sure, sure.
They're right.
I just wanna be really carefulwith it.
(23:06):
Now.
I try not to max people out whenI'm giving a preapproval letter,
or if I know that they're close,I'm having a really hard
conversation with them.
Like, look.
When you find a house that youlike, send me the link, let me,
let me look at the house.
Let me look at the taxes.
Let me make sure that we'regonna be okay here.
And yes, that creates a littleextra work on my side, but I
would much rather do that andhelp them get into the house
(23:26):
that they love.
But also did not be a trainwreck because their taxes were
$400 more a month than theythought they would be.
Or they were double.
I mean, we there's literally, Ithink almost some doubling in
some between some of ourcounties and the taxes.
It's, it's insane.
Um, and that makes a hugedifference on your monthly pay.
Yeah.
It makes a huge difference onyour monthly payment.
Mm-hmm yeah.
(23:47):
You really need to be, need tobe aware of your taxes, um, your
HOAs and the other thing that Ireally wanna throw in there,
that's on, you know, I don'tthink that this is even on the
preapproval letter and maybe itshould be.
Is what type of house thatyou've looked at.
And again, this comes back tothe HOA.
(24:08):
Townhouses are gonna have those,some single families have those.
They're typically not as highdepending on the area that you
buy in.
But the other thing ismanufactured homes, manufactured
homes can change thepreapproval.
So for me being a broker, I havea lot more flexibility than some
(24:29):
people do, but manufac.
Homes for a lot of lenders, alot of banks have a lot of
overlays.
What our overlay is, is kindalike an extra rule.
So like FHA tells us whatthey'll do this, this and this
for a manufactured home.
Well, the bank down the road orthe lender might say, well, we
don't really.
(24:50):
like manufactured homes.
They're a little riskier of a,of an investment.
So it's not something we reallywanna do.
So they might put somethingthat's called an overlay or an
additional rule on thatmanufactured home saying we
won't accept anyone under a six80 credit score with a
manufactured home, or we won'tdo single wise mm-hmm which is,
it is hard to find financing ona single wide.
(25:12):
Um, or we will only do 20% down.
I mean, there's a lot of.
Rules.
And usually it has to come inwith, uh, the credit score.
Typically there's overlays oncredit scores and sometimes with
the DTI as well.
Sure.
So you really wanna be carefulwith that?
Um, myself.
I being a broker, being able towork with many different
lenders.
I don't tend to have as manyoverlays of manufactured homes.
(25:34):
I can do a lot of round withthem, but you need to understand
that it is a different propertystructure and there are
different things involved onyour pre-approval.
So you wanna make sure if you'relooking at a manufactured home
that you take into account, whatthat might mean for your
preapproval.
mm-hmm Yeah, absolutely.
Absolutely.
(25:54):
And, and, and that's somethingthat, again, you mm-hmm as a
good broker would explain to.
You know, a client mm-hmm whomay or may not be looking for
some land mm-hmm you know, outthere in the rural areas here,
uh, on the outskirts of Gilfordcounty, um, even into Rockingham
and Davidson, what you'retalking about.
Um, and, and for those folks toactually understand that,
(26:15):
because that certainly could be,uh, mm-hmm yeah, a detractors.
Um, you know, they just mightnot be able to afford, or like
you said, get, get the lendingthat they need.
Yeah.
And we're seeing a lot of peoplego to alternative housing with
the inventory shortages or the,the tightening of the inventory.
You know, a lot of people arelooking at those manufactured
homes, mm-hmm or modular homesnow, modular homes, a little
(26:37):
different because they'reactually in the lending rule
consider the same as a singlefamily.
So those are, those are anydifferent, but when we're
looking at a manufacture hall,mm-hmm.
That is a different product andit has different guidelines to
it.
So we just need to make surethat we've, we've looked at
that.
I'm not saying there's anythingwrong with it or that you can't
do it.
We just need to check that box,run it as a manufactured home
and make sure that we're good togo on that and that you
(26:58):
understand what's involved.
Mm-hmm and you know, one otherthing that can change the amount
mm-hmm we're certainly dealingwith this now is the rate.
So.
Typically rates don't change asfast as they've been changing
the past two years, past two anda half years have been really
interesting for rates.
And right now we're recordingthis in the middle of, um,
(27:19):
actually the end of July.
And so we have some interestingthings happening with rates.
Um, rates have kind ofskyrocketed this year.
We went from being in, you know,the low threes to being in the
mid sixties in some cases.
So, um, If you are in anenvironment where you're
(27:40):
shopping and the rates are kindof in a volatile situation, like
we are now, your lenders shouldbe checking in with you and, and
making sure that if the ratetakes a jump, that you're still
preapproved because the, and thethree month timeframe between
March mm-hmm and June we had ahorrible increase in raise.
(28:01):
I mean, we went.
Two and a half, three points.
It was insane.
So every time we had a big jump,I'd go through and make sure
that all of my borrowers wereokay with the amounts I had
given them where the rates werefor that time.
So you really wanna make surethat you're staying current on
the rates and that, um,preapproval amount reflects that
(28:22):
cause that can greatly affectit.
I mean, if you were preapprovedat three and a half and now the
rate's five and a half.
You may need to change somethings.
You may, you may not bepreapproved for that found
anymore.
That's a big difference.
And, um, so yeah, absolutely.
Yeah.
Well, you know, initially whenwe kicked off the, the show,
yes.
We're talking about frustration.
We're talking about trying toeliminate that or, you know,
(28:44):
again, keep our goal and ourfocus mm-hmm, you know, really
just right in front of us.
And, and, and again, if we, youknow, went ahead, Like you said,
you know, three weeks ago or amonth ago, mm-hmm you know, we
were approved for a certainnumber at a 4% interest rate.
Yeah.
You, you just can't afford that.
No, you won't.
It won't payment.
(29:04):
A 5% interest rate.
And, and it's super importantagain, uh, for buyers mm-hmm to
check in with, with, with thefolks and say, Hey, you know,
I'm gonna go take a look at acouple of houses this weekend.
You know, mm-hmm, how's my ratelooking how's my monthly payment
gonna be looking if I'm lookingat a, you know,$350,000 house in
Summerfield.
(29:25):
again, you know, your, yourbackground, what you do, just
like you said, you know, you,you, you do all the factors, you
do the formula.
And if it says, you know, theycan't afford four 50, they're
back down in the$400 range or$4,000 range.
Um, and again, that's, that'shaving a clear, at least a set
expectation.
Um, and, and if that doesn'tmatch what it is that they are
(29:47):
looking for, if it's a specificneighborhood, if it's a specific
school system, then this justmight not be the right time.
Buy in that area.
Um, and, and your realtor, youknow, should be able to turn and
say, you know, Hey, this is,this is gonna be a different
scenario altogether as far.
Searching for a home, you know,again, because we've changed our
(30:09):
parameters somewhat for our maxlevel.
And you know, that, that, thatcertainly could impact again,
you know, the ability and theinventory, right?
Absolutely.
You that's out there.
Absolutely.
You know, it's funny talkingabout rates.
We've had some, you know,interesting stuff going on this
week.
Um, we'll do a littleinteresting is good.
(30:30):
Yeah.
Interesting.
I mean, nobody's going on rightnow?
I'll tell you.
It's a show.
It's that S S word in a showright now?
Um, it, it is just so out ofwhack, we had the, the fed, the
fed minutes came out onWednesday and this past
Wednesday, and we were expectingthem to, to hike the, the rates,
(30:52):
uh, 0.7, five, and they did,they increased it.
And he also, Jerome Powell saidthat, um, At the next meeting,
they intend to fight inflationas hard as they can.
So they're raising rates to tryto, to fight inflation.
And we, we kind of expected itto have a, a different impact on
rates than it did.
We expected the rates to take,uh, to worsen and they actually
(31:15):
improved quite a bit prettysignificantly after that
meeting.
So.
There are so many things thatare going into rates right now
that it's really hard to predictwhat they're going to do.
We have, um, inflation, we havesupply change shortages.
We have, um, global recessionshappening, uh, just listening to
news.
Like every, you know, there areplaces that are worse off than
we are, um, with gas prices,with food shortages, supply
(31:37):
change shortages.
So, you know the war on Ukraine,we still have that going on.
Mm-hmm so there are a lot ofthings that are pressing the
mortgage bonds in ways that.
Wouldn't normally press them.
So the reactions are really hardto judge right now, but we did
get a, an improvement.
So rates are, uh, rates arelooking pretty good right now
(31:58):
compared to where they were inthe end of June, about a month
ago.
So we've had quite a bit ofimprovement since then.
So, and you know, one thing Iwanna touch base on is when the,
when the feds come out and say,they're gonna raise rates 0.7,
five.
That doesn't mean they don't setthe interest rates.
That they're setting, sorry, mycomputer notifications, they're
(32:20):
setting the rate at which we buymoney from them that we borrow
money from them.
So yes, that will reflect intothe rate, but there are a lot of
other things that go into that.
The, you know, the margin atwhich the lenders are making the
profits.
Um, there are a lot of thingsthat go that go into that rate.
(32:43):
So the feds don't.
Mortgage rates.
They set the rate at which bankscan buy money from them.
So, um, so sometimes it has somedifferent, you know, different
effects.
so well, like, like you said,it's, it has been, uh, an
interesting couple of weeks,again, with, with, with a couple
(33:04):
of months, I should say with,with the interest rates, you
know, bumping up and down andyou know, the market is just
reacting, right.
It really is.
Yeah.
And a lot of things too, youkeep in mind is.
The mortgage.
So when you lock a right in andyou get a mortgage, there are a
lot of things that happen on thebackside.
And one of those is, you know,the loan goes to an investor to
be sold and they're, um, youknow, they're usually sold in
(33:27):
lump lump groups of mortgagesand not just one sale at a time.
So, um, mm-hmm so you have to,as a, as a lender, somebody
who's, who's selling loans, youhave to.
project the future a little bit.
You have to like, you almosthave to have a crystal ball.
Like, what are we gonna do?
So a lot of right, becauseyou're not selling, right.
(33:48):
You're not selling that loantoday.
You're selling that loan 90 daysfrom when it closes, maybe.
So you've gotta kind of gaugewhat the market's gonna do.
So a lot of these rate hikes arealready built in to the rates
where we are.
They they've already been builtin.
Sure.
You know, and that could havebeen part of the reason why we
didn't see as much of, you know,the change that we did.
(34:11):
So, yeah.
But it is an ever changingmarket.
Right, right.
Well, you know, and again, it'syeah.
I mean, you know, yes, we'vebeen at this for a few years
now.
Um, and, and just the fact that,uh, again, we're seeing some
mm-hmm aspects of the economythat just again are not
traditional.
Um, and, and, and, and I thinkthe market is, is reacting to
(34:35):
yeah, absolutely.
Nontraditional aspects.
Um, and, and again, you know, Ithink the best way that, uh,
again, to keep frustration at aminimum, um, to keep the home
buying experience at a maximum,um, as far as, you know,
enjoyment, uh, less taxing onemotion, um, and, uh,
(34:57):
absolutely, you know, just thebest experience it can be, uh,
again, is, is, is to keep, youknow, constant contact and.
Um, mm-hmm communication withagain, your realtor.
Um, you're a broker, uh, foryour lending.
And, um, and again, keeping aneye out there as far as the
inventory and what's available,um, through whatever you know
(35:20):
means you do see, uh, best fityou.
Um, again, whether it berealtor.com Zillow, um, if your
agent gets you set up on, uh, onyour own property search, um,
you know, it's very, veryimportant.
I think that if you are in themarket, Uh, that these are parts
of the formula that, uh, youknow, we need to take a look at.
(35:41):
Absolutely.
So it's not on a daily basis,you know, it's all about on a
weekly basis.
Again, like you said, thecommunication staying in contact
and knowing where you're at andthat you're ready to go.
When you go out and go shopping,don't go out and fall in love
with that house.
And you can't, you're not readybecause you can't do it.
right, right.
You can't do it.
Just so just say yourself.
I mean, almost in this.
(36:02):
Don't even, I was almost to saylike, you don't even start your
search until you you're ready.
Like get, get ready because youalways do it.
You find a house that's coming.
Absolutely.
And you're like, man, I love thehouse.
It's perfect.
Mm-hmm oh, I still, you know,I've only got money down
payment, same job, or I've gottaget, you know, repairs done on
my house or my, my lease on myapartment is not up for six more
(36:24):
months.
I don't have the money to buy itout.
So.
Be ready.
Be ready?
Yeah.
Be ready.
That's the moral today story.
Be ready to go.
Be ready.
Be ready.
So moral.
All right.
Well we just past 30 minutemark.
So I think that's, uh, that's a,that's a pretty good show and
lots of good information inthere.
If you guys need us, we're gonnahave contact information in the
links below.
(36:45):
Feel free to reach out to us.
Ask us more questions.
Uh, currently serving, um, youknow, North Carolina for myself,
Jeff is serving North Carolina.
if you're outside of our state,we can certainly have a
conversation and point you inthe right direction to somebody
who can help you in your state.
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