Money Rehab with Nicole Lapin - Nailing Your First Mortgage

Episode Date: May 2, 2022

If you’re diving into homeownership for the first time, your first question will be: WTF kind of mortgage should I get? And the second question will be, of course: How-TF do I get it? Today, Nicole explains.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. The Cole Lappin. So you played the money rehab tug of war and you decided that you actually want to buy a house.

And you listened to episode eight, Is Buying a House Actually a Bad Idea? And you discovered it made financial sense for you to buy a house. Mazel tov! Next comes the fun part, finding your dream house. And the not-so-fun part, locking in a mortgage. If you're a first-time homeowner, the first question, of course, is what the fuck kind of mortgage should I get anyway? The short answer is a 15-year fixed-rate mortgage at the lowest interest rate possible. I'll say that one more time for the folks in the back. You want a 15-year fixed rate mortgage at the lowest interest rate possible. Your interest rate can vary from 2% to 9%. And how much your initial

deposit depends on your credit score. You don't need a perfect credit score, which by the way, deposit depends on your credit score. You don't need a perfect credit score, which, by the way, is 850. Less than 2% of the people have that anyway. I would aim for 775 or above to be qualified for the best rates. Before you start the mortgage process, make sure your credit is in tip-top shape by practicing the credit score hygiene that I mentioned in last week's episode. credit score hygiene that I mentioned in last week's episode. It's number 274, five essential credit do's and don'ts. Once you've done as much credit hygiene as you possibly can, request a rapid credit rescore. This entails submitting proof of positive account changes to the three major credit bureaus, Experian, Equifax, and TransUnion. The process can lift your score by 100 points or more within days when erroneous or negative information is cleared from your credit profile, as opposed to

the months it usually takes for your credit score to reflect positive account changes. These two factors, your interest rate and your down payment, are extremely important to nail by every basis point possible. A slightly higher interest rate could mean thousands of dollars over the lifetime of the loan, and the amount you're putting down determines how much cash you have free to use to generate returns elsewhere. Conversely, a higher deposit could mean a lower interest rate because lenders like to see that you have the discipline to save a bigger amount. The strategy you take on down payment depends on your overall financial picture, but everyone can agree that the lowest interest rate possible is ideal. If you're having trouble

in a traditional loan application process, getting a mortgage broker isn't a bad idea. Obviously, I'd check to make sure that person isn't sketchy, but it's a pretty good idea. I used one who found the best deal for my needs, and the lender paid the commission. If you're a first-time homeowner, also make sure that you look at your state's bond loan programs. As you've probably imagined, the mortgage route comes with piles and piles of paperwork on all sides. Going into it, you should have your side of the paperwork straight cleaned up as much as possible. You will be asked many, many times along the way for your assets.

And if you're self-employed like moi, you'll be asked to verify even more. So pull together all of these documents ahead of time and keep them in a drive or a folder on your laptop for easy reference. or a folder on your laptop for easy reference. W-2s for two years, tax returns for one to two years, and copies of pay stubs if you work for someone else. Names and addresses of employers for two years, signed tax returns, and year-to-date profit and loss statements if you work for yourself. Bank statements for two to three months, any other income information, social security, pension, disability, child support, alimony, bonuses, and so on. Information on debt, including student loans, car loans, and credit cards, and investment account information. So stocks, bonds, retirement accounts, life insurance. Here's also something that no one tells you. Pre-qualifying for a mortgage is not the same as qualifying for a mortgage.

During the pre-qualification process, the bank, or if you're using an online mortgage provider like Quicken, runs simple formulas to ballpark the amount you could spend on a home. But when shit gets real and you want to make a formal offer on that home, they are going to scrutinize everything. Oftentimes, they will not count income that you included in your prequalification numbers for all sorts of reasons. They are particularly hard on self-employed money rehabbers because the income might not be as consistent or predictable. Or so a friend told me. For today's tip, you can take straight to the bank. If you're about to apply for a mortgage, hold off on making any big purchases that might ding your credit score. As I mentioned,

your credit score makes a huge difference in getting the best deal possible on your mortgage. So play it safe with your credit score until that mortgage is locked in. on your mortgage. So play it safe with your credit score until that mortgage is locked in. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.