Episode Transcript
[00:00:00] Speaker A: And I mean, again, there's probably some very savvy people out there. Maybe they leave their credit frozen all the time and they know to unfreeze it. Most of the time we stumble upon that where somebody had a credit event and then ended up freezing their credit and they forgot it was frozen. And then it's like they want that pre approval and it's like, okay, well, you first have to go to the bureaus and have your credit unfrozen. Sometimes they don't know how to do that. Sometimes it can take a day or two. So I think you just have to be careful with that.
[00:00:30] Speaker B: Hello and welcome to on youn Block. We're your hosts, Jeff Anklemet and Pam
[00:00:34] Speaker A: Beatty with Waterstone Mortgage, Fox Valley.
[00:00:37] Speaker B: Every episode we dig into the questions people are actually asking on Reddit, Quora and everywhere in between. And we bring you honest, no fluff answers from people who live and work in the mortgage industry every day. No sugarcoating, no sales pitch, just real talk about buying a home, owning one, and navigating everything in between. We're based right here in the Fox Valley, so along the way we'll keep things grounded in what's happening across northeast Wisconsin. Because real estate isn't one size fits all and where you live matters. At the beginning of every episode, we like to highlight a local small business that's doing great work in our area. And today's feature is Christiansen Heating and Air Conditioning. Winter's coming and you're going to need a good system or if you have repairs or run into anything at all. Christiansen Heating and Cooling has been in business, it's a family owned business, been in business for over 100 years. And I know, honestly, I know. The owner, Mike Christiansen, and his son Max works in the business as well with him. Their technicians have been with them for years and years. They take care of their people the same way that implies strongly, the same way they're going to take care of you and your equipment. So if you have any needs, give a call to Christiansen Heating and Cooling.
[00:01:56] Speaker A: Let's talk about a question a lot of future buyers are asking. How do you know when you are actually ready to buy a home? It's not about having perfect credit, a massive down payment, or every part of your financial life completely figured out. But it is about understanding your budget, building with some stability and, and knowing what steps can help you move forward with confidence. So what should you have in place before you start looking? And how can you avoid making decisions that could disrupt the process Once you're preapproved. Today we're pulling real conversations from Reddit and Quora and breaking down what financial readiness really looks like, the mistakes to avoid before closing, and why homeownership may be more possible than you think with the right preparation and support.
[00:02:51] Speaker B: Heads up to anyone shopping right now. A pre approval is an entry ticket, not the finish line. I've been doing this for 40 years and I still see guaranteed deals die in the last week because people start celebrating too early.
A 10 minute online pre qual is no, excuse me, is way different than a human underwriter actually signing off on your tax returns.
Even then, you're not 100% safe. Here's the rules if you want the keys.
Freezer credit, this guy says. Well, I would say put a hold on credit usage, but no new sofas, no new cars, no new credit card spend, don't change jobs. Even a better job messes up the math. Mid escrow, the house has to pass 2. You can have an 800 credit score, but if the appraisal is lower, the title is messy. The deal dies. The house has its own borrower.
No big deposits. Don't move money around without telling your lender first.
I once saw a deal die two days before closing because someone bought a fridge on credit. It was a small payment, but it shifted their ratios just enough to kill the whole file.
So this guy is asking, what's the craziest thing that's held up closing for you guys? I know there's some absolute horror stories out there.
[00:03:59] Speaker A: I wouldn't necessarily freeze your credit. And I think we have to be careful when we use the word freeze. Freeze credit. Because freezing your credit with the credit bureau does actually mean something specific. I think what this gentleman is talking about is kind of what you said. Put a pause on using your credit. Don't overuse it.
Don't open up any new accounts, don't close any accounts. That's something that people get confused by sometimes because even closing an account can affect your credit score, which they will continue to monitor as you go through this process.
[00:04:31] Speaker B: Yeah, that's what people and I tell everybody I sit down with. Once you have an accepted offer, you go under what they call credit monitoring and they can tell even if you just applied for credit. Then we have to prove either how much is the new payment or that you actually didn't open any credit up. Right, Exactly. There's just more hoops to jump through. So putting a pause on it is a much better terminology to use when you're talking about what you're doing with your credit.
[00:04:54] Speaker A: Exactly. And the not changing job, saying that the, that's very important too, because lots of times people think, oh, well, it's a better job, it's a higher paying job, or, you know, it's more hours. The challenge is, is underwriters are also looking for stability.
And if you've been at your job for a number of years, that shows stability.
They're also looking at how are you paid. You know, if this new job, if you're going from a salary to an hourly position, even though in the end you might be making more than that, could cause some hiccups for underwriting. Same thing. If maybe you're going, it's still a salaried position, but maybe that's going to come in the form of a bonus or commission. Those are things that can definitely affect the underwriting of your file. So I always tell people, if at all possible, you need to wait until after closing to change jobs.
[00:05:46] Speaker B: Well, and plus, through the process, you have situations where we have, you have a new job, but we gotta verify that job. How long is it going to be before you really get a check stub? Right. What do those hours look like when you just first get started compared to what they actually look like when you're, if there's any kind of training or some other things involved. Those are all hiccups that are going to put a pause on your actual new house.
[00:06:05] Speaker A: Probationary periods can be a killer. There's a lot of companies that will state right in when you're verifying their employment that they just started and they're on a 90 day probationary period. Well, that is not something an underwriter is going to want to hear because that means your income isn't guaranteed in 90 days.
[00:06:21] Speaker B: Yeah. So those can be challenges. I agree.
So, and in terms of the house having the pass too, you know, once the appraisal is done, you have an idea if that value is accurate or good enough to qualify. Having said that, an underwriter has to agree the appraisal. Just because it's got a number printed on it doesn't mean that that's the number at this point. Because they go online and they look at all kinds of different things to see what makes sure that appraiser did a good job with that appraisal number that they provide. Right.
[00:06:53] Speaker A: Yeah. And I mean, that isn't something I worry about too, too much. If the home was being sold by a real estate agent and was priced properly and the appraisal came in right at or above purchase price and the borrower did not, I guess, overbid for that home or pay too much over. I think most of the time the appraisal comes in and is fine. Lots of times the underwriters might ask for some additional supporting information or for some clarification.
But sometimes it gets stickier when you have maybe a for sale by owner situation where there wasn't somebody who was as qualified to price a home, or you have a situation where there was an intense bidding war and someone just is willing to pay an astronomical amount of over asking price. Those things are going to lead to appraisal challenges.
[00:07:49] Speaker B: When we pre approve someone, we get 60 days of bank statements. Well, two months of bank statements. And the reason is they're not just looking at how much money you have in the bank. They're also looking for any big deposits that could be a loan that the underwriter doesn't know about. And we end up having to verify or prove that it's not a loan. Well, if it's straight cash, that can be a problem. Right, because there's no paper trail. Like let's say you sold a vehicle and now you're going to deposit $3,000. Or you can make a copy of the title, make a copy of the check. Right? And we can show a paper trail. But straight cash, there is no paper trail. And that becomes a challenge. All right, so those big deposits matter because we have to verify where they really came from and in fact prove to an underwriter that it isn't a loan where you got another payment to make sure you still qualify.
[00:08:34] Speaker A: And we deal with a lot of programs where there are income limits. And when they see those deposits, they're also going to assume that could be additional household income that the underwriter doesn't know about. And we need to account for all the household income to make sure the buyer qualifies for the program. So yeah, it's definitely easier if you can minimize the movement of money. Reading some of the comments here. You know, remember, do the risky things after they give you the money. I don't know if I quite phrase it like that, but kind of what the next person said. Exactly. Keys in hand first, shopping second. Seen it go wrong way too many times.
Another comment here. My aunt learned this the hard way. She got new furniture for the house she was buying and it pushed her debt ratio just enough that the bank pulled out three days before closing. She had already given notice at her rental too, so ended up having to move back in with family for two months. Until she could get approved again. The timing of these things is just brutal. And I think that's exactly what we're telling people to avoid.
Do not put yourself in jeopardy by making any large purchases prior to closing.
[00:09:48] Speaker B: Yeah, I mean at the closing they're going to ask, right? And we've done this thousands of times.
You are going to get asked, are there any changes from this application? Because they will resign the application that they originally signed. Are there any changes in here? The correct answer is no, but if there are, then you, it can have to be re underwritten. I had a person who said, well, I had a car accident, I had to get a new car. Well, you got a new payment. This was at closing. So we ended up resolving the issue. But closing was hours later, not 10 seconds later. You know what I mean?
[00:10:22] Speaker A: Well, and he lucky it wasn't days later. Right. It's lucky that you could get it resolved as quickly as you did.
And people will say all the time, well, I want them to be able to deliver my furniture on the same day I'm moving in. And I'm like, but it's really not that important because if they don't, if you don't have a house for them to deliver the furniture to, then that, that's even a worse problem. See, what else does it say in here?
Unless you're paying cash. We bought a $3,000 couch during escrow, but in cash, of course. Checked with our lender first. They just don't want you financing anything or using credit.
Little bit of a double edged sword there, I would say too, because you can't be spending the cash that, that you need for closing if it depends
[00:11:09] Speaker B: if you really have it right.
Has it all accounted for. So I agree it's. There's a risk involved there. Right. Just don't get out over your skis is the right answer.
[00:11:20] Speaker A: Out over your skis.
[00:11:21] Speaker B: I like that. I like that.
[00:11:22] Speaker A: Or you can just check with your lender first.
Might be a better way to say that.
[00:11:27] Speaker B: All right, so the next comment is I just had a realtor who was buying a house for herself open up a new credit card three days before closing.
I'm like, of all people, you should know better than that. I'll add that buyers shouldn't shop pre approvals based off who makes it easiest to get a letter from. The guy asking for all your documentation isn't being overly difficult. He's the one actually preparing you for a smooth experience by getting as much info up front to review and eliminate any of the Random little things that can pop up in underwriting when a loan officer only collects the basic docs or no docs at all if they're really living life on the edge of the. So I agree with that. I mean, well, I think there's something that we.
[00:12:07] Speaker A: There's a couple of issues in there. Right. The first comment about the real estate agent opening up a credit card three days prior to the closing on their own home.
And yes, that would be our first natural reaction. You of all people should have known better.
However, the truth is, at that point in time, they are just a consumer just like anybody else. This is just as much of an emotional purchase for them as it is for any other buyer. They're probably not thinking with their real estate hat on. They're thinking with their I'm the buyer hat on.
[00:12:39] Speaker B: Yeah.
[00:12:40] Speaker A: And probably just didn't think through it. But, but yes, we, we would hope that those we work closest with would, would kind of know some of the, the, the guardrails and the, the common rules.
[00:12:52] Speaker B: Yeah, no, I agree. And they make it, you know, farther down. As a comment, an experienced loan originator will also identify the red flags and set expectations about the pile of additional documentation underwriting will ask for. The buyers are keen. They'll work on getting them before submission. Also a great opportunity to ask buyers, did anyone else find these issues?
Yeah, we have. And sometimes I'm just telling you to go online and get the simplest, fastest. What seems like easiest. Pre approval can be a challenge because they, they literally change the rules in underwriting and it comes down from Fannie Mae, Federal Housing Authority, Freddie Mac, you know, the people that are actually buying and consolidating these loans and the bonds, they set the rules and they change the rules at their own free will because they're the ones with the real cash behind the situation. And I'm telling you what if you're not up to speed on it or you haven't even looked and you don't have the right documentation, it hasn't been reviewed, you're putting a lot of time and effort sometimes into finally get an accepted offer on a house to at that point find out actually that pre approval was challenged. And that's not cool.
[00:14:02] Speaker A: And that's true. I think a good loan officer is going to collect all those documents up front. And I think we do a very good job of telling people these are all the documents we need. And this is why I always tell people, I do not want to put you out on the street. And nor does the real estate Agent who referred you to me want. Want me to put you out on the street with a preapproval letter only to find out when we send your documentation in that there was something missed, like a child support payment, or that maybe you don't work a consistent 40 hours a week, or there was a large deposit that was a loan, you know, that we didn't know about. So it's very important to collect those documents up front. It's very important to have multiple eyes review those documents so you can catch those little things when you hop online and just answer six questions based on your own knowledge. I mean, it's amazing sometimes how much money people think they make that they don't really make, or how good they think their credit is when maybe it isn't.
[00:15:02] Speaker B: Yeah, they got challenges. They.
I mean, slipped them through the crack someplace and just forget about it. Right. No, they're real challenges out there. So the more eyes and the. And the. The more complete the documentation package is, the stronger your pre approval is. And we do a program where we take all that information and actually send it to underwriting as well, called our platinum pre approval, where, in fact, you as a buyer have been underwritten. And now we just need the property and the title and some of these other pieces to qualify for you to just know with confidence that you're in a good spot.
[00:15:34] Speaker A: Yeah. And that is actually a great program. And we've had many of our business partners really latch on and like that program because you are getting basically half of the underwriting process out of the way in the beginning, in fact. And that's what I tell my buyers. This is gonna act. Should make underwriting feel a little bit easier. Cause we're gonna do it in two steps. And they are going to. The underwriter's gonna ask any questions or ask for any additional documentation regarding you personally, meaning your credit, your assets, your debts, things like that ahead of time. And then once you have that platinum credit approval also lets the seller know that you've been through the first round of underwriting. And like you said, we just need those property pieces for the underwriter to take a peek at. And lots of times we can close even quicker if we have that platinum credit approval. And hopefully, again, it's a smoother process for the buyer as they're going through this.
[00:16:25] Speaker B: Yes, they can shop with confidence, and that makes a big difference when you're ready to make a decision for sure.
[00:16:31] Speaker A: So the next comment here is something we actually touched on in the beginning. The next comment says, do not Put an actual freeze on your credit report. It will have to be removed for underwriting and will cause delays. Put a freeze on your spending and leave your credit alone.
Another comment that kind of tags along with that says your credit report should be frozen all the time anyway. You may have to temporarily unfreeze it for this. So we got some comments going back and forth.
I think it goes back to what we said in the beginning. Using the term freeze.
[00:17:09] Speaker B: Yeah.
[00:17:09] Speaker A: Can mean a couple of different things.
[00:17:11] Speaker B: So no, if you. I liked when you said pause. Put a pause on credit usage. That is important. But freezing your credit implies that you're going to if when you have a freeze on your credit, a literal freeze with the repositories Equifax Transunion as an example that means it's not available for a lender to see. All right. And then it has to be unfrozen in order for you to actually qualify. I mean to get a pre approval or to truly qualify because we have to have that credit available to show to an underwriter. So they are two different things. Do put your credit on usage on pause but the credit does have to be unfrozen if in fact you have it frozen in order to qualify or be pre approved.
[00:17:59] Speaker A: And I mean again there's probably some very savvy people out there. Maybe they leave their credit frozen all the time and they know to unfreeze it.
Most of the time we stumble upon that where somebody had a credit event and then ended up freezing their credit and they forgot it was frozen. And then it's like they want that preapproval and it's like okay, well you first have to go to the bureaus and have your credit unfrozen. Sometimes they don't know how to do that. Sometimes it can take a day or two. So I think you just have to be careful with that.
[00:18:28] Speaker B: I accepted a new job during my escrow period and was upfront about it with my loan person. It was a job company I've been wanting for years so I would have taken it even if it meant the deal falling through. Luckily everything worked out. Just need to understand the risk with doing this though. I was told as long as it generally in the same industry it's usually not a problem.
And he says yep, my lender had me confirm if it's in the same industry. Similar job title, provide a non contingent key non contingent job offer, proof of passing drug screening first two one to two pay stubs, et cetera. Overall pretty reasonable requests and yeah, but you Understand that they took a new job in that timeframe, but he's looking for, you know, a couple pay stubs. Well, when you start a new job, sometimes you're working for three weeks before you get that first check. Depending on when their timeframes of, you know, checks being cut are or pay periods are. And then if you need two of them, you might be out five weeks. Well, if you're closing in 45 days, maybe it works, maybe it doesn't. You know what I mean? There's risks there, right? This person was wanting that job, so they wanted to take that risk. But it's a genuine risk.
[00:19:35] Speaker A: Yeah, it is a genuine risk. And it sounds like that person discussed it with his loan officer. That person understood there was a risk. I do think there's probably certain jobs or careers where maybe it's less risky, but I wouldn't even necessarily count on that because some of the things that are important are that non contingent employment contract.
Even when somebody has an offer of employment, all the contingencies have to be satisfied.
The drug screening, the background checks, the fingerprint, whatever it is, all of that needs to be satisfied. And like you said, sometimes it's hard to get that inside of the closing timeframe. It also sounds like the person who made this comment was closing in an escrow state where you have a little bit more time between the closing and funding of your loan and the state of Wisconsin we close and fund on the same day, so there is no extra time.
[00:20:26] Speaker B: I agree.
[00:20:31] Speaker A: As we wrap up this episode, I would just really encourage people to reach out to us if they have questions or maybe they're thinking about getting pre approved but also thinking about a job change or maybe just purchased a new vehicle and want to see how all that's going to affect affect everything.
Let's just have a conversation. I think the more open and transparent you can be. I tell people all the time kind of chuckle that we pretty much have a workaround for everything. It just usually involves you having to chase more documentation and, and there is some truth to that. There's a lot of things we can work around. There just might be some hoops to jump through.
[00:21:07] Speaker B: Yep, I agree. And you know, the key is when something comes up, communicate with your loan officer.
We'll go to work and find a way. We may have done it before, we haven't, we'll know somebody who has.
And sometimes it might just delay things a little bit. But the key is to have that conversation because I'm telling you, in this AI driven world, there isn't anything anybody doesn't know about anymore. It's all somehow out there and it will get discovered. Cmazzle the sooner we know, the sooner we can help.
[00:21:36] Speaker A: So if you have questions about things you've seen seen online, or you're ready to put a plan together to buy your home, please give us a call at Waterstone Mortgage. We would love to help. And if you found today's information valuable, please subscribe. We're.
