Keys & Credit
The no-fluff real estate and mortgage podcast that helps you make smarter moves with confidence.
Hosted by Realtor Bill Jerikovsky and Mortgage Lender Barb Miller, this show cuts through the jargon and industry hype to bring you honest, practical insights on buying, selling, and financing homes. Whether you're a first-time buyer, seasoned investor, or just trying to decode your credit score—Bill and Barb keep it real with bite-sized episodes.
💡 Real answers. 🙅♂️ No sales pitches. 🏡 Just straight talk on homes, loans, and everything in between.
New episodes drop weekly.
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Barb Miller NMLS ID: 329237
Guaranteed Rate, Inc. dba Rate, NMLS #2611
Bill Jerikovsky RE/MAX RESULTS
This Podcast is edited and produced by Kody Hughes - Focal Point Media
FocalPointKody@gmail.com - 320-224-9828
Keys & Credit
Cracking the Mortgage Code: What No One Tells First-Time Homebuyers
Dreaming of homeownership but feeling overwhelmed by the mortgage maze? You're not alone. This eye-opening conversation between straight-talking lender Barb and no-nonsense realtor Bill tackles the most common misconceptions first-time buyers face during the pre-approval process.
Discover why your impressive credit score might not matter if your debt-to-income ratio is out of whack. Many buyers are shocked when told they need to sell that new truck or snowmobile before qualifying for their dream home! We break down exactly how lenders calculate this crucial ratio and what numbers you need to hit for approval.
The episode demystifies the alphabet soup of mortgage programs – VA, FHA, USDA, and conventional loans – explaining how each serves different needs and comes with unique advantages and limitations. Did you know veterans can qualify with no minimum credit score? Or that some rural properties qualify for zero-down financing? We also reveal little-known down payment assistance programs that can provide up to $18,000 for qualifying buyers.
Mortgage insurance remains one of the most misunderstood aspects of home financing. Learn the critical differences between how it works on different loan types – including the surprising truth that on some loans, you'll pay it for the entire mortgage term unless you refinance.
This conversation goes beyond textbook explanations to give you insider knowledge from two professionals with decades of experience. We share real-world examples of how strategic financial decisions during the mortgage process can save you thousands over the life of your loan. Knowledge truly is power when it comes to homebuying, and getting properly pre-approved before house hunting prevents the heartbreak of falling in love with homes beyond your budget.
Ready to navigate the homebuying journey with confidence? This episode provides the roadmap you need. Share it with friends embarking on their own real estate adventures, and leave us a review – it helps more than you think!
How's it going everyone this is Bill Welcome to Keys and Credit. We're going to say the no fluff, no nonsense. Real estate and mortgage podcast.
Speaker 2:And I'm Barb, your straight talking lender.
Speaker 1:I am Bill the no bullshit realtor, all right. So today we are going to talk about what first time buyers get wrong and we're going to kind of focus on the pre-approval process here. Right, right.
Speaker 2:Right.
Speaker 1:So when people come in to say an office or give us a call, or they're just wondering what to do to get started on the home buying process, we're going to focus on that today. Sounds great.
Speaker 2:Fire away, barb how do people get pre-approved? How do we do this? Clients will call that you've sent over, or maybe they'll just call me randomly. Maybe they have found me on Google. We do the initial pre-approval application. A lot of people will call me and they'll be like, hey, I want to see this house. We're seeing it at four o'clock today. There's a question how fast can you get someone pre-approved? Well, I can do it pretty quickly.
Speaker 1:I've had you do it within maybe 20 minutes.
Speaker 2:Oh yes.
Speaker 1:Absolutely.
Speaker 2:So they'll call, we'll kind of discuss what their goals are, where they're looking to buy, and then I'll direct them to my website. They'll complete the application. It will take less than probably 10 minutes for them to complete, so when they're on your website.
Speaker 1:What would they need to know? What questions is your website going to ask?
Speaker 2:Oh, they're going to ask you know where they've lived for the past two years, where they've worked for the past two years, whether they currently own a home or if they rent, and they'll complete that information. They'll need to know their social security number, address, employment, roughly how much they have in their checking and or savings accounts so here's a question, well, more of a statement.
Speaker 1:So we have a thing in the real estate industry called buyers are liars. What happens if they put some information on this pre-approval form on your website and they lie? Well, we'll review because we know that's what they do.
Speaker 2:After I've reviewed, uh, their application that has come over, which I'll be notified once it's complete, sure, once I've reviewed it, um, I will reach out to them and ask them you know how much do you make per hour? Or you paid a salary? Um, based that information, I'll update the information on their application because some will be confused. They will put their take-home pay versus their gross, yeah, and their gross pay is obviously before taxes and we use their gross pay, right? So then, I will.
Speaker 1:And you use their gross pay to go against their debt-to-income correct their debt-to-income ratio and you use their gross pay to go against their debt to income.
Speaker 2:correct their debt to income ratio, so their gross pay versus the minimum debt obligations they have to pay on their credit reporting obligations. So credit reporting meaning car loan, credit cards, student loans, not their cell phone not their heat bill, not their insurance on their car. There's a whole jump down.
Speaker 1:So debt to income is what a lot of homebuyers don't understand. Or they have so many loans out there they assume that they can buy a house. Right, I'm approved for this truck, this snowmobile, I mean everything. I can go buy anything I want. Because a bank they're just going to go off your credit score when you go to buy a house. Barb's going to look at how many payments you have and they're going to put that against what your house payment is going to be and your income, if I'm saying this correctly.
Speaker 2:Well, not how many payments you have, but what the dollar amount is the total.
Speaker 1:So if they have a, credit card, for example.
Speaker 2:sure, they may owe the credit card company $3,000, but maybe their minimum payment is 50. But maybe they pay 100 because they want that $3,000 balance to go away. I only have to use the minimum obligation, so the $50, in their debt to income ratio. So to figure out what our debt to income ratio is, it is our minimum debt obligations versus our gross income Right. So if our minimum debt obligations tally up to $1,000 for our car loan, credit cards, and snowmobile loan.
Speaker 1:Debt obligations are your total payments. Your total minimum payments. Correct Total dollar amount.
Speaker 2:Correct Versus our gross income your total payments your total minimum payments Correct Total dollar amount Correct Versus our gross income. So if our gross income is $6,000 a month, so gross once again before taxes, then we can go up to our a roughly probably about 50% of our gross income. So our 50% would be tippy top, tippy top, tippy top. So that would be $3,000 if we had 6,000 in gross income.
Speaker 2:So, our total payments can't be more than 3,000. So, once again, in this scenario, we had a $1,000 in our short-term debts, which would include our snowmobile loan, our car loan and our credit cards. Yep, and then our mortgage couldn't be more than $2,000, to tally up to $3,000. Yep.
Speaker 1:So that's where what we've run into with first-time buyers A lot of newbies will come in and say, well, I have this brand new truck and I have this brand new motorcycle, so I'm going to go buy a house. And we new truck and I have this brand new motorcycle, so I'm going to go buy a house. And we'll say, no, you can't, you have to sell the truck. Well, let's say why? Let's either that, or you can buy a house that's worth five bucks because your debt to income doesn't justify the payment of the house that you want or another option would be maybe they have a significant other or a family member that would take over the obligation of the truck loan?
Speaker 2:Yeah, and get it out of their credit.
Speaker 1:And then it doesn't show up and you move on to buy your house and once you close on your house you can refigure out your finances and see if you can afford that payment or just move on.
Speaker 2:Or maybe mom or dad, they're willing to take over that payment for you, sure.
Speaker 1:I think that's one of the biggest ones is debt to income. When people are blown away that they have to sell stuff to buy a house right, but I have so much nice stuff. The bank says they'll give me this money. Well, nobody's going to give you hundreds of thousands of dollars if you can't prove that you can't pay it back. Okay, so let's talk about credit scores. Let's move past debt to income, because that is one of the major factors. But another one is credit score. Say, I want to go buy this house that I've seen on Realtorcom for 300 grand. What does my credit score need to be?
Speaker 1:And does my credit score.
Speaker 2:No, it doesn't matter versus the price of the house, but it depends upon the program. So we have different lending programs that require different credit scores.
Speaker 1:Different lending programs like what would that be, barb?
Speaker 2:Well, we have VA financing for our veterans that actually has a no credit score minimum, right. Fha, we can go quite low into the 500s.
Speaker 1:We can't glaze over the VA no credit score minimum. So all you veterans out there for one, the no credit score minimum. So all you veterans out there for one, the no credit score minimum is a huge thing. And for two rate as a company which is why I like to work with Barb is they don't charge the lender fee, correct?
Speaker 2:Lender fee is generally $1640, but we do waive it for our veterans and we have helped millions of veterans buy homes. And waiving that lender fee right because we want to show our support to our veterans okay, so that's va. So that's veterans, now keep in mind, even though it's no credit score, when we run it through our automated system, it does have to approve it, although we can do manual underwrites, which is diving into a little bit about the underwriting process. Each loan has their own guidelines and there's pros and cons to each one.
Speaker 1:Like sometimes FHA. Fha is Federal Housing Administration loans. Sometimes their interest rates are lower. We were just talking to one of our buyers about this yesterday. They're approved for a conventional loan. Conventional loan is a basic, plain Jane, no fuss. Straight up loan Pretty simple, currently backed by. Fannie and Freddie Yep. Pretty simple, straightforward. If you go down to an FHA, you have some different standards and some different rules you have to follow. You know safety and habitability rules, things like that. But FHA right now has a lower interest rate.
Speaker 2:A lot of people think that FHA is only for first timers. It's not.
Speaker 1:If you're approved for conventional VA and FHA is lower, let's use FHA. Let's use FHA If it works.
Speaker 2:there is conventional right, conventional, the difference between FHA and conventional, why one would pick one over the other, which I would present all different options that's available to a particular buyer, client Conventional if you're putting 5% down, you're going to have mortgage insurance until you get to 80% lender value?
Speaker 1:What on earth is mortgage insurance? Where did this fee come from? These are all questions we hear. What is all this crazy nonsense, this nickel and dime crap? What?
Speaker 2:is mortgage insurance. Well, mortgage insurance protects the lender in case you were to go into default and they would pay the lender if you didn't pay your mortgage payment. So how do you get out of mortgage insurance? Once you get to that 80% loan to value, you would contact your servicer. You would need to have an appraisal done if you're at 80%, but at 78% it naturally comes off. So if you start.
Speaker 1:So let's go say we're using FHA, better Housing Administration loan. We start with 3.5% down. We pay on this for no, this is just guessing. We pay on this for 10 years. All of a sudden, we now owe less than 80% on our loan, right? So we've paid off 20% or more. That will automatically follow.
Speaker 2:Unconventional, but FHA Unconventional.
Speaker 1:Oh, you see how Barb's looking at me right now.
Speaker 2:FHA. It's on for the life of the loan.
Speaker 1:This is why lending is Barb's road, because of these little nuances that we don't know. This is why Barb does what she does. So Barb has. How much experience do you have in lending? Two decades, decades, decades, people Decades.
Speaker 2:Two decades.
Speaker 1:Throw something at her. I guarantee you she's seen it. So there's another thing too. So with an FHA to get out of your mortgage insurance, you have to refinance, you do.
Speaker 2:You do To go to a conventional loan.
Speaker 1:So first-timers, remember that If you are a federal housing administration with a lower interest rate, it could be beneficial. But when we come into a first-time buyer that's never done this before, they don't have a drunk Uncle Bob to help them. They don't have anybody, they're just flying blind. This is where you could get yourself in trouble if you're talking to the wrong people, Because instead of just saying yes, let's do that, let's do what you said because you looked on the internet, we're going to say how about this? Let's change this to that. If we do that, it might be harmful, because now you're stuck in mortgage insurance for 10 years. If we go too conventional, you're not in mortgage insurance for 10 years. If we use a VA, you don't need a minimum credit score. I mean, there's all this little stuff. What about USDA? Do you guys do USDAs?
Speaker 2:Oh yeah.
Speaker 1:Absolutely, and that is zero down.
Speaker 2:That is zero down, zero down. Now it does have mortgage insurance. They call it a guarantee fee. Okay, does that come off after?
Speaker 1:20%. So USDA is stuck with mortgage insurance forever.
Speaker 2:For the life of the loan.
Speaker 1:So for most of us, that's forever.
Speaker 2:Well, some people will refinance or sell. Or sell Well some people will refinance or sell or sell. Okay, so we have you, because not everyone has a loan for full 30 years.
Speaker 1:And most people sell their house within three, five years. Anyways, you know they're out of there.
Speaker 2:Or because rates are maybe a little elevated at the moment. They'll refinance Sure.
Speaker 1:Okay, so we have USDA. We also have what's called Minnesota Housing Finance Assistance. This is a program that you and I use frequently for first-time buyers that a lot of people don't know exist.
Speaker 2:They provide assistance for down payment and or closing costs Right.
Speaker 1:So that myth that you need $10,000 or $20,000 to put down on a house before you can buy a house is gone by the wayside. If you qualify for this program Right, correct, correct First-time buyers, take note before you can buy a house is gone by the wayside. If you qualify for this program right, correct, correct, first-time buyers, take note, that is something you could utilize, but there are two different types.
Speaker 2:Correct. So your minimum credit score requirement with MHFA is $650,000. And basically what that assistance loan is, it's a second mortgage. You can get up to $14,000 or $18,000.
Speaker 1:So second mortgage you mean second mortgage, as in this, has to be paid back.
Speaker 2:Correct.
Speaker 1:This is not a grant. Down payment assistance is not a grant. If someone comes up to you and says, hey, I can get you free money for down payment assistance, they are not lying, because barb's saying she can. Holy shit, all right, this is uh. We're learning, we're all learning together here. What? Where does the free money come from? Barb miller and well, apparently I.
Speaker 2:Uh, this is new uh, so anyway, let's continue on.
Speaker 1:Minnesota Housing Down Payment Assistance and then we will talk about some free money. I'm circling free money.
Speaker 2:Okay, all right, so anyways, down Payment Assistance you can get up to $14,000 or $18,000, depending upon your income, because it is based on your income. It is an income and asset based program and your minimum credit score is 650. Those funds do have to be paid back, some of the funds. Sometimes it's deferred and you have to pay it back when you sell the home or refinance the loan. So that's called the due on sale clause right, or it's deferred until you refinance the loan. Technically it's a sale.
Speaker 1:Yeah, yep, correct but you're not selling the home. Yep, yep, okay, or the other one Barb's kind of a dick.
Speaker 2:The other one is $18,000. That's paid back on a monthly basis, amortized over 10 years. Sure, okay, the interest rate matches the first.
Speaker 1:So long story short, if you qualify for Minnesota housing, we'll just call it down payment assistance. Okay, there is one program where you pay it back as a second mortgage and it adds to your debt, to income.
Speaker 2:Correct.
Speaker 1:There is one mortgage or one program that is put on the back of the loan and it doesn't add to your debt, to income. Is that correct? Correct?
Speaker 2:because there's no payment.
Speaker 1:Because there's no payment until you sell the house or refinance, correct, but that is all credit score and asset base. So this is where, when people ask me these questions, how do I do this? I say call barb seriously. I mean it's. There are times in our conversations where I just stopped, just like I am outside of my wheelhouse. I have no idea the people on Monday when we were talking she asked me questions. I'm like I don't know. This is a Barb question. Barb is the money numbers guru, so that's what she does. Now let's get back to this free money.
Speaker 2:You want to hear about that.
Speaker 1:I want to hear that Everybody wants to hear about free money when? Does free money come from.
Speaker 2:Well, you know, if you.
Speaker 1:I don't know.
Speaker 2:Where's the free money come from If you've never owned a home before?
Speaker 1:Oh, this one I've heard of.
Speaker 2:And your income is below 50% of the area median income, you could get up to $2,500 free money. Okay, so it's not a lot.
Speaker 1:But it helps, it definitely helps. So that would help with closing costs.
Speaker 2:So for example, if you buy a $250,000 house, it's 1% Yep.
Speaker 1:So that would help with closing costs. It will.
Speaker 2:That would help Down payment.
Speaker 1:Let's say they have all this money for closing costs and down payment. Could they use that to buy their rate down? Oh, yeah, right, okay, so there's something else we should talk about interest rates. Okay, so say, someone has 20 down into a conventional loan, okay, and we were able, because bill the no bullshit realtor has negotiated a fantastic contract and we were able to get three percent in closing costs from the seller. Okay, now we have our 20 down, we have our closing costs covered, but we have our 20% down.
Speaker 1:We have our closing costs covered, but we have extra money left over from the seller, we can buy down the interest rate.
Speaker 2:Buy down the interest rate. How does that work? Well, those are called discount points, okay, and so you're going to want to watch that when you are getting loan estimates, if you're shopping around Because the discount point is going to buy down your interest rate but it's not. Some people think, oh, I'm going to pay one percent discount and it's going to lower my rate one percent. No, not the case.
Speaker 2:that's not the case, definitely no, you'll pay probably one percent to lower the rate about maybe an eighth quarter, maybe three eighths, on the interest rate which depends upon the day depends upon how long you're going to be locking, for you know, if it's a 22 day lock versus a 30 day lock, the shorter the lock period this is all closing the less discount you'll have to pay, right. So be careful of that, because some people will be charging two, three points to buy down the interest rate, right. So then we have to look at what's your cost savings. What's your cost savings? What's the difference in the payment?
Speaker 1:And this is where we always say shop for a mortgage right. So usually when someone comes in, say a first-time buyer, and they have a lender and they say, bill, I don't know if I'm getting the best rate, I'll say, well, call Barb. Barb will compare both and 99% of the time yours is better because you don't bullshit. There's no. Let's try and get this much out of them because they don't know. And a half a point is huge money, huge money.
Speaker 2:And what they'll do. And some people will want to pay a point or 1.1 to buy down their rate because for them they want the lower payment. So then we have to look at the cost of buying that interest rate down versus what the savings is between this interest rate to that interest rate and this is all stuff that barb's gonna do when she has extra money from the fantastic contract that bill just negotiated.
Speaker 1:So think about that. When most people say, oh, a realtor, all they do is open doors. I mean, the stuff that we do, barb and I do behind the scenes that nobody sees is bananas. And this is just one conversation out of a 10,000 that we've had, right? But when it comes to buying rates down, changing payments, this is all stuff Barb will call you on, say, hey, you know what? We got this extra money. We got three extra grand. Here's what we can do with it. Instead of more money down, or instead of this or instead of that, we could buy it down. We could save you 100 bucks a month, 50 bucks a month, 200 bucks a month, whatever we have to use, and she'll explore all these options to see what she could save you versus you know what. We'll just keep it. We'll use it for something else. I mean, most lenders won't do that just because If they're not told to do it, they won't do it. There's some lenders out there. When you call them, you'll get a different person every single time. So if I call Barb's number here's a question If I call Barb's number at 9 o'clock, who do I get Barb?
Speaker 1:If I call Barb's number at 4 o'clock on a Saturday morning, when it's Memorial weekend, who do I got Four in the morning? Bill, barb, it would be me. It's always Barb. There's never. So we work with a team, right. I work with Remax Results Fantastic brokerage. I have an awesome team. Barb works with Rate Inc. Okay, fantastic team. But the people you talk to are always myself and Barb. It's never having to re-explain yourself, right?
Speaker 2:um, yeah, we're kind of going, we're going off point here um, they will reach out to the clients and get different things. But, yes, I, but it's always barb and it's always me it's always an extension of barb.
Speaker 1:Yep, okay, here's a. Here's a question with usda. What is the difference between va and usda? Because va is 100 or 100 financing, so no money down for a veteran. Yep, for a veteran, usda is no money down for anyone, as long as it's outside of the metro area usda is very rural based correct, very rural based.
Speaker 1:There are certain guidelines and specific rules we have to look for in a house. If someone comes or say someone calls Barb, they're approved for USDA, they'll call me and say, bill, I want to look at a house in Northeast and Minneapolis, that's great. We got to change your financing because USDA won't allow it, right? If they call and say, bill, we have USDA financing, we want to look at a house in North Branch, which is great, but we have to be careful where north branch because we have to be outside certain areas, correct, right?
Speaker 1:so certain areas but pretty much all of north branch um I haven't seen any no or any declines no around here, honestly.
Speaker 2:But really like it becomes like wyoming, really, yeah, well, okay, because of Anoka County.
Speaker 1:Oh, just because of the populations.
Speaker 2:No, chisago County, Anoka County. So it depends which county you're in. So we're in Wyoming, but keep in mind, usda is an income-based program. Oh so, right now, for 2025, one to four member households your income can be $112,450. Now, if you're a five to eight member households, your income can be $112,450. Now, if you're five to eight member household, your income could be as high as $148,450, but it is for all income earners within the house and this is all stuff Barb knows offhand.
Speaker 1:Right. When you call and say, hey, guess what? This is what we got, this is what we got going, barb's going to say you know what? You're a veteran. We can try a VA loan. You know what? Let's try USDA interest rates a little bit different. You qualify for this one. So this is stuff that Barb will know that I will not. If someone calls me and says, hey, bill, I really want to start buying a house. I know you have a good idea how to do it. Where do I start? My very next statement is call Barb, because I don't know what I can shop for, where we can go or what we can do, until Barb says this is what we're pre-approved for. That sentence is something that we've had. You'll call and say, okay, what are we doing? And she'll lay it out, and then it's my turn Away. We go Off to the races.
Speaker 2:Off to the races.
Speaker 1:Off to the races.
Speaker 2:But you're going to want that pre-approval letter because you're not going to want to go out shopping for a home without knowing what you can qualify for or what the terms are of the loan think about that? And what about the payment? What if the payment's too high, or just right, but you want to know, because knowledge is power think about that.
Speaker 1:So if you go out and you're looking at three hundred thousand dollar houses and you can only get pre-approved for 200 grand, we're looking at the wrong houses. When we go into a hundred thousand dollar less, you're going to be pissed.
Speaker 2:And you're going to be kind of bummed because you're going to really want that $300,000 house, not the $200,000. Well, whether you're a first time buyer, seasoned investor or just a real estate curious, you're in the right place. If you found this helpful, share it with a friend, leave us a review. It helps more than you can think.
Speaker 1:It.