Navigating The Home Buying Process: Tips For First-Time Buyers

Episode 8: Pocket Change Podcast

Do you get intimidated by the home buying process? It is no secret there is much to learn when it comes to purchasing a home. 

"The first step for most every buyer is really knowing what they can do......Having a plan, that's the key. So, you have to really know what you can afford, and you have to know what the process is."

Summary

On this episode of the Pocket Change Podcast, Kay Carroll, Director of Mortgage Sales and Services at Leaders Credit Union, talks about what a first-time homebuyer should know when navigating the homebuying process. The process of buying a home for the first time can be a daunting and overwhelming experience, especially for those who are not familiar. This podcast is dedicated to helping first-time homebuyers navigate the complexities of the home-buying process by providing valuable insights, tips, and advice from industry experts.

Whether you're in the early stages of your home search or you're ready to make an offer, this podcast is designed to empower you with the knowledge and confidence you need to make informed decisions and achieve your homeownership goals.

"And that's one thing that we really try to do very well, is not talk above our borrower. You know, we don't want to dumb it down. You know, and talk to them in those terms, but yet talk to them in a way that's relatable and it's understandable."

Key Takeaways

• The process of buying a home for the first time can be a daunting and overwhelming experience, especially for those who are not familiar with the ins and outs of the process.
  
  
• There are ways to purchase a home without a 20% down payment. 
  
  
• There are many terms that go along with buying a home, such as PMI, FHA, and APR. It's important to understand the mortgage lingo and your Mortgage Loan Officer is a great resource to understand the terms.
  
  

• Getting Pre-Qualified can allow you to get the home you love, faster and easier. Credit Documents are good up to 120 days. 

If you're ready to start the homebuyer journey, speak with a Leaders mortgage champion today! Our mortgage experts can help guide you through the process to find that home sweet home.

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Full Transcript

Shea:

Hey, this is Shea.

Mary Helen:

This is Mary Helen.

Shea:

Welcome to the Pocket Change podcast.

Mary Helen:

Where you'll learn better ways to spend, save, and invest and take control of your financial journey.

Shea:

You know, Mary Helen:, I was reading the other day, and over 30% of homebuyers in America are first time homebuyers. And so we're going to talk about that process and talk about all about first time home buying today on the podcast.

Mary Helen:

And that's a big deal. That's about a third of all homebuyers.

Shea:

Exactly.

Mary Helen:

Have never done or maybe don't know what they're doing and maybe need some help. Which is why I'm excited about our guest today.

Shea:

And she is an expert in all things home buying.

Mary Helen:

We're so excited to welcome our guests today. Kay Carroll is the director of mortgage services and sales. I'm so excited about what we're going to talk about today. First time home buying tips, maybe things people don't know about home buying that they need to know or should know. And you're going to help us get there.

Kay Carroll:

Absolutely. Thank you for having me today.

Shea:

Yeah. Tell us a little bit about how long you've been in mortgage services and helping homebuyers achieve their dream of homeownership.

Kay Carroll:

So I've been with the credit union for a little over 18 years, and all I've ever done is mortgage lending. So, you know, when our mortgage team was three people, I was a part of that. And now we're much over 25 on staff. So, yeah, we've grown exponentially.

Mary Helen:

And it's cool to see that you've seen it from the very beginning and helped it kind of develop in a way into what it is. Also know what it was like back then, but also know what it's like now and the trends and what changes and what's still important. And that's a great skill to have.

Kay Carroll:

Yes. We're excited about what our team is able to do. You know, with first-time homebuyers existing, you know, clients that come through and repeat clients. So, yeah, we're really excited about what the team is able to share; the education piece that they bring to the table and the expertise.

Mary Helen:

I feel like the first question that people want to know when they're buying a house is how much do I have to save in order to buy a house?

Kay Carroll:

So that's really a good misnomer. You know, people still believe that there is a 20% down payment that is required, and that's not true. You know, there are so many programs that help first time homebuyers that require no down payment whatsoever or very little down payment. So, you know, our team of experts are the key component to helping that borrower be able to navigate and know what they can weed through, what, you know, what's really true and what's really not true, and how it helps them in their scenario.

Mary Helen:

And so it's not necessarily you have to have $10,000 or a certain percentage. It all depends on what you're looking for and the opportunities in front of you.

Kay Carroll:

Right. That particular borrower, every scenario is unique to that one borrower. So what might fit Joe may not fit Sally. So, you know, that's where our team helps navigate with that borrower. What's specific to them being a first-time homebuyer.

Shea:

I think that's great for, you know, there being so many programs out there that have different options for down payment assistance, for closing cost assistance, or even different loan programs for, you know, maybe military or veterans or things like that. So that's great to know that, you know, there are those flexible options and then, you know, thinking about someone who's buying their first home or getting into that process, I mean, we know we've got to save and, you know, prepare for that with our budgets.

Shea:

But what's really the first step and where do we even start?

Kay Carroll:

So the first step for most every buyer is really knowing what they can do. So, you know, a lot of people don't just wake up one day and say, I'm going to go buy a house today. It doesn't work that way for the large part of Americans. So having a plan, that's the key. So you have to really know what can you afford and you have to know what the process is.

Kay Carroll:

So first step is getting in contact with someone who is in that field of expertise that can help provide the information, share what they need to be able to do as they walk through that process of being qualified, looking at credit, you know, looking at budget things. So, you know, those are really your first steps, is trying to have a plan put in place to know what you can do.

Kay Carroll:

And the budget is a big part of that.

Shea:

Right. And so, you know, a mortgage loan officer may sit down with a potential buyer and talk about what they have in mind for the size [of the] house or price and things like that and kind of get the ball rolling with those questions and kind of just get feedback and go from there and then talk about different programs and things.

Kay Carroll:

You know, every program is specific to that particular agency's guide. So, you know, from that standpoint, having a borrower who may come in with a specific process or a thought of this is the type of loan program that I want, may not be what they really think that it is once they've sat down and talked with one of our loan officers.

Shea:

And so a big part of lending, not only mortgage lending but all loans are credit reports. Credit reports tell the lender how likely a borrower is to repay their debt. So, you know, what's important when you're reviewing or your underwriting is reviewing a credit report for a first time home buyer.

Kay Carroll:

Any credit report, whether it be for a first-time homebuyer or any borrower when mortgage lending is being factored in, is you know, a lot of people think it's just the credit score. And the credit score is really reflective of many things that appear on the credit. So, you know, how much credit does a person have? Do they have too much credit?

Kay Carroll:

And there is such a thing as having too much credit.

Shea:

Squeeze in too much.

Kay Carroll:

Yes.Too many things. You know.

Shea:

That have a payment every month.

Kay Carroll:

Right. Exactly. So how long they've had their credit, the history that they've had with any financial institution, have they paid timely, you know, collection items or things of that nature? Has that hindered you? It could be that you can see from the credit report that there has been just a life happening, that everything happened in a very small time frame.

Kay Carroll:

So, you know, there are things that the credit report will tell you over a period of 8 to 10 years that gives you a very full picture of what that borrower's financial capabilities would be.

Shea:

And are there a certain number of credit lines or trade lines that a mortgage lender looks for? I mean, I know we probably need to have, you know, experience with credit. Credit history, like you mentioned. Is there a certain magic number or just that history that a lender looks for?

Kay Carroll:

I think years ago there was, you know, it's kind of like a gold standard rule: three open trade lines with reviewed payments for 12 months.

Shea:

And a trade line is a credit card, auto loan, student loan, or a personal loan, something like that.

Kay Carroll:

Right. Any credit account that would be reporting to your credit bureaus.

Shea:

So you said maybe they would look at around three for the last 12 months.

Kay Carroll:

Yes. That's, you know, you can have borrowers who come in and they may only have two, but they have what's called alternative trade loans. Let's say that they have rent. Rent doesn't typically report to your credit bureaus. So that's something that we could pick up if someone has what we call thin credit and they don't have very many active trade lines.

Shea:

I think that's helpful to know because, you know, some people may not be as experienced, you know, having credit and using credit. And while that's not what you're looking for, but looking for, you know, their ability to repay and, you know, pay on time and and make those wise choices with their money.

Kay Carroll:

Right. With the credit report being one of the things that we look at in the overall process, you know, there are very few instances where you have repeat borrowers that come through and they don't have a need for credit. Let's say that they've had the mortgage paid off for a long time and they pay cash for a lot of things.

Kay Carroll:

So that's one part of, you know, just the credit report is important. Don't get me wrong. But it is one part of the entire process.

Mary Helen:

This is so good to know. I'm already learning so much. So I've never bought a house before. Full disclosure. But there are terms that I'm not as familiar with. Don't know. And that I would like for you to explain. Maybe terms like PMI or FHA. Can you help us understand a little bit more about the lingo and what this means.

Mary Helen:

Because you don't know unless somebody teaches you.

Kay Carroll:

Absolutely.

Shea:

There's a lot in a home loan buying process.

Kay Carroll:

Yes. In our world, we use a lot of acronyms, you know, like PMI, that's private mortgage insurance. I call it the necessary evil. You know, a lot of people don't have a 20% down payment. So on most conventional loans, if you're not putting a standard 20% down payment, you will have PMI. And that is basically an insurance that you're paying the lender to help you navigate or mitigate the risk for them, allowing you to borrow over the 80%.

Kay Carroll:

So that's one term. Another term that I thought of was, you know, APR. That's your annual percentage rate. That's a big long calculation that the government kind of put in place to help consumers be able to shop one lender against another to see who's got the best. It could be the same rate, it could be the same term of 30 years.

Kay Carroll:

But their fees and how their fees are structured, that helps a borrower be able to shop apples for apples.

Shea:

So that structures into the rate different fees and interests?

Kay Carroll:

Yes, they do.

Shea:

That's good to know too.

Kay Carroll:

You know, FHA, that's one of the programs. You know, it's Federal Housing Authority or Administration, they basically shorten the terms of what those entities are that back mortgage loans and offer certain products. So the lingo is important. We talk a lot of terms in acronyms, you know, like our 1003, the application and average borrowers are not expected to know that.

Kay Carroll:

But I do think that it helps. So it doesn't seem as foreign concept.

Shea:

Well, I think it's good for borrowers to know that they can ask those questions. If you don't understand the acronym, ask your mortgage lender. You or whoever they're working with so they can understand like, I don't know what PMI means or this program name. I want to be sure to ask those questions to get those answers.

Kay Carroll:

And that's one thing that we really try to do very well, is not talk above our borrower. You know, we don't want to dumb it down. You know, and talk to them in those terms, but yet talk to them in a way that's relatable and it's understandable.

Mary Helen:

That matters.

Kay Carroll:

Yes, it matters a lot.

Shea:

I think another one of those terms is pre-qualification. That's a big term and in the process. And so what is a pre-qualification and how does that set me or Mary Helen: or whoever, as a borrower, a first time home buyer, how does that set us apart from other buyers?

Kay Carroll:

So a pre-qualification is your borrower is basically going through the process. They've made an application. We've been allowed to pull their credit report. We get certain documents in, say their income, their assets to back up. So our application basically is a story that we are writing for that borrower and the details of what is contained within that application we're documenting.

Kay Carroll:

So pre-qualification is basically the loan officer going through that application process with the borrower pulling their credit, getting them to a point that we know their story is beginning to take shape and we can back it up with the documentation that we need to. So pre-qualifications are an excellent way for a first-time homebuyer to go through that process, to know that they can shop with assurance that they don't go out and they find a house that they fall in love with and they might not be able to afford, You know, that would be devastating to anyone.

Kay Carroll:

So, you know, pre-qualification in that sense is very important. So you can shop with confidence and it gives those sellers that are having those offers made to them the assurance that, you know, with this pre-qualification letter from Leaders Credit Union, yes, we know we've got a solid buyer on the line and we should have no issues moving forward.

Shea:

So you said it's a letter from a lender - Leaders Credit Union, whoever it is. And it says what on that letter?

Kay Carroll:

The pre-qualification process results in us being able to issue that letter that gives that borrower's name…what they're qualified for as far as...

Shea:

They can borrow up to this much...

Kay Carroll:

Yes. Up to this sales price, basically what type of program we're looking to go. And then we have on our letters specifics of what we have already confirmed and verified, whether it's the full application, it's the credit report. It's looking at their assets, their tax documents, you know, whatever the case may be, which does help. Do they have a property that they're needing to sell before they can buy this new house?

Kay Carroll:

So those things really give, you know, an agent for that seller the ability to know that we've got something that has been vetted thoroughly. As best we can at that point.

Mary Helen:

So if someone decides to get pre-qualified, how long [are they]? Like are they pre-qualified up to so many months?

Kay Carroll:

Yes, they are.

Mary Helen:

How does that work?

Kay Carroll:

So if someone comes in today and they make an application with the credit union, with one of our team members. Credit documents are good for 120 days. So we generally put on our letters about 60 days. The homebuying process now is taking a little longer than what we have seen in the past, only because, you know, you've got buyers that are up against several different factors, you know, So with those factors being a part of where they are, it gives them time to shop.

Kay Carroll:

And it's not just a rush, rush, rush through the process.

Mary Helen:

So when you're shopping for a house, what are good qualities or just something that you should look for in a realtor? I know this is different from mortgages, but a realtor can be, and a lot of times is also, a vital process and a vital part in this process.

Kay Carroll:

So we encourage all first time homebuyers to partner with a realtor, someone local they can find. We work with many, many lenders or agents, rather, across Madison County and West Tennessee as a whole. So as we're meeting with clients, we kind of have an idea, you know, “oh, they would partner well with this person or maybe this person”.

Kay Carroll:

So we try to give them a reference of about three different agents in town or within their area that we think they might partner with well. So to me, one of the biggest things that anyone could look for in finding a local realtor is someone you can get along with. You're going to be working very closely with that individual for a while.

Shea:

And a lot of information is shared back and forth.

Kay Carroll:

Absolutely. You want someone who is responsive, you want someone who's transparent, they're honest. They're very proactive and aggressive in fighting on your behalf, because that's what they're really hired to do. And they are the negotiator between you as the home buyer and that seller. So they're looking out for things that we don't necessarily as a lender have at the top of our mind.

Kay Carroll:

So, you know, we're looking out for their finance, their loan and how that part is going. So there are aspects that a realtor would be very beneficial to a first time homebuyer in being able to know how to navigate that process of buying.

Shea:

And I think, you know, I've heard some other industry professionals or realtors say, you know, especially in this rate environment, fall in love with the house but not the rate. And so what does that really mean and how are rates affecting the homebuying budget? Our home buying budgets now in this environment?

Kay Carroll:

Yeah, that's a great question, Shea:. You know, the rates that we are currently seeing are higher than what they have been in some time. So it's very difficult for first time homebuyers to be able to navigate the entire journey. But, you know, they get qualified, let's say they get pre-qualified and they're ready to go, but they just can't seem to get over that hurdle of these rates and where they are. So, you know, having the assurance that we know that, and hope that, rates will cycle back down - and generally so. It's being able to share with them what they can do and what they can't do with rates being higher than where they have been. There are a lot of first time homebuyers that have basically been priced out of the market, things that they were, you know, able to qualify for, the rate being higher now, they might not be able to qualify for that level of sales price.

Shea:

They could’ve qualified for a $300,000 house. But now they can only afford a $200,000 house, for instance.

Kay Carroll:

Exactly. So, you know, having the knowledge of being able to help them and share with them the things that, you know, are pertinent to where that rate environment is, you know, a great thing that we do at Leaders is we offer REFI assurance*. The voucher is good for five years. And so if someone comes in and they buy their first home, don't expect to be in this rate forever.

Kay Carroll:

Because, we really don't [know], and trust, and hope that that is not going to be the case. So we've offered this voucher that's good for five years where they can refinance with no lender fee whatsoever. And we're going to take care of the appraisal form. So that's a huge thing to give them a little bit more peace of mind.

Kay Carroll:

And they can *exhale* “I think I can do this”, you know, because homeownership is important. It's one of the largest purchases that most folks will ever do in their lifetime.

Shea:

And, you know, if you're thinking or maybe a young family is looking for a home and, you know, it might be a home they're going to live in for several years, they're going to raise a family, grow their family, maybe. So fall in love with that house. Find that house that really suits your needs. And then there's programs out there and different options where, you know, hopefully down the road you can lower a rate and maybe be in a better position financially with that as well.

Kay Carroll:

Absolutely. Or upgrade the house because most of the time, if you're buying your first home, a lot of times that is not your home that you're going to be in for a lifetime. Oftentimes that's the case.

Mary Helen:

And so for people that are getting started or are interested to learn more about what we've talked about today, where can they go to find more information or reach out to somebody.

Kay Carroll:

They can call our direct line that we have, which is listed on our website. Any of our information can be found by going to our leaders web page, and we have a specific page for the mortgage division.

Shea:

That’s leaderscu.com/mortgages.

Kay Carroll:

Absolutely. And all of our loan officers are listed there, so all of their contact information.

Shea:

I love that too, because if you're looking for someone or if I want to share, you know, a MLO with a friend of mine, I can say, hey, we've got all the information here.

Kay Carroll:

Absolutely.

Shea:

And I kind of do that, too. I think, okay, this person might get along well with this person. So you can share that easily. So that's very, very helpful.

Kay Carroll:

Absolutely.

Shea:

I’ll also say check out our blog. Our blog at leaderscu.com. We've got a great blog post about this same topic.

Shea:

We use that to help us in this discussion today. And on a personal note, I can vouch for Kay Caroll, Leaders mortgage services. My wife and I have gone through the process twice and we didn't stay in our first home, you know, for so long as our family grows. So we've been really impressed with the service and just how you've answered our questions. And we went through all those things, learning the lingo and learning the process and Leaders mortgage services makes it easy to upload documents online and it’s very simple. So we enjoyed the process and we're glad to be able to have that.

Kay Carroll:

And do you think that you learned something from the first experience to the second?

Shea:

Yeah.

Kay Carroll:

Were you more comfortable?

Shea:

I was definitely more confident and comfortable in the terms and the programs and what I needed to prepare for and things like that.

Kay Carroll:

And that's what we hope for.

Mary Helen:

Well, we have a final question for you Kay. So if you had some spare pocket change, what would you do with it?

Kay Carroll:

Spare pocket change? Well, number one, I work in a financial institution. I never have cold, hard cash on me. But if I did, if I did have spare pocket change, we have. We have. Okay. So my husband, he does. He always has pocket change. We have a vase. It's an old vintage vase that we keep in the corner of one of the bedrooms, and that's where his pocket change goes.

Kay Carroll:

So when that gets full, it comes to Leaders Credit Union to be turned into money for a savings account.

Shea:

So he put it into your savings, just collect it and put it into the savings. There you go.

Mary Helen:

You know, you could also use it for a spare guest key. You know, you have people coming to visit.

Kay Carroll:

Yeah, well, we're empty nesters now, so the keys will stay with me.

Shea:

Well, thanks for being on the podcast today.

Kay Carroll:

Thank you for having me. We've really had a good time in our division and I look forward to what we can do in the future.

Mary Helen:

Thanks for being here. Thanks for tuning in at the Pocket Change podcast. Be sure to rate, review, and subscribe.

Shea:

And be sure to watch full episodes on our YouTube channel. Search Leaders Credit Union.

Mary Helen:

Or visit our Instagram account. Pocket Change.Podcast.

Shea:

The Pocket Change podcast is brought to you by Leaders Credit Union.

Mary Helen:

Where we power your passion and make lives better.

Shea & Mary Helen:

Cha-Ching!

*No Lender Fees Offer redeemable toward all lender fees except interest rate discount points, lock extension fees, rate re-lock fees, and prepaid daily interest due at closing. No Appraisal Cost Offer redeemable toward recipient’s actual appraisal cost or $500, whichever is less. Lender fee credit and appraisal credit will appear on final closing disclosures. To redeem offer, provide this card prior to initial loan disclosures and card expiration date. Offer only valid when all the following conditions are met: (1) the offer is redeemed by the recipient toward refinance of a first lien, owner occupied residential mortgage loan of $100,000 or more closed with Leaders Credit Union (Leaders); (2) Leaders originated the recipient’s initial purchase mortgage on the property; (3) since the recipient’s initial purchase mortgage, no subsequent refinance of the property has occurred; and (4) the recipient has made at least six consecutive payments on the initial purchase mortgage during the scheduled payment period in which they were due. Offer not valid on modification, conversion, or refinance of short-term financing, including but not limited to, construction or bridge loans. Offer may be subject to additional terms, conditions, restrictions, and product exclusions, all of which may change without notice. Offer and mortgage loans are subject to underwriting guidelines and approval. Offer may not: (a) be used in conjunction with any other down payment or cost assistance programs; (b) be combined with other Leaders offers, promotions, or incentives; (c) be transferred to another borrower; or (d) be redeemed for cash. Leaders employees are not eligible. Recipient is solely responsible for any personal tax liability arising out of this offer.