NerdWallet's Smart Money Podcast - Save Money at Weddings, and Vetting Mortgage Lenders

Episode Date: April 18, 2022

Wedding season is picking up steam. Are you — and your budget — ready? To kick off this episode, Sean and Liz talk about how you can save money attending weddings this year. Then Sean and Liz answer a listener’s question about the risks of going with the mortgage lender your real estate agent recommends.  To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Timestamps: This Week in Your Money segment: 0:00 - 10:57  Money Question segment: 10:58 - 30:35  Like what you hear? Please leave us a review and tell a friend. Also, we are running a sweepstakes ahead of our new Nerdy Book Club series. You can enter for a chance to win Paco de Leon’s book “Finance for the People: Getting a Grip on Your Finances” by emailing [e-mail] with the subject "Book Sweepstakes” during the Sweepstakes Period, which ends at midnight PST on April 20, 2022. Include the following information: your first and last name, email address, ZIP code and phone number. Check out our book club page for more info.

This is going to be a record year for weddings. Is your budget ready? Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Liz Weston. And I'm Sean Piles. Let the nerds answer your money questions. You can call or text us at 901-730-6373. That's 901-730-NERD or email us at podcast at nerdwallet.com. And to get new episodes delivered to your devices every Monday, be sure to follow us wherever you get your podcasts. And if you like what you hear, please leave us a review and tell a friend. In this episode, Sean and I are answering a listener's question about choosing a mortgage lender and when you should be suspicious of referrals.

But first in our This Week in Your Money segment, we're talking with personal finance nerd Laura McMullin about how to save money during the spring and summer wedding seasons. All right. Welcome back to the podcast, Laura. Thanks, Sean. Happy to be here. You recently wrote an article titled Please Don't Go Broke Attending Weddings, which I just love that title so much. Can you talk with us about the inspiration for this piece? Thank you. The inspiration, you could probably guess it. I certainly weren't a little bit broke last summer attending weddings. There was a couple months there where it felt relatively safe to go to outdoor events. And so I went to two weddings back to back and my word, that was a lot of money to throw around. Travel, gifts, dresses, suits, everything. Yeah. It sort of reminds me of what you talked about last week about when you start going to events that you may not have been going to when you're quarantining, you remember how much money

it costs to leave the house, let alone go to a wedding. So the couple of weddings I went to last summer weren't even particularly fancy schmancy affairs. I was just driving and staying in a couple of nights at a hotel and giving gifts. It really added up. And thankfully we were able to have a family member watch our daughter and our dog. But if we didn't, you could tack on another couple hundred dollars for childcare and pet care expenses. It could have doubled your costs, basically. Yeah, pretty much. How do you suggest people avoid going broke then? Because this is supposed to be a record setting wedding season. All these weddings that got put off are now going full speed ahead.

Well, I'll give you a few tips in a bit. But first, I'm going to start really, really broad because you don't know if something like a wedding is going to be a financial burden unless you know how much money you have to spend. So I recommend when you get that invite or that save the date, check your financial accounts, check your bank accounts, all that. Look up any sort of upcoming expenses you have. So you're looking at what you have to spend and also what expenses are on the horizon. So if you're invited to a wedding across the country in August, and also your AC is on the fritz, you might want to keep that in mind that you might have an air conditioner expense and a wedding expense. And also as you're mapping out the financial stuff, put things on a calendar,

like literally write these events on a calendar. Because as one of my experts pointed out, it seems like weddings lately have become these multi-day affairs with day before parties and day after brunches, not to mention parties and showers and all that. And when you write it out on a calendar, you can really visualize just how much time that takes. And remember, time is money. That's time that you're not working. That's time that you're deciding to not spend doing other stuff. So that helps you really visualize how much money and time this stuff will cost. Well, and every day you're there for an extra add on an extra scavenger hunt before the wedding. That's hotels. That's maybe getting another babysitter or a dog sitter. It just gets that much more expensive every single day you tack on. Exactly. In your article,

you also suggest that folks shouldn't just check in on their finances, but their feelings as well. Can you talk about what you mean by that? I talked to a therapist who said, if you are feeling compelled to spend money, or in my case, even a little bit excited to spend money, take a beat to explore where that feeling is coming from. Just let it marinate a little bit. And that might help you pinpoint what it is that you're actually looking forward to and want to spend money on and what you can just skip. So for example, for me, when I went to these weddings last summer, I think I just had pent up excitement after quarantining for so long. Right.

Yeah, I really wanted to get out there. I wanted to look good. You know, I've been in sweats and sweatshirts and nursing stuff for a year. But when I really reflected on it, I actually just wanted to be with other people. I wanted to be with my friends. So that reflecting in my situation, it's simple. But I didn't end up buying like the hot $200 dress that I felt like I was going to look great in.

Instead, I thrifted a jumpsuit. That works just fine. Yeah. What I wore didn't affect how I felt about seeing my friends, for example. Other feelings you might have are just like obligation. Like, do you feel just obligated to attend every event that you're ever invited to? I do. I do not, but I know a lot of people do.

I definitely do. Or I felt obligated to write a pre-fat check for my gift for each of these weddings, just because that's what I've always done. And it's supposed to be nice, but realistically, my financial situation has really changed since having a kid and I'm giving wedding gifts to people who are in their 30s. They don't necessarily need my money all that badly. Here's one thing that I have never been able to fully get over with weddings. Maybe it's because growing up, I only ever attended hippie weddings on farms, but I never understood why you would have to pay to travel somewhere, pay to go there, do all of that, and then give a big expensive gift on top of that. It's like, isn't the presence the present?

I don't know. I just, I can't get behind spending 200 bucks on a KitchenAid or something for a friend. Like, to me, it seems a little bit silly. But maybe I'm in the minority here. Well, I also think it has to do with your time of life. Because in my time of life, it's my friend's kids who are getting married typically. And we're in a position where we can be a little more generous than in the past. And it's fun. It really is. But you really have to look at your

own means and your own situation and make decisions from there and not necessarily spend because you think you have to. That's fair. Totally. The gift question is interesting. Like I said, I talked to a therapist for this article who specializes on talking to couples getting married, but I also talked to a certified financial planner and to an etiquette expert, and you could probably guess how this gift conversation went with each of them. The etiquette expert said,

you shouldn't be given less than 50 bucks, more or less. She said that. I asked her, well, what if you wrote a nice note? What if you gave some of your time, your presence? It was hard for me to get her on board with agreeing to that. She's an etiquette expert. I talked to the financial expert who said, dude, give what you can give and not any more than that.

You've done this financial check-in that we just talked about a couple of minutes ago. You should have a pretty good idea of what you can and can't afford to give. This was pretty eye-opening for me because like I said, for these weddings this summer, for both of them, we wrote pretty big checks. And then I'm so chatty at weddings and I love interviewing people. So I actually ended up talking to a lot of other people at the weddings and also later to my coworkers. They're like, how much did you give? Turns out it was way too much. I talked to a coworker here at NerdWallet

where we were pretty obsessed with saving money. And my coworker was like, what? No, you get the medium level thing on the registry and you move on. So that was pretty eye-opening to me. And again, this is such a personal decision, like Liz is saying. It depends so much on your personal finances. If I was a dink three years ago, double income, no kids, three years ago, sure, I'll write a three-digit check.

But now it's just different. I've got a kid and I live in an expensive city. It just doesn't really make much sense for me to be writing a big check to my friends. And my impression is that you will probably remember what you give the couple longer than the couple will. They are getting so much stuff. They might have a hard time recalling, oh, I got the mugs from Laura. I wish that she'd given me these nice wine glasses instead. They're probably not going to care. That's my impression. We just celebrated our 25th wedding anniversary recently. Congrats. Thank you. I don't remember a thing that I know that. Actually, no, I remember two things because

they were both handmade. What I remember is every single person who was there. So if that helps anybody who's listening decide, you know, should I send a great gift or should I send myself? If this is somebody you care about, try to send yourself. I think it makes a big difference. I'm a pretty schmaltzy person, and I'm just big on writing notes. I mean, it doesn't have to be a three-page letter about your love for this person getting married, but just taking a beat to write a personal note, that really goes far. We've talked about a couple ways so far to save money on gifts, but what are your other tips for saving money while attending weddings?

You don't have to stay at the hotel or the lodging that the couple recommended. Scout around for cheaper locations. Find opportunities to split costs with other guests. Maybe that means splitting a hotel room or instead of a hotel room, finding some sort of alternate lodging situation. Stay with a local friend, for example. You do not have to attend every single event. Like Sean had mentioned, if you just don't go to the night before party, you save a whole night at a hotel possibly. Or you save some time if you don't go to the next morning brunch, for example. And same with bachelorette parties, showers, shuffles, whatever we're calling them. It's totally fine to skip those if it's not in

your budget or if you just don't want to. All I say here is give the person getting married plenty of heads up and be graceful about it. Well, thank you so much, Laura. That was super helpful. Sure thing. Happy to be here. And one last thing before we get into this episode's money question. If you haven't heard, we're running a sweepstakes ahead of our Nerdy Book Club episode. This time around, personal finance nerd Kim Palmer is interviewing Paco de Leon, who wrote a book called Finance for the People, Getting a Grip on Your Finances. To enter for a chance to win Paco de Leon's book, all you have to do is email podcast at nerdwallet.com with the subject book sweepstakes during the sweepstakes period courtesy of the NerdWallet legal team.

The Smart Money Podcast's book, Sweepstakes, is sponsored by NerdWallet. No purchase necessary. Void where prohibited. Must be a legal U.S. resident 18 years or older to enter. Entries must be received by April 20th, 2022. Visit nerdwallet.com slash book club for more details. Excellent. Now we can get into this episode's money question. Let's do it. This episode's money question comes from Sarah, who sent us an email. Here it is. Hi, I have a question for the nerds about selecting a mortgage lender. I purchased a house in 2017, and before starting the search process, I got pre-approved through Rocket Mortgage. However, once I find a realtor, she strongly encouraged me to get another

pre-approval through a local bank. Her reason was that the seller's agent might not look favorably on a pre-approval from Rocket if the bidding process got competitive. Now that the housing market is orders of magnitude more competitive than it was in 2017, I'm wondering if there's any truth to this. Are the large lenders slow and difficult to work with and therefore put a burden on the seller in some way? Alternatively, was she just trying to send business to her network? Thanks. To help us answer Sarah's question on this episode of the podcast, we're joined by mortgage nerd Kate Wood. Welcome to the podcast, Kate. Thank you so much for having me. Kate, it's great to have you on. And one quick note before we get into the conversation, Rocket Mortgage is a NerdWallet partner, but that does not affect

how we are talking about them in this conversation. At a high level, let's start off by talking about what it means to be pre-approved versus pre-qualified for a mortgage. The difference between pre-approval and pre-qualification is sort of like the difference between having a driver's license and a driver's permit, right? The permit just means like you could drive, whereas a license shows that you can drive. Someone has tested you on this, you're good to go. It's pretty similar. Pre-qualification, it's really just relying on information that you provide to the lender. And so based on these theoretical qualifications, you could get approved for driver's license or mortgage, whatever. You could take the next step. With a pre-approval,

the difference is that you've let the lender actually verify some of your financials. So they've like done a hard credit inquiry. They've checked up on some other things. And so the amount that they're saying that they could lend you has a basis in actual numbers, right? In your actual financial picture. So they're giving you something. While it's not a guarantee, it's saying, yes, you could do this, right?

So it's sort of like the driver's license of like, yes, you can take the wheel. This person can drive a car. You've passed the test. You've passed. Our listener is wondering why a pre-approval from a big name company could be potentially less competitive than a pre-approval from a local lender. What's going on there? So this is, I wouldn't say is necessarily the case. Whenever you're in a multiple offer situation, the home seller and the seller's agent are going to look at multiple different aspects of the offers. Sarah is definitely right. The market has changed tremendously over the past several years. And that's probably an understatement. These days, someone who finds themselves in a multiple offer situation, probably the first cut they're going to make is cash versus financed offers.

Because sellers do love cash and we still are seeing a lot of cash buyers out there. But even assuming that the seller is only looking at financed offers, people who are using a mortgage to buy a home, they're probably going to look at variables like what's the price you're offering, the size of your down payment, and even the kind of loan you're using well before they would get into something like which lender the buyer is using. Something else that I think is worth considering is that the specific lender you're pre-approved by being familiar to the seller's agent or to the seller, that could be a plus or a minus. Just because they have experience with

them doesn't mean they necessarily have had a good experience with them. So your agent could have a really good relationship with a loan officer at your hometown credit union, but maybe the seller's agent who's also local has had interactions with them that weren't so great. So that could go either way. And same thing with a larger lender as well. When I was shopping around for mortgages and talking with my real estate agent, this didn't come up at all. It was basically up to me to find the lender I wanted to go with. It took me quite a while to do so because I applied for five different mortgages to see where I could get the best rates.

And that was on me. 2020 had nothing else to do in the pandemic. But my real estate agent, she couldn't have cared less. I had exactly the same experience. I bought my home in 2020. The market was already really heating up. It was imperative to have a pre-approval. If you're a financed buyer, if you were going to view a house, you needed to be able to essentially show the seller, show the selling agent right off the bat. Like, I could actually do this. I could actually buy this home. But who was potentially willing to underwrite that loan that never came up even once? Well, I have some thoughts about this, but we'll get to those in a moment. Maybe we should talk about the idea that larger lenders are going to be slower or more

difficult to work with than a local lender? In the scheme of things, any lender could be slow. I would say the advantage here is that if something is holding up your closing, because this is mostly during underwriting, that this would be a concern. So you've had an offer accepted and you are waiting for the deal to actually go through the lender to say, okay, yes, we can close. We're going to give you this money. If things are going really slow and you don't know why and say you're using like a regional credit union, if your agent knows someone there, they can probably just call them up, say, what's the problem, you know, get taken care of and get the thing moving again. With a larger lender, unless you are, for example, say you're working with a mortgage broker. And so that person has, you know, some kind of a relationship with them. You might be

at the mercy of an underwriter returning your caller email, which I will say like that was my experience working with a major lender. When I bought my home, everything moved really, really, really quickly until I had fully submitted the loan application. Once we were in underwriting, it was hard for me. It was hard for my agent. It was hard for the seller's agent to get answers to really any requests, but I didn't take it personally. Well, there's an aspect of the mortgage process that is a two-way street. They ask for so many documents from you. So in a way, you have to be quick to respond as well. And that can help them move faster if possible. Absolutely. Yeah. I'm just curious about being steered to the

local lender. That makes me suspicious of the agent. So it kind of depends if the agent is getting any kind of direct benefit from that referral. You referred to steering. So that was a practice that was common where mortgage brokers were steering clients to specific lenders who would basically give them financial kickbacks. Now super illegal, but that's not to say that something like that couldn't go on. So if the agent were getting that kind of direct benefit, that would be a big no. Similarly, if the agent, whether it's a lender, whether it's another service provider that you might be working with to get the loan, if the agent has like another type of relationship with them, it's like, oh, this is my brother-in-law's business that he's trying to get off the ground

or, oh, you know, this person's my good friend, and they're just trying to help that person, you don't need to be obligated in them doing someone else a favor. That's also a real no. In general, a buyer's real estate agent should have a fiduciary interest in you. So they should be taking what will benefit you the most as the bottom line, not themselves. So you really want the focus to be on what is going to work for you, not on them getting money, not on them helping people in their network, and not on them ensuring that the deal gets done quickly or that it'll definitely close. We should also point out that after you have your mortgage approved and you are making payments on it, the mortgage company that

you originally went with is probably going to sell your loan and it's going to be serviced by another company. So for the purposes of home buying and acquiring a mortgage, think about what you want out of that company for customer service and interface. But after you have the mortgage, it's not really up to you anymore. Yeah, I think a lot of people are surprised by that, right, Kate? Yeah, absolutely. What we're talking about here is really your mortgage originator, right? So it's the company that's making you the loan, the company that then you pay the mortgage to. And like, if you have questions or something comes up, you get in touch with them. That's the

loan servicer. This can be the same company, but more often than not, lenders do resell the loans more or less immediately, giving them the capital to go on and make more loans. This is sort of just like the business model of a mortgage originator. But it's something that can be really surprising to people, especially if you put in a lot of effort to do your homework and find a company that you really like working with. It's sort of like getting dumped on your honeymoon. Oh gosh. Yes. I took a long time to choose my mortgage originator and they were a good midsize company, great customer service. And about a month ago, which was maybe six months after I actually closed on my house, they sold my mortgage to this big national bank

that I had been trying to flee from for years. They had my bank account that I had since I was in high school. I finally moved to a local credit union to get away from this bank. And then lo and behold, now they have my mortgage. So I'm back with them. There is no escape. And that was a rude awakening when I got that piece of mail telling me, oh, by the way, your mortgage has been acquired.

So it just happens. Yeah, that was something that while I was going through the loan application, I asked about it. I said, oh, you know, who do you think my loan will be sold to? And the loan officer said, oh, actually we service almost all of our loans, which really surprised me. But I think not as much as it surprised him that I asked because hardly anyone actually ever asks about that. Right. Yeah. But there are some benefits to tapping your local network and that of your agent, like getting connected with contractors and things like that, right? Oh yeah, definitely. I would not come out and say, oh, referrals are a bad thing. Referrals are absolutely not necessarily a bad thing, but whenever anyone is recommending someone to you regardless of what they're recommending or whether the person who is doing the recommending is your agent a friend a relative whoever just ask them why are you recommending this person did they work with them do they have

some kind of other relationship with them do they know that they're good at this particular type of thing take that little extra step of not just saying, well, you know, this person's a really good friend, so I trust them. This will make it faster. Do your own homework. You take a couple minutes, do an internet search, look them up, find reviews. Depending what they do, you might look at licensure and stuff like that. If you can, don't just be like, oh, okay, we recommended them. So let's go with that. Yeah. Well, one area where we recommend folks not take the recommendation of their real estate agent is when it comes to finding a home inspector. At NerdWallet, we recommend folks choose their own home inspector versus the one that the agent would refer to you. Can you talk

about why that is? Yeah, absolutely. If I can go ahead and use yet another driving metaphor for some reason. You've got the green light to do that. Yes. Oh, thank you. All right. Pedal to the floor. Let's go. So say you're buying a used car from a dealership and you don't want to buy a lemon. You want to get it checked out before you sign on the dotted line. So you want to get it checked out by a mechanic, right? You wouldn't take it to the mechanic who works at the dealership. You would take it to another mechanic. You don't want someone who has any kind of vested interest in making this deal go through. So with an inspector who's referred by your agent, there is always the possibility that they could just be focused on making sure the deal goes through, making sure things

are easy on the agent that just, you know, this will get done. You don't want them to overlook something. You don't want them to not disclose something, nothing against home inspectors, particularly home inspectors that are affiliated with one or both of the major trade associations, absolutely are meant to adhere to a code of ethics and generally do. But it's always a safer bet to go with an inspector that you've found and that you've chosen because this is someone who you assume that they'll have your best interests, but you really need to know that they will have your best interests. Yeah. And this is interesting because when I bought my house, I didn't know that this was even a thing to think about. The home inspector who did my inspection, I don't even know where

they came from. I think that maybe my real estate agent recommended them. Maybe it was the builder of the house because I bought a new build. And now hearing what you've just laid out, that could have potentially not gone well for me based on conflicts of interest. It's definitely an area to be cautious because the home inspection contingency is one of the ones that, you know, depending on how you have it worded in your actual contract is often sort of your last line of being able to walk away from the deal and keep all your money, right? Get the earnest money back, all of that. So you really want to be confident in your home inspector. So Kate, our listener asked about how things have changed since 2017. What else has

changed in the mortgage market since then? Roughly everything. Okay. I mean, it's not like the Industrial Revolution or something, but I mean, there has been a lot of people. There's been a lot of change. No surprise, the pandemic has had a huge influence and that also sort of changes in the broader economy and changes within the housing market. So now things are starting to change

and it's almost easy to forget that this was just two years ago. But so two years ago, March 2020, the Federal Reserve did a surprise rate cut and that kicked off this frenzy for refinancing where just everybody was dropping everything and refinancing. This also kicked off an incredibly hot seller's market. And so all of a sudden, lenders had more business than they could handle kind of out of nowhere, because we're also coming off of lockdowns and stuff like that in some places. But at the other end of the economic spectrum, there were homeowners who were struggling to pay their mortgages, whether because of a lost job or lost wages, or because they were incurring heavier expenses, potentially due to medical bills and stuff like that. So lenders that also service

loans, we're working with borrowers who were seeking forbearance or other kinds of assistance. So they have all these people who are reaching out to them for different reasons. Also at this time, COVID is going on. We still don't have any kind of sense of how to deal with this. So this is the like washing your groceries sort of phase of COVID. Oh, yes. Lenders are going through all these transitions, staff are working remotely, or they're having people in a reduced capacity. Like if they have call centers or offices that are open, they've got fewer people, you know, per shift, they're keeping them apart from one another.

And so all of those factors combine to create this situation where we just saw lenders really, really pulling back to spending some loan products, bringing in stricter lending guidelines, in particular, higher credit score minimums was a really big one that we saw. And this was really lenders trying to reduce their risk during an unsettled time, but also they have working with limited capacity and also just this wealth of potential customers, they could really afford to turn people away. And that was something that I experienced in spades when I was shopping for a home during this time, like in summer 2020. Now, here we are a few years later, rates are rising. Everyone's sort of acclimated to COVID. We're already actually seeing a drop in refinances for the first time in quite a while. The volume of

loan through purchases is larger than that of refis. Everything that I just said could be changing. At the same time, though, given how many people are still in the market trying to buy homes, it's hard to make a prediction. Yeah. Got it. Well, bringing it back to Sarah's question, it seems like even though a lender could have been potentially slow and difficult to work with in 2017, it might be a magnitude more difficult and slow to work with in 2022. I mean, it's hard to say when you look at the statistics of how long in general loans are taking to close. It's not as bad as it was during like the depths of COVID where you were saying like an average that was around 50 days. You know, now it's more around 30 business days, which is pretty normal.

But, you know, you will like talk to different people who've bought or refinanced and you will hear horror stories where it's like, oh my goodness, this cash out refi took me six months. Jeez. Well, Kate, do you have any final thoughts about shopping around for mortgages as it relates to our listeners question? Sure. I mean, honestly, the biggest thing just is to shop around at all, regardless of whom you're getting a recommendation from, there's no reason not to consider that local lender that maybe someone is recommending to you as well as a lender where they had a cute Super Bowl ad or a bank that you already work with that can help you on closing costs if they're giving you discounts on fees and stuff like that. The biggest thing really is just to consider more than one mortgage lender. It's consistently surprising how many people only actually go through their pre-approval process with one. At Nerd I put all of the information they gave me into a spreadsheet and then thought through who I wanted to go with based on the factors I had in that spreadsheet.

And it helped me feel like I was making a very informed decision. You were indeed making a very informed decision. I would love to hear that. More borrowers were going to that much trouble because the thing is taking the time to compare this lender will give me this rate versus this lender will give me this rate. You can take a mortgage calculator and look at it and see the difference in terms of both what you'll be paying as a monthly payment, but also, you know, depending on how long you're going to keep that loan for, how much money you could stand to save over the life of the loan. Great. Well, Kate, thank you so much for talking with us. No, thank you for having me. It's super fun.

Now let's get into our takeaway tips and I'll start us off. First up, consider different types of mortgage lenders. Large banks, credit unions, regional banks, and others all have different pluses and minuses. Next, shop around. Getting pre-approved by at least three lenders can help you find the lender you prefer and nab the best rates. Lastly, trust but verify. Referrals can be helpful, but be sure to do your own research. And that's all we have for this episode.

Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com and visit nerdwallet.com slash podcast for more information on this episode. Remember to subscribe, rate, and review us wherever you're getting this podcast. And here is our brief disclaimer thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.