Host: 0:00

Welcome to episode 329 of the Live Better podcast, proudly presented by Centric FCU. Today, we will listen to the highlights from two of your favorite Live Better podcasts on home ownership. We will be joined by our very own Ashley Owens, VP of Mortgage, who will share tips to make home ownership a reality, as well as the mortgage products offered at Centric. So, whether you’ve been a loyal listener or you’re joining us for the first time, prepare to dive into home ownership and how side-by-side can walk with you on this journey.

Host: 0:38

So do you think that the housing prices will go down much over this year?

Ashley Owens: 0:43

I think they might elevate a little bit, they might go down a little bit, but I don’t think it’s just going to be a drastic change on the price of houses. I’ve seen the cost of houses, the listing price. They have been dropping the prices of them here lately and I think mainly it’s because of what’s going on in the market and the interest rates that we have to offer.

Host: 1:06

Well, is there anything that a prospective buyer can really do to get a lower interest rate, and how does the credit score impact the rate that they get?

Ashley Owens: 1:16

Your credit score definitely impacts your interest rate that you get on a mortgage. I always tell my members, the higher your score, the lower your interest rate. That plays a major part in your interest rate. You definitely want to have the best credit score so that you can obtain the best interest rate that we have to offer. If you do have the best credit score and you just want a little bit lower interest rate, you can always obtain a lower rate by buying down the interest rate and that’s basically like paying discount points for your closing costs and in theory, you’re just going to pay more closing costs. You’re going to bring more money to the table, depending how lower you want your interest rate. Sometimes we recommend that maybe you should look at it 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 going to be here? Because it may not be worth you paying extra to buy down your interest rate yeah, that makes sense.

Ashley Owens: 2:17

DTI. DTI basically stands for debt to income ratio. Debt to income ratio is how much you pay in debts each month compared to your gross monthly income. It is a key factor when purchasing a home. It helps your lender gauge about how much you would have to live off of after you’ve paid your mortgage, paid your monthly bills that you have. The max DTI is determined by different loan programs. Right now, a popular loan program that we have is FHA. Fha has the ability to go up to a higher debt to income ratio, which is 55%. So most people are leaning towards that loan program because the interest rates are high. They have a DTI issue. So, hey, we can put them in a FHA program where the max DTI is 55%. Va is another loan program. Their max debt to income ratio is 60%. So those are for vets. Other programs that we have they hang around maybe about 50% max debt to income ratio.

Ashley Owens: 3:29

Sometimes there are things that we can’t do to adjust your DTI. In a sense we had a member one time that had a car loan that was reflecting on their credit report. They had a lot of equity in the vehicle but they had other small credit cards. That was kind of maxing her out on her DTI a little bit. So here at the credit union we have the ability that we can send our member over to the retail side and we were able to refinance her vehicle roll in her credit card debt, her installment debt that she had. We got her debt to income ratio down and we actually got her car note down so she was able to purchase the home that she was looking at. Sometimes it just takes us taking a deeper dive, looking at their credit, what they have on their credit, and maybe just moving some stuff around a little bit. That’s the best thing about here at the credit union. With our mortgage department we have the ability to work with the retail staff and they maybe can do a consolidation loan.

Ashley Owens: 4:33

They can refinance their car to get their payment down a little bit. So we have the best of both worlds here.

Host: 4:39

That’s a good point that I hadn’t even thought about. I mean being able to go the extra mile like that to help this member get in the house that she wants. I mean I don’t know that just anybody would have been willing to take those extra steps, you know, to help her close the deal on that house. I think that’s awesome. So what is a good DTI, would you say?

Ashley Owens: 4:59

A good DTI would probably hang around 43%. Because you have to keep in mind and I tell the members this all the time we’re basing your debt to income ratio off of your gross income. That’s not what you’re bringing home, that’s not your net. We don’t know what your light water gas bill is going to be. We don’t know what your cell phone bill is going to be. If you have kids, we don’t know how much your daycare is. Life happens.

Ashley Owens: 5:27

We don’t know what may happen. So I tell them always take into consideration of your outside debts and maybe sit down and write 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 make sure that you are on budget to 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 in and take an account hey, life is going to happen. That’s just like with me. Um, my daughter, she’s 16, so she’s wanting a car.

Ashley Owens: 6:03

Well, it is that time. So I have to take into account, for I’m going to have to start paying car insurance for an additional 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 tap yourself out initially purchasing a home and be married to your house and not be able to do anything outside of just having a nice home. You still want to be able to go and do things that you normally can do. You still want to be able to enjoy your kids so they can do things they want to do. You still want to be able to maybe go on vacation or just small things. So you just don’t want to tie yourself down with your house just because, oh, I can get and fit inside the box of my DTIs at 48%. I can tap out at this because this is this nice house that I want. Sometimes it just doesn’t work that way.

Host: 6:55

How terrible would it be to to buy too much of a house that technically, on paper you can afford, but once you’re in it and now you realize that your way of life kind of has to change, so you can keep that. That is exactly right, that’s what you want to avoid for sure.

Ashley Owens: 7:10

And then, once you get into it, you have to think about how much is my light bill going to be, because those have gone up and it can definitely affect your budget and how much money cashflow that you have at the end of the month with paying your bills.

Host: 7:25

I for sure want to talk about PMI, if you were planning on throwing that in there, but yeah, what do they need to be aware of, like what needs to be in the forefront when they’re looking to buy?

Ashley Owens: 7:36

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 to be? My interest rate, closing costs Do I have enough money for closing costs? Is the seller going to pay any closing costs? I mean, it’s a lot of things that go into purchasing a home and when you’re, I would definitely suggest going and talking to a loan officer, because this is not something you do every day. So you definitely need somebody that you feel comfortable with, that’s going to explain the process to you and that’s just going to hold your hand along in this journey that you’re going to go on, because it’s definitely going to be a journey. Um, you need somebody to answer your questions that you might think are just crazy, but if it’s not something you do every day, no question is crazy. Period, but you just need somebody to explain the process. This is what you’re looking at and this is what PMI is. If I tell you PMI, you’re not going to know what PMI is.

Ashley Owens: 8:42

You may think that closing costs and down payment are the same thing. You might need somebody to explain. Down payment is one thing, your closing costs is another thing. Sometimes you have both. Sometimes you don’t have both. Some loan programs don’t require down payment so you could not even have that on a loan program.

Ashley Owens: 9:00

I know PMI is a big thing. Here at the credit union we have a unique product that is signature to the credit union. I would say it’s the first time home buyer program that we offer here at the credit union. The loan stays here at the credit union. We service the loan. We can finance up to 100% of the value of the property. So just say, if your home is $142,000 sales price, your loan amount will be $142,000. There’s no down payment required. There are closing costs that are associated with the loan.

Ashley Owens: 9:35

Closing costs normally include appraisal fee, origination charges, um, title fees that the title company charges to do title work on the property, um, and that basically covers you and covers us to make sure there’s not any judgments or liens against the property that you are unaware of and that the seller is unaware of um. It also includes collecting for 12 months of your homeowner’s insurance and we pay that upfront. If your loan is escrowed, we pay for your property taxes. Depending on when you’re closing depends on how many months that we hold back in your escrow account. It pays for lender’s title insurance. Lender title insurance covers the lender in the event that the abstractor that’s doing the title work on the property misses anything. They’re human, they go to the courthouse, they search the records. I mean they could miss anything. So if you have that insurance, it covers the credit union.

Ashley Owens: 10:33

They offer owner’s title insurance. It’s optional, it covers you, the buyer. So I would suggest buying owner’s title insurance. It’s a one-time fee, it doesn’t cost that much and it covers you in the event that you sell your house later on or that you refinance your house later on and a judgment pops up that the previous abstractor missed and then you’re stuck holding the bag of having to pay that. If you have owner’s title insurance, you file a claim and they pay it. It’s kind of like car insurance you know you have it, you pay it and it’s there if you need it. But we pay car insurance monthly. Owner’s title insurance you only pay it one time at closing.

Ashley Owens: 11:14

So I would recommend owner’s title insurance for anybody that’s purchasing a home, but the private mortgage insurance is PMI. It covers the lender anytime that they finance over 20% of the value of the property. So, I’m sorry, 80% of the value of the property. So if you are putting 20% down on a home you automatically don’t have PMI in the secondary market if we were to do a conventional loan, that doesn’t stay here at the credit union. So that’s a great perk that we have here. You don’t have to worry about paying that private mortgage insurance on our first-time homebuyer program. But we do have other loan programs such as FHA, va, rural Development and conventional loan programs that do have PMI on them. Va does not have PMI but FHA, conventional and Rural Development they have PMI as well 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, I pay 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 monthly note? It is Okay.

Ashley Owens: 12:37

It’s paid each monthly note. It’s paid in with your mortgage note. So you have your principal and interest, you have a monthly payment and your monthly payment is made up of your principal and interest. It’s made up of your escrows, and your escrows are basically your property taxes and your homeowner’s insurance, and then you have a portion that goes towards PMI. The amount of PMI that’s paid monthly, it varies depending on the loan product and it also depends on your loan to value and your debt to income ratio on a conventional loan. Okay, so it’s not the same across 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 you didn’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’re buying 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 middleman between the buyer and the seller and with their expertise, they can help guide you along the way on finding a home and negotiating the price and anything that may need to be repaired. Finding a home that comes on the market that may not even be on the market yet. They may have you know a friend of a home that comes on the market that may not even be on the market yet. They may have you know a friend of a friend that knows somebody that’s selling a house that fits your needs that you’re needing.

Ashley Owens: 14:11

I definitely think you need a realtor, because this is not something that you do every day. This is something they do every day and they’re able to guide you along the way, help you with things that you may not understand. You know things that septic system or should I or should I not purchase a home warranty on the 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, but the realtor does this every day, so they’re able to tell you these different things about the home and they’re able to negotiate good deals for you as well. So I recommend a real estate agent.

Host: 15:05

To kind of expand on what you said, I know, when we bought our home in July, um, our real estate agent said the house that we were looking at, it was marked sold everywhere. Um, and it was a house that I had been looking at. Well, I talked to my real estate agent and she was like this house, this deal actually fell through and it was back on the market again, but it was not online. Everywhere online, it said sold still. So you know, had we not had her, we proably would have lost out on that.

Ashley Owens: 15:28

Exactly. She kinda had the inside scoop on things and she knew and they’re able to look at. And you might look at a house and say wonder why this house has been on the market so long. They have the ability to go in and look and see what other buyers potential buyers were looking at. You know it didn’t have good lighting or you know it could be anything, and you’re like oh yeah, that’s why it probably didn’t sell.

Ashley Owens: 15:51

or it may look like a nice house on the outside. And then they’re able to look at the disclosures or the addendum and say, hey, it had a foundation issue, but it does have a warranty on it. You know, do you want to move forward with this? And sometimes you’re like, yeah, I can, or no, I don’t want to, but they’re able to give you that information.

Host: 16:10

That’s right. That reminds me of another thing that happened, similar like that, with us. We were looking at this house and 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 for so 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.

Host: 16:34

They do so, something that we know a lot of financial institutions don’t necessarily offer here at Centric or here in our community. But at Centric we really focus on first-time homebuyers or even getting people jump-started to understand that they can become a homeowner. So talk a little bit with us if you 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 been assisting our first-time homebuyers assisting with their homebuyer process for some time now, since we jump-started the program. It is a personalized product that we have here at Centric where we offer 100% financing on a property that you may find. It can be a site-built home or it can be mobile home and land the great part about it that there is no PMI on this product. So if you were to look at a USDA loan where they do 100% financing, you will in fact have to pay PMI and with their product you have to be in a certain area. We don’t limit the area that you can be in to purchase a home. We just want it to be moving ready. Well, the next step is very simple. Come talk to a loan officer here at Centric. We make the process very simple for them, Even if they do not know if they’re ready. We have certified financial counselors in the mortgage department that are here and ready to provide this free service to our members.

Ashley Owens: 18:10

We obtain a tri-merge credit report for our members. We can also look at a softball credit report if they think that hey, I don’t want my credit pool, I don’t know if I’m ready or not. We can also look at a softball credit report. If they think that, hey, I don’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 us detailed information, including scores, trade line history. We check credit. We address any errors on the credit report.

Ashley Owens: 18:35

A member may need to pay off their debt, may not need to pay off debt. They may need to reduce outstanding debt, avoid new credit. So it’s just getting into the weeds of what’s on your credit, getting a pre-qualification process started and then you can start looking for a home, because we never want our members to go out and look for a home first and then come back and say, hey, I found this wonderful home that I’m interested in, and then it may be some things on their credit report that they may need to fix or they’re not in budget for it right now and they falling in love with this house. I think the number one thing would be absolutely pre-qualification process. Talk with a loan officer that you’re comfortable with to go over the process, go over your options that you have.

Host: 19:24

So that pre-qualification process, you’re also sharing with them what they can afford based upon their income and they’re already their expenses that they’re committed to from what you found on that, on that credit report.

Ashley Owens: 19:36

That is correct. We go over their expenses, we go over their budget, what they’re comfortable paying. Because you do have to put into play that it’s not always just the price of the home. You have to account for homeowners insurance, you have to account for property taxes, you have to account for other expenses that are associated with purchasing a home, home inspection and then, even after you buy the home, you have to prepare for life. You know life happens and whether your family is expanding, for when the kids go to school or things that may break in the home, so you do have to prepare for that.

Ashley Owens: 20:13

Just because we say, hey, you can be approved for a $500,000 house, do you want to max yourself out nine times out of 10? No, I would not recommend maxing your loan amount or your buying ability out, because you do have to prepare for, hey, your child is going to turn 16 one day and they’re not going to be hard. So you do have to prepare for those things in life that will happen. The what ifs, that’s right. There is a lot that goes into when 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 pull would be just their identification and an authorization for us to pull that information and go over that 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.

Host: 21:11

Well, and so even talking about these, you know, I mean I know that we have multiple opportunities for folks to become homeowners, but I really just want us to lean in today about first time home buying and how simple it is. That’s what I think it’s. Just there’s this myth that’s out there. People really think that this is so much harder than what it really is. And you come in, you can visit to any of our locations. We have someone that you can speak 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 report even in that regard. So I mean, I think it’s just so simple. We kind of take the guesswork out for you.

Ashley Owens: 21:52

We do. We take the guesswork out for you, and some people are more technology or, you know, tech savvy, as I would say and we have the ability that we can even do a Zoom call and go over those documents with them. So we do have different avenues and ways. Some people are more hands on and one on one and want to come into the office, and we welcome that. We love to see our members come into the office and go over their documents, go over their credit report and what they should and should not do. We can do it online, we can do it over the phone and if we don’t have a loan officer at a center, we will travel to that center to meet the members. So we do have different avenues to go over this product with our members and other options that they may have.

Host: 22:42

I love it. Well, and so just to break this down very easy for everyone so when you come in and or even you’re talking with somebody, you go through this, you talk through, maybe even create a budget to see where you are financially. And if you take a peek and you’re getting pre-qualified meaning hey, this is something that we know, that you’re being pre-qualified based on your income and your expenses if not say, for example, if you’re not necessarily pre-qualified today, your team actually walks them through ways in which that, hey, here’s some things you might want to eliminate. Maybe you want to get caught up on. Take us through a little bit about that if it’s somebody that you’ve retrieved that credit report 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 been able to achieve their goal of buying a house. If they come in, we pull the credit report, we are able to do financial counseling to them to say, hey, you may need to pay off some debt. Say, hey, you may need to pay off some debt you may need. We create a plan for them basically, and if they follow the plan of and it’s different for everybody, their plan will be different. So some people may need to pay off some debt. Some people may need to get rid of some things on their credit report. Some people may be needing just times, because sometimes patience is the key to repairing your credit. We are just here to help them do whatever it needs to do for them to build or buy a house. Sometimes, limit knowing your limits as a budget patience finding the right property may take time. Sometimes it’s a long term project that we have to work on. It may take six months or longer. Sometimes it only takes three months. It just depends on the member, what they need and what is on their credit report, and sometimes it’s just them jumping in and purchasing a home. That’s right. That’s right Pre-qualification process. We provide that to them or provide it to their agent. They are on the road for searching for a home. They can provide an offer on the home. Once they get an accepted offer, they will provide that information back to us. We will complete the process, the application, with any missing information that we may have for their address, for the cost of the home. Down payment no down payment, closing costs.

Ashley Owens: 25:06

The lender processes the application. We send it over to underwriting. We get conditional approval. Once we get that information back, the underwriter basically is asking for additional information. We gather that information and in this process the appraisal is being done.

Ashley Owens: 25:24

The title work is being done on the property to make sure there are no judgments or liens on the property, that you have clear title on the property. Once we get the appraisal bag that states hey, your house appraises for what they are in fact selling it to you for, or it may appraise for more, which is definitely a plus we are ready to schedule closing issue, a closing disclosure, and we are ready to go to the moving table and then we are ready to go to the closing table and then you’re ready to move in after you sign all your documents. It may sound like a lengthy process, but once you get into it and once you provide documents to your lender in a timely manner, the process goes really really smooth. And as long as you’re comfortable with your realtor, as long as you’re comfortable with your lender, that you’re able to talk to them, the process 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’s conversation about homeownership and the steps necessary to becoming a homeowner to be enlightening and valuable. In the world of personal finance, knowledge is your greatest asset and Centric FCU remains your steadfast partner in that journey. If this episode resonated with you, we kindly ask you to show your support. Please hit the subscribe button, share this episode with your friends and family and take a moment to leave us a review. Your input is invaluable in shaping the content that addresses your financial interests and needs. And, of course, let’s stay connected on social media. You can find us on Facebook, at at CentricFCU, and on all platforms under MyCentric. Stay in the loop regarding the latest financial insight and resources tailored to your unique financial aspirations. Until our next episode, always remember Centric FCU is by your side as you navigate your financial journey. Thank you for tuning into the Live Better podcast.