May 17, 2024 • 27 mins
Unlock the door to your future home with confidence as Ashley Owens, Centric FCU's VP of Mortgage, joins us to clarify the journey of home ownership and the art of securing an advantageous mortgage. If you've ever felt baffled by the fluctuating housing market or tangled in the web of credit scores and interest rates, this episode is your beacon through the fog. Ashley disentangles market trends and illuminates how a sterling credit score is more than just a number—it's your ticket to a rate that smiles back at your wallet. Our chat navigates through the often-overlooked debt-to-income ratio and arms you with strategies to anchor yourself in a rate that won't leave you adrift when financial tides shift.
Step through the threshold of your first home with ease, as we explore Centric's tailored program for first-time buyers that's changing the game—one without private mortgage insurance or the confines of zip codes. Ever pondered the secret passages an experienced real estate agent might reveal or how to prepare for the financial surprises that life likes to throw our way? We've got you covered, filling your toolbox with the essentials for not only acquiring the keys to your new abode but also crafting a budget to keep the hearth of your home life glowing. From pre-qualification to post-purchase peace of mind, this episode is your guide through the labyrinth of home-buying to ensure your journey ends with a welcome mat at a place you can truly call your own.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Host (00:00):
Welcome to episode 329 of the Live Better podcast, proudly
presented by Centric FCU.
Today, we will listen to thehighlights from two of your
favorite Live Better podcasts onhome ownership.
We will be joined by our veryown Ashley Owens, VP of Mortgage
, who will share tips to makehome ownership a reality, as
(00:22):
well as the mortgage productsoffered at Centric.
So, whether you've been a loyallistener or you're joining us
for the first time, prepare todive into home ownership and how
side-by-side can walk withyou on this journey.
So do you think that the housingprices will go down much over
this year?
Ashley Owens (00:43):
I think they might elevate a little bit, they
might go down a little bit, butI don't think it's just going to
be a drastic change on theprice of houses.
I've seen the cost of houses,the listing price.
They have been dropping theprices of them here lately and I
think mainly it's because ofwhat's going on in the market
and the interest rates that wehave to offer.
Host (01:06):
Well, is there anything that a prospective buyer can
really do to get a lowerinterest rate, and how does the
credit score impact the ratethat they get?
Ashley Owens (01:16):
Your credit score definitely impacts your interest
rate that you get on a mortgage.
I always tell my members, thehigher your score, the lower
your interest rate.
That plays a major part in yourinterest rate.
You definitely want to have thebest credit score so that you
can obtain the best interestrate that we have to offer.
If you do have the best creditscore and you just want a little
(01:39):
bit lower interest rate, youcan always obtain a lower rate
by buying down the interest rateand that's basically like
paying discount points for yourclosing costs and in theory,
you're just going to pay moreclosing costs.
You're going to bring moremoney to the table, depending
how lower you want your interestrate.
Sometimes we recommend thatmaybe you should look at it
(02:00):
later on down the line.
Maybe look at refinancing.
It is this your forever home?
Will you be here forever?
How long you think you're goingto be here?
Because it may not be worth youpaying extra to buy down your
interest rate yeah, that makessense.
DTI.
DTI basically stands for debtto income ratio.
(02:21):
Debt to income ratio is howmuch you pay in debts each month
compared to your gross monthlyincome.
It is a key factor whenpurchasing a home.
It helps your lender gaugeabout how much you would have to
live off of after you've paidyour mortgage, paid your monthly
bills that you have.
The max DTI is determined bydifferent loan programs.
(02:46):
Right now, a popular loanprogram that we have is FHA.
Fha has the ability to go up toa higher debt to income ratio,
which is 55%.
So most people are leaningtowards that loan program
because the interest rates arehigh.
They have a DTI issue.
So, hey, we can put them in aFHA program where the max DTI is
(03:11):
55%.
Va is another loan program.
Their max debt to income ratiois 60%.
So those are for vets.
Other programs that we havethey hang around maybe about 50%
max debt to income ratio.
Sometimes there are things thatwe can't do to adjust your DTI.
(03:33):
In a sense we had a member onetime that had a car loan that
was reflecting on their creditreport.
They had a lot of equity in thevehicle but they had other
small credit cards.
That was kind of maxing her outon her DTI a little bit.
So here at the credit union wehave the ability that we can
(03:53):
send our member over to theretail side and we were able to
refinance her vehicle roll inher credit card debt, her
installment debt that she had.
We got her debt to income ratiodown and we actually got her
car note down so she was able topurchase the home that she was
looking at.
Sometimes it just takes ustaking a deeper dive, looking at
(04:14):
their credit, what they have ontheir credit, and maybe just
moving some stuff around alittle bit.
That's the best thing abouthere at the credit union.
With our mortgage department wehave the ability to work with
the retail staff and they maybecan do a consolidation loan.
They can refinance their car toget their payment down a little
(04:36):
bit.
So we have the best of bothworlds here.
Host (04:39):
That's a good point that I hadn't even thought about.
I mean being able to go theextra mile like that to help
this member get in the housethat she wants.
I mean I don't know that justanybody would have been willing
to take those extra steps, youknow, to help her close the deal
on that house.
I think that's awesome.
So what is a good DTI, wouldyou say?
Ashley Owens (04:59):
A good DTI would probably hang around 43%.
Because you have to keep inmind and I tell the members this
all the time we're basing yourdebt to income ratio off of your
gross income.
That's not what you're bringinghome, that's not your net.
We don't know what your lightwater gas bill is going to be.
We don't know what your cellphone bill is going to be.
(05:21):
If you have kids, we don't knowhow much your daycare is.
Life happens.
We don't know what may happen.
So I tell them always take intoconsideration of your outside
debts and maybe sit down andwrite a budget and say this is
how much money I bring home,this is how much car insurance
is, and X, Y, and Z, to makesure that you are on budget to
(05:44):
basically afford this house.
Because on paper it looks great, but in real life, when you're
bringing home your money,sometimes it just doesn't add up
.
So you just have to think inand take an account hey, life is
going to happen.
That's just like with me.
Um, my daughter, she's 16, soshe's wanting a car.
Well, it is that time.
(06:05):
So I have to take into account,for I'm going to have to start
paying car insurance for anadditional vehicle if we're able
to find her a cash car.
So you know, that's life.
Life is going to happen.
So you just don't want to tapyourself out initially
purchasing a home and be marriedto your house and not be able
to do anything outside of justhaving a nice home.
(06:25):
You still want to be able to goand do things that you normally
can do.
You still want to be able toenjoy your kids so they can do
things they want to do.
You still want to be able tomaybe go on vacation or just
small things.
So you just don't want to tieyourself down with your house
just because, oh, I can get andfit inside the box of my DTIs at
(06:46):
48%.
I can tap out at this becausethis is this nice house that I
want.
Sometimes it just doesn't workthat way.
Host (06:55):
How terrible would it be to to buy too much of a house
that technically, on paper youcan afford, but once you're in
it and now you realize that yourway of life kind of has to
change, so you can keep that.
That is exactly right, that'swhat you want to avoid for sure.
Ashley Owens (07:10):
And then, once you get into it, you have to think
about how much is my light billgoing to be, because those have
gone up and it can definitelyaffect your budget and how much
money cashflow that you have atthe end of the month with paying
your bills.
Host (07:25):
I for sure want to talk about PMI, if you were planning
on throwing that in there, butyeah, what do they need to be
aware of, like what needs to bein the forefront when they're
looking to buy?
Ashley Owens (07:36):
They need to be aware of insurance, repairs,
association fees, property taxes.
Should I get a realtor?
Should I not get a realtor?
How much is my payment going tobe?
My interest rate, closing costsDo I have enough money for
closing costs?
Is the seller going to pay anyclosing costs?
(07:56):
I mean, it's a lot of thingsthat go into purchasing a home
and when you're, I woulddefinitely suggest going and
talking to a loan officer,because this is not something
you do every day.
So you definitely need somebodythat you feel comfortable with,
that's going to explain theprocess to you and that's just
going to hold your hand along inthis journey that you're going
(08:18):
to go on, because it'sdefinitely going to be a journey
.
Um, you need somebody to answeryour questions that you might
think are just crazy, but ifit's not something you do every
day, no question is crazy.
Period, but you just needsomebody to explain the process.
This is what you're looking atand this is what PMI is.
If I tell you PMI, you're notgoing to know what PMI is.
(08:42):
You may think that closing costsand down payment are the same
thing.
You might need somebody toexplain.
Down payment is one thing, yourclosing costs is another thing.
Sometimes you have both.
Sometimes you don't have both.
Some loan programs don'trequire down payment so you
could not even have that on aloan program.
I know PMI is a big thing.
(09:03):
Here at the credit union wehave a unique product that is
signature to the credit union.
I would say it's the first timehome buyer program that we
offer here at the credit union.
The loan stays here at thecredit union.
We service the loan.
We can finance up to 100% ofthe value of the property.
So just say, if your home is$142,000 sales price, your loan
(09:27):
amount will be $142,000.
There's no down paymentrequired.
There are closing costs thatare associated with the loan.
Closing costs normally includeappraisal fee, origination
charges, um, title fees that thetitle company charges to do
title work on the property, um,and that basically covers you
(09:48):
and covers us to make surethere's not any judgments or
liens against the property thatyou are unaware of and that the
seller is unaware of um.
It also includes collecting for12 months of your homeowner's
insurance and we pay thatupfront.
If your loan is escrowed, wepay for your property taxes.
Depending on when you'reclosing depends on how many
(10:10):
months that we hold back in yourescrow account.
It pays for lender's titleinsurance.
Lender title insurance coversthe lender in the event that the
abstractor that's doing thetitle work on the property
misses anything.
They're human, they go to thecourthouse, they search the
records.
I mean they could miss anything.
So if you have that insurance,it covers the credit union.
(10:33):
They offer owner's titleinsurance.
It's optional, it covers you,the buyer.
So I would suggest buyingowner's title insurance.
It's a one-time fee, it doesn'tcost that much and it covers
you in the event that you sellyour house later on or that you
refinance your house later onand a judgment pops up that the
(10:54):
previous abstractor missed andthen you're stuck holding the
bag of having to pay that.
If you have owner's titleinsurance, you file a claim and
they pay it.
It's kind of like car insuranceyou know you have it, you pay
it and it's there if you need it.
But we pay car insurancemonthly.
Owner's title insurance youonly pay it one time at closing.
(11:14):
So I would recommend owner'stitle insurance for anybody
that's purchasing a home, butthe private mortgage insurance
is PMI.
It covers the lender anytimethat they finance over 20% of
the value of the property.
So, I'm sorry, 80% of the valueof the property.
(11:36):
So if you are putting 20% downon a home you automatically
don't have PMI in the secondarymarket if we were to do a
conventional loan, that doesn'tstay here at the credit union.
So that's a great perk that wehave here.
You don't have to worry aboutpaying that private mortgage
insurance on our first-timehomebuyer program.
But we do have other loanprograms such as FHA, va, rural
(12:02):
Development and conventionalloan programs that do have PMI
on them.
Va does not have PMI but FHA,conventional and Rural
Development they have PMI aswell anytime you don't put 20%
down.
So that's just a mouthful.
Host (12:19):
So let me get some clarification.
Okay, on PMI.
So if I don't put 20% down, Ipay PMI?
Ashley Owens (12:28):
That is correct and that covers the lender.
That covers the lender.
Host (12:32):
So how is that paid?
Is that paid on each monthlynote?
It is Okay.
Ashley Owens (12:37):
It's paid each monthly note.
It's paid in with your mortgagenote.
So you have your principal andinterest, you have a monthly
payment and your monthly paymentis made up of your principal
and interest.
It's made up of your escrows,and your escrows are basically
your property taxes and yourhomeowner's insurance, and then
(12:57):
you have a portion that goestowards PMI.
The amount of PMI that's paidmonthly, it varies depending on
the loan product and it alsodepends on your loan to value
and your debt to income ratio ona conventional loan.
Okay, so it's not the sameacross the board on all loans.
It definitely varies.
Host (13:17):
So it seems to me like PMI is something that you want to
avoid.
Ashley Owens (13:20):
Yes, In a sense you're paying money for them to
cover your loan because youdidn't put 20% down.
Host (13:27):
So you're paying for the lender to give you the money to
buy the house.
Ashley Owens (13:30):
In a sense you are Okay.
Host (13:33):
So do you think it's a good idea for buyers to use a
real estate agent when they'rebuying a home?
Do you recommend that?
Ashley Owens (13:41):
I think it's a great idea for buyers to use a
real estate agent.
The agent is like the middlemanbetween the buyer and the
seller and with their expertise,they can help guide you along
the way on finding a home andnegotiating the price and
anything that may need to berepaired.
Finding a home that comes onthe market that may not even be
(14:02):
on the market yet.
They may have you know a friendof a home that comes on the
market that may not even be onthe market yet.
They may have you know a friendof a friend that knows somebody
that's selling a house thatfits your needs that you're
needing.
I definitely think you need arealtor, because this is not
something that you do every day.
This is something they do everyday and they're able to guide
you along the way, help you withthings that you may not
(14:24):
understand.
You know things that septicsystem or should I or should I
not purchase a home warranty onthe property?
What about a septic system?
Does it have a septic system?
Has the house ever been burned?
Has it ever been flooded?
Is it in a flood zone?
Those are things that you know,you don't think about every day
(14:44):
, but the realtor does thisevery day, so they're able to
tell you these different thingsabout the home and they're able
to negotiate good deals for youas well.
So I recommend a real estateagent.
Host (15:05):
To kind of expand on what you said, I know, when we bought
our home in July, um, our realestate agent said the house that
we were looking at, it wasmarked sold everywhere.
Um, and it was a house that Ihad been looking at.
Well, I talked to my realestate agent and she was like
this house, this deal actuallyfell through and it was back on
the market again, but it was notonline.
Everywhere online, it said soldstill.
So you know, had we not hadher, we proably would have lost
(15:26):
out on that.
Ashley Owens (15:28):
Exactly.
She kinda had the inside scoopon things and she knew and
they're able to look at.
And you might look at a houseand say wonder why this house
has been on the market so long.
They have the ability to go inand look and see what other
buyers potential buyers werelooking at.
You know it didn't have goodlighting or you know it could be
anything, and you're like ohyeah, that's why it probably
(15:50):
didn't sell.
or it may look like a nice houseon the outside.
And then they're able to lookat the disclosures or the
addendum and say, hey, it had afoundation issue, but it does
have a warranty on it.
You know, do you want to moveforward with this?
And sometimes you're like, yeah, I can, or no, I don't want to,
but they're able to give youthat information.
Host (16:10):
That's right.
That reminds me of anotherthing that happened, similar
like that, with us.
We were looking at this houseand I was like why is it so?
It seems like it's under value, right, Compared to everything
else.
And the our agent was like well,it's got really bad foundation
issues.
So, it's been on the market forso long.
Do you want to look at it still?
And I was like Nope.
Ashley Owens (16:28):
Nope, nope, thank you.
Host (16:31):
Yeah, I'm totally with you on that.
A real estate agent helps a ton.
They do so, something that weknow a lot of financial
institutions don't necessarilyoffer here at Centric or here in
our community.
But at Centric we really focuson first-time homebuyers or even
getting people jump-started tounderstand that they can become
(16:53):
a homeowner.
So talk a little bit with us ifyou don't mind our first-time
homebuyer program.
Tell us a little bit about that.
Ashley Owens (17:05):
Well, we do offer a first-time homebuyer here at
Centric and I have beenassisting our first-time
homebuyers assisting with theirhomebuyer process for some time
now, since we jump-started theprogram.
It is a personalized productthat we have here at Centric
where we offer 100% financing ona property that you may find.
It can be a site-built home orit can be mobile home and land
(17:28):
the great part about it thatthere is no PMI on this product.
So if you were to look at aUSDA loan where they do 100%
financing, you will in fact haveto pay PMI and with their
product you have to be in acertain area.
We don't limit the area thatyou can be in to purchase a home
.
We just want it to be movingready.
(17:51):
Well, the next step is verysimple.
Come talk to a loan officerhere at Centric.
We make the process very simplefor them, Even if they do not
know if they're ready.
We have certified financialcounselors in the mortgage
department that are here andready to provide this free
service to our members.
We obtain a tri-merge creditreport for our members.
(18:13):
We can also look at a softballcredit report if they think that
hey, I don't want my creditpool, I don't know if I'm ready
or not.
We can also look at a softballcredit report.
If they think that, hey, Idon't want my credit pool, I
don't know if I'm ready or not,we can look at the softball
credit report and it gives usdetailed information, including
scores, trade line history.
We check credit.
We address any errors on thecredit report.
(18:35):
A member may need to pay offtheir debt, may not need to pay
off debt.
They may need to reduceoutstanding debt, avoid new
credit.
So it's just getting into theweeds of what's on your credit,
getting a pre-qualificationprocess started and then you can
start looking for a home,because we never want our
(18:57):
members to go out and look for ahome first and then come back
and say, hey, I found thiswonderful home that I'm
interested in, and then it maybe some things on their credit
report that they may need to fixor they're not in budget for it
right now and they falling inlove with this house.
I think the number one thingwould be absolutely
pre-qualification process.
Talk with a loan officer thatyou're comfortable with to go
(19:20):
over the process, go over youroptions that you have.
Host (19:24):
So that pre-qualification process, you're also sharing
with them what they can affordbased upon their income and
they're already their expensesthat they're committed to from
what you found on that, on thatcredit report.
Ashley Owens (19:36):
That is correct.
We go over their expenses, wego over their budget, what
they're comfortable paying.
Because you do have to put intoplay that it's not always just
the price of the home.
You have to account forhomeowners insurance, you have
to account for property taxes,you have to account for other
expenses that are associatedwith purchasing a home, home
(19:56):
inspection and then, even afteryou buy the home, you have to
prepare for life.
You know life happens andwhether your family is expanding
, for when the kids go to schoolor things that may break in the
home, so you do have to preparefor that.
Just because we say, hey, youcan be approved for a $500,000
(20:17):
house, do you want to maxyourself out nine times out of
10?
No, I would not recommendmaxing your loan amount or your
buying ability out, because youdo have to prepare for, hey,
your child is going to turn 16one day and they're not going to
be hard.
So you do have to prepare forthose things in life that will
happen.
The what ifs, that's right.
There is a lot that goes intowhen you purchase a home.
Host (20:43):
So for you to pull either the full credit report or a soft
pull.
What is needed from the member?
Ashley Owens (20:48):
The documents that we would need for the member to
pull a soft pull or a hard pullwould be just their
identification and anauthorization for us to pull
that information and go overthat with them.
That's very easy.
That is very easy, very simple,and most people have that
information on their phone.
Host (21:05):
That's right, and we take those things with us everywhere
we go, that is correct.
Well, and so even talking aboutthese, you know, I mean I know
that we have multipleopportunities for folks to
become homeowners, but I reallyjust want us to lean in today
about first time home buying andhow simple it is.
That's what I think it's.
Just there's this myth that'sout there.
(21:27):
People really think that thisis so much harder than what it
really is.
And you come in, you can visitto any of our locations.
We have someone that you canspeak with in every market that
we have.
You can also visit them, too,by email or by phone, and we can
even conduct that credit reporteven in that regard.
So I mean, I think it's just sosimple.
(21:49):
We kind of take the guessworkout for you.
Ashley Owens (21:52):
We do.
We take the guesswork out foryou, and some people are more
technology or, you know, techsavvy, as I would say and we
have the ability that we caneven do a Zoom call and go over
those documents with them.
So we do have different avenuesand ways.
Some people are more hands onand one on one and want to come
(22:14):
into the office, and we welcomethat.
We love to see our members comeinto the office and go over
their documents, go over theircredit report and what they
should and should not do.
We can do it online, we can doit over the phone and if we
don't have a loan officer at acenter, we will travel to that
center to meet the members.
(22:35):
So we do have different avenuesto go over this product with
our members and other optionsthat they may have.
Host (22:42):
I love it.
Well, and so just to break thisdown very easy for everyone so
when you come in and or evenyou're talking with somebody,
you go through this, you talkthrough, maybe even create a
budget to see where you arefinancially.
And if you take a peek andyou're getting pre-qualified
meaning hey, this is somethingthat we know, that you're being
pre-qualified based on yourincome and your expenses if not
(23:04):
say, for example, if you're notnecessarily pre-qualified today,
your team actually walks themthrough ways in which that, hey,
here's some things you mightwant to eliminate.
Maybe you want to get caught upon.
Take us through a little bitabout that if it's somebody that
you've retrieved that creditreport and you think we've got
some things we need to work on.
Ashley Owens (23:21):
We have had those instances before and later on
down the line they have beenable to achieve their goal of
buying a house.
If they come in, we pull thecredit report, we are able to do
financial counseling to them tosay, hey, you may need to pay
off some debt.
Say, hey, you may need to payoff some debt you may need.
We create a plan for thembasically, and if they follow
(23:47):
the plan of and it's differentfor everybody, their plan will
be different.
So some people may need to payoff some debt.
Some people may need to get ridof some things on their credit
report.
Some people may be needing justtimes, because sometimes
patience is the key to repairingyour credit.
We are just here to help themdo whatever it needs to do for
them to build or buy a house.
(24:09):
Sometimes, limit knowing yourlimits as a budget patience
finding the right property maytake time.
Sometimes it's a long termproject that we have to work on.
It may take six months orlonger.
Sometimes it only takes threemonths.
It just depends on the member,what they need and what is on
(24:31):
their credit report, andsometimes it's just them jumping
in and purchasing a home.
That's right.
That's right Pre-qualificationprocess.
We provide that to them orprovide it to their agent.
They are on the road forsearching for a home.
They can provide an offer onthe home.
Once they get an accepted offer, they will provide that
(24:52):
information back to us.
We will complete the process,the application, with any
missing information that we mayhave for their address, for the
cost of the home.
Down payment no down payment,closing costs.
The lender processes theapplication.
We send it over to underwriting.
We get conditional approval.
Once we get that informationback, the underwriter basically
(25:15):
is asking for additionalinformation.
We gather that information andin this process the appraisal is
being done.
The title work is being done onthe property to make sure there
are no judgments or liens on theproperty, that you have clear
title on the property.
Once we get the appraisal bagthat states hey, your house
appraises for what they are infact selling it to you for, or
(25:40):
it may appraise for more, whichis definitely a plus we are
ready to schedule closing issue,a closing disclosure, and we
are ready to go to the movingtable and then we are ready to
go to the closing table and thenyou're ready to move in after
you sign all your documents.
It may sound like a lengthyprocess, but once you get into
(26:05):
it and once you providedocuments to your lender in a
timely manner, the process goesreally really smooth.
And as long as you'recomfortable with your realtor,
as long as you're comfortablewith your lender, that you're
able to talk to them, theprocess will go very smoothly
for you.
Host (26:22):
That brings us to the end of the episode of the Live
Better podcast.
We hope you found today'sconversation about homeownership
and the steps necessary tobecoming a homeowner to be
enlightening and valuable.
In the world of personalfinance, knowledge is your
greatest asset and Centric FCUremains your steadfast partner
(26:42):
in that journey.
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(27:05):
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(27:27):
Thank you for tuning into theLive Better podcast.
Welcome to episode 329 of the Live Better podcast, proudly
presented by Centric FCU.
Today, we will listen to thehighlights from two of your
favorite Live Better podcasts onhome ownership.
We will be joined by our veryown Ashley Owens, VP of Mortgage
, who will share tips to makehome ownership a reality, as
(00:22):
well as the mortgage productsoffered at Centric.
So, whether you've been a loyallistener or you're joining us
for the first time, prepare todive into home ownership and how
side-by-side can walk withyou on this journey.
So do you think that the housingprices will go down much over
this year?
Ashley Owens (00:43):
I think they might elevate a little bit, they
might go down a little bit, butI don't think it's just going to
be a drastic change on theprice of houses.
I've seen the cost of houses,the listing price.
They have been dropping theprices of them here lately and I
think mainly it's because ofwhat's going on in the market
and the interest rates that wehave to offer.
Host (01:06):
Well, is there anything that a prospective buyer can
really do to get a lowerinterest rate, and how does the
credit score impact the ratethat they get?
Ashley Owens (01:16):
Your credit score definitely impacts your interest
rate that you get on a mortgage.
I always tell my members, thehigher your score, the lower
your interest rate.
That plays a major part in yourinterest rate.
You definitely want to have thebest credit score so that you
can obtain the best interestrate that we have to offer.
If you do have the best creditscore and you just want a little
(01:39):
bit lower interest rate, youcan always obtain a lower rate
by buying down the interest rateand that's basically like
paying discount points for yourclosing costs and in theory,
you're just going to pay moreclosing costs.
You're going to bring moremoney to the table, depending
how lower you want your interestrate.
Sometimes we recommend thatmaybe you should look at it
(02:00):
later on down the line.
Maybe look at refinancing.
It is this your forever home?
Will you be here forever?
How long you think you're goingto be here?
Because it may not be worth youpaying extra to buy down your
interest rate yeah, that makessense.
DTI.
DTI basically stands for debtto income ratio.
(02:21):
Debt to income ratio is howmuch you pay in debts each month
compared to your gross monthlyincome.
It is a key factor whenpurchasing a home.
It helps your lender gaugeabout how much you would have to
live off of after you've paidyour mortgage, paid your monthly
bills that you have.
The max DTI is determined bydifferent loan programs.
(02:46):
Right now, a popular loanprogram that we have is FHA.
Fha has the ability to go up toa higher debt to income ratio,
which is 55%.
So most people are leaningtowards that loan program
because the interest rates arehigh.
They have a DTI issue.
So, hey, we can put them in aFHA program where the max DTI is
(03:11):
55%.
Va is another loan program.
Their max debt to income ratiois 60%.
So those are for vets.
Other programs that we havethey hang around maybe about 50%
max debt to income ratio.
Sometimes there are things thatwe can't do to adjust your DTI.
(03:33):
In a sense we had a member onetime that had a car loan that
was reflecting on their creditreport.
They had a lot of equity in thevehicle but they had other
small credit cards.
That was kind of maxing her outon her DTI a little bit.
So here at the credit union wehave the ability that we can
(03:53):
send our member over to theretail side and we were able to
refinance her vehicle roll inher credit card debt, her
installment debt that she had.
We got her debt to income ratiodown and we actually got her
car note down so she was able topurchase the home that she was
looking at.
Sometimes it just takes ustaking a deeper dive, looking at
(04:14):
their credit, what they have ontheir credit, and maybe just
moving some stuff around alittle bit.
That's the best thing abouthere at the credit union.
With our mortgage department wehave the ability to work with
the retail staff and they maybecan do a consolidation loan.
They can refinance their car toget their payment down a little
(04:36):
bit.
So we have the best of bothworlds here.
Host (04:39):
That's a good point that I hadn't even thought about.
I mean being able to go theextra mile like that to help
this member get in the housethat she wants.
I mean I don't know that justanybody would have been willing
to take those extra steps, youknow, to help her close the deal
on that house.
I think that's awesome.
So what is a good DTI, wouldyou say?
Ashley Owens (04:59):
A good DTI would probably hang around 43%.
Because you have to keep inmind and I tell the members this
all the time we're basing yourdebt to income ratio off of your
gross income.
That's not what you're bringinghome, that's not your net.
We don't know what your lightwater gas bill is going to be.
We don't know what your cellphone bill is going to be.
(05:21):
If you have kids, we don't knowhow much your daycare is.
Life happens.
We don't know what may happen.
So I tell them always take intoconsideration of your outside
debts and maybe sit down andwrite a budget and say this is
how much money I bring home,this is how much car insurance
is, and X, Y, and Z, to makesure that you are on budget to
(05:44):
basically afford this house.
Because on paper it looks great, but in real life, when you're
bringing home your money,sometimes it just doesn't add up
.
So you just have to think inand take an account hey, life is
going to happen.
That's just like with me.
Um, my daughter, she's 16, soshe's wanting a car.
Well, it is that time.
(06:05):
So I have to take into account,for I'm going to have to start
paying car insurance for anadditional vehicle if we're able
to find her a cash car.
So you know, that's life.
Life is going to happen.
So you just don't want to tapyourself out initially
purchasing a home and be marriedto your house and not be able
to do anything outside of justhaving a nice home.
(06:25):
You still want to be able to goand do things that you normally
can do.
You still want to be able toenjoy your kids so they can do
things they want to do.
You still want to be able tomaybe go on vacation or just
small things.
So you just don't want to tieyourself down with your house
just because, oh, I can get andfit inside the box of my DTIs at
(06:46):
48%.
I can tap out at this becausethis is this nice house that I
want.
Sometimes it just doesn't workthat way.
Host (06:55):
How terrible would it be to to buy too much of a house
that technically, on paper youcan afford, but once you're in
it and now you realize that yourway of life kind of has to
change, so you can keep that.
That is exactly right, that'swhat you want to avoid for sure.
Ashley Owens (07:10):
And then, once you get into it, you have to think
about how much is my light billgoing to be, because those have
gone up and it can definitelyaffect your budget and how much
money cashflow that you have atthe end of the month with paying
your bills.
Host (07:25):
I for sure want to talk about PMI, if you were planning
on throwing that in there, butyeah, what do they need to be
aware of, like what needs to bein the forefront when they're
looking to buy?
Ashley Owens (07:36):
They need to be aware of insurance, repairs,
association fees, property taxes.
Should I get a realtor?
Should I not get a realtor?
How much is my payment going tobe?
My interest rate, closing costsDo I have enough money for
closing costs?
Is the seller going to pay anyclosing costs?
(07:56):
I mean, it's a lot of thingsthat go into purchasing a home
and when you're, I woulddefinitely suggest going and
talking to a loan officer,because this is not something
you do every day.
So you definitely need somebodythat you feel comfortable with,
that's going to explain theprocess to you and that's just
going to hold your hand along inthis journey that you're going
(08:18):
to go on, because it'sdefinitely going to be a journey
.
Um, you need somebody to answeryour questions that you might
think are just crazy, but ifit's not something you do every
day, no question is crazy.
Period, but you just needsomebody to explain the process.
This is what you're looking atand this is what PMI is.
If I tell you PMI, you're notgoing to know what PMI is.
(08:42):
You may think that closing costsand down payment are the same
thing.
You might need somebody toexplain.
Down payment is one thing, yourclosing costs is another thing.
Sometimes you have both.
Sometimes you don't have both.
Some loan programs don'trequire down payment so you
could not even have that on aloan program.
I know PMI is a big thing.
(09:03):
Here at the credit union wehave a unique product that is
signature to the credit union.
I would say it's the first timehome buyer program that we
offer here at the credit union.
The loan stays here at thecredit union.
We service the loan.
We can finance up to 100% ofthe value of the property.
So just say, if your home is$142,000 sales price, your loan
(09:27):
amount will be $142,000.
There's no down paymentrequired.
There are closing costs thatare associated with the loan.
Closing costs normally includeappraisal fee, origination
charges, um, title fees that thetitle company charges to do
title work on the property, um,and that basically covers you
(09:48):
and covers us to make surethere's not any judgments or
liens against the property thatyou are unaware of and that the
seller is unaware of um.
It also includes collecting for12 months of your homeowner's
insurance and we pay thatupfront.
If your loan is escrowed, wepay for your property taxes.
Depending on when you'reclosing depends on how many
(10:10):
months that we hold back in yourescrow account.
It pays for lender's titleinsurance.
Lender title insurance coversthe lender in the event that the
abstractor that's doing thetitle work on the property
misses anything.
They're human, they go to thecourthouse, they search the
records.
I mean they could miss anything.
So if you have that insurance,it covers the credit union.
(10:33):
They offer owner's titleinsurance.
It's optional, it covers you,the buyer.
So I would suggest buyingowner's title insurance.
It's a one-time fee, it doesn'tcost that much and it covers
you in the event that you sellyour house later on or that you
refinance your house later onand a judgment pops up that the
(10:54):
previous abstractor missed andthen you're stuck holding the
bag of having to pay that.
If you have owner's titleinsurance, you file a claim and
they pay it.
It's kind of like car insuranceyou know you have it, you pay
it and it's there if you need it.
But we pay car insurancemonthly.
Owner's title insurance youonly pay it one time at closing.
(11:14):
So I would recommend owner'stitle insurance for anybody
that's purchasing a home, butthe private mortgage insurance
is PMI.
It covers the lender anytimethat they finance over 20% of
the value of the property.
So, I'm sorry, 80% of the valueof the property.
(11:36):
So if you are putting 20% downon a home you automatically
don't have PMI in the secondarymarket if we were to do a
conventional loan, that doesn'tstay here at the credit union.
So that's a great perk that wehave here.
You don't have to worry aboutpaying that private mortgage
insurance on our first-timehomebuyer program.
But we do have other loanprograms such as FHA, va, rural
(12:02):
Development and conventionalloan programs that do have PMI
on them.
Va does not have PMI but FHA,conventional and Rural
Development they have PMI aswell anytime you don't put 20%
down.
So that's just a mouthful.
Host (12:19):
So let me get some clarification.
Okay, on PMI.
So if I don't put 20% down, Ipay PMI?
Ashley Owens (12:28):
That is correct and that covers the lender.
That covers the lender.
Host (12:32):
So how is that paid?
Is that paid on each monthlynote?
It is Okay.
Ashley Owens (12:37):
It's paid each monthly note.
It's paid in with your mortgagenote.
So you have your principal andinterest, you have a monthly
payment and your monthly paymentis made up of your principal
and interest.
It's made up of your escrows,and your escrows are basically
your property taxes and yourhomeowner's insurance, and then
(12:57):
you have a portion that goestowards PMI.
The amount of PMI that's paidmonthly, it varies depending on
the loan product and it alsodepends on your loan to value
and your debt to income ratio ona conventional loan.
Okay, so it's not the sameacross the board on all loans.
It definitely varies.
Host (13:17):
So it seems to me like PMI is something that you want to
avoid.
Ashley Owens (13:20):
Yes, In a sense you're paying money for them to
cover your loan because youdidn't put 20% down.
Host (13:27):
So you're paying for the lender to give you the money to
buy the house.
Ashley Owens (13:30):
In a sense you are Okay.
Host (13:33):
So do you think it's a good idea for buyers to use a
real estate agent when they'rebuying a home?
Do you recommend that?
Ashley Owens (13:41):
I think it's a great idea for buyers to use a
real estate agent.
The agent is like the middlemanbetween the buyer and the
seller and with their expertise,they can help guide you along
the way on finding a home andnegotiating the price and
anything that may need to berepaired.
Finding a home that comes onthe market that may not even be
(14:02):
on the market yet.
They may have you know a friendof a home that comes on the
market that may not even be onthe market yet.
They may have you know a friendof a friend that knows somebody
that's selling a house thatfits your needs that you're
needing.
I definitely think you need arealtor, because this is not
something that you do every day.
This is something they do everyday and they're able to guide
you along the way, help you withthings that you may not
(14:24):
understand.
You know things that septicsystem or should I or should I
not purchase a home warranty onthe property?
What about a septic system?
Does it have a septic system?
Has the house ever been burned?
Has it ever been flooded?
Is it in a flood zone?
Those are things that you know,you don't think about every day
(14:44):
, but the realtor does thisevery day, so they're able to
tell you these different thingsabout the home and they're able
to negotiate good deals for youas well.
So I recommend a real estateagent.
Host (15:05):
To kind of expand on what you said, I know, when we bought
our home in July, um, our realestate agent said the house that
we were looking at, it wasmarked sold everywhere.
Um, and it was a house that Ihad been looking at.
Well, I talked to my realestate agent and she was like
this house, this deal actuallyfell through and it was back on
the market again, but it was notonline.
Everywhere online, it said soldstill.
So you know, had we not hadher, we proably would have lost
(15:26):
out on that.
Ashley Owens (15:28):
Exactly.
She kinda had the inside scoopon things and she knew and
they're able to look at.
And you might look at a houseand say wonder why this house
has been on the market so long.
They have the ability to go inand look and see what other
buyers potential buyers werelooking at.
You know it didn't have goodlighting or you know it could be
anything, and you're like ohyeah, that's why it probably
(15:50):
didn't sell.
or it may look like a nice houseon the outside.
And then they're able to lookat the disclosures or the
addendum and say, hey, it had afoundation issue, but it does
have a warranty on it.
You know, do you want to moveforward with this?
And sometimes you're like, yeah, I can, or no, I don't want to,
but they're able to give youthat information.
Host (16:10):
That's right.
That reminds me of anotherthing that happened, similar
like that, with us.
We were looking at this houseand I was like why is it so?
It seems like it's under value, right, Compared to everything
else.
And the our agent was like well,it's got really bad foundation
issues.
So, it's been on the market forso long.
Do you want to look at it still?
And I was like Nope.
Ashley Owens (16:28):
Nope, nope, thank you.
Host (16:31):
Yeah, I'm totally with you on that.
A real estate agent helps a ton.
They do so, something that weknow a lot of financial
institutions don't necessarilyoffer here at Centric or here in
our community.
But at Centric we really focuson first-time homebuyers or even
getting people jump-started tounderstand that they can become
(16:53):
a homeowner.
So talk a little bit with us ifyou don't mind our first-time
homebuyer program.
Tell us a little bit about that.
Ashley Owens (17:05):
Well, we do offer a first-time homebuyer here at
Centric and I have beenassisting our first-time
homebuyers assisting with theirhomebuyer process for some time
now, since we jump-started theprogram.
It is a personalized productthat we have here at Centric
where we offer 100% financing ona property that you may find.
It can be a site-built home orit can be mobile home and land
(17:28):
the great part about it thatthere is no PMI on this product.
So if you were to look at aUSDA loan where they do 100%
financing, you will in fact haveto pay PMI and with their
product you have to be in acertain area.
We don't limit the area thatyou can be in to purchase a home
.
We just want it to be movingready.
(17:51):
Well, the next step is verysimple.
Come talk to a loan officerhere at Centric.
We make the process very simplefor them, Even if they do not
know if they're ready.
We have certified financialcounselors in the mortgage
department that are here andready to provide this free
service to our members.
We obtain a tri-merge creditreport for our members.
(18:13):
We can also look at a softballcredit report if they think that
hey, I don't want my creditpool, I don't know if I'm ready
or not.
We can also look at a softballcredit report.
If they think that, hey, Idon't want my credit pool, I
don't know if I'm ready or not,we can look at the softball
credit report and it gives usdetailed information, including
scores, trade line history.
We check credit.
We address any errors on thecredit report.
(18:35):
A member may need to pay offtheir debt, may not need to pay
off debt.
They may need to reduceoutstanding debt, avoid new
credit.
So it's just getting into theweeds of what's on your credit,
getting a pre-qualificationprocess started and then you can
start looking for a home,because we never want our
(18:57):
members to go out and look for ahome first and then come back
and say, hey, I found thiswonderful home that I'm
interested in, and then it maybe some things on their credit
report that they may need to fixor they're not in budget for it
right now and they falling inlove with this house.
I think the number one thingwould be absolutely
pre-qualification process.
Talk with a loan officer thatyou're comfortable with to go
(19:20):
over the process, go over youroptions that you have.
Host (19:24):
So that pre-qualification process, you're also sharing
with them what they can affordbased upon their income and
they're already their expensesthat they're committed to from
what you found on that, on thatcredit report.
Ashley Owens (19:36):
That is correct.
We go over their expenses, wego over their budget, what
they're comfortable paying.
Because you do have to put intoplay that it's not always just
the price of the home.
You have to account forhomeowners insurance, you have
to account for property taxes,you have to account for other
expenses that are associatedwith purchasing a home, home
(19:56):
inspection and then, even afteryou buy the home, you have to
prepare for life.
You know life happens andwhether your family is expanding
, for when the kids go to schoolor things that may break in the
home, so you do have to preparefor that.
Just because we say, hey, youcan be approved for a $500,000
(20:17):
house, do you want to maxyourself out nine times out of
10?
No, I would not recommendmaxing your loan amount or your
buying ability out, because youdo have to prepare for, hey,
your child is going to turn 16one day and they're not going to
be hard.
So you do have to prepare forthose things in life that will
happen.
The what ifs, that's right.
There is a lot that goes intowhen you purchase a home.
Host (20:43):
So for you to pull either the full credit report or a soft
pull.
What is needed from the member?
Ashley Owens (20:48):
The documents that we would need for the member to
pull a soft pull or a hard pullwould be just their
identification and anauthorization for us to pull
that information and go overthat with them.
That's very easy.
That is very easy, very simple,and most people have that
information on their phone.
Host (21:05):
That's right, and we take those things with us everywhere
we go, that is correct.
Well, and so even talking aboutthese, you know, I mean I know
that we have multipleopportunities for folks to
become homeowners, but I reallyjust want us to lean in today
about first time home buying andhow simple it is.
That's what I think it's.
Just there's this myth that'sout there.
(21:27):
People really think that thisis so much harder than what it
really is.
And you come in, you can visitto any of our locations.
We have someone that you canspeak with in every market that
we have.
You can also visit them, too,by email or by phone, and we can
even conduct that credit reporteven in that regard.
So I mean, I think it's just sosimple.
(21:49):
We kind of take the guessworkout for you.
Ashley Owens (21:52):
We do.
We take the guesswork out foryou, and some people are more
technology or, you know, techsavvy, as I would say and we
have the ability that we caneven do a Zoom call and go over
those documents with them.
So we do have different avenuesand ways.
Some people are more hands onand one on one and want to come
(22:14):
into the office, and we welcomethat.
We love to see our members comeinto the office and go over
their documents, go over theircredit report and what they
should and should not do.
We can do it online, we can doit over the phone and if we
don't have a loan officer at acenter, we will travel to that
center to meet the members.
(22:35):
So we do have different avenuesto go over this product with
our members and other optionsthat they may have.
Host (22:42):
I love it.
Well, and so just to break thisdown very easy for everyone so
when you come in and or evenyou're talking with somebody,
you go through this, you talkthrough, maybe even create a
budget to see where you arefinancially.
And if you take a peek andyou're getting pre-qualified
meaning hey, this is somethingthat we know, that you're being
pre-qualified based on yourincome and your expenses if not
(23:04):
say, for example, if you're notnecessarily pre-qualified today,
your team actually walks themthrough ways in which that, hey,
here's some things you mightwant to eliminate.
Maybe you want to get caught upon.
Take us through a little bitabout that if it's somebody that
you've retrieved that creditreport and you think we've got
some things we need to work on.
Ashley Owens (23:21):
We have had those instances before and later on
down the line they have beenable to achieve their goal of
buying a house.
If they come in, we pull thecredit report, we are able to do
financial counseling to them tosay, hey, you may need to pay
off some debt.
Say, hey, you may need to payoff some debt you may need.
We create a plan for thembasically, and if they follow
(23:47):
the plan of and it's differentfor everybody, their plan will
be different.
So some people may need to payoff some debt.
Some people may need to get ridof some things on their credit
report.
Some people may be needing justtimes, because sometimes
patience is the key to repairingyour credit.
We are just here to help themdo whatever it needs to do for
them to build or buy a house.
(24:09):
Sometimes, limit knowing yourlimits as a budget patience
finding the right property maytake time.
Sometimes it's a long termproject that we have to work on.
It may take six months orlonger.
Sometimes it only takes threemonths.
It just depends on the member,what they need and what is on
(24:31):
their credit report, andsometimes it's just them jumping
in and purchasing a home.
That's right.
That's right Pre-qualificationprocess.
We provide that to them orprovide it to their agent.
They are on the road forsearching for a home.
They can provide an offer onthe home.
Once they get an accepted offer, they will provide that
(24:52):
information back to us.
We will complete the process,the application, with any
missing information that we mayhave for their address, for the
cost of the home.
Down payment no down payment,closing costs.
The lender processes theapplication.
We send it over to underwriting.
We get conditional approval.
Once we get that informationback, the underwriter basically
(25:15):
is asking for additionalinformation.
We gather that information andin this process the appraisal is
being done.
The title work is being done onthe property to make sure there
are no judgments or liens on theproperty, that you have clear
title on the property.
Once we get the appraisal bagthat states hey, your house
appraises for what they are infact selling it to you for, or
(25:40):
it may appraise for more, whichis definitely a plus we are
ready to schedule closing issue,a closing disclosure, and we
are ready to go to the movingtable and then we are ready to
go to the closing table and thenyou're ready to move in after
you sign all your documents.
It may sound like a lengthyprocess, but once you get into
(26:05):
it and once you providedocuments to your lender in a
timely manner, the process goesreally really smooth.
And as long as you'recomfortable with your realtor,
as long as you're comfortablewith your lender, that you're
able to talk to them, theprocess will go very smoothly
for you.
Host (26:22):
That brings us to the end of the episode of the Live
Better podcast.
We hope you found today'sconversation about homeownership
and the steps necessary tobecoming a homeowner to be
enlightening and valuable.
In the world of personalfinance, knowledge is your
greatest asset and Centric FCUremains your steadfast partner
(26:42):
in that journey.
If this episode resonated withyou, we kindly ask you to show
your support.
Please hit the subscribe button, share this episode with your
friends and family and take amoment to leave us a review.
Your input is invaluable inshaping the content that
addresses your financialinterests and needs.
And, of course, let's stayconnected on social media.
(27:05):
You can find us on Facebook, atat CentricFCU, and on all
platforms under MyCentric.
Stay in the loop regarding thelatest financial insight and
resources tailored to yourunique financial aspirations.
Until our next episode, alwaysremember Centric FCU is by your
side as you navigate yourfinancial journey.
(27:27):
Thank you for tuning into theLive Better podcast.
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!